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:
|X| Preliminary proxy statement * Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
* Definitive proxy statement
* Definitive additional materials
* Soliciting material under Rule 14a-12
THCG, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
* Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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* Fee paid previously with preliminary materials:
* Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
April __, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of THCG, Inc. to be held on Monday, May 15, 2000, at 2:00 p.m.,
local time, at The New York Helmsley Hotel, located at 212 East 42nd Street, New
York, New York 10017.
We hope that you will attend in person. If you plan to do so, please
indicate in the space provided on the enclosed proxy. Whether you plan to attend
the Annual Meeting or not, we urge you to sign, date and return the enclosed
proxy as soon as possible in the postage-paid envelope provided. This will
ensure representation of your shares in the event that you are unable to attend
the Annual Meeting.
The matters expected to be acted upon at the Annual Meeting are
described in detail in the attached Notice of Annual Meeting and Proxy
Statement.
The Directors and Officers of THCG, Inc. look forward to meeting with
you.
Sincerely,
Joseph D. Mark
Co-Chief Executive Officer
Adi Raviv
Co-Chief Executive Officer
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THCG, INC.
650 Madison Avenue
New York, New York 10022
(212) 223-0440
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 15, 2000
To the Holders of Our Common Stock:
The 2000 Annual Meeting of Shareholders (the "Annual Meeting") of THCG,
Inc. ("THCG") will be held at 2:00 p.m., local time, at The New York Helmsley
Hotel, located at 212 East 42nd Street, New York, New York 10017, on Monday, May
15, 2000 at 2:00 p.m., local time, for the following purposes:
1. To elect 4 Class I directors to the Board of Directors.
2. To approve the THCG 2000 Stock Incentive Plan.
3. To approve the THCG 2000 Employee Stock Purchase Plan.
4. To approve the THCG 2000 Non-Employee Director Stock Option
Plan.
5. To approve the Agreement and Plan of Merger, dated April 6,
2000, by and between THCG and THCG, Inc., a Delaware
corporation and wholly-owned subsidiary of THCG (the "Merger
Agreement"), pursuant to which THCG will be reincorporated in
Delaware.
6. To ratify the appointment of Arthur Andersen LLP as independent
auditors for THCG for the fiscal year ending December 31, 2000.
7. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof. Management is
presently aware of no other business that is expected to come
before the Annual Meeting.
The Board of Directors has fixed the close of business on Friday, April
7, 2000 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournment thereof.
Shares of Common Stock can be voted at the Annual Meeting only if the holder is
present at the Annual Meeting in person or by valid proxy. A copy of THCG's 1999
Annual Report to Shareholders is being mailed with this Notice and Proxy
Statement on or about April __, 2000 to all shareholders of record on the record
date.
By Order of the Board of Directors,
SHAI NOVIK
Secretary
New York, New York
April __, 2000
IMPORTANT
Shareholders are requested to DATE, SIGN and MAIL the enclosed proxy.
A postage paid envelope is provided for mailing in the United States.
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THCG, INC.
650 Madison Avenue
New York, New York 10022
(212) 223-0440
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 15, 2000
General
This proxy statement (the "Proxy Statement") is furnished by the board
of directors (the "Board of Directors" or the "Board") of THCG, Inc., a Utah
corporation ("THCG"), in connection with THCG's annual meeting of shareholders
(the "Annual Meeting") to be held on Monday, May 15, 2000, at 2:00 p.m., local
time, at The New York Helmsley Hotel, located at 212 East 42nd Street, New York,
New York 10017. The proxy materials are being mailed on or about April __, 2000
to the holders of THCG's common stock (the "Shareholders") of record at the
close of business on April 7, 2000 (the "Record Date"). As of the Record Date,
there were ____________ shares of THCG's common stock, par value $.01 per share
(the "Common Stock"), issued and outstanding. Each holder of shares of Common
Stock issued and outstanding on the Record Date is entitled to one vote for each
such share held on each matter to be considered at the Annual Meeting. The
holders of a majority of the voting power of the issued and outstanding Common
Stock entitled to vote, present in person or represented by proxy, will
constitute a quorum at the Annual Meeting.
The enclosed proxy is solicited by the Board of Directors of THCG. A
person giving the enclosed proxy has the power to revoke it at any time before
it is exercised by (i) attending the Annual Meeting and voting in person, (ii)
duly executing and delivering a proxy bearing a later date, or (iii) sending a
written notice of revocation to THCG's Secretary. THCG will bear the cost of the
solicitation of proxies, including the charges and expenses of brokerage firms
and others who forward solicitation material to beneficial owners of Common
Stock. In addition to the solicitation of proxies by mail, THCG may solicit
proxies by personal interview, telephone, telegraph or telefacsimile.
If the enclosed proxy is properly executed and returned to THCG in time
to be voted at the Annual Meeting, it will be voted as specified on the proxy,
unless it is properly revoked prior thereto. Votes cast in person or by proxy at
the Annual Meeting will be tabulated by the inspectors of election appointed for
the meeting. If no specification is made on the proxy as to a proposal, the
shares represented by the proxy will be voted (i) FOR the election of the
nominees for Class I directors named herein, (ii) FOR the approval of the THCG
2000 Stock Incentive Plan; (iii) FOR the approval of the THCG 2000 Employee
Stock Purchase Plan; (iv) FOR the approval of the THCG 2000 Non-Employee
Director Stock Option Plan; (v) FOR the approval of the Merger Agreement
pursuant to which THCG will be reincorporated in Delaware; (vi) FOR the
ratification of the appointment of Arthur Andersen LLP as THCG's independent
auditors; and (vii) with respect to any other matter that may properly come
before the Annual Meeting, or any adjournment thereof, in the discretion of the
proxy holders.
The presence, in person or by proxy, of holders of a majority of the
outstanding shares of THCG Common Stock is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. Assuming that a quorum is
present, (i) the affirmative vote of the holders of a plurality of the votes
cast is required for the election of directors; (ii) the affirmative vote of the
holders of a majority of the votes cast is required for approval of proposals 2,
3, 4, 6 and any other matter that properly comes before the shareholders at the
Annual Meeting; and (iii) the affirmative vote of the holders of a majority of
all outstanding shares of THCG Common Stock is required for approval of proposal
5.
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Abstentions and broker non-votes (i.e., shares held by brokers or
nominees that the broker or nominee does not have discretionary power to vote on
a particular matter and as to which instructions have not been received from the
beneficial owners or persons entitled to vote) will be counted in determining
the presence of a quorum for the transaction of business. With regard to the
election of directors, votes may be cast in favor of or withheld; votes that are
withheld will be excluded entirely from the vote and will have no effect. For
each of the other proposals, abstentions may be specified. Abstentions and
broker non-votes will have no effect on the approval of proposals 2, 3, 4, 6 or
any other matter that properly comes before the shareholders at the Annual
Meeting; however, abstentions and broker non-votes will constitute votes against
proposal 5 because this proposal must be approved by the affirmative vote of the
holders of a majority of the outstanding shares of THCG Common Stock.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors, consisting of ten directors, is divided into
three classes. Each class of directors is elected for a staggered three-year
term. THCG's By-laws permit the Board of Directors to adjust the size of the
Board from a minimum of three directors to a maximum of twelve. THCG's directors
hold office until the annual meeting at which the term of the class in which
they serve has expired and until their successors are duly elected and qualified
or until their earlier death, disqualification, resignation or removal.
At the Annual Meeting, four directors will be elected as Class I
directors whose terms will expire upon the annual meeting of shareholders to be
held in 2003 and until their respective successors are duly elected and
qualified. Joseph D. Mark, Evan M. Marks, Larry W. Smith and Stanley B. Stern,
members of THCG's existing Board, have all been nominated for re-election to
Class I at the Annual Meeting. The shares represented by the enclosed proxy will
be voted in favor of the persons nominated, unless a vote is withheld from any
or all of the individual nominees. While management has no reason to believe
that the nominees will not be available as candidates, should such a situation
arise, proxies may be voted for the election of such other persons as the
holders of the proxies may, in their discretion, determine.
Vote Required
The affirmative vote of the holders of a plurality of the votes cast is
required for the election of directors. Votes that are withheld will be excluded
entirely from the vote and will have no effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" EACH OF THE NOMINEES.
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INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS
The following table provides certain information as of March 31, 2000
about each nominee for election as a director and each of THCG's continuing
directors:
<TABLE>
<CAPTION>
Class I Directors Age Position Director Since
- ----------------- --- -------- --------------
<S> <C> <C> <C>
Joseph D. Mark (3) 43 Director, Co-Chief Executive Officer 1999
Evan M. Marks (3) 42 Director, President of THCG Ventures LLC 1999
Larry W. Smith (3) 43 Director, President 1999
Stanley B. Stern (1)(2) 42 Director 1999
Class II (serving until the
2001 Annual Meeting) Age Position Director Since
- -------------------- --- -------- --------------
Keith W. Abell (2) (3) 42 Director 1999
Gene E. Burleson 57 Director 1996
Henry Klein (1) 37 Director 1999
Class III (serving until the
2002 Annual Meeting) Age Position Director Since
- -------------------- --- -------- --------------
Burton W. Kanter (2) 68 Director 1995
Joel S. Kanter (1) 43 Director 1995
Adi Raviv (3) 44 Director, Co-Chief Executive Officer 1999
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Executive Committee.
The business experience for at least the past five years, principal
occupation, employment and certain other information concerning each nominee is
set forth below.
Joseph D. Mark. Mr. Mark has served as a Co-Chief Executive Officer of
THCG since November 1999. In addition, Mr. Mark currently serves as President of
Tower Hill Securities, Inc., a subsidiary of THCG ("Tower Hill"). Prior to April
1998, Tower Hill was known as Hambro America Securities, Inc. From 1995 to
November 1999, Mr. Mark served as President and Managing Director of Tower Hill
where he was responsible for the management, coordination and direction of Tower
Hill's domestic and cross-border corporate finance and mergers and acquisitions
business. Mr. Mark is also a founder and general partner of The Israel
International Fund. Prior to joining Tower Hill, Mr. Mark worked for a number of
years as a mergers and acquisitions specialist, most recently as a Vice
President of Drexel Burnham Lambert Incorporated. Previously, he was a member of
the investment banking departments of Salomon Brothers Inc., Warburg Paribas
Becker, Inc. and Bankers Trust. Mr. Mark is also a director of Clay-Park Labs,
Inc., the U.S. subsidiary of Agis Industries Ltd.
Evan M. Marks. Mr. Marks has served as President of THCG Ventures LLC,
a subsidiary of THCG, since February 2000. Mr. Marks is also the managing member
of Alben Asset Management LLC ("Alben"), a private investment company based in
New York. Prior to forming Alben in 1998, Mr. Marks was in partnership with
George Soros from 1992 to 1998 as the President of G. Soros Realty, Inc. Prior
to his association with Mr. Soros, Mr. Marks was a Managing Director of
Wasserstein Perella & Co. and a principal in the real estate investment group of
Lazard Freres & Co. Mr. Marks is a also director of Telex Communications, Inc.,
a manufacturer of professional audio and telecommunication devices, GunForHire
Production Centers LLC, a provider of pre- and post-production services to the
film, television and cable industries, and the Hebrew Home for the Aged at
Riverdale, New York.
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Larry W. Smith. Mr. Smith has been President and a Director of THCG
since January 2000. From May 1999 to December 1999, he was one of the founders,
a director and the President of Mercury Coast Inc., which was acquired by THCG
in December 1999 ("Mercury Coast"). Prior to founding Mercury Coast, Mr. Smith
co-founded and served as CEO/President of US Interactive ("USIT"), one of the
leading Internet professional services firms, from May 1994 to February 1999.
Among the clients that Mr. Smith has served are: American Express, Infoseek,
AT&T, Sprint, Comedy Central, Associated Press, Dun & Bradstreet, Intel,
Microsoft, Netscape, Intuit, IBM, Columbia House, Network Solutions and Deloitte
& Touche.
Stanley B. Stern. Since January 2000, Mr. Stern has been Managing
Director of STI Ventures Advisors LLC ("STI"). Prior to STI, Mr. Stern was with
CIBC World Markets' ("CIBC") where he most recently served as head of the
Technology Investment Banking group. Mr. Stern was with CIBC since December
1981. Mr. Stern's broad transaction experience includes numerous public and
private financings of equity and debt, and financial advisory assignments,
including mergers and acquisitions, opinions and restructurings. Prior to
joining CIBC, Mr. Stern was associated with Salomon Brothers.
The business experience for at least the past five years, principal
occupation, employment and certain other information concerning each of the
continuing directors is set forth below.
Keith W. Abell. Mr. Abell currently serves as Co-President of GSCP,
Inc. ("GSCP"), the predecessor of which he joined in 1994. GSCP is the manager
of the Greenwich Street Funds, which collectively consists of Greenwich Street
Capital Partners II, L.P., a Delaware limited partnership, GSCP Offshore Fund,
L.P., a Cayman Islands exempted limited partnership, Greenwich Fund, L.P., a
Delaware limited partnership, Greenwich Street Employees Fund, L.P., a Delaware
limited partnership, and TRV Executive Fund, L.P., a Delaware limited
partnership. Prior to joining GSCP, from 1990 to 1994, Mr. Abell was with the
Blackstone Group, where he most recently served as Managing Director and from
1986 to 1990, he was with Goldman, Sachs & Co, where he was most recently a Vice
President. Mr. Abell is Chairman of the Board of Worth Media and is also a
director of Telex Communications, Inc., RAM Holdings Ltd., The Shooting Gallery,
Inc. and Espernet of New York, Inc., each of which is a private company. The
Greenwich Street Funds have a right to designate a director of THCG under a
Securities Purchase Agreement dated as of November 1, 1999, and certain
shareholders of THCG have agreed to vote their shares in favor of the Greenwich
Street Funds designee, so long as the Greenwich Street Funds own 5% of THCG's
outstanding Common Stock on a fully diluted basis. See "Certain Relationships
and Related Transactions." Mr. Abell has been designated by the Greenwich Street
Funds as a director of THCG.
Gene E. Burleson. Mr. Burleson has been a Director of THCG and was a
director of Walnut Capital, Inc., a subsidiary of THCG ("Walnut Capital"), from
June 1996 to November 1999. Mr. Burleson served as Chairman of the Board and
Chief Executive Officer of GranCare, Inc, form 1994 to 1997. Following the
merger of GranCare, Inc.'s pharmacy operations with Vitalink Pharmacy Services,
Inc., he served as Chief Executive Officer of Vitalink Pharmacy Services, Inc.
from February 1997 to August 1997. His previous experience includes serving as
President and Chief Operating Officer of American Medical International, Inc.
Mr. Burleson is also a director of Decker's Outdoor Corp., Alternative Living
Services Inc. and Mariner Post-Acute Network, Inc., all publicly-held companies.
Burton W. Kanter. Mr. Kanter has been a director of THCG, and THCG's
predecessor, Walnut Financial Services, Inc. ("Walnut"), since 1985 and was the
Chief Executive Officer and President of Walnut Capital, a subsidiary of THCG,
from February 1985 to April 1996. Mr. Kanter was a director of Walnut Capital
from 1983 to November 1999 and Treasurer of Walnut Capital from January 1994 to
February 1995. Mr. Kanter has acted as counsel to Neal Gerber & Eisenberg, a
Chicago, Illinois law firm and was a partner in the law firm of Kanter &
Eisenberg and its predecessor firms. He is the author of numerous articles and a
frequent lecturer in the field of federal income taxation, and founder of the
nationally known column in the Journal of Taxation called "Shop Talk." He is a
member of the faculty of the University of Chicago Law School. He is a director
of numerous companies, including the following public companies: First Health
Group Corp., Scientific Measurement Systems, Corp. and Logic Devices
Incorporated. He is a member of the Board of Directors or the Board of Trustees
of: the Midwest Film Center of the Chicago Art Institute, the Chicago
International Film Festival and the Museum of Contemporary Art of Chicago. He is
also on the advisory board of the Wharton School of the
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University of Pennsylvania Real Estate Center and the University of Chicago
Annual Tax Conference. In addition, Mr. Kanter serves as a member of the
Visiting Committee of the University of Chicago Art Department and as a member
of the Visiting Committee of the Law School of the University of Chicago.
Joel S. Kanter. Mr. Kanter has been a director of THCG and THCG's
predecessor, Walnut, since February 1995 and was the President and Chief
Executive Officer of THCG and Walnut Capital from 1995 to November 1, 1999. From
1988 to February 1995, Mr. Kanter was a consultant to Walnut Capital. Mr. Kanter
has served as President of Windy City, Inc. ("Windy City"), a privately held
investment firm, since July 1986. In 1978 and 1979, Mr. Kanter served as a
Legislative Assistant to Congressman Abner J. Mikva (D-Ill.) specializing in
Judiciary Committee affairs. From 1980 to 1982, Mr. Kanter served as a Special
Assistant to the National Association of Attorneys General, representing that
organization's positions in the criminal justice and environmental arenas. From
1982 to 1984, Mr. Kanter served as Staff Director of the House Subcommittee on
Legislative Process chaired by Congressman Gilles D. Long (D-La.). In that
capacity, he also lent assistance to the House Democratic Caucus which was also
chaired by Congressman Long. In 1985 and 1986, Mr. Kanter served as Managing
Director of The Investors' Washington Service, an investment advisory company
specializing in providing advice to large institutional clients regarding the
impact of federal legislative and regulatory decisions on debt and equity
markets. Clients of The Investors' Washington Service included Amoco Oil, AT&T,
Bankers Trust, Citicorp, Chase Manhattan Bank, Chrysler Corporation, General
Motors and J.C. Penney. Mr. Kanter is also a director of Mariner Post-Acute
Network, Inc., I-Flow Corporation, Osteoimplant Technology, Inc., Encore Medical
Corporation and Magna-Lab, Inc., each of which is a publicly-held company, as
well as a number of private concerns. Mr. Kanter is the son of Burton W. Kanter.
Henry Klein. Mr. Klein is a co-founder of TDA Capital Partners, Inc.
("TDA") which was formed in 1996 as Templeton Direct Advisors, Inc., a
subsidiary of Templeton Worldwide, Inc. In June 1999, Templeton Direct Advisors
was acquired by its management from Templeton Worldwide and changed its name to
TDA Capital Partners, Inc. TDA manages more than $100 million of assets through
funds investing in Central Europe, Israel and the United States. Mr. Klein is
responsible for technology and telecommunications investments at TDA. Prior to
joining TDA, from December 1995 to February 1996, Mr. Klein was a Senior Vice
President of Bassini, Playfair + Associates LLC, the successor to the private
equity investment arm of BEA Associates ("BEA"). From April 1993 to December
1995, Mr. Klein was a Vice President of BEA where he managed direct investments
in emerging markets and served as an officer of a number of New York Stock
Exchange listed closed-end funds. Prior to joining BEA, from August 1989 to
March 1993, Mr. Klein was a member of the investment banking department at
Lehman Brothers. Mr. Klein is also a director of RTimage Ltd and TechOnline,
Inc.
Adi Raviv. Mr. Raviv has served as the Co-Chief Executive Officer of
THCG since November 1999. From 1998 to November 1999, Mr. Raviv was Managing
Director and Secretary of Tower Hill. Prior to joining Tower Hill, in 1996 and
1997 he was the founder and Managing Director of The HTI Group, a small merchant
banking group focusing on technology, healthcare and emerging growth companies.
From 1994 to 1996, Mr. Raviv was a Senior Managing Director and Head of Global
Investment and Merchant Banking for Oscar Gruss & Son Incorporated until the
acquisition of its Israeli operations by CIBC Oppenheimer. Prior to his
association with Oscar Gruss in 1993 and 1994, he was the President and one of
the founders of the Stockton Group, established in 1993 to organize and manage
the Renaissance Funds, a $155 million private equity fund formed to invest in
the Middle East. Mr. Raviv was also a Vice President of BEA Associates and a
member of the management team of its International Equities Group. From 1987 to
1993, Mr. Raviv was a member of the investment banking department of Lehman
Brothers. Mr. Raviv is also a director of several private companies, including
Test University, Inc., Global Credit, Inc., IT Utility Inc., Globecom
Interactive, Inc. and Orisol Original Solutions Ltd.
Committees and Meetings of the Board of Directors
Pursuant to an Agreement and Plan of Merger dated as of August 5, 1999
between Walnut, Tower Hill Acquisition, Inc., a wholly-owned subsidiary of
Walnut ("Tower Hill Acquisition"), and Tower Hill, Tower Hill Acquisition was
merged with and into Tower Hill and Walnut changed its name to THCG (the
"Merger"). As a result of the Merger, effective November 1, 1999, the Board of
Directors and Committees of the Board of THCG were restructured.
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Between January 1, 1999 and November 1, 1999, the Board of Directors of
THCG met twelve times and acted by written consent four times. During that
period, the Board of Directors had an Investment Committee which met three
times, an Audit Committee which did not meet, a Compensation Committee which met
three times, a Finance Committee which did not meet and an Incentive Stock
Option Plan Committee which did not meet.
Between November 1, 1999 and December 31, 1999, the Board of Directors
of THCG met three times. During that period, the Board of Directors of THCG had
an Audit Committee, which did not meet, and a Compensation Committee which met
twice.
The current Audit Committee recommends to the Board of Directors the
appointment of independent public accountants to serve as auditors for THCG,
reviews the scope and fees of each annual audit and results of the same, reviews
compliance with the accounting and financial policies of THCG, and reviews the
adequacy of the financial organization of THCG. Between November 1, 1999 and
December 31, 1999, the Audit Committee was comprised of Joel S. Kanter, Henry
Klein and Stanley B. Stern.
The current Compensation Committee is responsible for administering the
THCG 1999 Stock Incentive Plan (the "1999 Plan"), the THCG 2000 Stock Incentive
Plan, the THCG 2000 Employee Stock Purchase Plan and the THCG 2000 Non-Employee
Director Stock Option Plan (collectively, the "2000 Plans"). The 2000 Plans are
summarized in this proxy statement under proposals 2, 3 and 4, respectively. The
Compensation Committee has the power and authority to grant options consistent
with the terms of the 1999 Plan and 2000 Plans. As of March 29, 2000, the
Compensation Committee has the power and authority to review and approve the
annual and incentive compensation of the officers of THCG, subject to
ratification by the Board of Directors, and has the authority to employ or
retain experts and professionals as deemed appropriate from time to time.
Between November 1, 1999 and December 31, 1999, the Compensation Committee was
comprised of Evan M. Marks, Keith W. Abell and Stanley B. Stern, each of whom
became a member of the Compensation Committee on November 2, 1999. Mr. Abell did
not attend one of the two meetings of the Compensation Committee held in 1999.
The Executive Committee was established on March 29, 2000 and is
responsible for the management of the business and affairs of THCG, including
the power and authority to evaluate and authorize acquisitions by THCG, and, in
connection therewith, to authorize the issuance of shares of common stock or
preferred stock, provided that the Executive Committee does not have the
authority in connection with any one acquisition to authorize the issuance of a
number of shares of common stock, or preferred stock convertible into a number
of shares of common stock, that exceeds ten percent (10%) of the then
outstanding number of shares of THCG Common Stock. The Executive Committee also
has the power and authority to fix the rights, preferences and privileges of a
series of preferred stock. The Executive Committee is comprised of Keith W.
Abell, Joseph D. Mark, Evan M. Marks, Adi Raviv and Larry W. Smith.
THCG does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole. Any shareholder who wishes to make a nomination at an annual or special
meeting for the election of directors must do so in compliance with the
applicable procedures set forth in THCG's By-laws. THCG will furnish copies of
such By-law provisions upon written request to Shai Novik at THCG's principal
executive offices, 650 Madison Avenue, New York, New York 10022.
Of the three meetings of the Board of Directors held between November
1, 1999 and December 31, 1999, Mr. Abell and Mr. Klein did not attend one of the
three and Mr. Stern did not attend two of the three.
Director Compensation
Prior to November 1, 1999, all non-employee directors of THCG were
compensated for their services as follows: (i) $2,500 for each regularly
scheduled meeting attended in person or by telephone; (ii) $2,500 for each
special meeting attended in person; and (iii) $500 for each committee meeting
attended in person or by telephone. All members of the
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Board were reimbursed for reasonable out-of-pocket expenses incurred in
connection with their activities on behalf of THCG.
Members of the current Board of Directors are not compensated for their
services as such. However, each non-employee director of THCG, other than
Messrs. Keith W. Abell and Stanley B. Stern, was granted an option to purchase
5,000 shares of THCG Common Stock at an exercise price of $3.625 per share on
November 2, 1999. The Board of Directors has approved and adopted, and recommend
that shareholders approve THCG's 2000 Non-Employee Director Stock Option Plan
under which each director of THCG who is not also an employee would each year
automatically be granted an option to purchase 10,000 shares of THCG Common
Stock, plus an additional option to purchase 2,500 shares of THCG Common Stock
for each committee of the Board of Directors on which he serves.
Compensation Committee Interlocks and Insider Participation
There were no interlocks or insider participation with respect to the
Board of Directors of THCG.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires THCG's directors and executive officers and persons who beneficially
own more than ten percent of THCG's Common Stock to report their ownership of
and transactions in THCG's Common Stock to the Securities and Exchange
Commission and The Nasdaq National Stock Market. Copies of these reports are
also required to be supplied to THCG. THCG believes, based solely on a review of
the copies of such reports received by THCG, that all applicable Section 16(a)
reporting requirements were complied with during 1999, except that Burton W.
Kanter did not timely file a Form 4 with respect to the month of November 1999.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The executive officers of THCG as of the date of this Proxy Statement,
together with information regarding the business experience of such officers,
are identified below. Information regarding the business experience of Messrs.
Joseph D. Mark, Evan M. Marks, Adi Raviv and Larry W. Smith is set forth above
under the heading "Information Concerning Nominees and Continuing Directors."
Each executive officer is elected annually by the Board of Directors of THCG and
serves until the next regular annual meeting of the Board and until his
successor is duly elected and qualified, or until his earlier death,
disqualification, resignation or removal.
Name Age Position
- ---- --- --------
Joseph D. Mark............................ 43 Co-Chief Executive Officer
Adi Raviv................................. 44 Co-Chief Executive Officer
Larry W. Smith............................ 43 President
Shai Novik................................ 34 Chief Operating Officer
Evan M. Marks............................. 42 President, THCG Ventures LLC
Shai Novik. Mr. Novik joined THCG on November 1, 1999. From February
1999 to November 1999, Mr. Novik was Chief Operating Officer of Tower Hill. From
April 1998 to February 1999, Mr. Novik served as Chief Executive Officer of
Optional Knowledge, Inc. ("Optional"), a company focused on risk management
applications for complicated financial derivatives. Prior to Optional, Mr. Novik
was with RogersCasey from June 1994 to April 1998, most recently serving as its
Chief Operating Officer. RogersCasey is one of the leading investment consulting
firms in the U.S., providing advisory services to institutional investors with
an asset pool of more than $500 billion. Mr. Novik served as the Assistant
Director of Advanced Software Development in the Israeli Defense Forces from
July 1984 to July 1991.
10
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation
Summary Compensation Table. The following table sets forth compensation
earned, whether paid or deferred, by THCG's Co-Chief Executive Officers, its two
other executive officers as of December 31, 1999 and the former Chief Executive
Officer and Chief Financial Officer of THCG (collectively, the "Named Executive
Officers") for services rendered in all capacities to THCG during the years
ended December 31, 1997, 1998 and 1999. Since November 1, 1999, Adi Raviv and
Joseph D. Mark have served as Co-Chief Executive Officers. Prior to November 1,
1999, Joel S. Kanter served as Chief Executive Officer and President of THCG.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation
Awards
Restricted Securities All Other
Stock Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) Other($) Awards($) Options ($)
- --------------------------- ---- --------- -------- -------- --------- -------- ---
(#)
<S> <C> <C> <C> <C> <C> <C> <C>
Adi Raviv................... 1999 $ 33,333 (1) $ 0 2,551 $ -- 450,000 --
Co-Chief Executive Officer 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Joseph D. Mark.............. 1999 $ 33,333 (1) $ 0 492 $ -- 450,000 $3,130
Co-Chief Executive Officer 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Larry W. Smith.............. 1999 -- (2) $ 0 -- -- 310,000 --
President 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Shai Novik.................. 1999 $ 25,000 (1) $ 0 1,188 $1,349,518(3) 100,000 $ 731
Chief Operating Officer 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Joel S. Kanter.............. 1999 $187,500 (4) $60,000(5) -- -- 90,000 --
Former Chief Executive 1998 225,000 -- -- -- -- --
Officer and President 1997 200,000 50,000(6) -- -- -- --
Robert F. Mauer............. 1999 $100,000 (4) $30,000(5) -- -- 50,000 --
Former Chief Financial 1998 115,000 -- -- -- -- --
Officer and Treasurer 1997 100,000 30,000(6) -- -- -- --
</TABLE>
(1) Represents a pro-rated annual salary for the period of November 1,
1999, the date on which the executive became an employee of THCG,
through December 31, 1999. The executive's annual salary is described
below under the section "Employment Agreements."
(2) Larry W. Smith's compensation is subject to the terms of his employment
agreement with THCG, entered into on December 29, 1999 (see "Employment
Agreements"). Mr. Smith was not added to THCG's payroll until January
1, 2000.
11
<PAGE>
(3) Represents the dollar value (net of consideration paid) of the
restricted stock calculated by multiplying $3.625, the market price of
the THCG Common Stock on November 1, 1999, the date of the issuance, by
the number of shares awarded, 372,281. The restricted stock is divided
into First Class and Second Class. The First Class consists of 204,755
shares of restricted stock. The vesting schedule with respect to that
class is as follows: 68,251.66 shares vested on November 1, 1999 and
the remaining 136,503.34 vest in four equal three-month quarterly
installments, commencing on February 1, 2000 and ending on November 1,
2000. The Second Class consists of 167,526 shares of restricted stock.
The vesting schedule with respect to that class is as follows:
22,336.79 shares vested on November 1, 1999 and the remaining
145,189.21 vest in twelve quarterly installments, commencing on
February 1, 2000 and ending on November 1, 2002. As of December 31,
1999, the aggregate value of the restricted stock held by Mr. Novik was
$10,656,543.
(4) Represents the annual salary as provided under the terms of his
employment agreement through November 1, 1999, the date on which the
employee resigned as an officer of THCG. Does not include compensation
received under consulting agreements between THCG and Windy City. For
more information concerning the terms of the consulting agreements,
see "Consulting Agreements" below.
(5) Executive was paid a bonus with respect to his job performance for the
fiscal year 1999.
(6) Executive was paid a bonus with respect to his job performance for the
fiscal year 1997.
12
<PAGE>
Option Grants Table. Shown below is information regarding grants of
stock options to the Named Executive Officers during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
% of Total
Options Potential Realizable Value at Assumed
Granted to Annual Rates of Stock Price
Number of Securities Employees Exercise Appreciation for Option Terms
Underlying Options In Fiscal Price Expiration
Name Granted Year (a) ($/Share) Date 0% 5% 10%
- ---- ------- -------- --------- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adi Raviv 250,000 (1) 9.0 % $3.625 11/2/04 -- $250,125 $552,500
200,000 (2) 7.2 % $3.625 11/2/04 -- 200,100 442,000
Joseph D. Mark 250,000 (1) 9.0 % $3.625 11/2/04 -- 250,125 552,500
200,000 (2) 7.2 % $3.625 11/2/04 -- 200,100 442,000
Larry W. Smith 310,000 (3) 11.2 % $6.00 12/31/04 $7,285,000 9,811,594 12,868,113
Shai Novik 100,000 (4) 3.6 % $10.00 12/15/04 600,000 852,200 1,129,600
Joel S. Kanter 90,000 (5) 3.2 % $3.625 11/2/04 -- 90,045 198,900
Robert F. Mauer 50,000 (5) 1.8 % $3.625 11/2/04 -- 50,025 110,500
</TABLE>
(a) The total number of options granted in 1999 was 2,754,000; Represents
options granted under the THCG 1999 Stock Incentive Plan (the "1999
Plan") as follows: 1,486,000 options granted on November 2, 1999 and
220,000 options granted on December 15, 1999. Additional options to
purchase shares of THCG Common Stock were granted as follows: 118,000
options were granted on December 15, 1999 and 930,000 options were
granted on December 27, 1999. These options were not granted under the
1999 Plan but were granted on the same terms and conditions as if they
had been.
(1) Represents options to purchase shares of THCG's Common Stock under the
1999 Plan and pursuant to each executives' Employment Agreement, as
summarized below under the heading "Employment Agreements." The options
were granted on November 2, 1999 and are immediately exercisable,
non-forfeitable, non-transferable and expire on the fifth anniversary
of the date they were granted.
(2) Represents options to purchase shares of THCG's Common Stock under the
1999 Plan and pursuant to each executives' Employment Agreement, as
summarized below under the heading "Employment Agreements." The options
vest in accordance with the same schedule as the restricted stock
options granted to Shai Novik described in note (3) to the Summary
Compensation Table and will be reduced by the number of shares of
restricted stock that is forfeited by Shai Novik. The options are
non-transferable and are non-forfeitable. The vesting schedule with
respect to 100,000 of the shares covered by these options is as
follows: 33,333.33 shares vested on November 1, 1999; the remaining
balance of 66,666,67 vests in four (4) equal three-month quarterly
installments, commencing on February 1, 2000 and ending on November 1,
2000. The vesting schedule with respect to the balance of the 100,000
shares subject to these options is as follows: 13,333.33 shares vested
on November 1, 1999; the remaining balance of 86,666.67 shares vests in
twelve quarterly installments, commencing on February 1, 2000 and
ending on November 1, 2002.
(3) Represents options to purchases shares of THCG's Common Stock. The
options were not granted under the 1999 Plan but are subject to the
terms as are set forth in the 1999 Plan. The options were granted
pursuant to an Employment Agreement entered into by Mr. Smith and THCG
in connection with the acquisition of Mercury Coast by THCG. The
options were granted at below the fair market of THCG Common Stock of
$29.50 on the date of the grant. The options vest in twelve quarterly
installments commencing on January 1, 2001 and expire on December 31,
2004.
13
<PAGE>
(4) Represents options to purchase shares of THCG's Common Stock under the
1999 Plan granted on December 15, 1999. The exercise price of $10.00
per share was below the fair market value of THCG Common Stock of
$16.00 on the date of the grant. The options are exercisable in three
approximately equal installments, commencing on December 15, 2000 and
ending on December 15, 2002.
(5) Represents options to purchase shares of THCG's Common Stock under the
1999 Plan. The options were granted on November 2, 1999 and are
immediately exercisable, non-forfeitable, non-transferable and expire
on November 2, 2004. The exercise price of $3.625 is equal to the fair
market value of the Common Stock on the date of the grant.
Aggregated Option Exercises and Fiscal Year-End Option Value Table.
Shown below is information regarding stock options exercised during the fiscal
year ended December 31, 1999 and the value of stock options as of December 31,
1999, held, by each of the Named Executive Officers.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options at In-The-Money Options at
Acquired Value Fiscal Year-End (#) Fiscal Year-End ($)
Name On Exercise (#) Realized ($) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- --------------- ------------ --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Adi Raviv 0 $0 296,666 / 153,334 $7,416,650 / $ 3,833,350
Joseph D. Mark 0 0 296,666 / 153,334 7,416,650 / 3.833.350
Larry W. Smith 0 0 0 / 310,000 0 / 7,013,750
Shai Novik 0 0 33,333 / 66,667 620,827 / 1,241,672
Joel S. Kanter 0 0 90,000 / 0 2,250,000 / 0
Robert F. Mauer 0 0 50,000 / 0 1,250,000 / 0
</TABLE>
Employment Agreements
Joseph D. Mark. Pursuant to his employment agreement, Joseph D. Mark
will serve as a Co-Chief Executive Officer of THCG for a five year term,
commencing November 1, 1999, which term will be automatically extended for one
or more additional annual periods unless either THCG or Mr. Mark gives written
notice, no less than ninety (90) days prior to the end of the initial term, or
any extension thereof, of his or its election not to renew the agreement. The
agreement provides that Mr. Mark's annual base salary will be a minimum of
$200,000 per year, or such greater sum as may be fixed by the Compensation
Committee of THCG's Board of Directors, provided that any such greater sum will
become the minimum rate of compensation for so long as Mr. Mark remains employed
by THCG. In addition, Mr. Mark will be entitled to bonus compensation as
reasonably determined in good faith by the Compensation Committee. Pursuant to
the employment agreement, Mr. Mark received an option to purchase 450,000 shares
of THCG Common Stock under the 1999 Plan. Mr. Mark will be entitled to
participate in any and all employee benefit plans generally available to THCG's
most senior executives and will be entitled to participate fully in THCG's group
pension, profit sharing and employee benefit programs made available to
employees of THCG generally. THCG will provide other benefits to Mr. Mark,
including, the following: THCG will lease or purchase an automobile for Mr. Mark
(or reimburse Mr. Mark for a lease of an automobile in his own name) at a cost
not to exceed $1,000 per month (including other related costs, expenses and
fees); THCG will pay the premiums on an ordinary life insurance policy on Mr.
Mark's behalf in the principal amount of $2,000,000; and THCG will also
reimburse Mr. Mark for personal tax preparation and financial planning
assistance in a total amount not to exceed $5,000 per year.
In the event that Mr. Mark's employment is terminated prior to the
expiration of the term by reason of his death or total disability, THCG will pay
Mr. Mark the following: any accrued but unpaid base salary for services rendered
through the date of termination, a prorated amount of bonus compensation, any
accrued but unpaid expenses required to be reimbursed pursuant to the employment
agreement and any accrued vacation to the date of termination. If Mr. Mark's
employment is terminated by THCG for "cause," or by Mr. Mark without "good
reason" (as those terms are defined therein), THCG will pay Mr. Mark the
following: any accrued but unpaid base salary for services rendered through the
date of termination, any accrued but unpaid expenses required to be reimbursed
pursuant to the employment agreement and any
14
<PAGE>
accrued vacation to the date of termination. In the event that Mr. Mark's
employment is terminated by THCG without cause, or by Mr. Mark for "good reason"
(as defined therein), THCG will pay Mr. Mark the following: any accrued but
unpaid base salary for services rendered to the date of termination, such bonus
as may reasonably be determined by THCG based on Mr. Mark's performance through
the date of termination, any accrued but unpaid expenses required to be
reimbursed pursuant to the employment agreement, any accrued vacation to the
date of termination and continued payment of his base salary until the earlier
of (a) 36 months after the date of termination or (b) the expiration of the
term. Generally, in the event of Mr. Mark's termination, any benefits to which
Mr. Mark may be entitled pursuant to any employee benefit plans and programs in
which he participated will be determined in accordance with the terms of those
plans and programs. Mr. Mark has also agreed to a noncompetition provision,
which is effective during the term of his employment, and to a nonsolicitation
provision (relating to employees and customers) which is effective during the
term of the agreement and for a period of one year subsequent to any termination
of the agreement or Mr. Mark's employment thereunder.
Adi Raviv. Pursuant to his employment agreement, Adi Raviv will serve
as a Co-Chief Executive Officer of THCG for a five year term, commencing
November 1, 1999, which term will be automatically extended for one or more
additional annual periods unless either THCG or Mr. Raviv gives written notice,
no less than ninety (90) days prior to the end of the initial term or any
extension thereof, of his or its election not to renew the agreement. The
agreement provides that Mr. Raviv's annual base salary will be a minimum of
$200,000 per year, or such greater sum as may be fixed by the Compensation
Committee of THCG's Board of Directors, provided that any such greater sum will
become the minimum rate of compensation for so long as Mr. Raviv remains
employed by THCG. In addition, Mr. Raviv will be entitled to bonus compensation
as reasonably determined in good faith by the Compensation Committee. Pursuant
to the employment agreement, Mr. Raviv received an option to purchase 450,000
shares of THCG Common Stock under the 1999 Plan. Mr. Raviv will be entitled to
participate in any and all employee benefit plans generally available to THCG's
most senior executives and will be entitled to participate fully in THCG's group
pension, profit sharing and employee benefit programs made available to
employees of THCG generally. THCG will provide other benefits to Mr. Raviv,
including the following: THCG will lease or purchase an automobile for Mr. Raviv
(or reimburse Mr. Raviv for a lease of an automobile in his own name) at a cost
not to exceed $1,000 per month (including other related costs, expenses and
fees); THCG will pay the premiums on an ordinary life insurance policy on Mr.
Raviv's behalf in the principal amount of $2,000,000; and THCG will also
reimburse Mr. Raviv for personal tax preparation and financial planning
assistance in a total amount not to exceed $5,000 per year.
In the event that Mr. Raviv's employment is terminated prior to the
expiration of the term by reason of his death or total disability, THCG will pay
Mr. Raviv the following: any accrued but unpaid base salary for services
rendered through the date of termination, a prorated amount of bonus
compensation, any accrued but unpaid expenses required to be reimbursed pursuant
to the employment agreement and any accrued vacation to the date of termination.
If Mr. Raviv's employment is terminated by THCG for "cause," or by Mr. Raviv
without "good reason" (as those terms are defined therein), THCG will pay Mr.
Raviv the following: any accrued but unpaid base salary for services rendered to
the date of termination, any accrued but unpaid expenses required to be
reimbursed pursuant to the employment agreement and any accrued vacation to the
date of termination. In the event that Mr. Raviv's employment is terminated by
THCG without cause, or by Mr. Raviv for "good reason" (as those terms are
defined therein), THCG will pay Mr. Raviv the following: any accrued but unpaid
base salary for services rendered to the date of termination, such bonus as may
reasonably be determined by THCG based upon Mr. Raviv's performance through the
date of termination, any accrued but unpaid expenses required to be reimbursed
pursuant to the employment agreement, any accrued vacation to the date of
termination and continued payment of his base salary until the earlier of (a) 36
months after the date of termination or (b) the expiration of the term.
Generally, in the event of Mr. Raviv's termination, any benefits to which Mr.
Raviv may be entitled pursuant to any employee benefit plans and programs in
which he participated will be determined in accordance with the terms of those
plans and programs. Mr. Raviv has also agreed to a noncompetition provision,
which is effective during the term of his employment, and to a nonsolicitation
provision (relating to employees and customers) which is effective during the
term of the agreement and for a period of one year subsequent to any termination
of the agreement or Mr. Raviv's employment thereunder.
15
<PAGE>
Shai Novik. Pursuant to his employment agreement, Shai Novik will serve
as the Chief Operating Officer of THCG for a five year term, commencing November
1, 1999, which term will be automatically extended for one or more additional
annual periods unless either THCG or Mr. Novik gives written notice, no less
than ninety (90) days prior to the end of the initial term, or any extension
thereof, of his or its election not to renew the agreement. The agreement
provides that Mr. Novik's annual base salary will be a minimum of $150,000 per
year, or such greater sum as may be fixed by the Compensation Committee of the
THCG Board of Directors; provided that any such greater sum will become the
minimum rate of compensation for so long as Mr. Novik remains employed by THCG.
In addition, Mr. Novik will be entitled to bonus compensation as reasonably
determined in good faith by the Compensation Committee, provided that Mr. Novik
will be entitled to participate in any bonus compensation plans THCG makes
generally available to its senior executives or its employees, in accordance
with the terms of such plans. Mr. Novik received a grant of 372,281 shares of
restricted THCG Common Stock under the 1999 Plan. Mr. Novik will be entitled to
participate in any and all employee benefit plans generally available to THCG's
most senior executives and will be entitled to participate fully in THCG's group
pension, profit sharing and employee benefit programs made available to
employees of THCG generally. THCG will provide other benefits to Mr. Novik,
including the following: THCG will lease or purchase an automobile for Mr. Novik
(or reimburse Mr. Novik for a lease of an automobile in his own name) at a cost
not to exceed $1,000 per month (including other related costs, expenses and
fees); THCG will pay the premiums on an ordinary life insurance policy on Mr.
Novik's behalf in the principal amount of $2,000,000; and THCG will also
reimburse Mr. Novik for personal tax preparation and financial planning
assistance in a total amount not to exceed $5,000 per year.
In the event that Mr. Novik's employment is terminated prior to the
expiration of the term by reason of his death or total disability, THCG will pay
Mr. Novik the following: any accrued but unpaid base salary for services
rendered through the date of termination, a prorated amount of bonus
compensation, any accrued but unpaid expenses required to be reimbursed pursuant
to the employment agreement and any accrued vacation to the date of termination.
If Mr. Novik's employment is terminated by THCG for "cause," or by Mr. Novik
without "good reason" (as those terms are defined therein), THCG will pay Mr.
Novik the following: any accrued but unpaid base salary for services rendered to
the date of termination, any accrued but unpaid expenses required to be
reimbursed pursuant to the employment agreement, and any accrued vacation to the
date of termination. In the event that Mr. Novik's employment is terminated by
THCG without cause, or by Mr. Novik for "good reason" (as defined therein), THCG
will pay Mr. Novik the following: any accrued but unpaid base salary for
services rendered to the date of termination, such bonus as may reasonably be
determined by the Company based upon Mr. Novik's performance through the date of
his termination, any accrued but unpaid expenses required to be reimbursed
pursuant to the employment agreement, any accrued vacation to the date of
termination and continued payment of the base salary for thirty-six months after
the date of termination, except as otherwise provided in the agreement.
Generally, in the event of Mr. Novik's termination, any benefits to which Mr.
Novik may be entitled pursuant to any employee benefit plans and programs in
which he participated will be determined in accordance with the terms of those
plans and programs. Mr. Novik has also agreed to a noncompetition provision,
which is effective during the term of his employment, and to a nonsolicitation
provision (relating to employees and customers) which is effective during the
term of the agreement and for a period of one year subsequent to any termination
of the agreement or Mr. Novik's employment thereunder.
Larry W. Smith. On December 29, 1999, THCG entered into an employment
agreement with Larry W. Smith, pursuant to which Mr. Smith will serve as
President of THCG for a three year term, which term will be automatically
extended for one or more additional annual periods unless either THCG or Mr.
Smith gives written notice, no less than ninety (90) days prior to the end of
the initial term, or any extension thereof, of his or its election not to renew
the agreement. The agreement provides that Mr. Smith's annual base salary will
be a minimum of $150,000 per year, or such greater sum as may be fixed by the
Compensation Committee of the Board of Directors; provided that any such greater
sum will become the minimum rate of compensation for so long as Mr. Smith
remains employed by THCG. In addition, Mr. Smith will be entitled to a bonus in
respect of the year 2000 in a minimum amount of $50,000 as determined by the
Compensation Committee of the Board of Directors; thereafter, Mr. Smith will be
entitled to bonus compensation in accordance with a bonus scheme based on the
operating profit of the business unit(s) of THCG for which Mr. Smith is
responsible, as devised in good faith by the Compensation Committee of the Board
of Directors. Mr. Smith received a grant of an option to purchase 310,000 shares
of THCG Common Stock under the 1999 Plan. Mr. Smith will be entitled to
participate in any group pension, profit sharing and employee benefit programs
made available to employees of THCG
16
<PAGE>
generally. THCG will provide other benefits to Mr. Smith, including, without
limitation, the following: THCG will lease or purchase an automobile for Mr.
Smith (or reimburse Mr. Smith for a lease of an automobile in his own name) at a
cost not to exceed $500 per month (including other related costs, expenses and
fees); THCG will pay the premiums on any life insurance policy (up to $1
million), medical insurance, group health, disability insurance, and any other
benefit plan or program made generally available by THCG to its most senior
executives; THCG will also reimburse Mr. Smith for personal tax preparation and
financial planning assistance in a total amount not to exceed $2,500 per year;
and Mr. Smith will be entitled to any other benefits or perquisites on terms no
less favorable than those pursuant to which such benefits or perquisites are
made available to any other executive or employee of THCG.
In the event that Mr. Smith's employment is terminated prior to the
expiration of the term by reason of his death or total disability, or for
"cause," or by Mr. Smith without "good reason" (as those terms are defined
therein), THCG will pay Mr. Smith the following: any accrued but unpaid base
salary for services rendered through the date of termination, any declared by
unpaid bonus compensation and any accrued but unpaid expenses required to be
reimbursed pursuant to the employment agreement. In the event that Mr. Smith's
employment is terminated by THCG without cause, or by Mr. Smith for "good
reason" (as defined therein), THCG will pay Mr. Smith the following: any accrued
but unpaid base salary for services rendered to the date of termination, any
declared but unpaid bonus, any accrued but unpaid expenses required to be
reimbursed pursuant to the employment agreement and any unvested options will
accelerate and become fully exercisable. Except as provided under the employment
agreement, under the terms of any incentive compensation, employee benefit or
fringe benefit plan applicable to Mr. Smith at the time of the termination of
his employment prior to the end of his Term, Mr. Smith will have no right to
receive any other compensation, or to participate in any other plan, arrangement
or benefit, with respect to any future period after such termination. Mr. Smith
has also agreed to a noncompetition provision, which is effective during the
term of his employment, and to a nonsolicitation provision (relating to
employees and customers) which is effective during the term of the agreement and
for a period of one year subsequent to any termination of the agreement or Mr.
Smith's employment thereunder.
Evan M. Marks. On February 1, 2000, THCG Ventures LLC ("THCG Ventures")
entered into an employment agreement with Evan M. Marks, pursuant to which Mr.
Marks will serve as President and Chief Executive Officer of THCG Ventures, a
wholly-owned subsidiary of Tower Hill, or in an equivalent position with an
affiliate of THCG Ventures or THCG, for a three year term, which term will be
automatically extended for one or more additional annual periods unless either
THCG Ventures or Mr. Marks gives written notice, no less than ninety (90) days
prior to the end of the initial term, or any extension thereof, of his or its
election not to renew the agreement. The agreement provides that Mr. Marks's
annual base salary will be $150,000 per year, or such greater sum as may be
fixed by the Compensation Committee of the Board of Directors of THCG; provided
that any such greater sum will become the minimum rate of compensation for so
long as Mr. Marks remains employed by THCG Ventures, THCG or one of its
affiliates. In addition, Mr. Marks will be entitled to a bonus in respect of the
year 2000 in a minimum amount of $50,000 as determined by the Compensation
Committee of the Board of Directors of THCG; thereafter, Mr. Marks will be
entitled to bonus compensation in accordance with a bonus scheme based on the
operating profit of the business unit(s) of THCG Ventures, THCG or any of its
affiliates for which Mr. Marks is responsible, as devised in good faith by the
Compensation Committee of the Board of Directors of THCG. Pursuant to his
employment agreement, Mr. Marks will receive a grant of options to purchase
195,000 shares of THCG Common Stock under the 2000 THCG, Inc. Stock Incentive
Plan. Mr. Marks will be entitled to participate in any group pension, profit
sharing and employee benefit programs made available to employees of THCG
generally. THCG Ventures will provide other benefits to Mr. Marks, including,
without limitation, the following: THCG Ventures will lease or purchase an
automobile for Mr. Marks (or reimburse Mr. Marks for a lease of an automobile in
his own name) at a cost not to exceed $500 per month (including other related
costs, expenses and fees); THCG Ventures will pay the premiums on any life
insurance policy (up to $1 million), medical insurance, group health, disability
insurance, and any other benefit plan or program made generally available by
THCG Ventures or THCG to its most senior executives; THCG Ventures will also
reimburse Mr. Marks for personal tax preparation and financial planning
assistance in a total amount not to exceed $2,500 per year; and Mr. Marks will
be entitled to any other benefits or perquisites on terms no less favorable than
those pursuant to which such benefits or perquisites are made available to any
other executive or employee of THCG Ventures or THCG.
17
<PAGE>
In the event that Mr. Marks's employment is terminated prior to the
expiration of the term by reason of his death or total disability, or for
"cause," or by Mr. Marks without "good reason" (as those terms are defined
therein), THCG Ventures will pay Mr. Marks the following: any accrued but unpaid
base salary for services rendered through the date of termination, any declared
by unpaid bonus compensation and any accrued but unpaid expenses required to be
reimbursed pursuant to the employment agreement. In the event that Mr. Marks's
employment is terminated by THCG Ventures without cause, or by Mr. Marks for
"good reason" (as defined therein), THCG Ventures will pay Mr. Marks the
following: any accrued but unpaid base salary for services rendered to the date
of termination, any declared but unpaid bonus, any accrued but unpaid expenses
required to be reimbursed pursuant to the employment agreement and any unvested
options will accelerate and become fully exercisable. Except as provided under
the employment agreement, under the terms of any incentive compensation,
employee benefit or fringe benefit plan applicable to Mr. Marks at the time of
the termination of his employment prior to the end of his Term, Mr. Marks will
have no right to receive any other compensation, or to participate in any other
plan, arrangement or benefit, with respect to any future period after such
termination. Mr. Marks has also agreed to a noncompetition provision, which is
effective during the term of his employment, and to a nonsolicitation provision
(relating to employees and customers) which is effective during the term of the
agreement and for a period of one year subsequent to any termination of the
agreement or Mr. Marks's employment thereunder.
Consulting Agreements
Pursuant to the consulting agreement between Windy City and THCG, Windy
City, through the provision of the services of Joel S. Kanter, serves as a
consultant to THCG for an initial term of twelve months, which term will
automatically be extended for one or more additional three-month periods unless
Windy City or THCG gives written notice, no less than ninety (90) days prior to
the end of the initial term or, as applicable, sixty (60) days prior to the end
of any extension of the term, of Windy City's or THCG's election not to renew
the agreement. The agreement provides that Windy City's consulting fees will be
at an annual rate of $100,000. In addition, THCG is to reimburse Windy City for
reasonable business expenses incurred in connection with the performance of its
duties and responsibilities under the agreement. If the agreement is terminated
prior to the end of its term, including any extensions thereof, Windy City will
be entitled to any accrued but unpaid consulting fees to the date of termination
and any accrued but unpaid expenses required to be reimbursed pursuant to the
agreement. In addition, if Windy City terminates the agreement as the result of
a material breach of the agreement by THCG that is not satisfactorily cured, or
if the term will terminate as the result of a sale of all or substantially all
of the assets of THCG, Windy City is entitled to the continued payment of
consulting fees through the end of the term (as the same may have been
extended), as if such termination had not occurred, with such payments being in
addition to payments described in the previous sentence. Pursuant to the
agreement, both Windy City and THCG have agreed to a nonsolicitation provision
(relating to employees) which is to be effective during the term of the
agreement and for a period of one year subsequent to any termination of the
agreement or the consulting engagement thereunder. Messrs. Joel S. Kanter and
Joshua Kanter are brothers and are the President and Vice President,
respectively, of Windy City. Trusts for the benefit of Mr. Burton W. Kanter's
family own indirectly all of the outstanding common stock of Windy City.
Pursuant to the consulting agreement between Chicago Advisory Group and
Inland Financial Corp. ("Inland Financial"), a wholly-owned subsidiary of THCG,
Chicago Advisory Group, through the provision of the services of Robert Mauer,
is to serve as a consultant to Inland Financial for an initial term of twelve
months, which term will automatically be extended for one or more additional
three-month periods unless Chicago Advisory Group or Inland Financial gives
written notice, no less than ninety (90) days prior to the end of the initial
term or, as applicable, sixty (60) days prior to the end of any extension of the
term, of Chicago Advisory Group's or Inland Financial's election not to renew
the agreement. The agreement provides that Chicago Advisory Group's consulting
fees will be at an annual rate of $50,000. In addition, Inland Financial is to
reimburse Chicago Advisory Group for reasonable business expenses incurred in
connection with the performance of its duties and responsibilities under the
agreement. In the event that the agreement is terminated prior to the end of its
term, including any extensions thereof, Chicago Advisory Group will be entitled
to any accrued but unpaid consulting fees to the date of termination and any
accrued but unpaid expenses required to be reimbursed pursuant to the agreement.
Further, in addition to those payments, if Chicago Advisory Group terminates the
agreement as a result of a material breach of the agreement by Inland Financial
that is not satisfactorily cured, Chicago Advisory Group is entitled to the
continued payment of consulting fees through the end of the term (as the same
may have been extended) as if such termination had not occurred, with such
payments being in addition to the payments described in the previous sentence.
18
<PAGE>
Pursuant to the agreement, both Chicago Advisory Group and Robert Mauer have
agreed that, during the term of the agreement, neither Chicago Advisory Group
nor Mr. Mauer will compete with or be engaged in any business which is engaged
in the business of factoring or financing of receivables in the United States or
Canada. Further, Chicago Advisory Group and Mr. Mauer have agreed to a
nonsolicitation provision (relating to employees and customers) which is
effective during the term of the agreement and for a period of one year
subsequent to a termination of the agreement or the consulting engagement
thereunder.
Report of the Board of Directors on Executive Compensation
Prior to November 1, 1999, the Compensation Committee of the Board of
Directors of THCG approved the compensation arrangements for Messrs. Joel S.
Kanter and Robert F. Mauer for fiscal year 1999. The compensation of Messrs.
Joseph D. Mark, Adi Raviv and Shai Novik for the period from November 1, 1999 to
December 31, 1999 were determined and approved by the then Board of Directors of
Walnut in accordance with the Merger Agreement between Walnut, Tower Hill
Acquisition and Tower Hill Securities. For fiscal year 2000, the compensation of
Messrs. Mark, Novik, Raviv, Larry W. Smith, President of THCG and Evan M. Marks,
President of THCG Ventures LLC, will be governed by the terms and conditions of
each executive's employment agreement with THCG, see "Employment Agreements"
above, provided that any bonuses to be paid with respect to fiscal year 2000
will be determined by the Compensation Committee of the Board of Directors.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information, as of March 24, 2000,
concerning the Common Stock of THCG beneficially owned (i) by each director and
nominee for election as a director of THCG, (ii) by the Named Executive Officers
and all executive officers and directors as a group, and (iii) by each
shareholder known by THCG to be the beneficial owner of more than 5% of the
outstanding Common Stock. Unless otherwise indicated in the footnotes to the
table, the beneficial owners named have, to the knowledge of THCG, sole voting
and dispositive power with respect to the shares beneficially owned, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
Number of Shares Percent of Shares
Name and Address of Beneficial Owner (a) Outstanding (a)
- ------------------------------------ --- ---------------
<S> <C> <C> <C>
Keith W. Abell.................................................................... 4,550,000 (1) 36.1 %
Greenwich Street Capital Partners, Inc.
388 Greenwich Street, 38th Floor
New York, NY 10013
Gene E. Burleson.................................................................. 23,400 (2) *
320 Argonne Drive
Atlanta, GA 30305
Burton W. Kanter.................................................................. 109,290 (3) *
Neal Gerber & Eisenberg
2 North LaSalle Street
Suite 2200
Chicago, IL 60602
Joel S. Kanter.................................................................... 92,415 (4) *
Windy City, Inc.
800 Towers Crescent Drive
Suite 1070
Vienna, VA 22182
Henry Klein....................................................................... 12,500 *
TDA Capital Partners, Inc.
15 Valley Drive
Greenwich, CT 06831
Joseph D. Mark.................................................................... 2,205,854 (5) 17.5 %
THCG, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
Evan M. Marks..................................................................... 265,833 (6) 2.1 %
THCG, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
20
<PAGE>
Shai Novik........................................................................ 209,133 (7) 1.6 %
THCG, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
Adi Raviv......................................................................... 2,205,853 (8) 17.5 %
THCG, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
Larry W. Smith.................................................................... 298,335 2.3 %
THCG, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
Stanley B. Stern.................................................................. 12,500 *
STI Ventures
110 East 59th Street
New York, NY 10022
Greenwich Street Capital Partners II, L.P......................................... 4,500,000 (9) 35.7 %
388 Greenwich Street, 38th Floor
New York, NY 10013
All executive officers and directors as a group (11 persons)...................... 9,985,113 (10) 79.3 %
</TABLE>
* Represents less than one percent (1%).
(1) Includes (1) 4,020,200 shares, of which 1,786,756 are issuable upon the
exercise of warrants that are exercisable within 60 days, held by
Greenwich Street Capital Partners II, L.P. ("GSCP II"), (2) 83,813
shares, of which 37,250 are issuable upon the exercise of warrants that
are exercisable within 60 days, held by GSCP Offshore Fund, L.P. ("GSCP
Offshore"), (3) 136,179 shares, of which 60,524 are subject to warrants
exercisable within 60 days, held by Greenwich Fund, L.P. ("Greenwich
Fund"), (4) 239,994 shares, of which 106,664 are issuable upon the
exercise of warrants that are exercisable within 60 days, held by
Greenwich Street Employees Fund, L.P. ("Employees Fund"), and (5)
19,814 shares, of which 8,806 are issuable upon the exercise of
warrants that are exercisable within 60 days, held by TRV Executive
Fund, L.P. ("TRV" and together with GSCP II, GSCP Offshore, Greenwich
Fund and Employees Fund, the "Greenwich Street Funds"). The general
partner of the Greenwich Street Funds is Greenwich Street Investments
II, L.L.C. ("GSI"). The managing members of GSI are Alfred C. Eckert
III, Keith W. Abell and Sanjay H. Patel. Mr. Abell is a director of
THCG. GSCP, Inc. ("GSCP") is the manager of the Greenwich Street Funds.
Messrs. Eckert, Abell and Patel are executive employees of GSCP. Mr.
Abell disclaims beneficial ownership of the shares owned by the
Greenwich Street Funds, except to the extent of his pecuniary interest
therein. Also includes 50,000 shares, in the aggregate, held by trusts
for the benefit of children of Evan M. Marks, for which trusts Mr.
Abell serves as trustee. Mr. Abell disclaims beneficial ownership of
the shares held by such trusts.
(2) Includes 20,000 shares issuable upon the exercise of options
exercisable within 60 days.
(3) Includes: (i) 1,504 shares owned by BWK, Inc. ("BWK"), (ii) 6,755
shares owned by Carlco, Inc. ("Carlco"), (iii) 94,351 shares owned by
Mr. Kanter, not personally but solely as Co-Trustee of each of the
general partners of the HAP Trusts Partnership ("HAP") and (iv) 6,680
shares owned by TMT, Inc. ("TMT").
Mr. Kanter disclaims any and all beneficial interest in any of the
above referenced shares of Common Stock owned by BWK, Carlco, HAP or
TMT. Mr. Kanter, as President of BWK, Carlco and TMT, has sole voting
and investment control of the shares owned by BWK, Carlco and TMT. Mr.
Kanter, as co-trustee of each of the general partners of HAP, shares
voting and investment control of the shares owned by HAP with his
fellow co-trustee.
21
<PAGE>
Each of BWK, Carlco, HAP and TMT disclaims any and all beneficial
ownership of the shares owned by the others.
(4) Includes 90,000 shares issuable upon exercise of options exercisable
within 60 days.
(5) Includes 558,423 shares in the aggregate held in various trusts for the
benefit of Joseph D. Mark's children, for which trusts his wife is
trustee. Mr. Mark disclaims beneficial ownership of the shares held by
such trusts. Also includes 344,445 shares issuable upon exercise of
options within 60 days.
(6) Includes 50,000 held in trusts established for the benefit of Mr.
Marks' children. Mr. Marks disclaims beneficial ownership of these
shares held by such trusts. Includes 65,883 shares issuable upon the
exercise of options within 60 days.
(7) Represents restricted shares that vest within 60 days. Includes 33,333
shares issuable upon the exercise of options within 60 days.
(8) Includes 465,352 shares held by Mr. Raviv in a grantor retained annuity
trust. Also includes 344,445 issuable upon the exercise of options
within 60 days.
(9) Consists of shares held by the Greenwich Street Funds. See note (1)
above.
(10) See notes (1) through (9) above.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 1, 1999, THCG issued: (1) 2,500,000 shares of Common Stock
valued at $2.00 per share, (2) warrants to purchase 1,000,000 shares of Common
Stock at $7.25 per share, and (3) warrants to purchase 1,000,000 shares of
Common Stock at $5.4375 per share to Greenwich Street Capital Partners II, L.P.
and certain of its affiliates ("GSCP") in a private placement transaction,
representing approximately 34.40% of the Common Stock issued and outstanding as
of November 1, 1999. In connection with this private placement, GSCP was given
with the right to appoint one individual to THCG's Board of Directors so long as
GSCP holds THCG Common Stock or warrants to purchase THCG Common Stock which
equal at least 5%, in the aggregate, of the outstanding shares of THCG Common
Stock on a fully diluted basis. Pursuant to GSCP's right to appoint one
individual to THCG's Board of Directors, THCG entered into voting agreements
with each of Adi Raviv, the Raviv Grantor Annuity Trust, Joseph D. Mark, Shai
Novik and the trusts for Mr. Marks' children, pursuant to which each of the
named parties to the voting agreements agreed to vote all shares of capital
stock owned from time to time by that party in favor of the election of the
person appointed by GSCP to the THCG Board of Directors. Keith W. Abell,
Co-President of GSCP, became a director of THCG on November 1, 1999. In
addition, Alben Asset Management LLC, which is 99% owned by Evan M. Marks,
received 100,000 shares of THCG Common Stock as a finders fee in connection with
the private placement.
On November 1, 1999, THCG issued 932,500 shares of Common Stock for
$2.00 per share in a private placement which included Henry Klein, Evan M.
Marks, Shai Novik, Larry Smith and Stanley B. Stern. Messrs. Klein, Marks and
Stern, who became directors of THCG on November 1, 1999, purchased 12,500,
50,000, and 12,500 shares of Common Stock, respectively. Trusts for the benefit
of Mr. Marks' children also purchased 50,000 shares in this private placement.
Shai Novik, who became the Chief Operating Officer and Treasurer of THCG on
November 1, 1999, purchased 25,000 shares of Common Stock and Larry W. Smith,
who became the President and a director of THCG on December 29, 1999, purchased
65,000 shares of Common Stock in this private placement.
THCG leases approximately 4,800 square feet of office space at 650
Madison Avenue, 21st Floor, New York, New York, under an occupancy agreement
with Hambro America, Inc. ("Hambro") that expires on August 30, 2000. Rental
payments under the occupancy agreement total $28,075.35 per month. Hambro is
owned by Joseph D. Mark and Adi Raviv, the Co-Chief Executive Officers of THCG
and Shai Novik, the Chief Operating Officer of THCG through their ownership of
MRN Capital Group, LLC ("Capital Group").
In October 1998, Tower Hill Securities, Inc., a wholly-owned subsidiary
of THCG, loaned $95,000 to Hambro. This loan is non-interest bearing and is
being repaid over 22 months at $4,318 per month, of which there are 7 months
remaining. As of December 31, 1999, the balance of the loan was $30,226. In
connection with THCG's acquisition of Tower Hill in November 1999, Tower Hill
also transferred $90,000 to Hambro.
Pursuant to an agreement, dated as of April 13, 1998, among Joseph D.
Mark, Adi Raviv and Yoav Bitter, on April 30, 1999, Messrs. Mark and Raviv
exercised their right to purchase all of Mr. Bitter's 25% interest in Tower
Hill. Additional payments are due to Mr. Bitter, in an amount equal to 25% of
"all net profits relative to work-in-progress as of" April 30, 1998. Tower Hill,
Joseph D. Mark and Adi Raviv have entered into an indemnification agreement,
dated as of April 30, 1998, pursuant to which Messrs. Mark and Raviv have agreed
to indemnify Tower Hill for any amounts Tower Hill is obligated to pay to Mr.
Bitter in respect of Tower Hill's net profits relative to the engagements of
Tower Hill that were pending, but not completed, on April 30, 1998. Tower Hill
has agreed to indemnify Messrs. Mark and Raviv with respect to any amounts
either of them becomes obligated to pay to Mr. Bitter in excess of the amount
described in the two prior sentences, and Tower Hill has agreed to assume and
pay for the defense of any claim by Mr. Bitter.
Pursuant to various agreements, Tower Hill sold to Capital Group
options to purchase certain warrants held by Tower Hill, which options were
exercised on June 15, 1999. In connection therewith, Capital Group entered into
an agreement with Tower Hill, dated June 15, 1999, pursuant to which Capital
Group agreed to reimburse Tower Hill with respect to income taxes payable by
Tower Hill upon the exercise of the warrants acquired by Capital Group pursuant
to the options. In addition, Capital Group sold to Tower Hill options to
purchase certain warrants held by Capital Group which options were exercised on
June 15, 1999.
23
<PAGE>
On November 1, 1999, pursuant to a stock purchase agreement, dated July
29, 1999, between Tower Hill and Carnegie Partners, Tower Hill purchased certain
shares of preferred stock and warrants issued by RTimage, Ltd. from Carnegie
Partners for a purchase price of $71,371.14. Adi Raviv owns 50% of Carnegie
Partners. On November 1, 1999, pursuant to a stock purchase agreement, dated
July 29, 1999, between Tower Hill and HTI Ventures LLC, Tower Hill purchased
certain securities from HTI Ventures LLC for a purchase price of $26,256.60. Adi
Raviv owns HTI Ventures LLC. On November 1, 1999, Adi Raviv transferred certain
securities to Tower Hill for a purchase price of $315,131.58, including
$132,237.18 of debt forgiveness.
In December 1998, Tower Hill loaned each of Joseph D. Mark and Adi
Raviv $50,000, which loans were forgiven (in the case of Mr. Mark) or repaid (in
the case of Mr. Raviv) on November 1, 1999. In addition, in December 1998, Tower
Hill loaned an aggregate of $219,299.16 to Joseph D. Mark, Adi Raviv and Yoav
Bitter. These loans were noninterest-bearing and had no specified maturity date.
The loan to Mr. Mark, in the amount of $82,237.18, was forgiven on November 1,
1999. The loan to Mr. Raviv, in the amount of $82,237.18, was repaid on November
1, 1999. The loan to Mr. Bitter, in the amount of $54,824.79, remains
outstanding.
Prior to November 1, 1999, THCG retained the firm of Barack Ferrazzano
Kirschbaum Perlman & Nagelberg as its general counsel. Joshua S. Kanter, the
Secretary of THCG from February 28, 1995 until November 1, 1999 and the General
Counsel of THCG from September 14, 1995 until November 1, 1999, is of counsel to
such firm and his wife is a partner of such firm. THCG paid approximately
$367,232.72 in legal fees and expenses to Barack Ferrazzano Kirschbaum Perlman &
Nagelberg during 1999. Joshua S. Kanter is the brother of Joel S. Kanter and the
son of Burton W. Kanter, who are directors of THCG.
In April 1997, The Holding Company, of which Burton W. Kanter is
President, made unsecured loans to Walnut Capital Corp., a wholly-owned
subsidiary of the Company until November 1, 1999, in the aggregate principal
amount of $400,000. Trusts for the benefit of Mr. Burton W. Kanter's family
control a majority of the outstanding common stock of The Holding Company. The
balance of the loan was repaid on November 1, 1999.
In connection with the transaction in which THCG acquired Inland
Financial Corp. ("Inland Financial"), Inland Financial borrowed $250,000 in
October 1998 from the Kanter Family Foundation, an Illinois not-for-profit
private charitable foundation established by the Kanter family, and $43,000 from
Windy City. These loans were repaid on November 1, 1999. Joel S. Kanter is the
President and a director of the Kanter Family Foundation, and Joshua Kanter is
the Vice President and a director of the Kanter Family Foundation.
Until November 1, 1999, Walnut Capital, a subsidiary of THCG, subleased
office space in Vienna, Virginia, which space was also utilized by THCG, from
Windy City pursuant to an oral sublease. Rental under the lease was $4,855 per
month and included secretarial services, office equipment and furniture and
parking. THCG and Walnut Capital paid Windy City $56,590 in rent in 1999. The
sublease was terminated on November 1, 1999.
THCG had a term loan with American National Bank and Trust Company of
Chicago ("ANB"), which term loan was personally guaranteed by Messrs. Burton W.
Kanter and Joel S. Kanter. In consideration for such guarantee, THCG paid
Messrs. Kanters, in the aggregate, an amount equal to .25% per annum of the
amounts so guaranteed. The loan with ANB was repaid on November 1, 1999.
24
<PAGE>
In December 1999, THCG Ventures LLC, a wholly-owned subsidiary of THCG,
formed THCG Venture Partners I, LLC, a Delaware limited liability company. The
members of THCG Venture Partners I, LLC are THCG LLC with a 9.9% interest, the
Greenwich Street Funds, with a 75% interest, and THCG Partners LLC, with a 15.1%
interest. THCG Ventures LLC is the manager of THCG Partners I LLC. Keith W.
Abell is Co-President of the Greenwich Street Funds, which beneficially owns
approximately 35% of THCG's outstanding Common Stock of a fully diluted basis.
Members of THCG Partners, LLC include Joseph D. Mark, Evan M. Marks, Adi Raviv
(through HTI Ventures LLC) and Larry W. Smith, who have committed to make
capital contributions for THCG Partners LLC of $200,000, $200,000, $250,000 and
$125,000, respectively. The members of THCG Venture Partners LLC are committed
to make capital contributions of an aggregate of $20 million in accordance with
their percentage interests, of which $11.5 million has been contributed as of
March 30, 2000.
In March, 2000, Shai Novik and THCG executed a promissory note (the
"Note") pursuant to which THCG will lend Mr. Novik, the Chief Operating Officer
of THCG, the principal sum of $277,349, together with interest at a rate of 8.5%
per annum, as of December 31, 1999. The maturity date of the Note is December
31, 2002. In the event Mr. Novik's employment with THCG is terminated without
cause (as defined in Mr. Novik's employment agreement) or by Mr. Novik for good
reason (as defined as defined in Mr. Novik's employment agreement), prior to
December 31, 2002 and prior to the occurrence of an event of default (as defined
in the Note), Mr. Novik's obligations to repay any principal or interest due
under the Note will be discharged. Mr. Novik has pledged and assigned to THCG a
security interest in 40,000 shares of restricted Common Stock of THCG owned by
Mr. Novik as collateral for Mr. Novik's obligations under the Note.
25
<PAGE>
STOCK PERFORMANCE GRAPH
The incorporation by reference of this Proxy Statement into any
document filed with the SEC by THCG will not be deemed to include the following
performance graph unless such graph is specifically stated to be incorporated by
reference into such document.
The following graph provides a comparison of the cumulative total
stockholder return among THCG, the Nasdaq Stock Market total return index (the
"Nasdaq Stock Market Index") prepared by the Center for Research in Security
Prices ("CRSP") and the Nasdaq Financial Stocks total return index prepared by
CRSP (the "Nasdaq Financial Stocks Index"). The comparison is for the period
from August 22, 1995 (the date THCG's Common Stock first became listed on the
Nasdaq National Market) to December 31, 1999 and assumes an investment of $100
on August 22, 1995 and the reinvestment of any dividends. The initial price of
THCG's Common Stock shown in the graph below is based upon the price of $3.50 as
reported on August 22, 1995 on the Nasdaq National Market. The Nasdaq Stock
Market Index comprises all domestic shares traded on the Nasdaq National Market
and The Nasdaq SmallCap Market. The Nasdaq Financial Stocks Index comprises all
shares traded on the Nasdaq National Market and The Nasdaq SmallCap Market which
were issued by companies whose primary business falls within Standard Industrial
Classification (SIC) codes 60 through 67. The historical information set forth
below is not necessarily indicative of future performance. From October 15, 1997
to November 1, 1999, THCG (d/b/a Walnut Financial Services, Inc.) was a business
development company ("BDC") and registered under the Investment Company Act of
1940. Upon the acquisition of Tower Hill Securities, Inc. by THCG, effective
November 1, 1999, THCG withdrew its election to be registered as a BDC under the
Investment Company Act of 1940.
[Graph Inserted Here]
<TABLE>
<CAPTION>
Cumulative Total Return
8/22/95 12/95 12/96 12/97 12/98 12/99
------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
THCG, Inc. 100 64 32 44 10 817
Nasdaq Stock Market Index 100 103 127 155 219 397
Nasdaq Financial Stocks Index 100 115 147 224 217 204
</TABLE>
26
<PAGE>
PROPOSAL 2
APPROVAL OF THE THCG 2000 STOCK INCENTIVE PLAN
THCG is submitting to its shareholders for approval the THCG, Inc. 2000
Stock Incentive Plan (the "THCG 2000 Stock Plan"). The THCG 2000 Stock Plan is
designed primarily to provide certain key individuals, on whose initiative and
efforts the successful conduct of the business of THCG largely depends, and who
are largely responsible for the management, growth and protection of the
business of THCG, with incentives and rewards to encourage them to continue
their association with THCG, and to maximize their performance and to provide
certain "performance-based compensation" to these key individuals.
THCG's Board of Directors has unanimously approved a resolution
adopting the THCG 2000 Stock Plan, subject to stockholder approval. Shareholder
approval of the THCG 2000 Stock Plan is required under the Nasdaq National
Market corporate governance rules.
DESCRIPTION OF THE THCG 2000 STOCK PLAN
In General
Nature of Shares to be Issued/Administrative Committee. Shares issued
under the THCG 2000 Stock Plan may be authorized but unissued shares of THCG
Common Stock or treasury shares of THCG Common Stock, at the discretion of a
committee designated to administer the THCG 2000 Stock Plan (the "Committee").
The THCG 2000 Stock Plan provides that the Committee will be the Compensation
Committee of the Board of Directors or such other committee of the Board of
Directors as the Board of Directors will appoint to administer the THCG 2000
Stock Plan. At all times, the Committee must consist of at least two persons. In
addition, the Committee is to consist solely of individuals who are (or grants
will be made by a subcommittee of two or more persons, each of whom will be)
"non-employee directors" (as defined in Rule 16b-3 promulgated under the
Exchange Act), and all members of the Committee must be "outside directors" (as
defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). If no Committee is appointed, the Board of Directors will administer
the THCG 2000 Stock Plan.
Awards. The THCG 2000 Stock Plan specifically provides for the grant of
(i) non-qualified stock options ("NQOs"), (ii) incentive stock options ("ISOs"),
(iii) limited stock appreciation rights ("LSARs"), (iv) tandem stock
appreciation rights ("Tandem SARs"), (v) stand-alone stock appreciation rights
("Stand-Alone SARs"), (vi) shares of restricted stock, (vii) shares of phantom
stock, (viii) stock bonuses, (ix) cash bonuses and (x) dividend equivalent
rights ("DERs") (collectively, "Incentive Awards"). The THCG 2000 Stock Plan
also provides that the Committee may grant other types of stock-based awards in
such amounts and subject to such terms and conditions, as the Committee will in
its discretion determine.
Maximum Number of Shares. The maximum number of shares of THCG Common
Stock with respect to which "Incentive Awards" may be granted under the THCG
2000 Stock Plan is 4,500,000. The maximum number of shares of THCG Common Stock
with respect to which any individual may be granted Incentive Awards during any
calendar year is 1,000,000.
Eligibility. Key current and former employees of THCG and its
affiliates (including prospective employees) and certain current and former
consultants or other independent contractors to THCG and its affiliates
(including non-employee directors of THCG or its affiliates) will be eligible to
receive grants of Incentive Awards. Fourteen individuals have received awards,
subject to shareholder approval and certain other conditions. See "Issuance of
Options" and "New Plan Benefits" below for more details on the awards to certain
of these individuals. On an ongoing basis, the number of individuals in any
eligible class is indeterminable.
27
<PAGE>
Committee's Authority. The Committee will determine which key
individuals receive grants of Incentive Awards, the type of Incentive Awards
granted and the number of shares subject to each Incentive Award. No Incentive
Award may be granted under the THCG 2000 Stock Plan after February 14, 2010.
Subject to the terms of the THCG 2000 Stock Plan, the Committee also will
determine the prices, expiration dates and other material features of Incentive
Awards granted under the THCG 2000 Stock Plan.
The Committee may, in its absolute discretion, without amendment to the
THCG 2000 Stock Plan, (i) accelerate the date on which any option or stock
appreciation right granted under the THCG 2000 Stock Plan becomes exercisable or
otherwise adjust any of the terms of such option or stock appreciation right,
(ii) accelerate the date on which any Incentive Award vests, (iii) waive any
condition imposed under the THCG 2000 Stock Plan with respect to any Incentive
Award or (iv) otherwise adjust any of the terms of any Incentive Award.
The Committee will administer the THCG 2000 Stock Plan and has the
authority to interpret and construe any provision of the THCG 2000 Stock Plan
and to adopt such rules and regulations for administering the THCG 2000 Stock
Plan as it deems necessary or appropriate. All decisions and determinations of
the Committee are final and binding on all parties. THCG will indemnify each
member of the Committee against any loss, cost, expense or liability arising out
of any action, omission or determination relating to the THCG 2000 Stock Plan,
unless such action, omission or determination was taken or made in bad faith and
without reasonable belief that it was in the best interests of THCG.
Suspension, Discontinuance, Amendment. The Board of Directors may, at
any time, suspend or discontinue the THCG 2000 Stock Plan or revise or amend it
in any respect whatsoever; provided, however, that if and to the extent required
under Section 422 of the Code (related to the grant of ISOs) (if and to the
extent that the Board of Directors deems it appropriate to comply with Section
422) and if and to the extent required to treat some or all of the Incentive
Awards as "performance-based compensation" within the meaning of Section 162(m)
of the Code (if and to the extent that the Board of Directors deems it
appropriate to meet such requirements), no amendment will be effective without
the approval of the shareholders of THCG, that (i) increases the number of
shares of THCG Common Stock with respect to which Incentive Awards may be issued
under the Plan, (ii) modifies the class of individuals eligible to participate
in the THCG 2000 Stock Plan or (iii) materially increases the benefits accruing
to individuals pursuant to the THCG 2000 Stock Plan. No amendment or
modification may, without the consent of a participant, reduce the participant's
rights under any previously granted and outstanding Incentive Award except to
the extent that the Board of Directors determines that such amendment is
necessary or appropriate to prevent such Incentive Awards from constituting
"applicable employee remuneration" within the meaning of Section 162(m) of the
Code.
Summary of Awards Available Under the THCG 2000 Stock Plan
Non-Qualified Stock Options. The exercise price of each NQO granted
under the THCG 2000 Stock Plan will be such price as the Committee will
determine on the date on which such NQO is granted, which price will not be less
than that required by law. Each NQO will be exercisable for a term, not to
exceed ten years, established by the Committee on the date on which such NQO is
granted. The exercise price will be paid in cash or, subject to the approval of
the Committee, in shares of THCG Common Stock valued at their fair market value
on the date of exercise.
Except in the event of a "Termination of Employment" for "Cause,"
"Disability" (as each such term is defined in the THCG 2000 Stock Plan) or
death, unless otherwise determined by the Committee and included in the
agreement pursuant to which an NQO is granted, in the event a participant's
employment terminates: (i) NQOs, to the extent that they were exercisable at the
time of such termination, will remain exercisable until the expiration of three
months after such termination (or, if earlier, the expiration of their term) and
(ii) NQOs, to the extent that they were not exercisable at the time of such
termination, will expire at the close of business on the date of such
termination. In the event of a participant's Termination of Employment by reason
of Disability or death, (i) NQOs, to the extent that they were exercisable at
the time of such termination, will remain exercisable until the expiration of
their original term and (ii) NQOs, to the extent that they were not exercisable
at the time of such termination, will expire at the close of business on the
date of such termination. In the event of the Termination of Employment of a
participant for Cause, all NQOs held by such participant terminate immediately
as of the date of such termination.
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In the event a participant's employment is terminated by THCG, other
than for Cause, on or after the occurrence of a "Change in Control" of THCG (as
defined in the THCG 2000 Stock Plan) but prior to the expiration of a six-month
period following the Change in Control, all NQOs become immediately exercisable.
Incentive Stock Options. Very generally, ISOs are options that may
provide certain federal income tax benefits to a participant that are not
available with NQOs provided that the participant holds the shares acquired upon
exercise of an ISO for at least two years after the date the ISO is granted and
at least one year after the exercise date. The exercise price-per-share of each
ISO granted under the THCG 2000 Stock Plan must be the fair market value of a
share of THCG Common Stock on the date on which such ISO is granted. An ISO will
be exercisable for a maximum term, not to exceed ten years, established by the
Committee on the date on which such ISO is granted. The exercise price in
respect of an ISO will be paid in cash or, subject to the approval of the
Committee, in shares of THCG Common Stock valued at their fair market value on
the date of exercise.
An ISO granted to any individual who owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of THCG
is subject to the following additional limitations: (i) the exercise
price-per-share of the ISO must be at least 110% of the fair market value of a
share of THCG Common Stock at the time any such ISO is granted and (ii) the ISO
cannot be exercisable after the expiration of five years from the grant date.
The aggregate fair market value of shares of THCG Common Stock with
respect to which ISOs are exercisable by a participant for the first time during
any calendar year (determined on the grant date) under the THCG 2000 Stock Plan
or any other plan of THCG or its subsidiaries may not exceed $100,000.
In the event of a participant's Termination of Employment, ISOs granted
to the participant are exercisable to the same extent as described above with
respect to NQOs (although the definition of the term Disability in respect of
ISOs may differ). However, in the event of a Termination of Employment by reason
of Disability, an option granted as an ISO will be treated for tax purposes as
an NQO rather than an ISO to the extent it is exercised more than one year after
the Termination of Employment. ISOs are not transferable other than by will or
by the laws of descent and distribution.
In the event of a participant's Termination of Employment by THCG,
other than for Cause, on or after the occurrence of a Change in Control of THCG
but prior to the expiration of a six-month period following the Change in
Control, all ISOs become immediately exercisable.
Reload Options. In certain circumstances, the Committee may include in
any agreement evidencing an option (the "Original Option") a provision that a
"reload option" will be granted to any participant who delivers shares of THCG
Common Stock in partial or full payment of the exercise price of the Original
Option. The reload option will relate to a number of shares of THCG Common Stock
equal to the number of shares of THCG Common Stock delivered, and will have an
exercise price-per-share equal to the fair market value of a share of THCG
Common Stock on the date of the exercise of the Original Option.
Limited Stock Appreciation Rights. Each NQO and ISO granted under the
THCG 2000 Stock Plan may include an LSAR with respect to a number of shares
equal to the number of shares subject to the related option. The exercise of an
LSAR with respect to a number of shares causes the cancellation of the option
with which it is included with respect to an equal number of shares. The
exercise of an option with respect to a number of shares causes the cancellation
of the LSAR included with it with respect to an equal number of shares.
In general, LSARs are exercisable only during the sixty-day period
immediately following a Change in Control and only to the extent that their
related options are exercisable. The exercise of an LSAR included with a NQO
with respect to a number of shares entitles the participant to an amount in
cash, for each such share, equal to the excess of (i) the greater of (A) the
highest price-per-share of THCG Common Stock paid in connection with the Change
in Control in connection with which the LSAR became exercisable and (B) the
highest fair market value of a share of THCG Common Stock on the date of such
Change in Control over (ii) the exercise price of the related NQO. The exercise
of an LSAR included with an ISO with respect to a number of shares entitles the
participant to an amount in cash, for each such share, equal to the excess of
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<PAGE>
(i) the fair market value of a share of THCG Common Stock on the date of
exercise over (ii) the exercise price of the related ISO.
Tandem Stock Appreciation Rights. The Committee may grant, in
connection with any NQO or ISO, a Tandem SAR with respect to a number of shares
of THCG Common Stock less than or equal to the number of shares subject to the
related option. The exercise of a Tandem SAR with respect to a number of shares
causes the cancellation of its related option with respect to an equal number of
shares. The exercise of an option with respect to a number of shares causes the
cancellation of its related Tandem SAR to the extent that the number of shares
subject to the option after its exercise is less than the number of shares
subject to the Tandem SAR.
A Tandem SAR is exercisable at the same time and to the same extent as
its related option. The exercise of a Tandem SAR with respect to a number of
shares entitles the participant to an amount in cash, for each such share, equal
to the excess of (i) the fair market value of a share of THCG Common Stock on
the date of exercise over (ii) the exercise price of the related option.
Stand-Alone Stock Appreciation Rights. The Committee may grant
Stand-Alone SARs, which are stock appreciation rights that are not related to
any option, pursuant to the THCG 2000 Stock Plan. The exercise price of each
Stand-Alone SAR granted under the THCG 2000 Stock Plan will be such price as the
Committee will determine on the date on which such Stand-Alone SAR is granted. A
Stand-Alone SAR will be exercisable for a term, not to exceed ten years,
established by the Committee on the date on which such Stand-Alone SAR is
granted. The exercise of a Stand-Alone SAR with respect to a number of shares
entitles the participant to an amount in cash, for each such share, equal to the
excess of (i) the fair market value of a share of THCG Common Stock on the date
of exercise over (ii) the exercise price of the Stand-Alone SAR.
Except in the event of a Termination of Employment of a participant for
Cause, Disability or death, unless otherwise determined by the Committee and
included in the agreement pursuant to which a Stand-Alone SAR is granted, in the
event of a participant's Termination of Employment: (i) Stand-Alone SARs, to the
extent that they were exercisable at the time of such termination, will remain
exercisable until the expiration of three months after such termination (or, if
earlier, the expiration of their term) and (ii) Stand-Alone SARs, to the extent
that they were not exercisable at the time of such termination, will expire at
the close of business on the date of such termination. In the event of a
participant's Termination of Employment by reason of Disability or death, (i)
Stand-Alone SARs, to the extent that they were exercisable at the time of such
termination, will remain exercisable until the expiration of their original term
and (ii) Stand-Alone SARs, to the extent that they were not exercisable at the
time of such termination, will expire at the close of business on the date of
such termination. In the event of the Termination of Employment of a participant
for Cause, all Stand-Alone SARs held by such participant terminate immediately
as of the date of such termination.
In the event of a participant's Termination of Employment by THCG,
other than for Cause, on or after the occurrence of a Change in Control of THCG
but prior to the expiration of a six-month period following the Change in
Control, all Stand-Alone SARs become immediately exercisable.
Restricted Stock. A grant of shares of restricted stock represents the
promise of THCG to issue shares of THCG Common Stock on a predetermined date
(the "issue date") to a participant, provided the participant is continuously
employed by THCG until the issue date. Prior to the vesting of the shares, the
shares are not transferable by the participant and are forfeitable. Vesting of
the shares occurs on a second predetermined date (the "vesting date") if the
participant has been continuously employed by THCG until that date. The
Committee may, at the time shares of restricted stock are granted, impose
additional conditions, such as, for example, the achievement of specified
performance goals, to the vesting of the shares. Vesting of some portion of, or
all, shares of restricted stock may occur upon the Termination of Employment of
a participant other than for Cause prior to the vesting date. If vesting does
not occur, shares of restricted stock are forfeited upon a participant's
Termination of Employment for any reason.
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<PAGE>
In the event of a participant's Termination of Employment by THCG,
other than for Cause, on or after the occurrence of a Change in Control of THCG
but prior to the expiration of a six-month period following the Change in
Control, all shares of restricted stock that have not been issued (or forfeited)
automatically are issued and all shares of restricted stock that have not yet
been vested (or forfeited), automatically vest.
Phantom Stock. A grant of shares of phantom stock represents the right
to the economic equivalent of a grant of restricted stock, which is payable in
cash. Shares of phantom stock are subject to the same vesting requirements as
are shares of restricted stock. In the event of a participant's Termination of
Employment by THCG, other than for Cause, on or after the occurrence of a Change
in Control of THCG but prior to the expiration of a six-month period following
the Change in Control, all shares of Phantom Stock which have not vested, or
have not been canceled or forfeited, automatically vest.
Stock Bonuses. Bonuses payable in THCG Common Stock may be granted by
the Committee and may be payable at such times and subject to such conditions as
the Committee determines.
Cash Bonuses. In connection with a grant of shares of restricted stock
or in connection with the grant of a stock bonus, the Committee may grant a cash
"tax bonus," payable when a participant is required to recognize income for
federal income tax purposes with respect to such shares. The tax bonus may not
be greater than the fair market value of the shares of restricted stock or stock
bonus on the date the income is required to be so recognized.
Dividend Equivalent Rights. The Committee may, in its discretion, grant
with respect to any Incentive Award a DER entitling a participant to receive
amounts equal to the ordinary dividends that would have been paid during the
time such Incentive Award is outstanding (and, in the case of Options and SARs,
unexercised, in the case of an award of Restricted Stock or a Stock Bonus, prior
to the issue date for the related shares and, in the case of an award of Phantom
Stock, prior to the payment date in respect of such Phantom Stock) on the shares
of THCG Common Stock covered by such Incentive Award if such shares were then
outstanding. Dividend Equivalent Rights may be payable in cash, in shares of
THCG Common Stock or in any other form.
Other Equity-Based Awards
The Committee may grant other types of stock-based awards in such
amounts and subject to such terms and conditions as the Committee will in its
discretion determine, subject to the provisions of the THCG 2000 Stock Plan.
Transferability
In general, no Incentive Award is transferable other than by will or
the laws of descent and distribution (except to the extent an agreement with
respect to an Incentive Award permits certain transfers to certain of a
participant's family members or trusts).
Certain Corporate Changes
The THCG 2000 Stock Plan provides for an adjustment in the number of
shares of THCG Common Stock available to be issued under the THCG 2000 Stock
Plan, the number of shares subject to Incentive Awards, and the exercise prices
of certain Incentive Awards upon a change in the capitalization of THCG, a stock
dividend or split, a merger or combination of shares and certain other similar
events. The THCG 2000 Stock Plan also provides for the adjustment or termination
of Incentive Awards upon the occurrence of certain corporate events.
Income Tax Withholding
The THCG 2000 Stock Plan provides that a participant may be required to
meet certain income tax withholding requirements by remitting to THCG cash or
through the withholding of shares otherwise payable to the participant. In
addition, the participant may meet such withholding requirements, subject to
certain conditions, by remitting shares of previously acquired THCG Common
Stock.
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Limitations Imposed by Section 162(m)
Prior to a Change in Control of THCG, if and to the extent that the
Committee determines THCG's federal tax deduction in respect of an Incentive
Award may be limited as a result of Section 162(m) of the Code, the Committee
may delay the exercise of or payments to, as the case may be, a participant with
respect to stock options, Tandem SARs, Stand-Alone SARs or DERs (collectively,
the "Delayed Payments") or require a participant to surrender to the Committee
any certificates with respect to restricted stock and stock bonuses and
agreements with respect to phantom stock in order to cancel such awards (and any
related cash bonuses or DERs) and, in exchange for such cancellation, credit to
an account on the books and records of THCG a cash amount equal to the fair
market value of the shares of THCG Common Stock subject to such awards
(collectively, the "Book Accounts"). The Delayed Payments and Book Accounts will
be paid to the participant within thirty days after the earlier to occur of (i)
the date the compensation paid to the participant no longer is subject to the
deduction limitation under Section 162(m) of Code and (ii) a Change in Control
of THCG.
Forfeiture of Gain from Awards in Certain Events
To the extent that a participant breaches any restrictive covenant
otherwise applicable to the participant (such as a noncompetition,
nonsolicitation or nondisclosure covenant) within one year after the date on
which the participant exercises a stock option, LSAR, Tandem SAR or Stand-Alone
SAR, or the date on which any Restricted Stock or Phantom Stock vests, or the
date on which the participant realizes income with respect to any other
Incentive Award, then any gain realized by the participant thereby, will be
required to be repaid to THCG.
Application of 1940 Act
Any provision of the THCG 2000 Stock Plan that would conflict with a
provision of the of Investment Company Act of 1940, to the extent applicable to
THCG or any affiliate, will have no force or effect.
Issuance of Options
THCG has granted options to purchase shares of THCG Common Stock (the
"Initial Options") to certain individuals pursuant to the THCG 2000 Stock Plan.
If the THCG 2000 Stock Plan is approved by shareholders, the following table
indicates the amount of such Initial Options to be held by the executive
officers, directors, nominees and associates of such officers, directors and
nominees of THCG and its subsidiaries:
Number of
Name and Position Shares(1)
- ----------------- ---------
Joseph D. Mark
Co-Chief Executive Officer....................................... 0
Adi Raviv
Co-Chief Executive Officer....................................... 0
Larry W. Smith
President........................................................ 0
Shai Novik
Chief Operating Officer and Secretary............................ 0
Evan M. Marks
President, THCG Ventures LLC..................................... 195,000(2)
Joel S. Kanter
Former Chief Executive Officer and President..................... 0
Robert F. Mauer
Former Chief Financial Officer and Treasurer..................... 0
Executive Group (3)................................................. 195,000(4)
Non-Executive Director Group (5).................................... 0
Director Nominees................................................... 195,000(6)
Associates of Directors, Executive Officers and Nominees............ 0
Other 5% recipients................................................. 0
Non-Executive Officer Employee Group................................ 351,500(7)
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(1) Number of shares acquirable upon the exercise of each option grant.
(2) These options are divided into four classes which become exercisable
concurrently but with a separate exercise price for each class, are
exercisable pro-rata in twelve equal quarterly installments, commencing
on February 1, 2000, and have a term of five years. The exercise prices
for the four classes are $12.50, $15.00, $17.50 and $20.00,
respectively.
(3) This group is comprised of the executive officers of THCG.
(4) See note (2).
(5) Consists of directors of THCG who are not employees of THCG.
(6) See note (2).
(7) Of these options, 239,000 have an exercise price equal to $10 per
share, of which 37,500 are immediately exercisable, 49,166.66 are
exercisable commencing on June 27, 2000 and the remaining 152,333.34
are exercisable in two equal installments commencing on the March 29,
2001 and March 29, 2002, respectively. All of these options expire five
years from the date of grant on March 29, 2005.
Of these options, 12,500 have an exercise price of $15.00 per share, of
which 4,166.66 are exercisable commencing on June 27, 2000 and the
remaining 8,333.34 are exercisable in two equal installments commencing
on March 29, 2001 and March 29, 2002, respectively. All of these
options expire five years from the date of grant on March 29, 2005.
Of these options, 100,000 have an exercise price of $17.00 per share
and are exercisable ratably over six months commencing on March 8,
2000. These options expire on March 7, 2005.
New Plan Benefits
The following individuals received option grants of THCG Common Stock
to acquire the number of shares of THCG Common Stock indicated below, subject to
the approval and adoption of the THCG 2000 Stock Plan by THCG's shareholders.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
The THCG 2000 Stock Incentive Plan
Number of
Name and Position Dollar Value (1) Units (2)
- ----------------- ---------------- ---------
Joseph D. Mark
<S> <C> <C>
Co-Chief Executive Officer........................................... $ 0 0
Adi Raviv
Co-Chief Executive Officer........................................... $ 0 0
Larry W. Smith
President............................................................ $ 0 0
Shai Novik
Chief Operating Officer and Secretary................................ $ 0 0
Evan M. Marks
President, THCG Ventures LLC......................................... $ 3,168,750 195,000 (3)
Joel S. Kanter
Former Chief Executive Officer and President......................... $ 0 0
Robert F. Mauer
Former Chief Financial Officer and Treasurer......................... $ 0 0
Executive Group (4)..................................................... $ 3,168,750 195,000
Non-Executive Director Group (5)........................................ $ 0 0
Non-Executive Officer Employee Group(6)................................. $ 4,277,500 351,500
</TABLE>
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<PAGE>
(1) The dollar value of the awards is based on the difference between the
exercise price and the fair market value of the THCG Common Stock on
the date of the grant.
(2) Number of shares acquirable with each option grant.
(3) These options are divided into four classes which become exercisable
concurrently but with a separate exercise price for each class, are
exercisable pro-rata in twelve equal quarterly installments, commencing
on February 1, 2000, and have a term of five years. The exercise prices
for the four classes are $12.50, $15.00, $17.50 and $20.00,
respectively.
(4) Consists of the executive officers of THCG.
(5) Consists of directors of THCG who are not employees of THCG.
(6) Of these options, 239,000 have an exercise price equal to $10 per
share, of which 37,500 are immediately exercisable, 49,166.66 are
exercisable commencing on June 27, 2000 and the remaining 152,333.34
are exercisable in two equal installments commencing on the March 29,
2001 and March 29, 2002, respectively. All of these options expire five
years from the date of grant on March 29, 2005.
Of these options, 12,500 have an exercise price of $15.00 per share, of
which 4,166.66 are exercisable commencing on June 27, 2000 and the
remaining 8,333.34 are exercisable in two equal installments commencing
on March 29, 2001 and March 29, 2002, respectively. All of these
options expire five years from the date of grant on March 29, 2005.
Of these options, 100,000 have an exercise price of $17.00 per share
and are exercisable ratably over six months commencing on March 8,
2000. These options expire on March 7, 2005.
Summary of Federal Tax Consequences
The following is a description of the principal federal income tax
consequences of awards under the THCG 2000 Stock Plan based on present federal
income tax laws. Federal income tax laws may change from time to time and any
legislation that may be enacted in the future by the United States Congress may
significantly affect the federal income tax consequences described below. No
representation is or can be made regarding whether any such legislation will or
may be enacted and/or the impact of any such legislation. The description below
does not purport to be a complete description of the tax consequences associated
with awards under the THCG 2000 Stock Plan applicable to any particular award
recipient. Differences in each individual's financial situation may cause
federal, state and local tax consequences of awards to vary. Each recipient of
an award should consult his or her personal tax adviser about the detailed
provisions of the applicable tax laws and regulations.
Non-Qualified Stock Options. In general, an optionee will not be deemed
to receive any income at the time an NQO is granted, nor will THCG be entitled
to a federal tax deduction at that time.
When an optionee exercises an NQO, the optionee will recognize ordinary
compensation income equal to the excess of (a) the fair market value of the THCG
Common Stock received as a result of the exercise of the option on the exercise
date over (b) the option exercise price, and THCG will be entitled to a tax
deduction in that amount. The shares acquired by the optionee upon exercise of
the NQO will have a tax basis equal to the fair market value of the shares on
the exercise date. Upon any subsequent sale of THCG Stock received on exercise
of the NQO, the optionee will recognize a capital gain (or loss) in an amount
equal to the difference between the amount realized on the sale and such tax
basis. Any such gain (or loss) will be characterized as long-term
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<PAGE>
capital gain (or loss) if the shares have been held for more than one year;
otherwise, the gain (or loss) will be characterized as a short-term capital gain
(or loss). An optionee's holding period for federal income tax purposes for such
shares will commence on the date following the date of exercise. Short-term
capital gain is subject to tax at the same rate as is ordinary income. Under
current law, the rate at which net long-term capital gain will be taxed will
vary depending on the optionee's holding period and the date the optionee
disposes of the shares. The Code currently provides that, in general, the net
long-term capital gain resulting from the sale of shares held for more than 12
months will be subject to tax at a maximum rate of 20% (10% for individuals in
the 15% tax bracket). The Code currently provides that net long-term capital
gain resulting from dispositions after December 31, 2005 of shares held for more
than 5 years may be subject to a reduced rate.
If all or any part of the exercise price of an NQO is paid by the
optionee with shares of common stock (including, based upon proposed regulations
under the Code, shares previously acquired upon exercise of an ISO), no gain or
loss will be recognized by the optionee on the shares surrendered in payment.
The number of shares received on such exercise of the NQO equal to the number of
shares surrendered will have the same tax basis and holding period, for purposes
of determining whether subsequent dispositions result in long-term or short-term
capital gain or loss and the applicable tax rates, as the basis and holding
period of the shares surrendered. The balance of the shares received on such
exercise will be treated for federal income tax purposes as described in the
preceding paragraphs as though issued upon the exercise of the NQO for an
exercise price equal to the consideration, if any, paid by the optionee in cash.
The optionee's compensation taxable as ordinary income upon such exercise, and
THCG's deduction, will not be affected by whether the exercise price is paid in
cash or in shares of THCG Common Stock.
Incentive Stock Options. In general, an optionee will not be deemed to
receive any income at the time an ISO is granted or exercised if the optionee
does not dispose of the shares acquired on exercise of the ISO within two years
after the grant of the ISO and one year after the exercise of the ISO (discussed
more fully in the next paragraph). In such a case, the gain (if any) on a
subsequent sale (the excess of the amount received over the exercise price) or
loss (if any) on a subsequent sale (the excess of the exercise price over the
amount received) will be a long-term capital gain or loss and will be subject to
tax based on the holding period of the shares described in the discussion of
NQOs above. However, for purposes of computing the "alternative minimum tax"
applicable to an optionee, the optionee will include in the optionee's
alternative minimum taxable income the amount the optionee would have included
in income if the ISO were an NQO. Such amount may be subject to an alternative
minimum tax of 26% or 28%. Similarly, for purposes of making alternative minimum
tax calculations, the optionee's basis in the stock received on the exercise of
an ISO will be determined as if the ISO were an NQO.
If an optionee sells the shares acquired on exercise of an ISO within
two years after the date of grant of the ISO or within one year after the
exercise of the ISO, the disposition is a "disqualifying disposition," and the
optionee will recognize income in the year of the disqualifying disposition
equal to the excess of the amount received for the shares over the exercise
price. Of that income, the portion equal to the excess of the fair market value
of the shares at the time the ISO was exercised over the exercise price will be
treated as compensation to the optionee, taxable as ordinary income, and the
balance (if any) will be long- or short- term capital gain depending on whether
the shares were sold more than one year after the ISO was exercised. The federal
tax rate applicable to any long-term capital gain will depend upon the holding
period of the shares as described above. If the optionee sells the shares in a
disqualifying disposition at a price that is below the exercise price, the loss
will be a short-term capital loss if the optionee has held the shares for one
year or less and otherwise will be a long-term capital loss.
If an optionee uses shares acquired upon the exercise of an ISO to
exercise an ISO, and the sale of the shares so surrendered for cash on the date
of surrender would be a disqualifying disposition of such shares, the use of
such shares to exercise an ISO also would constitute a disqualifying
disposition. In such case, proposed regulations under the Code appear to provide
that the tax consequences described above with respect to disqualifying
dispositions would apply, except that no capital gain would be recognized with
respect to such disqualifying disposition. In addition, the basis of the
surrendered shares would be allocated to the shares acquired upon exercise of
the ISO, and the holding period of the shares so acquired would be determined,
in a manner prescribed in proposed regulations under the Code.
THCG is not entitled to a deduction as a result of the grant or
exercise of an ISO. If the optionee has compensation taxable as ordinary income
as a result of a disqualifying disposition, THCG will be entitled to a deduction
in an amount equal to the compensation income resulting from the disqualifying
disposition in the taxable year of THCG in which the disqualifying disposition
occurs.
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<PAGE>
Stock Appreciation Rights. A recipient of a stock appreciation right
will not be deemed to receive any income at the time a stock appreciation right
is granted, nor will THCG be entitled to a deduction at that time. However, when
a stock appreciation right is exercised, the recipient will be deemed to have
received compensation taxable as ordinary income in an amount equal to the
amount of cash or fair market value of THCG Common Stock or other property
received. THCG will be entitled to a deduction in an amount equal to the amount
of ordinary income recognized by the recipient.
Restricted Stock. A grant of restricted shares of THCG Common Stock
will not result in income for the recipient or a tax deduction for THCG until
such time as the shares are no longer subject to a substantial risk of
forfeiture or restrictions on transferability (unless, as described below, the
recipient elects otherwise under Section 83(b) of the Code within 30 days of the
date of grant). Upon lapse or release of such restrictions, the recipient
generally will include in gross income an amount equal to the fair market value
of the shares less any amount paid for them, and THCG will be entitled to a tax
deduction in the same amount. The recipient's tax basis in the shares will equal
the income so recognized plus the amount paid for the shares. Any gain or loss
upon a subsequent disposition of the shares will be long-term capital gain or
loss if the shares are held for more than one year and otherwise will be
short-term capital gain or loss. The federal tax rate applicable to any
long-term capital gain will depend upon the holding period of the shares as
described above.
Pursuant to Section 83(b) of the Code, the recipient of a restricted
stock award may elect within 30 days of receipt of the award to be taxed at
ordinary income tax rates on the fair market value of the THCG Common Stock
comprising the award at the time of award. If the election is made, the
recipient will acquire a tax basis in the shares equal to the ordinary income
recognized by the recipient at the time of award plus any amount paid for the
shares and THCG will be entitled to a deduction in an amount equal to the amount
of ordinary income recognized by the recipient. No income will be recognized
upon lapse or release of the restrictions. Any gain or loss upon a subsequent
disposition of the shares will be long-term capital gain or loss if the shares
are held for more than one year and otherwise will be short-term capital gain or
loss. The federal tax rate applicable to any long-term capital gain will depend
upon the holding period of the shares. In the event of a forfeiture of the
shares with respect to which a recipient previously made a Section 83(b)
election, the recipient will not be entitled to a loss deduction.
Phantom Stock. A participant will not be deemed to receive any income
at the time shares of phantom stock are granted, nor will THCG be entitled to a
deduction at that time. However, when shares of phantom stock vest, the
participant will be deemed to have received compensation taxable as ordinary
income in the amount of the cash received. THCG will be entitled to a deduction
in an amount equal to the amount of ordinary income recognized by the
participant.
Stock Bonuses. In general, upon the receipt of a stock bonus, a
participant will be deemed to have received compensation taxable as ordinary
income in an amount equal to the fair market value of the stock at the time it
is received. THCG will be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the participant.
Upon any sale of shares of THCG Common Stock received as a stock bonus,
any gain (the excess of the amount received over the fair market value of the
shares on the date ordinary income was recognized) or loss (the excess of the
fair market value of the shares on the date ordinary income was recognized over
the amount received) will be a long-term capital gain or loss if the sale occurs
more than one year after such date of recognition and otherwise will be a
short-term capital gain or loss.
Cash Bonuses. Upon the receipt of a cash bonus, a participant will be
deemed to have received compensation taxable as ordinary income in the amount of
the cash received. THCG will be entitled to a deduction in an amount equal to
the amount of ordinary income recognized by the participant.
Dividend Equivalent Rights. The grant of dividend equivalent rights
will not result in income to the recipient or in a tax deduction for THCG. When
any amount is paid or distributed to recipient in respect of a dividend
equivalent right, the recipient will recognize ordinary income equal to the fair
market value of any property distributed and/or the amount of any cash
distributed, and THCG will be entitled to a tax deduction in the same amount at
such time.
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Deduction Limit under Section 162(m) of the Code. In general, Section
162(m) of the Code (the "Million Dollar Limit") provides that, subject to
certain exceptions, remuneration in excess of $1 million that is paid to certain
"covered employees" of a publicly held corporation (generally, the corporation's
Chief Executive Officer and its four most highly compensated employees other
than the Chief Executive Officer) will not be deductible by the corporation. If
the THCG 2000 Stock Plan is approved by the THCG shareholders, grants of NQOs,
ISOs, Tandem SARs, LSARs and Stand-Alone SARs generally would be eligible for an
exception to the Million Dollar Limit applicable to certain qualified
"performance-based compensation", provided the applicable exercise price
relating to such grants is not less than the fair market value of a share of
THCG common stock on the date of grant. However, without meeting certain other
requirements, it would not appear that other Incentive Awards would be exempt
from the Million Dollar Limit. Thus, if and to the extent such other Incentive
Awards constitute taxable income to a covered employee in a year and such
covered employee's income subject to the Million Dollar Limit exceeds $1
million, THCG would not be entitled to a deduction for such excess. The THCG
2000 Stock Plan permits the Committee, prior to a Change in Control, to defer
payments to covered employees that otherwise might count against the Million
Dollar Limit until a year in which such individuals are no longer covered
employees as described above regarding limitations imposed by Section 162(m). As
a result, THCG's deduction for such amounts could be preserved.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION ON THE PARTICIPANT AND THCG WITH RESPECT TO THE SHARES PURCHASED UNDER
THE THCG 2000 STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT
DISCUSS THE TAX CONSEQUENCES ARISING IN THE CONTEXT OF A PARTICIPANT'S DEATH OR
THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT'S INCOME OR GAIN MAY BE TAXABLE.
Incorporation by Reference
The foregoing is only a summary of the THCG 2000 Stock Plan and is
qualified in its entirety by reference to its full text, a copy of which is
attached hereto as Appendix A.
Vote Required
The affirmative vote of the holders of a majority of the votes cast is
required to approve the THCG 2000 Stock Plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE THCG, INC. 2000 STOCK INCENTIVE PLAN AND THE RESERVATION OF SHARES FOR
ISSUANCE THEREUNDER.
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PROPOSAL 3
APPROVAL OF THE THCG 2000 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted the THCG, Inc. Employee Stock
Purchase Plan (the "ESPP"), effective February 15, 2000, and reserved 200,000
shares of THCG Common Stock for issuance under the ESPP, subject to shareholder
approval within 12 months of Board approval.
At the Annual Meeting, THCG shareholders are being asked to approve the
ESPP and the Board's reservation of shares of THCG Common Stock under the ESPP
for the purpose of qualifying such shares for special tax treatment under
Section 423 of the Code.
Summary of the ESPP
General. The purpose of the ESPP is to provide eligible employees of
THCG and its designated subsidiaries with an opportunity to purchase THCG Common
Stock and, therefore, to have an additional incentive to contribute to the
prosperity of THCG.
Administration. The ESPP is administered by the Compensation Committee
of the Board (the "Committee"). The Committee has full power to interpret the
ESPP, and the decisions of the Committee are final and binding upon all
participants. In the event the Committee is no longer responsible for
administering the ESPP, the Board of Directors will be responsible for
administering the ESPP.
Eligibility. Any employee of THCG or any THCG subsidiary designated by
the Committee is eligible to participate in the ESPP during the Offering Period
(as defined below) beginning on a given Enrollment Date (as defined below),
subject to administrative rules established by the Committee. However, no
employee is eligible to participate in the ESPP to the extent that, immediately
after the grant, the employee would have owned 5% of either the voting power or
the value of THCG's Common Stock, and no employee's rights to purchase THCG's
Common Stock pursuant to the ESPP may accrue at a rate that exceeds $25,000 per
calendar year. Eligible employees become participants in the ESPP by filing with
THCG a subscription agreement authorizing payroll deductions on a date set by
the Committee, if any, prior to the applicable Enrollment Date. As of March 31,
2000, approximately 29 THCG employees, including 5 executive officers, were
eligible to participate in the ESPP.
Participation in the Offering. The ESPP is implemented by offering
periods lasting for no more than two years (an "Offering Period"). The
commencement date and duration of first Offering Period, and each subsequent
Offering Period thereafter will be determined by the Committee in advance of the
last day of the immediately preceding Offering Period. The Enrollment Date is
the first trading day of the Offering Period or, for new participants, the first
trading day of the Offering Period after the employee becomes eligible. Offering
Periods may commence at quarterly or semi-annual intervals over the term of the
ESPP. An eligible employee may participate in only one Offering Period at a
time. To participate in the ESPP, each eligible employee must authorize payroll
deductions pursuant to the ESPP. Such payroll deductions may not exceed, for an
Offering Period, 10% of a participant's compensation and are also subject to the
limitations discussed above. A participant may increase or decrease his or her
rate of contribution through payroll deductions at any time. Each participant
who has elected to participate is automatically granted an option to purchase
shares of common stock on his or her Enrollment Date. The option expires at the
end of the Offering Period and is exercised on the last day of each Offering
Period (the "Exercise Date") to the extent of the payroll deductions accumulated
during such Offering Period, except that the option expires upon termination of
employment if that occurs prior to the Exercise Date. The number of shares of
THCG Common Stock that may be purchased by an employee in any Offering Period,
subject to the limitations discussed above, may not exceed 2,500 shares during
an Offering Period.
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Purchase Price, Shares Purchased. Shares of THCG Common Stock may be
purchased under the ESPP at a price not less than 85% of the fair market value
of the Common Stock on (i) the Enrollment Date, or (ii) the last trading day of
the Offering Period, whichever is less. On April 5, 2000, the closing price per
share of the common stock was $12.25. The number of whole shares of THCG Common
Stock a participant purchases in each Offering Period is determined by dividing
the total amount of payroll deductions withheld from the participant's
compensation during that Offering Period by the purchase price.
Termination of Employment. Termination of a participant's employment
for any reason, including death, immediately cancels his or her option and
participation in the ESPP. In such event, the payroll deductions credited to the
participant's account will be returned without interest to him or her or, in the
case of death, to the person or persons entitled to those deductions.
Adjustments Upon Changes in Capitalization, Merger or Sale of Assets.
In the event that THCG Common Stock is changed by reason of any stock split,
stock dividend, combination, recapitalization or other similar change in THCG's
capital structure effected without the receipt of consideration, appropriate
proportional adjustments may be made in the number of shares of stock subject to
the ESPP, the number of shares of stock to be purchased pursuant to an option
and the price per share of common stock covered by an option. Any such
adjustment will be made by the Committee, whose determination will be conclusive
and binding. In the event of a proposed sale of all or substantially all of the
assets of THCG or the merger or consolidation of THCG with another company, each
option will be assumed by, or an equivalent option substituted by the successor
company or its affiliates. In the absence of such option assumption or
substitution, the purchase date will be accelerated, and the option will be
exercised automatically on the accelerated Exercise Date.
Amendment and Termination of the ESPP. The Board may terminate or amend
the ESPP at any time, except that it may not increase the number of shares
subject to the ESPP other than as described in the ESPP. The ESPP will continue
until February 15, 2010 unless otherwise terminated earlier by the Board.
Withdrawal. Generally, a participant may withdraw from the ESPP during
an Offering Period by giving written notice to THCG. The Committee may establish
rules limiting the frequency with which participants may withdraw and re-enroll
in the ESPP and may establish a waiting period for participants wishing to
re-enroll.
New Plan Benefits. Because benefits under the ESPP will depend upon
employees' elections to participate and the fair market value of THCG Common
Stock at various future dates, it is not possible to determine the benefits that
will be received by executive officers and other employees if the ESPP is
approved by the shareholders. Non-employee directors are not eligible to
participate in the ESPP.
Federal Income Tax Consequences
If THCG shareholders approve this proposal, the ESPP, and the right of
participants to make purchases thereunder, should qualify under the provisions
of Sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant until the shares purchased under the ESPP are sold or
otherwise disposed of. Upon a sale or other disposition of the shares, the
participant will generally be subject to tax, and the amount of the tax will
depend upon the holding period. If the shares are sold or otherwise disposed of
more than two years from the first day of the applicable Enrollment Date and
more than one year from the date of transfer of the shares to the participant,
then the participant generally will recognize ordinary income equal to the
lesser of (i) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price, or (ii) an amount equal to 15%
of the fair market value of the shares as of the Enrollment Date. Any additional
gain should be treated as long-term capital gain. If the shares are sold or
otherwise disposed of before the expiration of this holding period, the
participant will recognize ordinary income generally equal to the excess of the
fair market value of the shares on the date the shares are purchased over the
purchase price. Any additional gain or loss on such sale or disposition will be
long-term or short-term capital gain or loss, depending on the holding period.
THCG is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent ordinary income is recognized
by participants upon a sale or disposition of shares prior to the expiration of
the holding period described above. In all other cases, no deduction is allowed
to THCG.
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THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION ON THE PARTICIPANT AND THCG WITH RESPECT TO THE SHARES PURCHASED UNDER
THE ESPP. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES ARISING IN THE CONTEXT OF A PARTICIPANT'S DEATH OR THE INCOME TAX
LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT'S
INCOME OR GAIN MAY BE TAXABLE.
Incorporation by Reference
The foregoing is only a summary of the ESPP and is qualified in its
entirety by reference to its full text, a copy of which is attached hereto as
Appendix B.
Vote Required
The affirmative vote of the holders of a majority of the votes cast is
required to approve the THCG 2000 Employee Stock Purchase Plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE THCG, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN AND THE RESERVATION OF SHARES
FOR ISSUANCE THEREUNDER.
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PROPOSAL 4
APPROVAL OF THE THCG 2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
THCG is submitting to its shareholders for approval the THCG, Inc. 2000
Non-Employee Director Stock Option Plan (the "THCG 2000 Director Plan"). The
THCG 2000 Director Plan is designed primarily to increase the ownership interest
in THCG of non-employee directors whose services are considered essential to
THCG's continued progress, to align such interests with those of the
shareholders of THCG and to provide a further incentive to service as a director
of THCG.
THCG's Board of Directors has unanimously approved a resolution
adopting the THCG 2000 Director Plan, subject to stockholder approval.
Shareholder approval of the THCG 2000 Director Plan is required under the NASDAQ
National market corporate governance rules.
SUMMARY OF THE THCG 2000 DIRECTOR PLAN
In General
Nature of Shares to be Issued/Administration. Shares issued under the
THCG 2000 Director Plan may be authorized but unissued shares of THCG Common
Stock or treasury shares of THCG Common Stock at the discretion of the Board.
The THCG 2000 Director Plan provides that the Board will administer the THCG
2000 Director Plan.
Awards. The THCG 2000 Director Plan specifically provides for the grant
of non-qualified stock options only (the "Options").
Maximum Number of Shares. The maximum number of shares of THCG Common
Stock with respect to which awards may be granted under the THCG 2000 Director
Plan is 500,000 shares. The maximum number of shares of THCG Common Stock with
respect to which any individual may be granted Options during any calendar year
is 10,000, plus 2,500 for each committee on which a director serves, as more
fully described below.
Eligibility. All non-employee directors of the Company will be eligible
to receive grants of Options. A "non-employee director" is a director of the
Company who is neither an employee of the Company nor of any subsidiary of the
Company.
Board's Authority. The Board of Directors will administer the THCG 2000
Director Plan and has the authority to interpret and construe any provision of
the THCG 2000 Director Plan and to adopt such rules and regulations for
administering the THCG 2000 Director Plan as it deems necessary or appropriate.
Suspension, Discontinuance, Amendment. The Board of Directors may, at
any time suspend or discontinue the THCG 2000 Director Plan or revise or amend
it in any respect whatsoever; provided, however, that no action will adversely
change the terms and conditions of an outstanding Option without the option
holder's consent and (i) the number of shares of THCG Common Stock subject to an
Option, (ii) the purchase price therefor, (iii) the date of grant of any Option
and (iv) the termination provisions relating to such Option will not be amended
more than once every six months, other than to comply with changes in the Code
or the Employee Retirement Income Security Act of 1974, as amended, or any
successor law, or the rules and regulations thereunder.
Summary of Option Terms
Exercise Price. The exercise price per share of THCG Common Stock under
each Option granted pursuant to the THCG 2000 Director Plan will be 100% of the
fair market value per such share of THCG Common Stock on the date of grant of
the Option. The exercise price will be paid in cash.
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Options Granted. Each person who is a non-employee director of THCG
immediately after the Annual Meeting of shareholders of THCG will be granted an
Option to purchase 10,000 shares of THCG Common Stock. Each person who is a
non-employee director of THCG immediately after the Annual Meeting of
shareholders of THCG who serves on a committee of the Board of Directors will be
granted an additional Option to purchase 2,500 shares of THCG Common Stock for
each committee on which a director serves. Persons elected to the Board of
Directors between annual meetings are awarded a pro rata portion of the 10,000
annual Option award for the first year of service.
Exercisability of Options. An Option may be exercised in full at any
time after the date of grant of the Option and prior to the expiration of ten
years from the date of grant, unless there is a termination as described below.
Termination of Employment. Except in the event of a termination for
disability, death or retirement, upon termination of service as a director, (i)
the Options, to the extent that they were exercisable at the time of such
termination, will remain exercisable until the expiration of three months after
such termination (or, if earlier, the expiration of their term) and (ii) the
Options, to the extent that they were not exercisable at the time of such
termination, will expire at the close of business on the date of such
termination. In the event of termination of service as a director by reason of
their death, the Options will be immediately vested and exercisable by the
option holder's legal representative until the expiration of one year after such
date of death (or, if earlier, the expiration of their term). In the event of
termination of service as a director by reason of disability or retirement, the
Options will remain exercisable in accordance with their terms. If the option
holder dies following termination of service as a director by reason of
disability or retirement, (i) the Options, to the extent that they were
exercisable on the date of death will remain exercisable until the expiration of
one year after such date of death (or, if earlier, the expiration of their term)
and (ii) the Options, to the extent that they were not exercisable on the date
of death, will expire at the close of business on the date of such termination.
Transferability
In general, no Option is transferable other than by will or the laws of
descent and distribution (except to the extent an agreement with respect to
Options permits certain transfers to certain of an option holder's family
members or trusts).
Certain Corporate Changes
The THCG 2000 Director Plan provides for an adjustment in the number of
shares of THCG Common Stock available to be issued under the THCG 2000 Director
Plan, the number of shares subject to Options, and the exercise prices of
Options upon a change in the capitalization of THCG, a stock dividend or split,
a merger or combination of shares and certain other similar events. The THCG
2000 Director Plan also provides for the adjustment of Options upon the
occurrence of certain corporate events.
Income Tax Withholding
The THCG 2000 Director Plan provides that an option holder may be
required to meet certain income tax withholding requirements by remitting cash
to THCG.
Summary of Federal Tax Consequences
The following is a description of the principal federal income tax
consequences of awards under the Director Plan based on present federal tax
laws. Federal tax laws may change from time to time, and any legislation that
may be enacted in the future may significantly affect the federal income tax
consequences described below. No representation is or can be made regarding
whether any such legislation will or may be enacted and/or the impact of any
such legislation. The description below does not purport to be a complete
description of the tax consequences associated with awards under the Director
Plan applicable to any particular award recipient. Differences in each
individual's financial situation may cause federal, state and local tax
consequences of awards to vary. Each recipient of an award should consult his or
her personal tax advisor about the detailed provisions of the applicable tax
laws and regulations.
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In general, an option holder will not be deemed to have received any
income at the time an option is granted, nor will THCG be entitled to a federal
tax deduction at that time.
When an option holder exercises an option, the option holder will
recognize ordinary compensation income equal to the excess of (a) the fair
market value of the THCG Common Stock received as a result of the exercise of
the option on the exercise date over (b) the option exercise price, and THCG
will be entitled to a tax deduction in that amount. The shares acquired by the
option holder upon exercise of the option will have a tax basis equal to the
fair market value of the shares on the exercise date. Upon any subsequent sale
of THCG Common Stock received on exercise of the option, the option holder will
recognize a capital gain (or loss) in an amount equal to the difference between
the amount realized on the sale and such tax basis. Any such gain (or loss) will
be characterized as long-term capital gain (or loss) if the shares have been
held for more than one year; otherwise, the gain (or loss) will be characterized
as short-term gain (or loss). An option holder's holding period for federal
income tax purposes for such shares will commence on the date following the date
of exercise. Short-term capital gain is subject to tax at the same rate as
ordinary income. Under current law, the rate at which net long-term capital gain
will be taxed will vary depending on the option holder's holding period and the
date the option holder disposes of the shares. The Code currently provides that,
in general, the net long-term capital gain resulting from the sale of shares
held for more than 12 months will be subject to tax at a maximum rate of 20%
(10% for individuals in the 15% tax bracket). In addition, the Code currently
provides that net long-term capital gain resulting from dispositions after
December 31, 2000 of shares held for more than five years may be subject to a
reduced rate.
Incorporation by Reference
The foregoing is only a summary of the THCG 2000 Director Plan and is
qualified in its entirety by reference to its full text, a copy of which is
attached hereto as Appendix C.
Vote Required
The affirmative vote of the holders of a majority of the votes cast is
required to approve the THCG 2000 Director Plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE THCG, INC. 2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND THE
RESERVATION OF SHARES FOR ISSUANCE THEREUNDER.
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PROPOSAL 5
APPROVAL OF AGREEMENT AND PLAN OF MERGER TO
REINCORPORATE IN DELAWARE
Introduction
For the reasons set forth below, the Board of Directors believes that
the best interests of THCG Utah and its shareholders will be served by changing
THCG's state of incorporation from Utah to Delaware (the "Reincorporation"). The
Board of Directors has adopted an Agreement and Plan of Merger, dated April 6,
2000, between THCG and THCG, Inc., a Delaware corporation and wholly-owned
subsidiary of THCG (the "Merger Agreement"), a copy of which is attached hereto
as Appendix D. Pursuant to the Merger Agreement, THCG Utah will be merged with
and into THCG Delaware (the "Merger"). Upon the effectiveness of the Merger,
THCG Delaware will continue to operate THCG Utah's business and THCG Utah will
cease to exist. Pursuant to the Merger, each outstanding share of THCG Utah's
Common Stock will automatically be converted into one share of THCG Delaware
common stock, $.01 par value, upon the effective date of the merger.
As used in this Proposal 5, the terms "THCG Utah" and "THCG" mean THCG,
Inc., the Utah corporation, and "THCG Delaware" means the Delaware corporation
and wholly-owned subsidiary of THCG Utah into which THCG Utah will be merged
pursuant to the Merger Agreement.
Under Utah law, the affirmative vote of a majority of the outstanding
shares of THCG Utah's Common Stock is required for approval of the
Reincorporation. Approval of the Reincorporation proposal will constitute
approval of the Merger Agreement. A copy of the Merger Agreement may be obtained
from the Secretary of THCG, at the address set forth on the first page of this
Proxy Statement or by telephone request to Maria Iannitti at (212) 223-0440. The
Merger Agreement has been approved by the Board of Directors of THCG Utah and
the Board of Directors of THCG Delaware. If approved by the shareholders, it is
anticipated that the merger will become effective as soon as practicable
following the Annual Meeting. However, pursuant to the Merger Agreement, the
merger may be abandoned or the Merger Agreement may be amended by the Board of
Directors of the THCG Utah and THCG Delaware either before or after shareholder
approval has been obtained but, after any such approval, no amendment will be
made which requires the approval of such stockholders under applicable law
without such approval.
Shareholders of THCG Utah have the right under the Utah Revised
Business Corporation Act (the "URBCA") to dissent from the Reincorporation
merger and to receive the fair value of their shares as determined under the
URBCA. See "Dissenters' Rights" below.
Principal Reasons for the Proposed Reincorporation
THCG was originally incorporated in Utah under the name "Walnut
Financial Services, Inc." ("Walnut"). Pursuant to the Amended and Restated
Agreement and Plan of Merger, dated as of August 5, 1999, among Walnut, Tower
Hill Acquisition Corp,. a New York corporation, and wholly-owned subsidiary of
Walnut ("Tower Hill Acquisition") and Tower Hill Securities, Inc. a New York
corporation ("Tower Hill"), Tower Hill Acquisition was merged with and into
Tower Hill, Tower Hill became a wholly-owned subsidiary of Walnut and Walnut
changed its name to THCG.
As THCG plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and general predictability of Delaware corporate law provide a reasonably
reliable foundation on which THCG's governance decisions can be based and THCG
believes that shareholders will benefit from the greater predictability of
Delaware corporate laws. The following are some of the more notable advantages
to being incorporated under Delaware law.
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Prominence, Predictability and Flexibility of Delaware Law. Delaware
has for many years followed a policy of encouraging incorporation in that state
and has been a leader in adopting, construing and implementing comprehensive,
flexible corporate laws responsive to the legal and business needs of
corporations organized under its laws. Many corporations have chosen Delaware
initially as a state of incorporation or have subsequently changed corporate
domicile to Delaware in a manner similar to that proposed by THCG. The Delaware
courts have developed considerable expertise in dealing with corporate law
issues and a substantial body of case law has developed construing Delaware law
and establishing public policies with respect to corporate legal affairs.
Increased Ability to Attract and Retain Qualified Directors. Both Utah
and Delaware law permit a corporation to include a provision in its charter
document which reduces or limits the monetary liability of directors for
breaches of fiduciary duty in certain circumstances. The increasing frequency of
claims and litigation directed against directors has greatly expanded the risks
facing directors of corporations in exercising their respective duties. The
amount of time and money required to respond to such claims and to defend such
litigation can be substantial. It is THCG's desire to reduce these risks to its
directors and to limit situations in which monetary damages can be recovered
against directors so that THCG may continue to attract and retain qualified
directors who otherwise might be unwilling to serve because of the risks
involved. THCG believes that, in general, Delaware law provides greater
protection to directors than Utah law and that Delaware case law regarding a
corporation's ability to limit director liability is more developed and provides
more guidance than Utah law.
Well Established Principles of Corporate Governance. There is
substantial judicial precedent in the Delaware courts as to the legal principles
applicable to measures that may be taken by a corporation and as to the conduct
of the Board of Directors under the business judgment rule. THCG believes that
its shareholders will benefit from the well established principles of corporate
governance that Delaware law affords.
No Change in the Board Members, Business, Management, Employee Plans or
Location of Principal Facilities of THCG. The Reincorporation proposal will
effect a change only in the legal domicile of THCG and certain other changes of
a legal nature. Those changes that are of greater legal significance are
described in this Proxy Statement. The proposed Reincorporation will not result
in any change in the business, management, fiscal year, assets or liabilities
(except to the extent of legal and other costs of effecting the reincorporation)
or location of the principal facilities of THCG. The directors who are elected
at the Annual Meeting will become the directors of THCG Delaware. All
obligations of THCG Utah (including, without limitation, all stock option plans
currently in effect and options granted thereunder) will be assumed and be the
obligations of THCG Delaware. Other employee benefit arrangements of THCG Utah
will also be continued by THCG Delaware upon the terms and subject to the
conditions currently in effect. After the merger, the shares of Common Stock of
THCG Delaware will continue to be traded, without interruption, in the same
principal market as the shares of Common Stock of THCG Utah are traded under
prior to the merger.
Prior to the Effective Date of the merger, THCG Utah will obtain any
requisite consents to such merger from parties with whom it may have contractual
arrangements. As a result, THCG Utah's rights and obligations under such
contractual arrangements will continue and be assumed by THCG Delaware.
Antitakeover Implications. Delaware, like many other states, permits a
corporation to adopt a number of measures through amendment of the corporate
charter or bylaws or otherwise, that are designed to reduce a corporation's
vulnerability to unsolicited takeover attempts. The Reincorporation proposal is
not being proposed in order to prevent a change in control, nor is it in
response to any present attempt known to the Board of Directors to acquire
control of THCG or to obtain representation on the Board of Directors.
Certain effects of the Reincorporation proposal may be considered to
have antitakeover implications. Section 203 of the Delaware General Corporation
Law restricts certain "business combinations" with "interested shareholders" for
three (3) years following the date that a person becomes an interested
shareholder, unless prior to such time, the Board of Directors approves the
business combination. THCG Delaware does not intend to opt out of the provisions
of such Section 203. See "Significant Differences Between the Corporation laws
of Utah and Delaware - Acquisition of Significant Shares of Stock ."
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The Board of Directors believes that unsolicited takeover attempts may
be unfair or disadvantageous to THCG and its shareholders because: (i) a
non-negotiated takeover bid may be timed to take advantage of temporarily
depressed stock prices; (ii) a non-negotiated takeover bid may be designed to
foreclose or minimize the possibility of more favorable competing bids or
alternative transactions; (iii) a non-negotiated takeover bid may involve the
acquisition of only a controlling interest in the corporation's stock, without
affording all shareholders the opportunity to receive the same economic
benefits; and (iv) certain of THCG's contractual arrangements may provide that
they may not be assigned pursuant to, or may be terminated as a result of, a
transaction which results in a "Change of Control" of THCG without the prior
written consent of the contracting party.
By contrast, in a transaction in which an acquiror must negotiate with
an independent Board of Directors, the Board can and should take account of the
underlying and long-term values of THCG's business, technology and other assets,
the possibilities for alternative transactions on more favorable terms, possible
advantages from a tax-free reorganization, anticipated favorable developments in
THCG's business not yet reflected in the stock price and equality of treatment
of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which is
not approved by the Board of Directors, but which a majority of the shareholders
may deem to be in their best interest or in which shareholders may receive a
substantial premium for their shares over the then current market value or over
their cost basis in such shares. As a result of such effects of the
Reincorporation proposal, shareholders who might wish to participate in a tender
offer may not have an opportunity to do so. In addition, to the extent that such
provisions enable the Board of Directors to resist a takeover or a change in
control of THCG, they could make it more difficult to change the existing Board
of Directors and management.
The Reincorporation
After Effective Time of the Merger, THCG Delaware will be the surviving
corporation. The terms and conditions of the Reincorporation are as set forth in
the Merger Agreement to this Proxy Statement and the summary of the terms and
conditions of the Merger Agreement is qualified by reference to the full text of
the Merger Agreement.
Upon consummation of the Reincorporation, THCG Delaware will continue
to exist in its present form under the name "THCG, Inc," and THCG Utah will
cease to exist. The Reincorporation will change the legal domicile of THCG, but
will not result in a change in the principal offices, business, management,
capitalization, assets or liabilities of THCG. By operation of law, THCG
Delaware will succeed to all the assets and assume all the liabilities of THCG
Utah.
At the Effective Time, the Board of Directors and officers of THCG Utah
immediately preceding the Effective Time will become the directors and officers
of the THCG Delaware, to serve until the earlier of their death, resignation or
removal and until their respective successors are duly elected and qualified.
After the Reincorporation, the rights of the stockholders of THCG and
the corporate affairs of THCG will be governed by the Delaware General
Corporation Law and by the certificate of incorporation and bylaws of THCG
Delaware. Certain material differences are discussed below under "The Charter
and Bylaws of THCG Utah and THCG Delaware." A copy of the certificate of
incorporation of THCG Delaware is included as Appendix E to this Proxy
Statement. The articles of incorporation and bylaws of THCG Utah and the bylaws
of THCG Delaware are available for inspection by shareholders at the principal
offices of THCG located at: 650 Madison Avenue, New York, NY 10022, (212)
223-0440.
Upon the effectiveness of the Reincorporation, each outstanding share
of common stock of THCG Utah, par value $.01 per share, will be automatically
converted into one (1) fully paid and nonassesable share of common stock of THCG
Delaware, par value $.01 per share. In addition, each share of THCG Utah
preferred stock, par value, $.01 per share, if any, will be automatically
converted into one (1) fully paid and nonassessable share of identical preferred
stock of THCG Delaware, par value $.01 per share. Each share of THCG Utah common
stock and THCG Delaware common stock held in
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treasury by THCG Utah and THCG Delaware, respectively, immediately prior to the
Effective Time will be cancelled and retired and cease to exist, without any
conversion thereof.
Following the effectiveness of the Reincorporation, THCG Utah's (a)
Walnut Capital Corporation 1987 Stock Option Plan, (b) Amended and Restated 1994
Walnut Financial Services, Inc. Stock Incentive Plan, (c) 1999 Walnut Financial
Services, Inc. Stock Incentive Plan, (d) 2000 Stock Incentive Plan, (e) 2000
Non-Employee Director Stock Option Plan, (f) 2000 Employee Stock Purchase Plan
and any other option plan adopted by the Board of Directors of THCG UTAH and in
effect on the Effective Date of the Merger (collectively, the "THCG Utah
Plans"), as well as each option to purchase common stock of THCG Utah (each a
"THCG Utah Option"), whether or not granted pursuant to the THCG Utah Plans,
will be assumed by THCG Delaware and will be converted into and constitute an
option to purchase, for the same exercise price per share and on the same terms
and conditions as are contained in such THCG Utah Option on the Effective Date,
one fully paid and non-assessable share of common stock of THCG Delaware. As
soon as practicable following the Effective Time, THCG Delaware will cause to be
delivered to each holder of an outstanding THCG Utah Option an appropriate
notice setting forth such holder's rights pursuant thereto and that such THCG
Utah Option will continue in effect on the same terms and conditions.
The Charters and Bylaws of THCG Utah and THCG Delaware
If the Reincorporation is consummated, holders of Common Stock of THCG
Utah (and holders of options, warrants or other securities exchangeable for or
convertible in shares of Common Stock) will become holders of THCG Delaware
Common Stock, which will result in the their rights are stockholders being
governed by the Delaware General Corporation Law and to the THCG Delaware
certificate of incorporation and bylaws. The THCG Delaware certificate of
incorporation and bylaws will effectively replace the articles of incorporation
and bylaws of THCG Utah, resulting in only minor changes to the rights of
shareholders.
The changes that will take effect to the Delaware certificate of
incorporation are as follows: (i) the number of authorized shares of common
stock will be increased by 50,000,000, raising the total number of shares of
authorized common stock to 110,000,000, and (ii) the certificate of
incorporation will explicitly state that special meetings of the stockholders
may be called only by a Co-Chief Executive Officer of THCG or the Board of
Directors pursuant to a resolution approved by the affirmative vote of a
majority of directors then in office. The most significant changes that will
effect the bylaws are as follows: (i) no proxy may be voted or acted upon for
three years from its date (as opposed to eleven months under the Bylaws of THCG
Utah) and (ii) certain provisions governing the date on which a record date is
established for purposes of determining the stockholders entitled to vote a any
meeting of the stockholders.
The increase in the authorized number of shares of common stock would
provide THCG Delaware with additional authorized and unissued shares which could
be used for any proper corporate purpose, including, for example, financing
programs, acquisitions, payment of stock dividends, stock splits and issuance
under stock option plans or purchase plans, including plans that may be adopted
by the shareholders at this Annual Meeting or in the future, or a future public
or private sale of equity to provide additional capital for THCG Delaware. The
Board of Directors believes that it will be in the best interests of THCG to
increase the authorized number of shares of common stock that are available for
issuance when such issuance is desirable. In the event a specific opportunity
arises which would require the issuance of additional shares in excess of the
presently authorized amount, the possible delay and expense of a special meeting
of the shareholders might deprive THCG of the ability to quickly take advantage
of an existing favorable market condition. Approval of the Merger Agreement at
the Annual Meeting also approves of the increase in the number of authorized
shares of common stock.
If the Reincorporation is approved by the shareholders, the increased
number of authorized shares of Common Stock will be available for issue from
time to time for such purposes and consideration as the Board of Directors may
approve and no further vote of the stockholders of THCG Delaware will be
required, except as required under the Delaware General Corporation Law or the
rules of any national securities exchange or quotation system, such as the
Nasdaq National Market, on which the shares of the Company are at the time
listed or quoted.
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Significant Differences Between the Corporate Laws of Utah and Delaware
The corporation laws of Utah and Delaware differ in many respects.
Although all the differences are not set forth in this Proxy Statement, certain
provisions, which could materially affect the right of shareholders, are
discussed below.
Removal of Directors. Under Utah law, any director may be removed, with
or without cause, unless the articles of incorporation provide that a director
may only be removed for cause, with the approval of a majority of the shares
voting at a duly convened shareholders meeting. Under Delaware law, a director
of a corporation with a classified Board of Directors may be removed only for
cause, unless the certificate of incorporation otherwise provides. The
Certificate of Incorporation of THCG Delaware provides for a classified Board of
Directors. Consequently, a director of THCG Delaware may be removed from office
only for cause, unless the certificate of incorporation provides otherwise. The
certificate of incorporation of THCG Delaware does not provide otherwise.
Quorum of Directors. Under Delaware law, unless a greater or lesser
number is required for a quorum by the certificate of incorporation or bylaws
(but in no event less than one-third of the votes of the entire Board or
committee), a majority of the directors then in office will constitute a quorum.
Under Utah law, a quorum of the Board of Directors consists of a
majority of the fixed number of directors if the corporation has a fixed board
size, or if the corporation's bylaws provide for a range for the size of the
board, a majority of the number of directors prescribed, or if no number is
prescribed, the number in office. However, the articles of incorporation or the
bylaws may establish a higher or lower number of directors to constitute a
quorum, but in no event may the number be less than one-third of the number of
directors.
Stockholders Consent Without a Meeting. Under Delaware law, unless
otherwise provided in the certificate of incorporation, any action requiring the
vote of stockholders may be taken without a meeting, without prior notice and
without a vote, by the written consent of stockholders having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. The certificate of incorporation of THCG provides that the stockholders
of THCG may not take action by written consent.
Under Utah law, unless otherwise provided in the articles of
incorporation, action requiring the vote of shareholders may be taken without a
meeting and without prior notice by one or more written consents of the
shareholders having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which all shares entitled to vote
thereon were present and voted (if shareholder action is by less than unanimous
written consent, notice will be provided to the shareholders who did not consent
at least ten (10) days before the consummation of the transaction, action or
event authorized by the shareholders). However, any written consent for the
election of directors must be unanimous and the shareholders of any corporation
in existence prior to July 1, 1992, which includes THCG, are required to adopt a
resolution permitting action by less than unanimous written consent; otherwise,
the shareholders are only permitted to act by unanimous written consent. THCG's
Utah shareholders have not adopted such a resolution.
Limitation on Liability of Directors; Indemnification of Officers and
Directors. Delaware law permits a corporation to adopt provisions in its
certificate of incorporation eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, with the following exceptions: (a) a breach of
the director's duty of loyalty; (b) payment of an unlawful stock dividend or
making an unlawful stock repurchase or redemption; (c) acts or omissions not in
good faith or involving intentional misconduct or a knowing violation of law; or
(d) in any transaction in which the director derived an improper personal
benefit.
Under Utah law, a corporation may, if so provided in its articles of
incorporation, its bylaws or in a shareholder resolution, eliminate or limit the
liability of a director to the corporation or its shareholders for monetary
damages for any action taken or any failure to take action as a director, except
liability for: (a) improper financial benefits received by a director; (b)
intentional infliction of harm on the corporation or its stockholders; (c)
payment of a distribution (a direct or indirect transfer of money or other
property, including a dividend, to or incurrence of indebtedness for the benefit
of its
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shareholders in respect of any of its shares), to shareholders after which the
corporation is insolvent; and (d) an intentional violation of criminal law.
The Delaware and Utah laws contain basically similar provisions
governing indemnification of officers and directors.
Acquisition of Significant Shares of Stock. THCG Delaware will become
subject to Section 203 of Delaware law which regulates certain business
combinations, including tender offers. Section 203 may have the effect of
significantly delaying certain stockholders' ability to acquire a significant
equity interest in THCG if such acquisition is not approved by THCG's Board of
Directors. In general, Section 203 prevents an "Interested Stockholder" (defined
generally as a person who beneficially owns 15% or more of a corporation's
outstanding voting stock) of a Delaware corporation from engaging in a "Business
Combination" (defined to include mergers and a variety of other transactions
such as transfers of assets, loans and transactions that would increase the
Interested Stockholder's proportionate share of stock) with a Delaware
corporation for three years following the date such person became an Interested
Stockholder unless, among other things, before such person became an Interested
Stockholder the Board of Directors of the corporation approved the Business
Combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder. Under Section 203, the restrictions described above do
not apply to certain Business Combinations proposed by an Interested Stockholder
following the announcement or notification of one of certain extraordinary
transactions (as defined therein) involving the corporation and a person who had
not been an Interested Stockholder during the previous three years or who became
an Interested Stockholder with the approval of a majority of the corporation's
directors. In addition, the restrictions under Section 203 do not apply if the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by Section 203. THCG Delaware's
certificate of incorporation does not contain such a provision.
The Utah Control Share Acquisitions Act provides, among other things,
that, when any person obtains shares (or the power to direct the voting shares)
of "an issuing public corporation" such that the person's voting power equals or
exceeds any of three levels (20%, 33 1/3% or a majority), the ability to vote
(or to direct the voting of) the "control shares" is conditioned on approval by
a majority of the corporation's shares (voting in voting groups, if applicable),
excluding "interested shares" (which include the shares acquired in the "control
share acquisition"). Shareholder approval may occur at the next annual meeting
of the shareholders, or, if the acquiring person requests and agrees to pay the
associated costs of the corporation, at a special meeting of the shareholders
(to be held within fifty (50) days of the corporation's receipt of the request
by the acquiring person). If authorized by the articles of incorporation or the
bylaws, the corporation may redeem "control shares" acquired in the "control
share acquisition" at their fair market value if the acquiring person fails to
file an "acquiring person statement" or if the shareholders do not grant full
voting rights to the control shares. If the shareholders grant full voting
rights to the control shares, and if the acquiring person obtained a majority or
more of the voting power, all shareholders are entitled to dissenters' rights
under Utah law. An acquisition of shares does not constitute a control share
acquisition if (a) the corporation's articles of incorporation or bylaws provide
that the Control Share Acquisition Act does not apply, (b) the acquisition is
consummated pursuant to a merger in accordance with Utah law, or (c) under
certain other specified circumstances.
Voting Rights with Respect to Extraordinary Corporate Transactions.
Under Delaware law, approval of mergers and consolidations requires the
affirmative vote or consent of the holders of a majority of the outstanding
shares entitled to vote, except that, unless required by the certificate of
incorporation, no vote of stockholders of the corporation surviving a merger is
necessary if: (a) the merger does not amend in any respect the certificate of
incorporation of the corporation; (b) each outstanding share immediately prior
to the effective date of the merger is to be an identical share of the surviving
corporation after the merger; and (c) either no common stock of the corporation
and no securities or obligations convertible into common stock are to be issued
in the merger, or the common stock to be issued in the merger plus that
initially issuable on conversion of other securities issued in the merger does
not exceed 20% of the common stock of the corporation outstanding immediately
before the merger.
Under Utah law, a merger, share exchange or sale, lease, exchange or
other disposition of all or substantially all of the assets of a corporation
(other than in the ordinary course of the corporation's business) requires the
approval of a majority (unless Utah law, the articles of incorporation, the
bylaws or a resolution of the Board of Directors requires a
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greater number) of the outstanding shares of the corporation (voting in separate
voting groups, if applicable). No vote of the shareholders of the surviving
corporation in a merger is required if: (a) the articles of incorporation of the
surviving corporation will not be changed; (b) each shareholder of the surviving
corporation whose shares were outstanding immediately before the effective date
of the merger will hold the same number of shares, with identical designations,
preferences, limitations and relative rights, immediately after the merger; (c)
the number of voting shares outstanding immediately after the merger, plus the
number of voting shares issuable as a result of the merger (either by the
conversion of securities issued pursuant to the merger or the exercise of rights
and warrants issued pursuant to the merger), will not exceed by more than 20% of
the total number of voting shares of the surviving corporation outstanding
immediately before the merger; and (d) the number of participating shares
(shares that entitle their holder to participate without limitation in
distributions) outstanding immediately after the merger, plus the number of
participating shares issuable as a result of the merger (either by the
conversion of securities issued pursuant to the merger or the exercise of rights
and warrants issued pursuant to the merger), will not exceed by more than 20%
the total number of participating shares of the surviving corporation
outstanding immediately before the merger.
Payment of Dividends and Repurchase of Shares of Stock. Under Delaware
law, a corporation may pay dividends only out of surplus (generally, the
stockholders' equity of the corporation less the par value of the capital stock
outstanding) or, if there exists no surplus, out of the net profits of the
corporation for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. If the capital of the corporation has diminished to an
amount less than the aggregate amount of capital represented by issued and
outstanding stock having a liquidation preference, the corporation may not
declare and pay out of its net profits any dividends to the holders of its
common stock until the deficiency has been repaired. In general, Delaware law
provides that shares of a corporation's capital stock may only be repurchased or
redeemed by the corporation out of surplus. To determine the surplus, assets and
liabilities are valued at their current fair market value. Assuming that such
assets have a fair market value greater than their book value and that
liabilities have not increased in value to a greater extent, such revaluation
will increase the surplus of the corporation and thereby permit the corporation
to pay an increased dividend and/or to repurchase a greater number of shares.
Under Utah law, a corporation is prohibited from making a distribution
(including a repurchase of its shares) to its shareholders if, after giving
effect to the distribution, the corporation would not be able to pay its debts
as they become due in the usual course of business or the corporation's total
assets would be less than its total liabilities (plus any amounts necessary to
satisfy any preferential rights).
It is the present policy of THCG Utah's Board of Directors to retain
any earnings for use in THCG Utah's business and it is anticipated that THCG
Delaware will do the same.
Transactions with Officers and Directors. Under Delaware law, contracts
or transactions in which a director or officer is financially interested are not
automatically void or voidable, if approved by the stockholders or the directors
under substantially the same circumstances as in Utah. Approval by the
stockholders, however, requires only a simple majority. Board approval must be
by a majority of the disinterested directors, but interested directors may be
counted for purposes of establishing a quorum.
Under Utah law, a "director's conflicting interest transaction" (a
transaction that is financially significant to the director or a person related
to the director or a transaction brought or which in the normal course would be
brought to the board of directors in which an entity or person related to the
director is either a party or is so closely linked or for which or whom the
transaction is so financially significant that the interest would reasonably be
expected to exert an influence on the director's judgment) may not be enjoined,
set aside, or give rise to an award of damages or other sanctions solely because
the directors "conflicting interest" if the (a) the transaction received the
affirmative vote of a majority of the directors who did not have a "conflicting
interest" after disclosure to them of the existence of the conflicting interest
and all other relevant facts; (b) approval of the transaction by a majority of
the votes entitled to be cast by the holders of qualified shares present in
person or by proxy after notice to the shareholders describing the "conflicting
interest transaction" and disclosure to them of all other relevant facts; or (c)
the transaction is established to be fair to the corporation.
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Derivative Suits. Under Delaware law, the plaintiff must have been a
stockholder of the corporation at the time of the transaction of which he
complains or his stock thereafter must have devolved under him by operation of
law.
Under Utah law, a person may not commence a derivative action unless
the person was a shareholder of the corporation at the time when the transaction
complained of occurred (unless the person became a shareholder through transfer
by operation of law from a person who was a shareholder at the time). The
complaint must be verified and allege with particularity (i) the demand made on
the board of directors and that either the demand was refused or ignored by the
board of directors, or (ii) if no demand was made on the board of directors, why
the person did not make the demand. On the termination of the proceeding, if the
court finds that the proceeding was commenced without reasonable cause, the
court may require the plaintiff to pay the defendant's reasonable expenses,
including counsel fees.
Stockholder Appraisal Rights. Stockholder appraisal rights are
statutory rights of dissenting stockholders to demand that, upon consummation of
certain reorganizations or other designated corporate action, the corporation
purchase their shares at an appraised fair value. Delaware law provides rights
of appraisal to stockholders in the event of a merger or consolidation, except
(a) a merger by a corporation, the shares of which are either listed on a
national securities exchange or are widely held (by more than 2,000 stockholders
of record) if such stockholders receive shares of the surviving corporation and
(b) a merger, if the corporation in which the dissenter is a stockholder
survives the merger and no vote of such corporation's stockholders is required
to approve the merger. Under Delaware law, no vote of the stockholders of a
corporation surviving a merger is required if the number of shares to be issued
in the merger does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to such issuance and if certain other conditions
are met. Delaware law provides that any corporation may stipulate in its
certificate of incorporation that appraisal rights will be available for shares
of its stock as a result of an amendment to its certificate of incorporation,
any merger in which the corporation is a constituent corporation or the sale of
all or substantially all of the assets of the corporation. THCG Delaware's
certificate of incorporation does not provide for appraisal rights in any of
those transactions.
Utah law grants shareholder appraisal rights with certain exceptions
that are similar to the exceptions under Delaware law. However, Delaware law
contains exceptions that are not found in Utah law.
Special Meetings of Stockholders. Under Delaware law, stockholders
generally do not have the right to call meetings of stockholders unless such
right is granted in the certificate of incorporation or bylaws. THCG Delaware's
certificate of incorporation does not grant stockholders the right to call
special meetings. However, if a corporation fails to hold its annual meeting
within a period of 30 days after the date designated therefor, or if no date has
been designated for a period of 13 months after its last annual meeting, the
Delaware Court of Chancery may order a meeting to be held upon the application
of a stockholder.
Under Utah law, special meetings of the shareholders may be called by:
(a) the board of directors (b) the person or persons authorized by the bylaws to
call a special meeting, or (c) the holders of shares representing at least 10%
of all votes entitled to be cast on any issue proposed to be considered at the
special meeting. The corporation will give notice of the date, time and place of
the meeting no fewer than ten (10) and no more than sixty (60) days before the
meeting. Notice of a special meeting must include a description of the purposes
for which the special meeting is called. THCG Utah's current bylaws do not limit
the ability of shareholders to call special meetings.
Inspection of Books and Records. Under Delaware law, any stockholder of
record, upon written demand under oath stating the purpose thereof, has the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders and its other books and
records to make copies or extract therefrom.
Under Utah law, upon providing the corporation with a written demand at
least five business days before the date the shareholder wishes to make an
inspection, a shareholder and his agent and attorneys are entitled to inspect
and copy, during regular business hours, (a) the articles of incorporation,
bylaws, minutes of shareholders meetings and records of actions taken by the
shareholders without a meeting for the previous three years, all written
communications to shareholders within the previous three years, a list of the
names and business addresses of the officers and directors, the most recent
annual report delivered to the State of Utah, and all financial statements for
periods ending during the previous three years
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and (b) if the shareholder is acting in good faith and for a proper purpose,
excerpts from (i) the minutes of any meeting or records of any action taken by
the board of directors or by a committee of the board of directors acting in
place of the board of directors, (ii) minutes or records of any meeting of or
action taken by the shareholders, (iii) waivers of notice of any meeting of the
shareholder, board of directors, or committee of the board of directors, (iv)
accounting records of the corporation, and (v) shareholder lists.
Amendments to Charter. Under Delaware law, amendments to the
certificate of incorporation require the approval of the Board and the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote thereon, except that if the certificate of incorporation requires the
vote of a greater number of the holders of any class of stock than is required
by Delaware law with respect to any matter, the provision of the certificate of
incorporation may not be amended, altered or repealed except by such greater
vote. The certificate of incorporation of THCG Delaware does not require a
greater vote for amendment.
Under Utah law, the board of directors may propose amendments to the
articles of incorporation for submission to the shareholders, however, there are
certain amendments the board of directors may make without shareholder approval.
For an amendment to be adopted, (1) the board of directors must recommend the
amendment to the shareholders (unless the board determines that because of a
conflict of interest or other special circumstances it should not make a
recommendation and communicates the basis for its determination to the
shareholders), and (2) unless the articles of incorporation, the bylaws (if
authorized by the articles of incorporation) or a resolution of the board of
directors require a greater number, the amendment must be approved by (a) a
majority of the votes entitled to be cast on the amendment by any voting group
as to which the amendment would create dissenters' rights, (b) a majority of the
votes entitled to be cast on the amendment by any voting group as to which the
amendment would materially and adversely affect the voting group's rights in
shares (including preferential rights, rights in redemption, preemptive rights,
voting rights or rights in certain reverse splits), and (c) a majority of the
votes cast by each and every other voting group (voting separately from any
other voting group, as applicable, with shares constituting a quorum present for
each voting group).
Summary of Certain Federal Income Tax Consequences of the Proposed
Reincorporation
The following is a discussion of certain federal income tax
considerations that may be relevant to holders of THCG Utah's Common Stock who
receive THCG Delaware Common Stock in exchange for their Common Stock as a
result of the proposed Reincorporation. The discussion does not address all of
the tax consequences of the proposed Reincorporation that may be relevant to
particular shareholders, such as dealers in securities, or those shareholders
who acquired their shares upon the exercise of stock options, nor does it
address the tax consequences to holders of options or warrants to acquire THCG
Delaware Common Stock. Furthermore, no foreign, state, or local tax
considerations are addressed herein.
IN VIEW OF THE VARYING NATURE OF SUCH TAX CONSEQUENCES, EACH
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE APPLICABILITY OF
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications and exceptions described
herein, and assuming the proposed Reincorporation qualifies as a reorganization
within the meaning of Section 368(a) of the Code, the following tax consequences
generally should result:
(a) No gain or loss should be recognized by holders of THCG Utah Common
Stock upon receipt of THCG Delaware Common Stock pursuant to the proposed
Reincorporation;
(b) The aggregate tax basis of the THCG Delaware Common Stock received
by each shareholder in the proposed Reincorporation should be equal to the
aggregate tax basis of THCG Utah Common Stock surrendered in exchange therefor;
and
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(c) The holding period of the THCG Delaware Common Stock received by
each shareholder of THCG Utah should include the period for which such
shareholder held THCG Utah Common Stock surrendered in exchange therefor,
provided that such THCG Utah Common Stock was held by the shareholder as a
capital asset at the time of proposed Reincorporation.
(d) THCG Utah should not recognize gain or loss for federal income tax
purposes as a result of the proposed Reincorporation, and THCG Delaware should
succeed, without adjustment, to the federal income tax attributes of THCG Utah.
However, as a result of the Reincorporation, THCG Delaware will be subject to
Delaware franchise tax, which is based on the total asset value of a
corporation.
THCG Utah has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the proposed
Reincorporation under the Code.
A successful IRS challenge to the reorganization status of the proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of THCG Common Stock exchanged in the proposed
Reincorporation equal to the difference between the shareholder's basis in such
share and the fair market value, as of the time of the proposed Reincorporation,
of the THCG Delaware Common Stock received in exchange therefor. In such event,
a shareholder's aggregate basis in the shares of THCG Delaware Common Stock
received in the exchange would equal their fair market value on such date, and
the shareholder's holding period for such shares would not include the period
during which the shareholder held THCG Common Stock.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION ON THE SHAREHOLDERS AND THCG WITH RESPECT TO THE REINCORPORATION. IT
DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE SHAREHOLDER'S INCOME OR GAIN
MAY BE TAXABLE.
Dissenters' Rights
Sections 1301-1331 of Part 13 ("Part 13") of URBCA provide appraisal
rights (sometimes referred to as "dissenters' rights") to shareholders of Utah
corporations in certain situations. Holders of record of THCG Common Stock who
comply with applicable statutory procedures summarized herein may be entitled to
dissenters' rights under Part 13 in connection with the Reincorporation
proposal, because the Reincorporation must be effected through a merger and none
of the exceptions to appraisal rights set forth in the URBCA are applicable. If
holders of a material number of shares exercise dissenters' rights, the board
anticipates that it will likely abandon the Reincorporation.
A person having a beneficial interest in shares of THCG Utah Common
Stock held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect dissenters' rights.
The following discussion is not a complete statement of the law
pertaining to dissenters' rights under the URBCA and is qualified in its
entirety by the full text of Part 13, which is reprinted in its entirety as
Appendix F to this Proxy Statement. All references in Part 13 and in this
summary to a "shareholder" or "holder" are to the record holder of the shares of
THCG Utah Common Stock as to which dissenters' rights may be asserted.
Under Part 13, where a proposed merger is to be submitted for approval
at a meeting of shareholders, the corporation must notify each of its
shareholders as of the record date for such meeting of the availability of
dissenters' rights with respect to his or her shares of THCG Utah Common Stock,
and must include in such notice a copy of Part 13 and the materials, if any,
that under Part 13 are required to be given to the shareholders entitled to vote
on the proposed merger at the meeting.
This Proxy Statement constitutes such notice to the holders of
Dissenting Shares (as defined below) and the applicable statutory provisions of
the URBCA are attached to this Proxy Statement. Any shareholder who wishes to
assert
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such dissenters' rights or who wishes to preserve his or her right to do so
should review the following discussion and Appendix F carefully, because failure
to timely and properly comply with the procedures specified will result in the
loss of dissenter's rights under the URBCA.
If the Reincorporation is approved by the required vote of THCG Utah's
shareholders and is not abandoned or terminated, each holder of shares of THCG
Utah Common Stock who does not vote in favor of the Reincorporation and who
follow the procedures set forth in Part 13 will be entitled to have his or her
shares of THCG Utah Common Stock purchased by THCG Utah or THCG Delaware for
cash at their Fair Value (as defined below). The "Fair Value" of shares of THCG
Utah Common Stock will be determined as of the day before consummation of the
merger by which the Reincorporation will be consummated, excluding any
appreciation or depreciation in anticipation of the proposed Reincorporation.
The shares of THCG Utah Common Stock with respect to which holders have
perfected their purchase demand in accordance with Part 13 and have not
effectively withdrawn or lost such rights are referred to in this Proxy
Statement as the "Dissenting Shares."
Under Part 13, a holder of Dissenting Shares wishing to exercise
dissenters' rights must deliver to THCG, prior to the vote on the proposed
Reincorporation at the Annual Meeting, a properly executed written notice of
intent to demand payment for shares if the proposed Reincorporation is
effectuated. The dissenting shareholder may not vote in favor of the
Reincorporation. A holder of Dissenting Shares wishing to exercise such holder's
dissenters' rights must be the record holder of such Dissenting Shares on the
date the proposed corporate action creating dissenters' rights under Part 13 is
approved by the shareholders. Accordingly, a holder of Dissenting Shares who is
the record holder of Dissenting Shares on the date the written demand for
appraisal is made, but who thereafter transfers such Dissenting Shares prior to
the vote on the proposed Reincorporation, will lose any right to appraisal in
respect of such Dissenting Shares.
Only a holder of record of Dissenting Shares is entitled to assert
dissenters' rights for the Dissenting Shares registered in that holder's name. A
demand for payment should be executed by or on behalf of the holder of record,
fully and correctly, as such holder's name appears on such holder's stock
certificates. If the Dissenting Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the Dissenting Shares are owned of
record by more than one person as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all joint owners. An authorized
agent, including one or more joint owners, may execute a demand for payment on
behalf of a holder of record; however, the agent must identify the record owner
or owners and expressly disclose the fact that, in executing the demand, the
agent is agent for such owner or owners. A record holder such as a broker who
holds Dissenting Shares as nominee for several beneficial owners may exercise
dissenters' rights with respect to the Dissenting Shares held for one or more
beneficial owners while not exercising such rights with respect to the
Dissenting Shares held for other beneficial owners only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person; in such case, THCG must receive written notice which states the dissent
and the name and address of such person on whose behalf dissenters' rights are
being asserted. If a shareholder holds Dissenting Shares through a broker who in
turn holds the shares through a central securities depositary nominee, a demand
for appraisal of shares must be made by or on behalf of the depositary nominee
and must identify the depositary nominee as record holder. Shareholders who hold
their Dissenting Shares in brokerage accounts or other nominee forms and who
wish to assert dissenters' rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
such a nominee. All written demands for payment should be sent or delivered to
THCG, Inc., 650 Madison Avenue, 21st Floor, New York, NY 10022, Attention: Shai
Novik.
Under Part 13, a shareholder who wishes to assert dissenters' rights
must cause THCG Utah to receive written notice of his or her intent to demand
payment for shares if the proposed Reincorporation is approved prior to the vote
taken to approve the proposal at the Annual Meeting. In the case of a beneficial
owner of Dissenting Shares held through a broker or nominee (or other record
holder), as discussed above, such holder's notice to THCG Utah must certify that
both such beneficial owner and the record holder(s) of all shares of THCG Utah
Common Stock owned beneficially by him have asserted, or will timely assert,
dissenters' rights as to all of such shares. Within ten days after approval of
the Reincorporation, THCG Utah (or THCG Delaware, as applicable) must mail a
notice of such approval (the "Approval Notice") to all shareholders who are
entitled to demand payment for their shares under Part 13. Such notice will
include, among other things, (i) the address at which THCG will receive payment
demands and an address at which certificates for
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shares so certified may be deposited, (ii) with respect to holders of
uncertified shares, the extent to which the transfer of shares will be
restricted after payment demand is received, (iii) a form for demanding payment,
which includes a request for the dissenter's address to which payment is to be
made, (v) the date by which THCG must receive a payment demand, and (vi) a copy
of Part 13.
A dissenter who has not accepted an offer in full satisfaction under
Part 13 may notify THCG in writing of his or her own estimate of the Fair Value
of his or her shares. Such notice must be received by THCG within thirty days
after THCG has made its payment or offer. If THCG refuses to pay such demand, it
has sixty days after it receives notice to commence a proceeding in the district
court of Salt Lake County, Utah. The holders of the Dissenting Shares will be
named as parties to the suit and will be served with a copy of the petition. The
court will then make a determination of Fair Value to which the dissenter will
be entitled, plus interest.
The district court will determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court and will assess the costs against THCG unless the court finds that all
or some of the dissenters acted arbitrarily, vexatiously, or not in good faith.
The court may also make other allocations of attorney's fees among the parties
in accordance with various equitable criteria set forth in Section 16-10a-1331
of Part 13.
Failure to follow the steps required by Part 13 as described above for
perfecting dissenters' rights may result in the loss of such rights. If, after
the Effective Time, a holder of Dissenting Shares has failed to perfect or has
effectively withdrawn or lost his or her right to payment, such holder's shares
will be deemed to have been converted into and to have become exchangeable, at
the Effective Time, for a corresponding number of shares of THCG Delaware Common
Stock.
Vote Required
The affirmative vote of the holders of a majority of all outstanding
shares of THCG Common Stock is required to approve the Merger Agreement and the
proposed Reincorporation.
THE BOARD OF DIRECTORS OF THCG UTAH UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT AND THE PROPOSED REINCORPORATION IN DELAWARE.
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PROPOSAL 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On April 6, 2000, THCG dismissed Richard A. Eisner & Company, LLP
("Eisner & Company") as its independent auditors. The Audit Committee of the
Board of Directors has recommended and the Executive Committee of the Board of
Directors has approved the selection of Arthur Andersen LLP as independent
auditors to audit the financial statements of THCG for the fiscal year ending
December 31, 2000, subject to ratification by the shareholders at the Annual
Meeting. Arthur Andersen LLP replaces Eisner & Company, who served as
independent auditors of THCG for the fiscal year ending December 31, 1999.
Eisner & Company's reports on THCG's financial statements for the last
fiscal year did not contain an adverse opinion or disclaimer of opinion,
nor were any such reports qualified or modified as to uncertainty, audit scope
or accounting principles. Further, there have been no disagreements with Eisner
& Company on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which disagreement, if not
resolved to the satisfaction of such auditors, would have caused such auditors
to make reference to the subject matter of the disagreement(s) in connection
with their report thereon during THCG's most recent fiscal year.
If the shareholders reject the appointment, the Board will reconsider
its selection. If the shareholders ratify the appointment, the Board, in its
sole discretion, may still direct the appointment of new independent auditors at
any time during the year if the Board believes it would be in the best interests
of THCG.
THCG does not anticipate that representatives of Eisner & Company or
Arthur Andersen LLP will be present at the Annual Meeting.
Vote Required
The affirmative vote of the holders of a majority of the votes cast is
required to approve the ratification of the Board's appointment of Arthur
Andersen LLP as THCG's independent auditors for the year ending December 31,
2000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THCG'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000.
PROPOSALS BY SHAREHOLDERS
Any shareholder proposal which is intended to be presented at THCG's
2001 Annual Meeting of Shareholders must be received at THCG's principal
executive offices, 650 Madison Avenue, New York, New York 10022, Attention:
Secretary, no later than December 15, 2000, if such proposal is to be considered
for inclusion in THCG's proxy statement and form of proxy relating to such
meeting, which meeting THCG expects will be held in or about May, 2001. Any such
proposals must comply in all respects with the rules and regulations of the
Securities and Exchange Commission. Shareholders of THCG who intend to bring
business before the meeting must also comply with the applicable procedures set
forth in THCG's By-laws, a copy of which will be furnished upon written request
to the Company at the aforementioned address.
1999 ANNUAL REPORT AND FORM 10-K
A copy of the 1999 Annual Report to Shareholders accompanies this Proxy
Statement. The Annual Report includes a copy of THCG's Annual Report on Form
10-K for the year ended December 31, 1999, as filed with the Securities and
Exchange Commission, which contains detailed information concerning THCG and its
operations.
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OTHER BUSINESS
The Annual Meeting is being held for the purposes set forth in the
Notice accompanying this Proxy Statement. The Board is not presently aware of
business to be transacted at the Annual Meeting other than as set forth in the
Notice.
By Order of the Board of Directors,
----------------------------------
Shai Novik
Secretary
New York, New York
April __, 2000
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APPENDIX A
THE 2000 THCG, INC.
STOCK INCENTIVE PLAN
(as adopted February 15, 2000)
1. Purpose of the Plan
This 2000 THCG, Inc. Stock Incentive Plan is intended to promote the
interests of the Company and its stockholders by providing certain key
individuals, on whose judgment, initiative and efforts the successful conduct of
the business of the Company largely depends, and who are largely responsible for
the management, growth and protection of the business of the Company, with
appropriate incentives and rewards to encourage them to continue their
Employment with the Company and to maximize their performance and to provide
certain "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code.
2. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Affiliate" shall mean any entity (whether or not incorporated)
controlling, controlled by or under common control with the Company.
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash
pursuant to Section 13 hereof.
(d) "Cause" shall mean, when used in connection with a Participant's
Termination of Employment:
(i) to the extent that there is an employment, severance or
other agreement governing the relationship between the Participant
and the Company, which agreement contains a definition of "Cause,"
cause will consist of those acts or omissions that would constitute
"cause" under such agreement; and otherwise
(ii) the Participant's Termination of Employment by the Company
or an Affiliate on account of any one or more of the following:
(A) any failure by the Participant substantially to perform
the Participant's Employment duties;
(B) any excessive unauthorized absenteeism by the
Participant;
(C) any refusal by the Participant to obey the lawful
orders of the Board of Directors or any other person or
committee to whom the Participant reports;
(D) any act or omission by the Participant that is or may
be injurious to the Company, monetarily or otherwise;
(E) any act by the Participant that is inconsistent with
the best interests of the Company;
(F) the Participant's material violation of any of the
Company's policies, including, without limitation, those
policies relating to discrimination or sexual harassment;
(G) the Participant's unauthorized (a) removal from the
premises of the Company or Affiliate of any document (in any
medium or form) relating to the Company or an Affiliate or the
customers
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or clients of the Company or an Affiliate or (b) disclosure to
any person or entity of any of the Company's confidential or
proprietary information;
(H) the Participant's commission of any felony, or any
other crime involving moral turpitude; and
(I) the Participant's commission of any act involving
dishonesty or fraud.
To the extent the definition of Cause herein is determined pursuant
to Section 2(d)(ii) hereof, then solely for the purposes of Sections 6(h), 9(e),
10(g) and 11(e) of this Plan the definition of Cause shall be determined only by
reference to subsections (C), (F), (G), (H) and (I) of such Section 2(d)(ii).
Any rights the Company may have hereunder in respect of the events
giving rise to Cause shall be in addition to the rights the Company may have
under any other agreement with a Participant or at law or in equity. Any
determination of whether a Participant's Employment is (or is deemed to have
been) terminated for Cause shall be made by the Committee in its discretion,
which determination shall be final and binding on all parties. If, subsequent to
a Participant's voluntary Termination of Employment or involuntary Termination
of Employment without Cause, it is discovered that the Participant's Employment
could have been terminated for Cause, such Participant's Employment shall be
deemed to have been terminated for Cause. A Participant's Termination of
Employment for Cause shall be effective as of the date of the occurrence of the
event giving rise to Cause, regardless of when the determination of Cause is
made.
(e) "Change in Control" shall mean the occurrence of any of the
following:
(i) a change in control of a nature that would be required to be
reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act shall have occurred, unless such
change in control results in control by the Participant, his
designee(s) or "affiliate(s)" (as defined in Rule 12b-2 under the
Exchange Act) or any combination thereof;
(ii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Participant, his
designee(s) or "affiliate(s)" (as defined in Rule 12b-2 under the
Exchange Act), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing forty percent (40%) or more of
the combined voting power of the Company's then outstanding
securities;
(iii) during any period of two (2) consecutive years during this
Agreement, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director
at the beginning of such period has been approved in advance by
directors representing at least a majority of the directors then in
office who were directors at the beginning of the period;
(iv) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than 25% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control of
the Company; or
(v) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of, or the Company sells or disposes of,
all or substantially all of the Company's assets.
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(f) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" shall mean the Compensation Committee of the Board of
Directors or such other committee as the Board of Directors shall appoint from
time to time to administer the Plan; provided, however, that the Committee shall
at all times consist of two or more persons. The Committee shall consist solely
of individuals who are (or grants shall be made by a subcommittee of two or more
persons, each of whom shall be) a "non-employee director" within the meaning of
Rule 16b-3. Each member of the Committee shall be an "outside director" within
the meaning of Section 162(m) of the Code.
(h) "Company" shall mean THCG, Inc., a Utah corporation, or any
successor thereto.
(i) "Company Stock" shall mean the common stock , par value $0.01 per
share, of the Company.
(j) "Disability" shall mean, except in connection with an Incentive
Stock Option, any physical or mental condition that would qualify a Participant
for a disability benefit under the long-term disability plan maintained by the
Company or, if there is no such plan, a physical or mental condition that
prevents the Participant from performing the essential functions of the
Participant's position (with or without reasonable accommodation) for a period
of six consecutive months or, in connection with an Incentive Stock Option, a
disability described in Section 422(c)(6) of the Code. The existence of a
Disability shall be determined by the Committee in its absolute discretion.
(k) "Dividend Equivalent Right" shall mean an Incentive Award granted
pursuant to Section 14 hereof of a right to receive an amount equivalent to the
ordinary cash dividends paid in respect to some or all of the shares of Company
Stock underlying an Incentive Award.
(l) "Employment" shall mean, in the case of a Participant who is not
an employee of the Company, the Participant's association with the Company or an
Affiliate as a consultant.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(n) "Fair Market Value" shall mean, with respect to a share of
Company Stock on an applicable date:
(i) If Company Stock is traded on a national securities
exchange, (A) the average of the high and low reported sales price
regular way per share of Company Stock on the principal national
securities exchange on which Company Stock is traded or (B) if no
reported sales take place on the applicable date, the average of the
highest bid and lowest asked price of Company Stock on such exchange
or (C) if no such quotation is made on such date, on the next
preceding day (not more than 10 business days prior to the applicable
date) on which there were reported sales or such quotations.
(ii) If Company Stock is not traded on a national securities
exchange but quotations are available for Company Stock on the
over-the-counter market, (A) the mean between the highest bid and
lowest asked quotation on the over-the-counter market as reported by
the National Quotations Bureau, or any similar organization, on the
applicable date or (B) if no such quotation is made on such date on
the next preceding day (not more than 10 business days prior to the
applicable date) on which there were such quotations.
(iii) If Company Stock is neither traded on a national
securities exchange nor are quotations therefor available on the
over-the-counter market or if there are no sales or quotations in the
10 business days immediately prior to the applicable date, as
determined in good faith by the Committee in a manner consistently
applied.
(o) "Incentive Award" shall mean an Option, LSAR, Tandem SAR,
Stand-Alone SAR, Dividend Equivalent Right, share of Restricted Stock, share of
Phantom Stock, Stock Bonus, Cash Bonus or other equity-based award granted
pursuant to the terms of the Plan.
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(p) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of the Code and that
is identified as an Incentive Stock Option in the agreement by which it is
evidenced.
(q) "Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued by
the Company pursuant to the terms of Section 10(d) hereof.
(r) "LSAR" shall mean a limited stock appreciation right that is
granted pursuant to the provisions of Section 7 hereof and that relates to an
Option. Each LSAR shall be exercisable only upon the occurrence of a Change in
Control and only in the alternative to the exercise of its related Option.
(s) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(t) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 6 hereof. Each Option shall be identified as either
an Incentive Stock Option or a Non-Qualified Stock Option in the agreement by
which it is evidenced.
(u) "Participant" shall mean any person who is eligible to
participate in the Plan and to whom an Incentive Award is granted pursuant to
the Plan, and, upon his death, such person's successors, heirs, executors and
administrators, as the case may be.
(v) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
(w) "Phantom Stock" shall mean the right to receive in cash the Fair
Market Value of a share of Company Stock, which right is granted pursuant to
Section 11 hereof and subject to the terms and conditions contained therein.
(x) "Plan" shall mean this 2000 THCG, Inc. Stock Incentive Plan, as
it may be amended from time to time.
(y) "Reload Option" shall mean an Option granted to a Participant in
accordance with Section 6(b) hereof upon the exercise of an Option.
(z) "Restricted Stock" shall mean a share of Company Stock that is
granted pursuant to the terms of Section 10 hereof and that is subject to the
restrictions set forth in Section 10(c) hereof for so long as such restrictions
continue to apply to such share.
(aa) "SAR" shall mean a Tandem SAR, Stand-Alone SAR or LSAR.
(bb) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(cc) "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 9 hereof that is not related to any Option.
(dd) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Company Stock pursuant to Section 12 hereof.
(ee) "Tandem SAR" shall mean a stock appreciation right granted
pursuant to Section 8 hereof that is related to an Option. Each Tandem SAR shall
be exercisable only to the extent its related Option is exercisable and only in
the alternative to the exercise of its related Option.
(ff) "Termination of Employment" shall mean a Participant's
Employment by the Company and any Affiliates, or by a corporation assuming
Incentive Awards in a transaction to which section 424(a) of the Code applies,
coming to an end. The Committee may determine, in its absolute discretion, (i)
whether any leave of
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absence or absence in military or government service constitutes a Termination
of Employment for purposes of the Plan, subject to applicable law, (ii) the
effect, if any, of any such leave of absence on Incentive Awards granted under
the Plan, and (iii) when a change in any Participant's association with the
Company constitutes a Termination of Employment for purposes of the Plan.
(gg) "Vesting Date" shall mean the date established by the Committee
on which a share of Restricted Stock or Phantom Stock may vest.
3. Stock Subject to the Plan
(a) Plan Limit
Subject to adjustment as provided in Section 16 hereof, the
Committee may grant Incentive Awards hereunder with respect to a number of
shares of Company Stock that in the aggregate does not exceed 5,000,000 shares.
The grant of an LSAR, Tandem SAR or Dividend Equivalent Right shall not reduce
the number of shares of Company Stock with respect to which Incentive Awards may
be granted pursuant to the Plan. Incentive Awards granted under the Plan shall
count against the foregoing limits at the time they are granted but shall again
become available for grant under the Plan as follows:
(i) To the extent that any Options, together with any related
rights granted under the Plan, terminate, expire or are canceled
without having been exercised (including a cancellation resulting
from the exercise of a related LSAR or a Tandem SAR) the shares
covered by such Options shall again be available for grant under the
Plan.
(ii) To the extent that any Stand-Alone SARs terminate, expire
or are canceled without having been exercised, the shares covered by
such Stand-Alone SARs shall again be available for grant under the
Plan.
(iii) To the extent any shares of Restricted Stock or Phantom
Stock, or any shares of Company Stock granted as a Stock Bonus are
forfeited or canceled for any reason, such shares shall again be
available for grant under the Plan.
Shares of Company Stock issued under the Plan may be either
newly issued shares or treasury shares, at the discretion of the Committee.
(b) Individual Limit
Subject to adjustment as provided in Section 14 hereof, the
Committee shall not, during any calendar year, grant any one Participant
Incentive Awards hereunder with respect to more than 1,000,000 shares of Company
Stock. Such Incentive Awards may be made up entirely of any one type of
Incentive Award or any combination of types of Incentive Awards available under
the Plan, in the Committee's sole discretion. Once granted to a Participant,
Incentive Awards shall not again be available for grant to that Participant. The
grant of an LSAR, Tandem SAR or Dividend Equivalent Right shall not reduce the
number of shares of Company Stock with respect to which Incentive Awards may be
granted to any Participant pursuant to the Plan.
4. Administration of the Plan
The Plan shall be administered by the Committee. The Committee shall
from time to time designate the key individuals who shall be granted Incentive
Awards and the amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Incentive Award issued under it, and to adopt such rules and
regulations for administering the Plan as it may deem necessary or appropriate.
Decisions of the Committee shall be final and binding on all parties. Except as
provided in Section 2(n)(iii), the Committee's determinations
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under the Plan may, but need not, be uniform and may be made on a
Participant-by-Participant basis (whether or not two or more Participants are
similarly situated).
The Committee may, in its absolute discretion, without amendment to
the Plan, (i) accelerate the date on which any Option or Stand-Alone SAR granted
under the Plan becomes exercisable or otherwise adjust any of the terms of such
Option or Stand-Alone SAR (except that no such adjustment shall, without the
consent of a Participant, reduce the Participant's rights under any previously
granted and outstanding Incentive Award unless the Committee determines that
such adjustment is necessary or appropriate to prevent such Incentive Award from
constituting "applicable employee remuneration" within the meaning of Section
162(m) of the Code), (ii) accelerate the Vesting Date or Issue Date, or waive
any condition imposed hereunder, with respect to any share of Restricted Stock
granted under the Plan or otherwise adjust any of the terms of such Restricted
Stock and (iii) accelerate the Vesting Date or waive any condition imposed
hereunder, with respect to any share of Phantom Stock granted under the Plan or
otherwise adjust any of the terms of such Phantom Stock.
In addition, the Committee may, in its absolute discretion and
without amendment to the Plan, grant Incentive Awards of any type to
Participants on the condition that such Participants surrender to the Committee
for cancellation such other Incentive Awards of the same or any other type
(including, without limitation, Incentive Awards with higher exercise prices or
values) as the Committee specifies. Notwithstanding Section 3(a) hereof, prior
to the surrender of such other Incentive Awards, Incentive Awards granted
pursuant to the preceding sentence of this Section 4 shall not count against the
limits set forth in such Section 3(a).
No member of the Committee shall be liable for any action, omission
or determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
Notwithstanding anything in the Plan to the contrary, until the
Board of Directors shall have appointed the members of the Committee, the Board
of Directors shall administer the Plan. In addition, the Board of Directors may,
in its sole discretion, at any time and from time to time, grant Incentive
Awards or resolve to administer the Plan in which case, to the extent provided
in such resolutions, the Board of Directors shall have the powers of the
Committee.
5. Eligibility
The persons who shall be eligible to receive Incentive Awards
pursuant to the Plan shall be those key current and former employees of the
Company and its Affiliates (including prospective employees, which Incentive
Awards shall be conditioned on the prospective employees actually becoming
employees) and certain current and former consultants or other independent
contractors (including directors of the Company or any of its Affiliates who are
not employees of the Company or any of its Affiliates) to the Company and its
Affiliates who are largely responsible for the management, growth and protection
of the business of the Company and its Affiliates (including officers of the
Company, whether or not they are directors of the Company) as the Committee
shall select from time to time.
6. Options
The Committee may grant Options pursuant to the Plan. Such Options
shall be evidenced by agreements in such form as the Committee shall from time
to time approve. Options shall comply with and be subject to the following terms
and conditions:
(a) Identification of Options
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All Options granted under the Plan shall be clearly identified
in the agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b) Conditions to Issuance and Exercisability
At the time of the grant of any Options under the Plan, the
Committee may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the issuance or exercisability of the Options, as the
Committee, in its absolute discretion, deems appropriate. By way of example and
not by way of limitation, the Committee may require, as a condition to the
issuance or exercisability of any Options, that the Participant or the Company
achieve such performance criteria as the Committee may specify at the time of
the grant of such shares.
(c) Exercise Price
The exercise price of any Non-Qualified Stock Option granted
under the Plan shall be such price as the Committee shall determine (which may
be equal to, less than or greater than the Fair Market Value of a share of
Company Stock on the date such Non-Qualified Stock Option is granted) on the
date on which such Non-Qualified Stock Option is granted; provided, that such
price may not be less than the minimum price required by law. Subject to Section
6(e), the exercise price-per-share of any Incentive Stock Option granted under
the Plan shall be not less than 100% of the Fair Market Value of a share of
Company Stock on the date on which such Incentive Stock Option is granted
(except as permitted in connection with the assumption or issuance of Options in
a transaction to which Section 424(a) of the Code applies).
(d) Term and Exercise of Options
(i) Each Option shall be exercisable on such date or dates,
during such period and for such number of shares of Company Stock as
shall be determined by the Committee on the day on which such Option
is granted and set forth in the agreement evidencing such Option;
provided, however, that: (A) if such agreement does not specify the
date or dates on which the Option will become exercisable, the shares
subject to the Option shall become exercisable in three equal
installments on each of the first, second and third anniversary of
the day on which the Option is granted; (B) no Option shall be
exercisable after the expiration of ten years from the date such
Option was granted; and (C) each Option shall be subject to earlier
termination, expiration or cancellation as provided in the Plan.
(ii) Each Option shall be exercisable in whole or in part;
provided, that no partial exercise of an Option shall be for an
aggregate exercise price of less than $1,000. The partial exercise of
an Option shall not cause the expiration, termination or cancellation
of the remaining portion thereof. Upon the partial exercise of an
Option, the agreement evidencing such Option and any related LSARs
and Tandem SARs shall be returned to the Participant exercising such
Option together with the delivery of the certificates described in
Section 6(d)(v) hereof.
(iii) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no
less than five business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the agreement
or agreements evidencing the Option and any related LSARs and Tandem
SARs, shall specify the number of shares of Company Stock with
respect to which the Option is being exercised and the effective date
of the proposed exercise and shall be signed by the Participant. The
Participant may withdraw such notice at any time prior to the close
of business on the business day immediately preceding the effective
date of the proposed exercise, in which case such agreement or
agreements shall be returned to him. Payment for shares of Company
Stock purchased upon the exercise of an Option shall be made on the
effective date of such exercise either:
(A) in cash, by certified check, bank cashier's check or
wire transfer; or
(B) subject to the approval of the Committee, in shares of
Company Stock owned by the Participant and valued at their Fair
Market Value on the effective date of such exercise, or partly
in
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shares of Company Stock with the balance in cash, by
certified check, bank cashier's check or wire transfer; or
(C) subject to the approval of the Committee, pursuant to a
"cashless exercise" pursuant to procedures adopted by the
Committee whereby the Participant, by a properly written notice,
directing (A) an immediate market sale or margin loan respecting
all or a part of the shares of Company Stock to which the
Participant is entitled upon exercise pursuant to an extension
of credit by the Company to the Participant of the exercise
price, (B) the delivery of the shares of Company Stock from the
Company directly to the brokerage firm, and (C) the delivery of
the exercise price from the sale or margin loan proceeds from
the brokerage firm directly to the Company.
Any payment in shares of Company Stock shall be effected by
the delivery of such shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
(iv) Except as otherwise provided in an applicable agreement
evidencing an Option, during the lifetime of a Participant, each
Option granted to a Participant shall be exercisable only by the
Participant and no Option shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
The Committee may, in any applicable agreement evidencing an Option
(other than an Incentive Stock Option to the extent inconsistent with
the requirements of Section 422 of the Code applicable to incentive
stock options), permit a Participant to transfer all or some of the
Options to (A) the Participant's spouse, children or grandchildren
("Immediate Family Members"), (B) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (C) other parties
approved by the Committee in its absolute discretion. Following any
such transfer, any transferred Options shall continue to be subject
to the same terms and conditions as were applicable immediately prior
to the transfer.
(v) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant
or his beneficiary (or permitted transferee), as the case may be, and
delivered to the Participant or his beneficiary (or permitted
transferee), as the case may be, as soon as practicable following the
effective date on which the Option is exercised.
(e) Limitations on Grant of Incentive Stock Options
(i) The aggregate Fair Market Value of shares of Company Stock
with respect to which Incentive Stock Options granted hereunder are
exercisable for the first time by a Participant during any calendar
year under the Plan and any other stock option plan of the Company
(or any "subsidiary corporation" of the Company within the meaning of
Section 424 of the Code) shall not exceed $100,000. Such Fair Market
Value shall be determined as of the date on which each such Incentive
Stock Option is granted. In the event that the aggregate Fair Market
Value of shares of Company Stock with respect to such Incentive Stock
Options exceeds $100,000, then Incentive Stock Options granted
hereunder to such Participant shall, to the extent and in the order
in which they were granted, automatically be deemed to be
Non-Qualified Stock Options, but all other terms and provisions of
such Incentive Stock Options shall remain unchanged.
(ii) No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant: (i) such individual was not an
employee of the company, a parent or subsidiary corporation of the
Company, or a corporation or a parent or subsidiary corporation of
such corporation issuing or assuming a stock option in a transaction
to which Section 424(a) of the Code applies or (ii) such individual
owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any of its
"subsidiary corporations" (within the meaning of Section 424 of the
Code), unless (A) the exercise price of such Incentive Stock Option
is at least one hundred ten percent (110%) of the Fair Market Value
of a share of Company Stock at the time such Incentive Stock Option
is granted and
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(B) such Incentive Stock Option is not exercisable after the
expiration of five years from the date such Incentive Stock Option is
granted.
(f) Grants of Reload Options
The Committee may, in its discretion, include in any agreement
evidencing an Option (the "Original Option") a provision that a Reload Option
shall be granted to any Participant who, pursuant to Section 6(d)(iii), delivers
shares of Company Stock in partial or full payment of the exercise price of the
Original Option. The Reload Option shall relate to a number of shares of Company
Stock equal to the number of shares of Company Stock delivered, and shall have
an exercise price-per-share equal to the Fair Market Value of a share of Company
Stock on the date of the exercise of the Original Option. In the event that an
agreement evidencing an Original Option provides for the grant of a Reload
Option, such agreement shall also provide that the exercise price-per-share of
the Original Option shall be no less that the Fair Market Value of a share of
Company Stock on its date of grant, and that any shares that are delivered
pursuant to Section 6(d)(iii) in payment of such exercise price shall have been
held for at least six months.
(g) Effect of Termination of Employment
(i) Unless otherwise provided in any agreement evidencing an
Option, in the event that the Employment of a Participant with the
Company and its Affiliates shall terminate for any reason other than
Cause, Disability or death (A) Options granted to such Participant,
to the extent that they were exercisable at the time of such
Termination of Employment, shall remain exercisable until the
expiration of three months after such Termination of Employment, on
which date they shall expire, and (B) Options granted to such
Participant, to the extent that they were not exercisable at the time
of such Termination of Employment, shall expire at the close of
business on the date of such Termination of Employment; provided,
however, that no Option shall be exercisable after the expiration of
its term.
(ii) Unless otherwise provided in any agreement evidencing an
Option, in the event that the Employment of a Participant with the
Company shall terminate on account of the Disability or death of the
Participant (A) Options granted to such Participant, to the extent
that they were exercisable at the time of such Termination of
Employment, shall remain exercisable until the expiration of the
original term as provided for in the Plan or as specified in the
agreement evidencing the Option, and (B) Options granted to such
Participant, to the extent that they were not exercisable at the time
of such Termination of Employment, shall expire at the close of
business on the date of such Termination of Employment.
(iii) Unless otherwise provided in any agreement evidencing an
Option, in the event of a Participant's Termination of Employment for
Cause, all outstanding Options granted to such Participant shall
expire at the commencement of business on the effective date of such
Termination of Employment.
(h) Acceleration of Exercise Date Upon Change in Control
In the event a Participant's Termination of Employment by the
Company, other than for Cause, on or after the occurrence of a Change in Control
but prior to the expiration of a six-month period following the Change in
Control, each Option granted under the Plan that is outstanding and
unexercisable immediately prior to such Termination of Employment shall become
fully and immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation pursuant to the terms of the Plan.
7. LSARs
The Committee may grant in connection with any Option granted
hereunder one or more LSARs relating to a number of shares of Company Stock less
than or equal to the number of shares of Company Stock subject to the related
Option. An LSAR may be granted at the same time as, or, in the case of a
Non-Qualified Stock Option, subsequent to the time that, its related Option is
granted. Each LSAR shall be evidenced by an agreement in such form as the
Committee shall from time to time approve. Each LSAR granted hereunder shall be
subject to the following terms and conditions:
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(a) Benefit Upon Exercise
(i) The exercise of an LSAR relating to a Non-Qualified Stock
Option with respect to any number of shares of Company Stock shall
entitle the Participant to a cash payment, for each such share, equal
to the excess of (A) the greater of (x) the highest price-per-share
of Company Stock paid in the Change in Control in connection with
which such LSAR became exercisable and (y) the Fair Market Value of a
share of Company Stock on the date of such Change in Control over (B)
the exercise price of the related Option. Such payment shall be made
as soon as practicable, but in no event later than the expiration of
five business days after the effective date of such exercise.
(ii) The exercise of an LSAR relating to an Incentive Stock
Option with respect to any number of shares of Company Stock shall
entitle the Participant to a cash payment, for each such share, equal
to the excess of (A) the Fair Market Value of a share of Company
Stock on the effective date of such exercise over (B) the exercise
price of the related Option. Such payment shall be made as soon as
practicable, but in no event later than the expiration of five
business days, after the effective date of such exercise.
(b) Term and Exercise of LSARs
(i) An LSAR shall be exercisable only during the period
commencing on the first day following the occurrence of a Change in
Control and terminating on the expiration of sixty days after such
date. Notwithstanding anything else herein, an LSAR relating to an
Incentive Stock Option may be exercised with respect to a share of
Company Stock only if the Fair Market Value of such share on the
effective date of such exercise exceeds the exercise price relating
to such share. Notwithstanding anything else herein, an LSAR may be
exercised only if and to the extent that the Option to which it
relates is exercisable.
(ii) The exercise of an LSAR with respect to a number of shares
of Company Stock shall cause the immediate and automatic cancellation
of the Option to which it relates with respect to an equal number of
shares. The exercise of an Option, or the cancellation, termination
or expiration of an Option (other than pursuant to this Section
(b)(ii)), with respect to a number of shares of Company Stock, shall
cause the cancellation of the LSAR related to it with respect to an
equal number of shares.
(iii) Each LSAR shall be exercisable in whole or in part;
provided, that no partial exercise of an LSAR shall be for an
aggregate exercise price of less than $1,000. The partial exercise of
an LSAR shall not cause the expiration, termination or cancellation
of the remaining portion thereof. Upon the partial exercise of an
LSAR, the agreement evidencing the LSAR, the related Option and any
Tandem SARs related to such Option, marked with such notations as the
Committee may deem appropriate to evidence such partial exercise,
shall be returned to the Participant exercising such LSAR together
with the payment described in Section 7(a)(i) or (ii) hereof, as
applicable.
(iv) Except as otherwise provided in an applicable agreement
evidencing an LSAR, during the lifetime of a Participant, each LSAR
granted to a Participant shall be exercisable only by the Participant
and no LSAR shall be assignable or transferable otherwise than by
will or by the laws of descent and distribution and otherwise than
together with its related Option. The Committee may, in any
applicable agreement evidencing an LSAR, permit a Participant to
transfer all or some of the LSAR to (A) the Participant's Immediate
Family Members, (B) a trust or trusts for the exclusive benefit of
such Immediate Family Members, or (C) other parties approved by the
Committee in its absolute discretion. Following any such transfer,
any transferred LSARs shall continue to be subject to the same terms
and conditions as were applicable immediately prior to the transfer.
(v) An LSAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no
less than five business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the applicable
agreement evidencing the LSAR, the related Option and any Tandem SARs
relating to such Option, shall specify the number of shares of
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Company Stock with respect to which the LSAR is being exercised and
the effective date of the proposed exercise and shall be signed by
the Participant. The Participant may withdraw such notice at any time
prior to the close of business on the business day immediately
preceding the effective date of the proposed exercise, in which case
such agreement shall be returned to him.
8. Tandem SARs
The Committee may grant in connection with any Option granted
hereunder one or more Tandem SARs relating to a number of shares of Company
Stock less than or equal to the number of shares of Company Stock subject to the
related Option. A Tandem SAR may be granted at the same time as, or subsequent
to the time that, its related Option is granted. Each Tandem SAR shall be
evidenced by an agreement in such form as the Committee shall from time to time
approve. Tandem SARs shall comply with and be subject to the following terms and
conditions:
(a) Benefit Upon Exercise
The exercise of a Tandem SAR with respect to any number of
shares of Company Stock shall entitle a Participant to a cash payment, for each
such share, equal to the excess of (i) the Fair Market Value of a share of
Company Stock on the effective date of such exercise over (ii) the exercise
price of the related Option. Such payment shall be made as soon as practicable,
but in no event later than the expiration of five business days, after the
effective date of such exercise.
(b) Term and Exercise of Tandem SAR
(i) A Tandem SAR shall be exercisable at the same time and to
the same extent (on a proportional basis, with any fractional amount
being rounded down to the immediately preceding whole number) as its
related Option. Notwithstanding the first sentence of this Section
8(b)(i), (A) a Tandem SAR shall not be exercisable at any time that
an LSAR related to the Option to which the Tandem SAR is related is
exercisable and (B) a Tandem SAR relating to an Incentive Stock
Option may be exercised with respect to a share of Company Stock only
if the Fair Market Value of such share on the effective date of such
exercise exceeds the exercise price relating to such share.
(ii) The exercise of a Tandem SAR with respect to a number of
shares of Company Stock shall cause the immediate and automatic
cancellation of its related Option with respect to an equal number of
shares. The exercise of an Option, or the cancellation, termination
or expiration of an Option (other than pursuant to this Section
6(b)(ii)), with respect to a number of shares of Company Stock shall
cause the automatic and immediate cancellation of its related Tandem
SARs to the extent that the number of shares of Company Stock subject
to such Option after such exercise, cancellation, termination or
expiration is less than the number of shares subject to such Tandem
SARs. Such Tandem SARs shall be canceled in the order in which they
became exercisable.
(iii) Each Tandem SAR shall be exercisable in whole or in part;
provided, that no partial exercise of a Tandem SAR shall be for an
aggregate exercise price of less than $1,000. The partial exercise of
a Tandem SAR shall not cause the expiration, termination or
cancellation of the remaining portion thereof. Upon the partial
exercise of a Tandem SAR, the agreement evidencing such Tandem SAR,
its related Option and LSARs relating to such Option shall be
returned to the Participant exercising such Tandem SAR together with
the payment described in Section 8(a) hereof.
(iv) Except as otherwise provided in an applicable agreement
evidencing a Tandem SAR, during the lifetime of a Participant, each
Tandem SAR granted to a Participant shall be exercisable only by the
Participant and no Tandem SAR shall be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
The Committee may, in any applicable agreement evidencing a Tandem
SAR, permit a Participant to transfer all or some of the Tandem SAR
to (A) the Participant's Immediate Family Members, (B) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or
(C) other parties approved by the Committee in its absolute
discretion. Following any such transfer, any
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transferred Tandem SARs shall continue to be subject to the same
terms and conditions as were applicable immediately prior to the
transfer.
(v) A Tandem SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no
less than five business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the applicable
agreement evidencing the Tandem SAR, its related Option and any LSARs
related to such Option, shall specify the number of shares of Company
Stock with respect to which the Tandem SAR is being exercised and the
effective date of the proposed exercise and shall be signed by the
Participant. The Participant may withdraw such notice at any time
prior to the close of business on the business day immediately
preceding the effective date of the proposed exercise, in which case
such agreement shall be returned to him.
9. Stand-Alone SARs
The Committee may grant Stand-Alone SARs pursuant to the Plan, which
Stand-Alone SARs shall be evidenced by agreements in such form as the Committee
shall from time to time approve. Stand-Alone SARs shall comply with and be
subject to the following terms and conditions:
(a) Exercise Price
The exercise price of any Stand-Alone SAR granted under the Plan
shall be determined by the Committee at the time of the grant of such
Stand-Alone SAR.
(b) Benefit Upon Exercise
(i) The exercise of a Stand-Alone SAR with respect to any number
of shares of Company Stock prior to the occurrence of a Change in
Control shall entitle a Participant to a cash payment, for each such
share, equal to the excess of (A) the Fair Market Value of a share of
Company Stock on the exercise date over (B) the exercise price of the
Stand-Alone SAR.
(ii) The exercise of a Stand-Alone SAR with respect to any
number of shares of Company Stock on or after the occurrence of a
Change in Control shall entitle a Participant to a cash payment, for
each such share, equal to the excess of (A) the greater of (x) the
highest price-per-share of Company Stock paid in connection with such
Change in Control and (y) the Fair Market Value of a share of Company
Stock on the date of such Change in Control over (B) the exercise
price of the Stand-Alone SAR.
(iii) All payments under this Section 9(b) shall be made as soon
as practicable, but in no event later than five business days, after
the effective date of the exercise.
(c) Term and Exercise of Stand-Alone SARs
(i) Each Stand-Alone SAR shall be exercisable on such date or
dates, during such period and for such number of shares of Company
Stock as shall be determined by the Committee and set forth in the
agreement evidencing such Stand-Alone SAR; provided, however, that:
(A) if such agreement does not specify the date or dates on which the
Stand-Alone SAR will become exercisable, the shares subject to the
Stand-Alone SAR shall become exercisable in three equal installments
on each of the first, second and third anniversary of the day on
which the Stand-Alone SAR is granted; (B) no Stand-Alone SAR shall be
exercisable after the expiration of ten years from the date such
Stand-Alone SAR was granted; and (C) each Stand-Alone SAR shall be
subject to earlier termination, expiration or cancellation as
provided in the Plan.
(ii) Each Stand-Alone SAR may be exercised in whole or in part;
provided, that no partial exercise of a Stand-Alone SAR shall be for
an aggregate exercise price of less than $1,000. The partial exercise
of a Stand-Alone SAR shall not cause the expiration, termination or
cancellation of the remaining portion thereof. Upon the partial
exercise of a Stand-Alone SAR, the agreement evidencing such
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Stand-Alone SAR, marked with such notations as the Committee may deem
appropriate to evidence such partial exercise, shall be returned to
the Participant exercising such Stand-Alone SAR, together with the
payment described in Section 9(b)(i) or 9(b)(ii) hereof.
(iii) A Stand-Alone SAR shall be exercised by delivering notice
to the Company's principal office, to the attention of its Secretary,
no less than five business days in advance of the effective date of
the proposed exercise. Such notice shall be accompanied by the
applicable agreement evidencing the Stand-Alone SAR, shall specify
the number of shares of Company Stock with respect to which the
Stand-Alone SAR is being exercised and the effective date of the
proposed exercise, and shall be signed by the Participant. The
Participant may withdraw such notice at any time prior to the close
of business on the business day immediately preceding the effective
date of the proposed exercise, in which case the agreement evidencing
the Stand-Alone SAR shall be returned to him.
(iv) Except as otherwise provided in an applicable agreement
evidencing a Stand-Alone SAR, during the lifetime of a Participant,
each Stand-Alone SAR granted to a Participant shall be exercisable
only by the Participant and no Stand-Alone SAR shall be assignable or
transferable otherwise than by will or by the laws of descent and
distribution. The Committee may, in any applicable agreement
evidencing a Stand-Alone SAR, permit a Participant to transfer all or
some of the Stand-Alone SAR to (A) the Participant's Immediate Family
Members, (B) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or (C) other parties approved by the
Committee in its absolute discretion. Following any such transfer,
any transferred Stand-Alone SARs shall continue to be subject to the
same terms and conditions as were applicable immediately prior to the
transfer.
(d) Effect of Termination of Employment
(i) Unless otherwise provided in any agreement evidencing a
Stand-Alone SAR, in the event that the Employment of a Participant
with the Company and its Affiliates shall terminate for any reason
other than Cause, Disability or death (A) Stand-Alone SARs granted to
such Participant, to the extent that they were exercisable at the
time of such Termination of Employment, shall remain exercisable
until the expiration of three months after such Termination of
Employment, on which date they shall expire, and (B) Stand-Alone SARs
granted to such Participant, to the extent that they were not
exercisable at the time of such Termination of Employment, shall
expire at the close of business on the date of such Termination of
Employment; provided, however, that no Stand-Alone SAR shall be
exercisable after the expiration of its term.
(ii) Unless otherwise provided in any agreement evidencing a
Stand-Alone SAR, in the event that the Employment of a Participant
with the Company and its Affiliates shall terminate on account of the
Disability or death of the Participant (A) Stand-Alone SARs granted
to such Participant, to the extent that they were exercisable at the
time of such Termination of Employment, shall remain exercisable
until the expiration of the original term as provided for in the Plan
or as specified in the agreement evidencing the Stand-Alone SAR, and
(B) Stand-Alone SARs granted to such Participant, to the extent that
they were not exercisable at the time of such Termination of
Employment, shall expire at the close of business on the date of such
Termination of Employment.
(iii) In the event of a Participant's Termination of Employment
for Cause, all outstanding Stand-Alone SARs granted to such
Participant shall expire at the commencement of business on the
effective date of such Termination of Employment.
(e) Acceleration of Exercise Date Upon Change in Control
In the event a Participant's Termination of Employment by the
Company, other than for Cause, on or after the occurrence of a Change in Control
but prior to the expiration of a six-month period following the Change in
Control, each Stand-Alone SAR granted under the Plan that is outstanding and
unexercisable immediately prior to such Termination of Employment shall become
fully and immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation pursuant to the terms of the Plan.
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10. Restricted Stock
The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by an
agreement in such form and containing such terms and conditions and subject to
such agreements or understandings as the Committee shall from time to time
approve. Each grant of shares of Restricted Stock shall comply with and be
subject to the following terms and conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Issue Date and/or Vesting Date for each
class. If the Committee does not specify a Vesting Date or Vesting Dates at the
time of the grant, the shares shall vest in three equal installments on the
first, second and third anniversary of the Issue Date. Except as provided in
Sections 10(c) and 10(f) hereof, upon the occurrence of the Issue Date with
respect to a share of Restricted Stock, a share of Restricted Stock shall be
issued in accordance with the provisions of Section 10(d) hereof. Provided that
all conditions to the vesting of a share of Restricted Stock imposed pursuant to
Section 10(b) hereof are satisfied, and except as provided in Sections 10(c) and
10(f) hereof, upon the occurrence of the Vesting Date with respect to a share of
Restricted Stock, such share shall vest and the restrictions of Section 10(c)
hereof shall cease to apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion, deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any class or classes
of shares of Restricted Stock, that the Participant or the Company achieve such
performance criteria as the Committee may specify at the time of the grant of
such shares.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer
of a Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to such share, but immediately upon any
attempt to transfer such rights, such share, and all of the rights related
thereto, shall be forfeited by the Participant and the transfer shall be of no
force or effect.
(d) Issuance of Certificates
(i) Except as provided in Sections 10(c) or 10(f) hereof,
reasonably promptly after the Issue Date with respect to shares of
Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such
shares were granted, evidencing such shares; provided, that the
Company shall not cause to be issued such a stock certificate unless
it has received a stock power duly endorsed in blank with respect to
such shares. Each such stock certificate shall bear the following
legend:
The transferability of this certificate and the
shares of stock represented hereby are subject to the
restrictions, terms and conditions (including forfeiture
provisions and restrictions against transfer) contained in the
2000 THCG, Inc. Stock Incentive Plan and an Agreement entered
into between the registered owner of such shares and THCG, Inc.
A copy of the Plan and Agreement is on file in the office of the
Secretary of THCG, Inc., 650 Madison Avenue, 21st Floor, New
York, New York 10022.
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Such legend shall not be removed from the certificate evidencing such shares
until such shares vest pursuant to the terms hereof.
(ii) Each certificate issued pursuant to Section 10(d)(i)
hereof, together with the stock powers relating to the shares of
Restricted Stock evidenced by such certificate, shall be deposited by
the Company with a custodian designated by the Company (which
custodian may be the Company). The Company shall cause such custodian
to issue to the Participant a receipt evidencing the certificates
held by it which are registered in the name of the Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the
terms hereof, the restrictions of Section 10(c) hereof shall cease to apply to
such share. Reasonably promptly after a share of Restricted Stock vests pursuant
to the terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Section 10(d)(i) hereof, together with
any other property of the Participant held by the custodian pursuant to Section
16(b) hereof.
(f) Effect of Termination of Employment
(i) In the event that the Employment of a Participant with the
Company shall terminate for any reason (other than a termination that
is, or is deemed to have been, for Cause) prior to the vesting of
shares of Restricted Stock granted to such Participant, a proportion
of such shares, to the extent not forfeited or canceled on or prior
to such Termination of Employment pursuant to any provision hereof,
shall vest on the date of such Termination of Employment. The
proportion referred to in the preceding sentence shall initially be
determined by the Committee at the time of the grant of such shares
of Restricted Stock and may be based on the achievement of any
conditions imposed by the Committee with respect to such shares
pursuant to Section 10(b). Such proportion may be equal to zero. In
the absence of any such provision in an agreement evidencing an award
of Restricted Stock, a Participant's Termination of Employment with
the Company and its Affiliates for any reason (including death or
Disability) shall cause the immediate forfeiture of all shares of
Restricted Stock that have not vested as of the date of such
Termination of Employment.
(ii) In the event a Participant's Employment is or is deemed to
have been terminated for Cause, all shares of Restricted Stock
granted to such Participant that have not vested as of the effective
date of such Termination of Employment immediately shall be
forfeited.
(g) Effect of Change in Control
In the event a Participant's Termination of Employment by the
Company, other than for Cause, on or after the occurrence of a Change in Control
but prior to the expiration of a six-month period following the Change in
Control, all shares of Restricted Stock which have not vested as of the date
immediately prior to such Termination of Employment (including those with
respect to which the Issue Date has not yet occurred), or have not been canceled
or forfeited pursuant to any provision hereof, immediately shall vest.
11. Phantom Stock
The Committee may grant shares of Phantom Stock pursuant to the Plan.
Each grant of shares of Phantom Stock shall be evidenced by an agreement in such
form as the Committee shall from time to time approve. Each grant of shares of
Phantom Stock shall comply with and be subject to the following terms and
conditions:
(a) Vesting Date
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At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign a different
Vesting Date for each class. If the Committee does not specify a Vesting Date or
Vesting Dates at the time of the grant, the shares shall vest in three equal
installments on the first, second and third anniversary of the date on which
such Phantom Stock was granted. Provided that all conditions to the vesting of a
share of Phantom Stock imposed pursuant to Section 11(c) hereof are satisfied,
and except as provided in Section 11(d) hereof, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant
shall be entitled to receive, within 30 days after the date on which such share
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair Market
Value of a share of Company Stock on the date on which such share of Phantom
Stock vests and (ii) the aggregate amount of cash dividends paid with respect to
a share of Company Stock the record date for which occurs during the period
commencing on the date on which the share of Phantom Stock was granted and
terminating on the date on which such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion, deems appropriate. By way of example and not by way of limitation,
the Committee may require, as a condition to the vesting of any class or classes
of shares of Phantom Stock, that the Participant or the Company achieve such
performance criteria as the Committee may specify at the time of the grant of
such shares of Phantom Stock.
(d) Effect of Termination of Employment
(i) In the event that the Employment of a Participant with the
Company and its Affiliates shall terminate for any reason (other than
a termination that is, or is deemed to have been, for Cause) prior to
the vesting of shares of Phantom Stock granted to such Participant, a
proportion of such shares, to the extent not forfeited or canceled on
or prior to such Termination of Employment pursuant to any provision
hereof, shall vest on the date of such Termination of Employment. The
proportion referred to in the preceding sentence initially shall be
determined by the Committee at the time of the grant of such shares
of Phantom Stock and may be based on the achievement of any
conditions imposed by the Committee with respect to such shares
pursuant to Section 11(c). Such proportion may be equal to zero. In
the absence of any such provision in an agreement evidencing an award
of Phantom Stock, a Participant's Termination of Employment with the
Company and its Affiliates for any reason (including death or
Disability) shall cause the immediate forfeiture of all shares of
Phantom Stock that have not vested as of the date of such Termination
of Employment.
(ii) In the event a Participant's Employment is or is deemed to
have been terminated for Cause, all shares of Phantom Stock granted
to such Participant which have not vested as of the date of such
Termination of Employment immediately shall be forfeited.
(e) Effect of Change in Control
In the event a Participant's Termination of Employment by the
Company, other than for Cause, on or after the occurrence of a Change in Control
but prior to the expiration of a six-month period following the Change in
Control, all shares of Phantom Stock which have not vested as of the date
immediately prior to such Termination of Employment, or have not been canceled
or forfeited pursuant to any provision hereof, immediately shall vest.
12. Stock Bonuses
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The Committee may grant Stock Bonuses in such amounts as it shall
determine from time to time. A Stock Bonus shall be paid at such time (including
a future date selected by the Committee at the time of grant) and subject to
such conditions as the Committee shall determine at the time of the grant of
such Stock Bonus. Certificates for shares of Company Stock granted as a Stock
Bonus shall be issued in the name of the Participant to whom such grant was made
and delivered to such Participant as soon as practicable after the date on which
such Stock Bonus is required to be paid. Prior to the date on which a Stock
Bonus awarded hereunder is required to be paid, such award shall constitute an
unfunded, unsecured promise by the Company to distribute Company Stock in the
future.
13. Cash Bonuses
The Committee may, in its absolute discretion, in connection with any
grant of Restricted Stock or Stock Bonus or at any time thereafter, grant a cash
bonus, payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such grant
of Restricted Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event shall the
amount of a Cash Bonus exceed the Fair Market Value of the related shares of
Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
14. Grant of Dividend Equivalent Rights
The Committee may, in its absolute discretion, in connection with any
Incentive Award (other than an award of shares of Phantom Stock), grant a
Dividend Equivalent Right entitling the Participant to receive amounts equal to
the ordinary dividends that would be paid on the shares of Company Stock covered
by such Incentive Award if such shares then were outstanding, during the time
such Incentive Award is outstanding and (a) in the case of Options and SARs,
during the time such Options or SARs are unexercised or (b) in the case of
Restricted Stock and Stock Bonuses, prior to the issue date for the related
shares of Company Stock. The Committee shall determine whether any Dividend
Equivalent Rights shall be payable in cash, in shares of Company Stock or in
another form, the time or times at which they shall be made, and such other
terms and conditions as the Committee shall deem appropriate. No Dividend
Equivalent Right shall be conditioned on the exercise of any Option or SAR.
15. Other Equity-Based Awards
The Committee may grant other types of equity-based awards in such
amounts and subject to such terms and conditions, as the Committee shall in its
discretion determine, subject to the provisions of the Plan. Such Incentive
Awards may entail the transfer of actual shares of Company Stock to
Participants, or payment in cash or otherwise of amounts based on the value of
shares of Company Stock.
16. Adjustment Upon Changes in Company Stock
(a) Shares Available for Grants
In the event of any change in the number of shares of Company
Stock outstanding by reason of any stock dividend or split, reverse stock split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum number of shares of Company Stock with
respect to which the Committee may grant Incentive Awards under Section 3 hereof
shall be appropriately adjusted by the Committee. In the event of any change in
the number of shares of Company Stock outstanding by reason of any other event
or transaction, the Committee may, but need not, make such adjustments in the
number and class of shares of Company Stock with respect to which Incentive
Awards may be granted under Section 3 hereof as the Committee may deem
appropriate.
(b) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise
determines, any securities or other property (including dividends paid in cash)
received by a Participant with respect to a share of Restricted Stock, the
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Issue Date with respect to which occurs prior to such event, but which has not
vested as of the date of such event, as a result of any dividend, stock split,
reverse stock split, recapitalization, merger, consolidation, combination,
exchange of shares or otherwise will not vest until such share of Restricted
Stock vests, and shall be promptly deposited with the custodian designated
pursuant to Paragraph 10(d)(ii) hereof.
The Committee may, in its absolute discretion, adjust any grant
of shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events, or any
grant of shares of Phantom Stock, to reflect any dividend, stock split, reverse
stock split, recapitalization, merger, consolidation, combination, exchange of
shares or similar corporate change as the Committee may deem appropriate to
prevent the enlargement or dilution of rights of Participants under the grant.
(c) Outstanding Options, LSARs, Tandem SARs, Stand-Alone SARs and
Dividend Equivalent Rights-- Increase or Decrease in Issued
Shares Without Consideration
Subject to any required action by the stockholders of the
Company, in the event of any increase or decrease in the number of issued shares
of Company Stock resulting from a subdivision or consolidation of shares of
Company Stock or the payment of a stock dividend (but only on the shares of
Company Stock), or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Company, the Committee shall
proportionally adjust the number of shares of Company Stock subject to each
outstanding Option, LSAR, Tandem SAR and Stand-Alone SAR, and the exercise
price-per-share of Company Stock of each such Option, LSAR, Tandem SAR and
Stand-Alone SAR and the number of any related Dividend Equivalent Rights.
(d) Outstanding Options, LSARs, Tandem SARs, Stand-Alone SARs and
Dividend Equivalent Rights -- Certain Mergers
Subject to any required action by the stockholders of the
Company, in the event that the Company shall be the surviving corporation in any
merger or consolidation (except a merger or consolidation as a result of which
the holders of shares of Company Stock receive securities of another
corporation), each Option, LSAR, Tandem SAR, Stand-Alone SAR and Dividend
Equivalent Right outstanding on the date of such merger or consolidation shall
pertain to and apply to the securities and/or other property, including cash,
which a holder of the number of shares of Company Stock subject to such Option,
LSAR, Tandem SAR, Stand-Alone SAR or Dividend Equivalent Right would have
received in such merger or consolidation
(e) Outstanding Options, LSARs, Tandem SARs, Stand-Alone SARs and
Dividend Equivalent Rights -- Certain Other Transactions
In the event of (i) a dissolution or liquidation of the Company,
(ii) a sale of all or substantially all of the Company's assets, (iii) a merger
or consolidation involving the Company in which the Company is not the surviving
corporation or (iv) a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Company Stock
receive securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(A) cancel, effective immediately prior to the occurrence of
such event, each Option (including each LSAR, Tandem-SAR or Dividend
Equivalent Right related thereto) and Stand-Alone SAR (including each
Dividend Equivalent Right related thereto) outstanding immediately
prior to such event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the Participant to whom
such Option or Stand-Alone SAR was granted an amount in cash, for
each share of Company Stock subject to such Option or Stand-Alone
SAR, respectively, equal to the excess of (x) the value, as
determined by the Committee in its absolute discretion, of the
securities and/or other property, including cash received by the
holder of a share of Company Stock as a result of such event over (y)
the exercise price of such Option or Stand-Alone SAR; or
(B) provide for the exchange of each Option (including any
related LSAR, Tandem SAR or Dividend Equivalent Right)
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and Stand-Alone SAR (including any related Dividend Equivalent Right)
outstanding immediately prior to such event (whether or not then
exercisable) for an option on or stock appreciation right and
dividend equivalent right with respect to, as appropriate, some or
all of the securities and/or other property, including cash, which a
holder of the number of shares of Company Stock subject to such
Option or Stand-Alone SAR would have received in such transaction
and, incident thereto, make an equitable adjustment as determined by
the Committee in its absolute discretion in the exercise price of the
option or stock appreciation right, or the number of shares or amount
of property subject to the option, stock appreciation right or
dividend equivalent right or, if appropriate, provide for a cash
payment to the Participant to whom such Option or Stand-Alone SAR was
granted in partial consideration for the exchange of the Option or
Stand-Alone SAR.
In the event that the Committee does not exercise the
discretionary power granted it under this Section 16(e), each Option (including
any related LSAR, Tandem SAR or Dividend Equivalent Right) and Stand-Alone SAR
(including any related Dividend Equivalent Right) outstanding immediately prior
to such event (whether or not then exercisable) shall be converted into an
option on or stock appreciation right and dividend equivalent right, as the case
may be, to acquire for the same exercise price-per-share the securities and/or
other property, including cash, which a holder of the number of shares of
Company Stock subject to such Option or Stand-Alone SAR would have received in
such transaction.
(f) Outstanding Options, LSARs, Tandem SARs, Stand-Alone SARs and
Dividend Equivalent Rights -- Other Changes
In the event of any change in the capitalization of the Company
or a corporate change other than those specifically referred to in Sections
16(c), (d) or (e) hereof, the Committee may, in its absolute discretion, make
such adjustments in the number and class of shares subject to Options, LSARs,
Tandem SARs, Stand-Alone SARs and Dividend Equivalent Rights outstanding on the
date on which such change occurs and in the per-share exercise price of each
such Option, LSAR, Tandem SAR and Stand-Alone SAR as the Committee may consider
appropriate to prevent dilution or enlargement of rights. In addition, if and to
the extent the Committee determines it is appropriate, the Committee may elect
to cancel each Option (including each LSAR, Tandem-SAR or Dividend Equivalent
Right related thereto) and Stand-Alone SAR (including each Dividend Equivalent
Right related thereto) outstanding immediately prior to such event (whether or
not then exercisable), and, in full consideration of such cancellation, pay to
the Participant to whom such Option or Stand-Alone SAR was granted an amount in
cash, for each share of Company Stock subject to such Option or Stand-Alone SAR,
respectively, equal to the excess of (i) the Fair Market Value of Company Stock
on the date of such cancellation over (ii) the exercise price of such Option or
Stand-Alone SAR.
(g) No Other Rights
Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger
or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Company Stock subject to an Incentive Award or the exercise
price of any Option, LSAR, Tandem SAR or Stand-Alone SAR.
17. Rights as a Stockholder
No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Incentive Award granted
pursuant to this Plan until the date the Participant becomes the registered
owner of such shares. Except as otherwise expressly provided in Section 16
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
18. No Special Employment Rights; No Right to Incentive Award
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Nothing contained in the Plan or any Incentive Award shall confer
upon any Participant any right with respect to the continuation of his
Employment by the Company or interfere in any way with the right of the Company
or an Affiliate, subject to the terms of any separate employment agreement to
the contrary, at any time to terminate such Employment or to increase or
decrease the compensation of the Participant from the rate in existence at the
time of the grant of an Incentive Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
19. Securities Matters
(a) The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of any interests in the Plan or any
shares of Company Stock to be issued hereunder or to effect similar compliance
under any state laws. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Company Stock pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on which
shares of Company Stock are traded. The Committee may require, as a condition of
the issuance and delivery of certificates evidencing shares of Company Stock
pursuant to the terms hereof, that the recipient of such shares make such
covenants, agreements and representations, and that such certificates bear such
legends, as the Committee, in its sole discretion, deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall be effective
only at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Company Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Company Stock are
traded. The Committee may, in its sole discretion, defer the effectiveness of
any exercise of an Option granted hereunder in order to allow the issuance of
shares of Company Stock pursuant thereto to be made pursuant to registration or
an exemption from registration or other methods for compliance available under
federal or state securities laws. The Committee shall inform the Participant in
writing of its decision to defer the effectiveness of the exercise of an Option
granted hereunder. During the period that the effectiveness of the exercise of
an Option has been deferred, the Participant may, by written notice, withdraw
such exercise and obtain a refund of any amount paid with respect thereto.
20. Withholding Taxes
(a) Cash Remittance
Whenever shares of Company Stock are to be issued upon the
exercise of an Option, the occurrence of the Issue Date or Vesting Date with
respect to a share of Restricted Stock or the payment of a Stock Bonus, or in
connection with a Dividend Equivalent Right, the Company shall have the right to
require the Participant to remit to the Company, in cash, an amount sufficient
to satisfy the federal, state and local withholding tax requirements, if any,
attributable to such exercise, occurrence or payment prior to the delivery of
any certificate or certificates for such shares. In addition, upon the exercise
of an LSAR, Tandem SAR or Stand-Alone SAR, the grant of a Cash Bonus or the
making of a payment with respect to a share of Phantom Stock or a Dividend
Equivalent Right, the Company shall have the right to withhold from any cash
payment required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such exercise or grant.
(b) Stock Remittance
At the election of the Participant, subject to the approval of
the Committee, when shares of Company Stock are to be issued upon the exercise
of an Option, the occurrence of the Issue Date or the Vesting Date with respect
to a share of Restricted Stock or the grant of a Stock Bonus, or a payment in
connection with a
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Dividend Equivalent Right, in lieu of the remittance required by Section 20(a)
hereof, the Participant may tender to the Company a number of shares of Company
Stock, the Fair Market Value of which at the tender date the Committee
determines to be sufficient to satisfy the federal, state and local withholding
tax requirements, if any, attributable to such exercise, occurrence, grant or
payment and not greater than the Participant's estimated total federal, state
and local tax obligations associated with such exercise, occurrence, grant or
payment.
(c) Stock Withholding
The Company shall have the right, when shares of Company Stock
are to be issued upon the exercise of an Option, the occurrence of the Issue
Date or the Vesting Date with respect to a share of Restricted Stock or the
grant of a Stock Bonus or a payment in connection with a Dividend Equivalent
Right, in lieu of requiring the remittance required by Section 20(a) hereof, to
withhold a number of such shares, the Fair Market Value of which at the exercise
date the Committee determines to be sufficient to satisfy the federal, state and
local withholding tax requirements, if any, attributable to such exercise,
occurrence, grant or payment and is not greater than the Participant's estimated
total federal, state and local tax obligations associated with such exercise,
occurrence, grant or payment.
21. Amendment or Termination of the Plan
The Board of Directors may, at any time, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever; provided, however, that if
and to the extent required under Section 422 of the Code (if and to the extent
that the Board of Directors deems it appropriate to comply with Section 422) and
if and to the extent required to treat some or all of the Incentive Awards as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, (if and to the extent that the Board of Directors deems it appropriate to
meet such requirements), no amendment shall be effective without the approval of
the stockholders of the Company, that (a) except as provided in Section 16
hereof, increases the number of shares of Company Stock with respect to which
Incentive Awards may be issued under the Plan, (b) modifies the class of
individuals eligible to participate in the Plan or (c) materially increases the
benefits accruing to individuals pursuant to the Plan. Nothing herein shall
restrict the Committee's ability to exercise its discretionary authority
hereunder pursuant to Section 4 hereof, which discretion may be exercised
without amendment to the Plan. No action under this Section 21 may, without the
consent of a Participant, reduce the Participant's rights under any previously
granted and outstanding Incentive Award except to the extent that the Board of
Directors determines that such amendment is necessary or appropriate to prevent
such Incentive Awards from constituting "applicable employee remuneration"
within the meaning of Section 162(m) of the Code.
22. No Obligation to Exercise
The grant to a Participant of an Option, LSAR, Tandem SAR or
Stand-Alone SAR shall impose no obligation upon such Participant to exercise
such Option, LSAR, Tandem SAR or Stand-Alone SAR.
23. Transfers Upon Death
Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executors or administrators of
the Participant's estate or by any person or persons who shall have acquired
such right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award. Except as provided in this Section 23, or in any applicable
agreement pursuant to Sections 6(d)(iv), 7(b)(iv), 8(b)(iv), or 9(c)(iv) of the
Plan, no Incentive Award shall be transferable, and Incentive Awards shall be
exercisable only by a Participant during the Participant's lifetime.
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24. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
25. Limitations Imposed by Section 162(m)
Notwithstanding any other provision hereunder, prior to a Change in
Control, if and to the extent that the Committee determines the Company's
federal tax deduction in respect of an Incentive Award may be limited as a
result of Section 162(m) of the Code, the Committee may take the following
actions:
(a) With respect to Options, Tandem SARs, Stand-Alone SARs or
Dividend Equivalent Rights, the Committee may delay the exercise or payment, as
the case may be, in respect of such Options, Tandem SARs, Stand-Alone SARs or
Dividend Equivalent Rights until a date that is within 30 days after the earlier
to occur of (i) the date that compensation paid to the Participant no longer is
subject to the deduction limitation under Section 162(m) of the Code and (ii)
the occurrence of a Change in Control. In the event that a Participant exercises
an Option, Tandem SAR or Stand-Alone SAR or would receive a payment in respect
of a Dividend Equivalent Right at a time when the Participant is a "covered
employee," and the Committee determines to delay the exercise or payment, as the
case may be, in respect of any such Incentive Award, the Committee shall credit
cash or, in the case of an amount payable in Company Stock, the Fair Market
Value of the Company Stock, payable to the Participant to a book account. The
Participant shall have no rights in respect of such book account and the amount
credited thereto shall not be transferable by the Participant other than by will
or laws of descent and distribution. The Committee may credit additional amounts
to such book account as it may determine in its sole discretion. Any book
account created hereunder shall represent only an unfunded unsecured promise by
the Company to pay the amount credited thereto to the Participant in the future.
(b) With respect to Restricted Stock, Phantom Stock and Stock
Bonuses, the Committee may require the Participant to surrender to the Committee
any certificates with respect to Restricted Stock and Stock Bonuses and
agreements with respect to Phantom Stock, in order to cancel the awards of such
Restricted Stock, Phantom Stock and Stock Bonuses (and any related Cash Bonuses
or Dividend Equivalent Rights). In exchange for such cancellation, the Committee
shall credit to a book account a cash amount equal to the Fair Market Value of
the shares of Company Stock subject to such awards. The amount credited to the
book account shall be paid to the Participant within 30 days after the earlier
to occur of (i) the date that compensation paid to the Participant no longer is
subject to the deduction limitation under Section 162(m) of the Code and (ii)
the occurrence of a Change in Control. The Participant shall have no rights in
respect of such book account and the amount credited thereto shall not be
transferable by the Participant other than by will or laws of descent and
distribution. The Committee may credit additional amounts to such book account
as it may determine in its sole discretion. Any book account created hereunder
shall represent only an unfunded unsecured promise by the Company to pay the
amount credited thereto to the Participant in the future.
26. Failure to Comply
In addition to the remedies of the Company elsewhere provided for
herein, a failure by a Participant (or beneficiary or permitted transferee) to
comply with any of the terms and conditions of the Plan or the agreement
executed by such Participant (or beneficiary or permitted transferee) evidencing
an Incentive Award, unless such failure is remedied by such Participant (or
beneficiary or permitted transferee) within ten days after having been notified
of such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion, may determine.
27. Effective Date of Plan
The Plan was adopted by the Board of Directors on February 15, 2000,
subject to approval by the stockholders of the Company. Incentive Awards may be
granted under the Plan at any time prior to the receipt of such stockholder
approval; provided, however, that each such grant shall be subject to such
approval. Without limitation on the foregoing, no Option, LSAR, Tandem SAR or
Stand-Alone SAR may be exercised prior to the
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receipt of such approval, no share certificate shall be issued pursuant to a
grant of Restricted Stock or Stock Bonus prior to the receipt of such approval
and no Cash Bonus or payment with respect to a Dividend Equivalent Right or
share of Phantom Stock shall be paid prior to the receipt of such approval. If
the Plan is not so approved on or before February 15, 2000 then the Plan and all
Incentive Awards then outstanding under the Plan shall forthwith automatically
terminate and be of no force or effect.
28. Term of the Plan
The right to grant Incentive Awards under the Plan will terminate
upon the expiration of 10 years after the date the Plan was adopted.
29. Application of Investment Company Act of 1940
Any provision of this Plan that would conflict with a provision of
the Investment Company Act of 1940, to the extent applicable to the Company or
any Affiliate, shall have no force or effect.
30. Forfeiture of Gain from Awards in Certain Events
To the extent that a Participant breaches any restrictive covenant
applicable to the Participant (such as a noncompetition, nonsolicitation or
nondisclosure covenant) within one year after the date on which the Participant
exercises an Option, LSAR, Tandem SAR or Stand-Alone SAR, or the date on which
any Restricted Stock or Phantom Stock vests, or the date on which the
Participant realizes income with respect to any other Incentive Award (each such
event, a "Realization Event"), then any gain realized by the Participant from
the Realization Event shall be paid by the Participant to the Company
immediately upon notice from the Company. Such gain shall be determined as of
the date of the Realization Event, without regard to any subsequent change in
the Fair Market Value of a share of Company Stock. To the fullest extent
permitted by applicable law, the Company shall have the right to offset such
gain against any amounts otherwise owed to the Participant by the Company
(whether as wages, vacation pay or pursuant to any benefit plan or other
compensatory arrangement or otherwise).
31. Applicable Law
Except to the extent preempted by any applicable federal law, the
Plan will be construed and administered in accordance with the laws of the State
of New York, without reference to the principles of conflict of laws.
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APPENDIX B
THCG, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide eligible employees of
the Company and its Designated Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll
deductions. It is the intention of the Company to have the Plan qualify
as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation
in a manner consistent with the requirements of that section of the
Code.
2. Definitions.
a. "Board" shall mean the Board of Directors of the Company.
b. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
c. "Common Stock" shall mean the Common Stock, par value $.01, of
the Company.
d. "Company" shall mean THCG, INC., a Delaware corporation, and
any Designated Subsidiary of the Company.
e. "Compensation" shall mean (i) the regular basic earnings paid
to a Participant by one or more Participating Companies, (ii)
any salary deferral contributions made on behalf of the
Participant to the Company's Code Section 401 (k) Plan (iii)
overtime payments, bonuses and commissions. There shall be
excluded from the calculation of Compensation: (I) all
profit-sharing distributions and other incentive-type payments
and (II) all contributions (other than Code Section 401 (k))
made by the Company or its Corporate Affiliates for the
Participant's benefit under any employee benefit or welfare
plan now or hereafter established.
f. "Designated Subsidiary" shall mean any Subsidiary which has
been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
g. "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than
five (5) months in any calendar year. For purposes of the
Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the
period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
h. "Enrollment Date" shall mean the first day of each Offering
Period.
i. "Exercise Date" shall mean the last day of each Offering
Period.
j. "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
i. (1) If the Common Stock is listed on any established
stock exchange or a national market system, including
without limitation the Nasdaq National Market or The
Nasdaq
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SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for
the last market trading day on the date of such
determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable, or;
ii. (2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are
not reported, its Fair Market Value shall be the mean
of the closing bid and asked prices for the Common
Stock on the date of such determination, as reported
in The Wall Street Journal or such other source as
the Board deems reliable, or;
iii. (3) ln the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Board.
k. "Offering Period" shall have the meaning provided in Section
4.
l. "Plan" shall mean this Employee Stock Purchase Plan.
m. "Plan Administrator" shall mean the Board or a committee of
members of the Board appointed by the Board.
n. "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date
or on the Exercise Date, whichever is lower; provided,
however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
o. "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been
exercised and the number of shares of Common Stock which have
been authorized for issuance under the Plan but not yet placed
under option.
p. "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now
exists or is hereafter organized or acquired by the Company or
a Subsidiary.
q. "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
a. Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
b. Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the
extent that, immediately after the grant, such Employee (or
any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own
capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of the
capital stock of the Company or of any Subsidiary, or (ii) to
the extent that his or her rights to purchase stock under all
employee stock purchase plans of the Company and its
Subsidiaries accrues at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of stock (determined at the
fair market value of the shares at the time such option is
granted) for each calendar year in which such option is
outstanding at any time.
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4. Offering Periods.
a. Stock shall be offered for purchase under the Plan through a
series of successive offering periods (each, an "Offering
Period"). The first Offering Period under the Plan shall
commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the
Company's Registration Statement effective. The Board shall
have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change
is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected
thereafter.
b. The Plan shall be implemented in a series of consecutive
Offering Periods, each to be of such duration (not to exceed
twenty-four (24) months per Offering Period) as determined by
the Plan Administrator prior to the commencement date of the
Offering Period. Offering Periods may commence at quarterly or
semi-annual intervals over the term of the Plan. Accordingly,
up to four (4) separate Offering Periods may commence in each
calendar year the Plan remains in existence. The Plan
Administrator will announce the date each Offering Period will
commence and the duration of that Offering Period in advance
of the last day of the immediately preceding Offering Period.
c. An Employee may participate in only one Offering Period at a
time. Accordingly, an Employee who wishes to join a new
Offering Period must withdraw from the current Offering Period
in which he/she is participating and must also enroll in the
new Offering Period prior to the start date of that Offering
Period. The Plan Administrator, in its discretion, my require
an Employee who withdraws from one Offering Period to wait one
full Offering Period before re-enrolling in a new Offering
Period under the Plan.
5. Eligibility & Participation.
a. An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll
deductions in the form of Exhibit A to this Plan and filing it
with the Company's payroll office prior to the applicable
Enrollment Date.
b. Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on
the last payroll in the Offering Period to which such
authorization is applicable, unless sooner terminated by the
participant as provided in Section 10 hereof.
6. Payroll Deductions.
a. At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions
made on each pay day during the Offering Period in an amount
not exceeding ten percent 10% of the Compensation which he or
she receives an each pay day during the Offering Period.
b. All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be
withheld in whole percentages only. A participant may not make
any additional payments into such account.
c. A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his or her payroll deductions during the
Offering Period by completing or filing with the Company a new
subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the
number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first
full payroll period following five (5) business days after the
Company's receipt of the new subscription agreement unless the
Company elects to process a given change in participation
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<PAGE>
more quickly. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless
terminated as provided in Section 10 hereof.
d. Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b)
hereof, a participant's payroll deductions may be decreased to
zero percent (0%) at any time during an Offering Period.
Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of
the first Offering Period which is scheduled to end in the
following calendar year, unless terminated by the participant
as provided in Section 10 hereof.
e. At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued
under the Plan is disposed of, the participant must make
adequate provision for the Company's federal, state, or other
tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but shall not be obligated to,
withhold from the participant's compensation the amount
necessary for the Company to meet applicable withholding
obligations, including any withholding required to make
available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by
the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering
Period (at the applicable Purchase Price) up to a number of shares of
the Company's Common Stock determined by dividing such Employee's
payroll deductions accumulated prior to such Exercise Date and retained
in the Participant's account as of the Exercise Date by the applicable
Purchase Price; provided that in no event shall an Employee be
permitted to purchase during each Offering Period more than 2,500
shares (subject to any adjustment pursuant to Section 19), and provided
further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The Option shall expire on the
last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the
maximum number of full shares subject to option shall be purchased for
such participant at the applicable Purchase Price with the accumulated
payroll deductions in his or her account. No fractional shares shall be
purchased; any payroll deductions accumulated in a participant's
account which are not sufficient to purchase a full share shall be
retained in the participant's account for the subsequent Offering
Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any remaining amount in the participant's account
shall be carried over to the next Offering Period. During a
participant's lifetime, a participant's option to purchase shares
hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, the shares purchased upon exercise of
his or her option.
10. Withdrawal.
a. A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet
used to exercise his or her option under the Plan at any time
by giving written notice to the Company in the form of Exhibit
B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and
such participant's option for the Offering Period shall be
automatically terminated, and no further payroll deductions
for the purchase of shares shall be made for such Offering
Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the
succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
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<PAGE>
b. A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in
any similar plan which may hereafter be adopted by the Company
or in succeeding Offering Periods which commence after the
termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to
exercise the option shall be returned to such participant or, in the
case of his or her death, to the person or persons entitled thereto
under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a
participant who receives payment in lieu of notice of termination of
employment shall be treated as continuing to be an Employee for the
participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu
of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
a. Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number
of shares of the Company's Common Stock which shall be made
available for sale under the Plan shall be two hundred
thousand (200,000) shares. If, on a given Exercise Date, the
number of shares with respect to which options are to be
exercised exceeds the number of shares then available under
the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be
equitable.
b. The participant shall have no interest or voting right in
shares covered by his option until such option has been
exercised.
c. Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of
the participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Plan
Administrator (whether the Board or the committee) shall have full and
exclusive discretionary authority to construe, interpret and apply the
terms of the Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
a. A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such
participant's death subsequent to an Exercise Date on which
the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary
who is to receive any cash from the participant's account
under the Plan in the event of such participant's death prior
to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent
shall be required for such designation to be effective.
b. Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the
death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of
such participant's death, the Company shall deliver such
shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the
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Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such
other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to
receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 15 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds from an Offering Period in
accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll
deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the
amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
a. Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves, the maximum
number of shares each participant may purchase per Offering
Period (pursuant to Section 7), as well as the price per share
and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall
be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase
or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without
receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common
Stock subject to an option.
b. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period
then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date"), and shall terminate
immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the
Board. The New Exercise Date shall be before the date of the
Company's proposed dissolution or liquidation. The Board shall
notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
c. Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each
outstanding option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the
option, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise
Date"). The Now Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each
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participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date
and that the participant's option shall be exercised
automatically on the New Exercise Date, unless prior to such
date the participant has withdrawn from the Offering Period as
provided in Section 10 hereof.
20. Amendment or Termination.
a. The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in
Section 19 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if
the Board determines that the termination of the Offering
Period or the Plan is in the best interests of the Company and
its stockholders. Except as provided in Section 19 and Section
20 hereof, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section
423 of the Code (or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.
b. Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to
change the Offering Periods, limit the frequency and/or number
of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in
a currency other than U.S. dollars, permit payroll withholding
in excess of the amount designated by a participant in order
to adjust for delays or mistakes in the Company's processing
of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its
sole discretion advisable which are consistent with the Plan.
c. In the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the
extent necessary or desirable, modify or amend the Plan to
reduce or eliminate such accounting consequence including, but
not limited to:
i. altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of
the change in Purchase Price;
ii. shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an
Offering Period underway at the time of the Board
action; and
iii. allocating shares.
Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the
receipt thereof.
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22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with
all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon
which the shares may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned applicable
provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 20 hereof.
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EXHIBIT A
THCG, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: _________
_______ Change in Payroll Deduction Rate
_______ Change of Beneficiary(ies)
1. __________________________________ hereby elects to participate in the
THCG, INC. 2000 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of _____% of my Compensation on each payday (from 1 to 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within 30 days after the date of
any disposition of shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but
will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year holding period, I understand that I will be
treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of
(1) the excess of the fair market value of the shares at the time of
such disposition over the purchase price which I paid for the shares,
or (2) 15% of the fair market value of the shares on the first day of
the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
B-9
<PAGE>
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
(First) (Middle) (Last)
Relationship
(Address)
Employee's Social
Security Number:
Employee's Address:
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
Signature of Employee: _______________________________
Spouse's Signature (If beneficiary other than spouse):
__________________________________
B-10
<PAGE>
EXHIBIT B
THCG, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the THCG. INC. 2000
Employee Stock Purchase Plan which began on ________________, 20__ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date: __________________________
B-11
<PAGE>
APPENDIX C
THCG, INC.
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE I - PURPOSE OF THE PLAN
The purpose of the THCG, Inc. 2000 Non-Employee Director Stock
Option Plan ("Plan") is to increase the ownership interest in the Company of
non-employee directors whose services are considered essential to the Company's
continued progress, to align such interests with those of the shareholders of
the Company and to provide a further incentive to serve as a director of the
Company.
ARTICLE II - DEFINITIONS
Unless the context clearly indicates otherwise, the following
terms shall have the following meanings:
2.1. "2000 Annual Meeting" means the annual meeting of
shareholders of the Company scheduled to be held on May 15, 2000, or
any adjournment thereof.
2.2. "Award Summary" means the award summary delivered by the
Administrator to each Non-Employee Director upon grant of an Option
under the Plan.
2.3. "Board" means the Board of Directors of THCG, Inc.
2.4. "Company" means THCG, Inc.
2.5. "Exercise Period" means the date which is ten years after
the Option Grant Date of such Option.
2.6. "Fair Market Value" shall mean, with respect to Shares on
an applicable date:
(i) If the Shares are traded on a national securities
exchange, (A) the average of the high and low reported sales price
regular way per Share on the principal national securities exchange on
which the Shares is traded or (B) if no reported sales take place on
the applicable date, the average of the highest bid and lowest asked
price of the Shares on such exchange or (C) if no such quotation is
made on such date, on the next preceding day (not more than 10 business
days prior to the applicable date) on which there were reported sales
or such quotations.
(ii) If the Shares are not traded on a national securities
exchange but are traded in the NASD National Market ("NASDAQ"), (A) the
average of the high and low reported sales price per Share on NASDAQ or
(B) if no reported sales take place on the applicable date, the average
of the highest bid and lowest asked price of the Shares on NASDAQ or
(C) if no such quotation is made on such date, on the next preceding
day (not more than 10 business days prior to the applicable date) on
which there were reported sales or such quotations.
(iii) If the Shares are not traded on a national securities
exchange or quoted on NASDAQ, but quotations are available for the
Shares on the over-the-counter market, (A) the mean between the highest
bid and lowest asked quotation on the over-the-counter market as
reported by the National Quotations Bureau, or any similar
organization, on the applicable date or (B) if no such quotation is
made on such date on the next preceding day (not more than 10 business
days prior to the applicable date) on which there were such quotations.
(iv) If the Shares are neither traded on a national securities
exchange or quoted on NASDAQ, nor are quotations therefor available on
the over-the-counter market or if there are no sales or
<PAGE>
C-1
quotations in the 10 business days immediately prior to the applicable
date, as determined in good faith by the Board in a manner consistently
applied.
2.7. "Option" means an option to purchase Shares awarded under
Article VIII which does not meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, or any successor law.
2.8. "Option Grant Date" means the date upon which an Option
is granted to a Non-Employee Director.
2.9. "Optionee" means a Non-Employee Director of the Company
to whom an Option has been granted.
2.10. "Non-Employee Director" means a director of the Company
who is neither an employee of the Company nor any subsidiary of the
Company.
2.11. "Plan" means the THCG, Inc. 2000 Non-Employee Director
Stock Option Plan, as amended and restated from time to time.
2.12. "Shares" means shares of the Common Stock, par value
$0.01 per share, of the Company.
ARTICLE III - ADMINISTRATION OF THE PLAN
3.1 IN GENERAL. The Plan shall be administered by the Board.
3.2 AUTHORITY OF THE BOARD. Except as otherwise provided
herein, the Board shall have full power and authority to (i) interpret and
construe the Plan and to adopt such rules and regulations it shall deem
necessary and advisable to implement and administer the Plan and (ii) designate
persons to carry out its responsibilities, subject to such limitations,
restrictions and conditions as it may prescribe, such determinations to be made
in accordance with the Board's best business judgment as to the best interests
of the Company and its shareholders and in accordance with the purposes of the
Plan subject to applicable conditions of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"). The Board may delegate
administrative duties under the Plan to one or more agents as it shall deem
necessary or advisable.
ARTICLE IV - AWARDS UNDER THE PLAN
Awards in the form of Options shall be granted to Non-Employee
Directors in accordance with Article VIII. Each Option granted under the Plan
shall be evidenced by a stock option agreement in a form approved by the Board.
ARTICLE V - ELIGIBILITY
Non-Employee Directors of the Company shall be eligible to
participate in the Plan in accordance with Article VIII.
ARTICLE VI - SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Article XI, the aggregate
number of Shares which may be issued upon the exercise of Options shall not
exceed 500,000 Shares. To the extent an outstanding Option expires or terminates
unexercised or is canceled or forfeited, the Shares subject to the expired,
unexercised, canceled or forfeited portion of such option shall again be
available for grants of Options under the Plan.
<PAGE>
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ARTICLE VII - NON-TRANSFERABILITY OF OPTIONS
All Options under the Plan will be nontransferable and shall
not be assignable, alienable, salable or otherwise transferable by the Optionee
other than by will or the laws of descent and distribution except pursuant to a
domestic relations order entered by a court of competent jurisdiction or as
otherwise determined by the Administrator. During the life of the Optionee,
Options under the Plan shall be exercisable only by him or her.
Notwithstanding the immediately preceding paragraph, the
Optionee may assign or otherwise transfer his interest without restriction
(subject to the application of any and all relevant state or federal securities
laws) to (i) any trust maintained solely for the benefit of the Optionee, (ii)
the legal guardian of the Optionee, in the event of the Optionee's mental
incapacity, or (iii) the Optionee's Family Group (as hereinafter defined). The
term "Family Group" shall mean (I) the spouse, parents, siblings or descendants
of the Optionee, in each such case, if applicable, whether natural or by
adoption, (II) the parent, siblings, spouses or descendants of any of the
parties listed in clause (I) hereof, in each such case, if applicable, whether
natural or adopted, (III) any trust established for the benefit of any of the
individuals identified in clauses (I) or (II) hereof, (IV) any corporation or
partnership, the principal equity owners of which are, directly or indirectly,
either (x) individuals or entities listed in clauses (I), (II) or (III) hereof
or (y) other corporations or partnerships satisfying the requirements of clauses
(I), (II) or (III) hereof or this clause (IV), or (V) any exempt charitable
organization.
If so permitted by the Board, an Optionee may designate a
beneficiary or beneficiaries to exercise the rights of the Optionee under this
Plan upon the death of the Optionee. However, any contrary requirement of Rule
16b-3 under the 1934 Act or any successor rule shall prevail over the provisions
of this section.
ARTICLE VIII - OPTIONS
Each Non-Employee Director shall be granted Options, subject
to the following terms and conditions:
8.1 TIME OF GRANT. On the date of the 2000 Annual Meeting and,
thereafter, on the date of each annual meeting of shareholders of the Company,
(i) each person who is a Non-Employee Director immediately after such meeting of
shareholders shall be granted an Option to purchase 10,000 Shares, and (ii) each
person who is a Non-Employee Director immediately after such meeting of
shareholders who serves on a committee of the Board shall be granted an
additional Option to purchase 2,500 Shares for each committee on which such
person then serves. Any person elected to the Board subsequent to the 2000
Annual Meeting at a time other than at any other annual meeting of shareholders
who becomes a Non-Employee Director, upon the date of such election, shall be
granted an option to purchase a number of Shares determined by multiplying the
numbers set forth in the preceding sentence by a fraction, the numerator of
which shall be the number of days between the date of such election and the date
which is the first anniversary of the date of the last preceding annual meeting
of shareholders and the denominator of which shall be 365.
8.2 PURCHASE PRICE. The purchase price per Share under each
Option granted pursuant to this Article shall be 100% of the Fair Market Value
per Share on the Option Grant Date.
8.3 OPTION WAITING PERIOD AND EXERCISE DATES. The Shares
subject to an Option may be exercised in full immediately after the Option Grant
Date.
Subject to Article IX, an Option may be exercised until the
end of the Exercise Period. An Option, or portion thereof, may be exercised in
whole or in part only with respect to whole Shares, provided that no partial
exercise may be for less than twenty Shares.
<PAGE>
C-3
8.4 METHOD OF EXERCISING OPTION. The Options may be exercised
from time to time by written notice to the Company, which shall state the
election to exercise the Options and the number of shares with respect to which
the Options are being exercised, and shall be signed by the person exercising
the Options. Such notice must be accompanied by a check payable to the Company
in payment of the full purchase price. After receipt of such notice, the Company
will advise the person exercising the Option of the amount of withholding tax
which must be paid under U.S. Federal, and where applicable, U.S., state and
local law resulting from such exercise. Upon receipt of payment of the purchase
price and the withholding tax the Company shall, without transfer or issue tax
to the person exercising the Options, issue a certificate or certificates for
the number of shares covered by such notice of exercise.
ARTICLE IX - TERMINATION OF DIRECTORSHIP
9.1 TERMINATION OF SERVICE. If an Optionee ceases to be a
director of the Company other than by reason of disability, retirement from
service on the Board, or death, each Option held by such Optionee may thereafter
be exercised by such Optionee (or such Optionee's executor, administrator,
guardian, legal representative, beneficiary or similar person) and shall expire
on the earlier of: (i) three months from the date of such termination or (ii)
expiration of the Exercise Period.
9.2 DISABILITY, RETIREMENT OR DEATH. If an Optionee ceases to
be a director of the Company by reason of disability or retirement from service
on the Board, each Option held by such Optionee may thereafter be exercised by
such Optionee in accordance with the provisions of Article VIII. If the Optionee
dies following termination of service from the Board by reason of retirement or
disability, outstanding Options shall be exercisable by such Optionee's
executor, administrator, guardian, legal representative, beneficiary or similar
person and shall expire on the earlier of one year following the date of death
or expiration of the Exercise Period. If the Optionee ceases to be a director as
a result of death, such Option shall be exercisable by the Optionee's legal
representative at any time within one year of the Optionee's death but in no
event after the expiration of the Exercise Period.
ARTICLE X - AMENDMENT AND TERMINATION
The Board may amend the Plan from time to time or terminate
the Plan at any time; provided, however, that no action authorized by this
Article shall adversely change the terms and conditions of an outstanding option
without the Optionee's consent and, subject to Article XI, the number of Shares
subject to an Option granted under Article VIII, the purchase price therefor,
the date of grant of any such Option and the termination provisions relating to
such Option, shall not be amended more than once every six months, other than to
comply with changes in the Internal Revenue Code of 1986, as amended, or any
successor law, or the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, or the rules and regulations thereunder.
ARTICLE XI - ADJUSTMENT PROVISIONS
11.1 If the Company shall at any time change the number of
issued shares without new consideration to the Company (such as by stock
dividend, stock split, recapitalization, reorganization, exchange of shares,
liquidation, combination or other change in corporate structure affecting the
Shares) or make a distribution of cash or property which has a substantial
impact on the value of issued Shares, the total number of Shares reserved for
issuance under the Plan shall be appropriately adjusted and the number of Shares
covered by each outstanding Option and the purchase price per Share under each
outstanding Option shall be adjusted so that the aggregate consideration payable
to the Company and the value of each such Option shall not be changed.
11.2 Notwithstanding any other provision of the Plan, and
without affecting the number of Shares reserved or available hereunder, the
Board shall authorize the issuance, continuation or assumption of outstanding
Options or provide for other equitable adjustments after changes in the Shares
resulting from any merger, consolidation, sale of assets, acquisition of
property or stock, recapitalization, reorganization or similar occurrence in
which the Company is the continuing or surviving corporation, upon such terms
and conditions as it may deem necessary to preserve their rights under the Plan.
<PAGE>
C-4
11.3 In the case of any sale of assets, merger, consolidation
or combination of the Corporation with or into another corporation other than a
transaction in which the Company is the continuing or surviving corporation and
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property, or any combination
thereof (an "Acquisition"), any Non-Employee Director who holds an outstanding
Option shall have the right (subject to the provisions of the Plan and any
limitation applicable to the Option) thereafter and during the term of the
Option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon the Acquisition by a holder of the number of
Shares which would have been obtained upon exercise of the Option immediately
prior to the Acquisition. The term "Acquisition Consideration" shall mean the
kind and amount of shares of the surviving or new corporation or other entity,
cash, securities, evidence of indebtedness, other property or any combination
thereof receivable in respect of one Share of the Company upon consummation of
an Acquisition.
ARTICLE XII - EFFECTIVE DATE
The Plan shall be submitted to the shareholders of the Company
for, and, if adopted by a majority of all outstanding shares entitled to vote
thereon at the 2000 Annual Meeting, shall become effective as of the date of
adoption by shareholders.
ARTICLE XIII - MISCELLANEOUS PROVISIONS
13.1 GOVERNING LAW. The validity, construction and effect of
the Plan and any actions taken or relating to the Plan shall be determined in
accordance with the laws of the State of New York and applicable Federal law.
13.2 SUCCESSORS AND ASSIGNS. The Plan shall be binding on ail
successors and permitted assigns of a Non-Employee Director, including, without
limitation, the estate of such Non-Employee Director and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Non-Employee Director's creditors.
13.3 GENERAL RESTRICTION. Each Option shall be subject to the
requirement that, if at any time the Board shall determine, in its sole
discretion, that the listing, registration or qualification of any Option under
the Plan upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of such Options or the
exercise thereof, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
13.4 FUTURE RIGHTS. No Non-Employee Director shall have any
claim or rights to be granted an option under the Plan, and no Non-Employee
Director shall have any rights by reason of the grant of any Options under the
Plan to continue as a Non-Employee Director for any period of time, or at any
particular rate of compensation.
13.5 RIGHTS AS A SHAREHOLDER. A Non-Employee Director shall
have no rights as a shareholder with respect to shares covered by Options
granted hereunder until the date of issuance of a stock certificate therefor,
and no adjustment will be made for dividends or other rights for which the
record date is prior to the date such certificate is issued.
13.6 FRACTIONS OF SHARES. The Company shall not be required to
issue fractions of shares. Whenever under the terms of the Plan a fractional
share would be required to be issued, the Optionee shall be paid in cash for
such fractional share based upon Fair Market Value at the time of exercise of
the Option.
<PAGE>
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APPENDIX D
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 6, 2000 (this
"Agreement"), by and between THCG, Inc., a Utah corporation ("THCG Utah"), and
THCG, Inc., a Delaware corporation and a wholly-owned subsidiary of THCG Utah
("THCG Delaware").
WHEREAS, the respective boards of directors of THCG Utah and
THCG Delaware, deeming it advisable and for the respective benefit of THCG Utah
and THCG Delaware and their stockholders, have approved this Agreement pursuant
to which THCG Utah will be merged with and into THCG Delaware (the "Merger ") on
the terms and conditions contained herein and in accordance with the Utah
Revised Business Corporation Act (the "URBCA") and the General Corporation Law
of the State of Delaware (the "DGCL");
NOW, THEREFORE, in consideration of the premises and
agreements herein contained, and intending to be legally bound hereby, the THCG
Utah and THCG Delaware hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time and in accordance with the
URBCA and the DGCL, THCG Utah shall be merged with and into THCG Delaware.
Following the Merger, the separate corporate existence of THCG Utah shall cease
and THCG Delaware shall continue as the surviving corporation (the "Surviving
Corporation ") under the name "THCG, Inc."
SECTION 1.2 Effective Time. The parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of
Merger") in such form as is required by and executed in accordance with the
relevant provisions of the URBCA and the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Division of
Corporations and Commercial Code of the State of Utah and the Secretary of State
of the State of Delaware or at such subsequent time as the parties shall agree
and shall be specified in the Certificate of Merger (the date and time the
Merger becomes effective being the "Effective Time").
SECTION 1.3 Certificate of Incorporation. At the Effective
Time, the certificate of incorporation of THCG Delaware, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation, unless and until thereafter changed
or amended as provided therein or in accordance with applicable law.
SECTION 1.4 By-laws. At the Effective Time, the by-laws of
THCG Delaware, as in effect immediately prior to the Effective Time, shall be
the by-laws of the Surviving Corporation, unless and until thereafter changed or
amended as provided therein or in the certificate of incorporation of the
Surviving Corporation or by applicable law.
SECTION 1.5 Directors and Officers. At the Effective Time, the
directors of THCG Utah immediately preceding the Effective Time shall become the
directors of the Surviving Corporation to serve until the earlier of their
death, resignation or removal and until their respective successors are duly
elected and qualified. At the Effective Time, the officers of THCG Utah
immediately preceding the Effective Time shall become the officers of the
Surviving Corporation until the earlier of their death, resignation or removal
and until their respective successors are duly elected or qualified.
<PAGE>
D-1
ARTICLE 2
CONVERSION OF CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
As of the Effective Time, by virtue of the Merger and without
any action on the part of THCG Utah, THCG Delaware or their respective
stockholders:
SECTION 2.1 Conversion of Capital Stock of THCG Utah. Subject
to Section 2.6, (a) each share of common stock, par value $.01 per share, of
THCG Utah (the "THCG Utah Common Stock") issued and outstanding immediately
prior to the Effective Time shall be converted into one (1) validly issued,
fully paid and non-assessable share of common stock, par value $.01 per share,
of the Surviving Corporation (the "THCG Delaware Common Stock"), and (b) each
share of Preferred Stock, par value $.01 per share, of THCG Utah ("THCG Utah
Preferred Stock"), if any, issued and outstanding immediately prior to the
Effective Time shall be converted into one (1) validly issued, fully paid and
non assessable share of identical Preferred Stock, par value $.01 per share, of
the Surviving Corporation ("THCG Delaware Preferred Stock").
SECTION 2.2 THCG Utah Stock Options. At the Effective Time,
the Surviving Corporation shall assume and continue THCG Utah's (a) Walnut
Capital Corporation 1987 Stock Option Plan (the "1987 Plan"), (b) Amended and
Restated 1994 Walnut Financial Services, Inc. Stock Incentive Plan (the "1994
Plan"), (c) 1999 Walnut Financial Services, Inc. Stock Incentive Plan (the "1999
Plan"), (d) THCG, Inc. 2000 Employee Stock Purchase Plan (the "Purchase Plan"),
(e) 2000 THCG, Inc. Stock Incentive Plan (the "2000 Plan"), (f) 2000
Non-Employee Directors Stock Option Plan (the "Directors Plan"), (g) any other
option plan heretofore adopted by the Board of Directors of THCG Utah and in
effect on the date hereof (the "Other Plans," and, together with the 1987 Plan,
the 1994 Plan, the 1999 Plan, the Purchase Plan, the Directors Plan and the 2000
Plan, the "Plans") and (h) each option or warrant to purchase THCG Utah Common
Stock, whether or not granted pursuant to the Plans (each, a "THCG Utah
Option"), shall be assumed by THCG Delaware and shall be converted into and
shall constitute an option to purchase, for the same exercise price per share
and on the same terms and conditions as are contained in such THCG Utah Option
on the Effective Date, one fully paid and non-assessable share of THCG Delaware
Common Stock. As soon as practicable following the Effective Time, THCG Delaware
shall cause to be delivered to each holder of an outstanding THCG Utah Option an
appropriate notice setting forth such holder's rights pursuant thereto and that
such THCG Utah Option shall continue in effect on the same terms and conditions.
SECTION 2.3 Conversion of Capital Stock of THCG Delaware. Each
share of THCG Delaware Common Stock issued and outstanding immediately prior to
the Effective Time and held by THCG Utah shall be cancelled and retired and
cease to exist, without any conversion thereof.
SECTION 2.4 Treasury Shares. Each share of THCG Utah Common
Stock and THCG Delaware Common Stock held in treasury by THCG Utah and THCG
Delaware, respectively, immediately prior to the Effective Time shall be
cancelled and retired and cease to exist, without any conversion thereof.
SECTION 2.5 Stock Certificates. On or after the Effective
Time, all of the outstanding stock certificates which prior to that time
represented shares of THCG Utah Common Stock or THCG Utah Preferred Stock, if
any, shall be deemed for all purposes to evidence ownership of and to represent
the shares of THCG Delaware Common Stock and THCG Delaware Preferred Stock,
respectively, into which the shares of THCG Utah Common Stock or THCG Utah
Preferred Stock, if any, represented by such certificates have been converted as
provided by Section 2.1 and shall be so registered on the books and records of
the Surviving Corporation or its transfer agent. The registered owner of any
such outstanding stock certificate shall , until such certificate shall been
surrendered for transfer or conversion to the Surviving Corporation or its
transfer agent, have and be entitled to exercise any voting and other rights
with respect to and to receive any dividend and other distributions upon the
shares of THCG Delaware Common Stock or THCG Utah Preferred Stock, if any,
evidenced by such outstanding stock certificate as provided in this Section 2.5.
SECTION 2.6 Dissenters' Rights. Notwithstanding any provision
of this Agreement to the
<PAGE>
D-2
contrary, any shares of THCG Utah Common Stock or THCG Utah Preferred Stock, if
any, outstanding immediately prior to the Effective Time held by a holder who
has demanded and perfected the right, if any, for appraisal of those shares in
accordance with the provisions of Section 16-10a-1302 of the URBCA and as of the
Effective Time has not withdrawn or lost such right to appraisal shall not be
converted into or represent a right to receive THCG Delaware Common Stock or
THCG Delaware Preferred Stock, as the case may be, pursuant to Sections 2.1, but
the holder shall only be entitled to such rights as are granted by said Section
of the URBCA. If a holder of shares of THCG Utah Common Stock or THCG Utah
Preferred Stock, if any, who demands appraisal of those shares under the URBCA
shall effectively withdraw or lose (through failure to perfect or otherwise) the
right to appraisal, then, as of the Effective Time or the occurrence of such
event, whichever last occurs, those shares shall be converted into and represent
only the right to receive THCG Delaware Common Stock or THCG Delaware Preferred
Stock, as the case may be, as provided in Sections 2.1, without interest.
SECTION 2.7 Tax Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code and the regulations promulgated thereunder. The parties
hereto hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations with respect to the Merger.
ARTICLE 3
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 3.1 Conditions to Each Party's Obligations to Effect
the Merger. The respective obligations of each party hereto to effect the Merger
and the other transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) this Agreement (including the Merger) shall have been
approved and adopted by the applicable requisite vote of the shareholders of
THCG Utah in accordance with the applicable provisions of the URBCA;
(b) this Agreement (including the Merger) shall have been
approved and adopted by THCG Utah, as the sole stockholder of THCG Delaware, in
accordance with the applicable provisions of the DGCL;
(c) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or enforced
by any governmental entity which prohibits, restrains, enjoins or restricts the
consummation of the transactions contemplated by this Agreement (including the
Merger) or which subjects any party to substantial damages as a result of the
consummation of the transactions contemplated by this Agreement (including the
Merger); and
(d) all required consents, approvals, waivers and
authorizations of any governmental entity or regulatory agency which are
necessary to effect the transactions contemplated by this Agreement (including
the Merger) shall have been obtained.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the shareholders of THCG Utah or the sole
stockholder of THCG Delaware, by the Board of Directors of either THCG Utah or
THCG Delaware or both if, in the opinion of the Boards of Directors of THCG Utah
and THCG Delaware, such action would be in the best interest of such
corporations. In the event that this Agreement is terminated and the Merger
abandoned pursuant to this Section 4.1, no party hereto and none of their
respective subsidiaries or any of the officers or directors of any of them shall
have any liability of any nature whatsoever hereunder, or in connection with the
transactions contemplated hereby.
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SECTION 4.2 Amendment. This Agreement may be amended by action
taken by THCG Utah and THCG Delaware at any time before or after approval of the
Merger by the shareholders of THCG Utah and the sole stockholder of THCG
Delaware but, after any such approval, no amendment shall be made which requires
the approval of such stockholders under applicable law without such approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto.
SECTION 4.3 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise.
SECTION 4.4 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
SECTION 4.5 Interpretation. The headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Article, such
reference shall be to a Section or Article of this Agreement unless otherwise
indicated. Where the reference "hereby" or "herein" appears in this Agreement,
such reference shall be deemed to be a reference to this Agreement as a whole.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Words denoting the singular include the plural, and vice versa, and
references to it or its or words denoting any gender shall include all genders.
SECTION 4.6 Further Assurances. By its signature hereto, each
party consents and agrees to all of the transactions contemplated hereby. Each
party hereto shall execute, deliver, file and record any and all instruments,
certificates, agreements and other documents, and take any and all other
actions, as reasonably requested by the other party hereto in order to
consummate the transactions contemplated hereby.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and year first above
written.
THCG, INC., a Utah corporation
By /s/ Joseph D. Mark
------------------------------
Joseph D. Mark
Co-Chief Executive Officer
THCG, INC., a Delaware corporation
By /s/ Adi Raviv
------------------------------
Adi Raviv
Co-Chief Executive Officer
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APPENDIX E
CERTIFICATE OF INCORPORATION
OF
THCG, INC.
FIRST: The name of the Corporation is THCG, Inc. (the
"Corporation").
SECOND: The address of the registered office of the
Corporation in Delaware is 1013 Centre Road, City of Wilmington, County of New
Castle, and the name of the registered agent of the Corporation at such address
is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "Delaware General Corporation
Law").
FOURTH: The name and mailing address of the Sole Incorporator
are as follows:
Name Mailing Address
---- ---------------
Sherri Hawkins c/o Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
FIFTH: The total number of shares of all classes of stock
which the Corporation is authorized to issue is 110,000,000 shares, of which
100,000,000 shall be designated Common Stock, par value $0.01 per share, and
10,000,000 shall be designated Preferred Stock, par value $0.01 per share.
(a) The Common Stock:
The holders of Common Stock shall be entitled to one
vote for each Share so held and shall be entitled to notice of any stockholders
meeting and to vote upon any such matters as provided in the by-laws of the
Corporation or as may be provided by law. Except for and subject to those rights
expressly granted to holders of Preferred Stock, and except as may be provided
by the laws of the State of Delaware, the holders of Common Stock shall have all
other rights of stockholders, including, without limitation, (i) the right to
receive dividends, when, as and if declared by the Board of Directors of the
Corporation, out of assets lawfully available therefor, and (ii) in the event of
any distribution of assets upon a liquidation or otherwise, the right to receive
all the assets and funds of the Corporation remaining after the payment to the
holders of the Preferred Stock, if any, of the specific amounts which they are
entitled to receive upon such distribution.
(b) The Preferred Stock:
The Board of Directors is hereby expressly authorized
to provide for, designate and issue, out of the authorized but unissued shares
of Preferred Stock, one or more series of Preferred Stock, subject to the terms
and conditions set forth herein. Before any shares of any such series are
issued, the Board of Directors shall fix, and hereby is expressly empowered to
fix, by resolution or resolutions, the following provisions of the shares of any
such series:
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(i) the designation of such series, the number of
shares to constitute such series and the stated value thereof, if different from
the par value thereof;
(ii) whether the shares of such series shall have
voting rights or powers, in addition to any voting rights required by law, and,
if so, the terms of such voting rights or powers, which may be full or limited;
(iii) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, the preference
or relation which such dividends shall bear to the dividends payable on any
other series of Preferred Stock or on any other class or classes of stock of the
Corporation or any series of any such class;
(iv) whether the shares of such series shall be
subject to redemption at the option of the Corporation or at the option of the
holder thereof, and, if so, the times, prices and other conditions of such
redemption;
(v) the amount or amounts payable on shares of such
series upon, and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any distribution of
the assets, of the Corporation and the preference or relation which such amounts
shall bear to the amounts payable on any other series of Preferred Stock or on
any other class or classes of stock of the Corporation or any series of any such
class ;
(vi) whether the shares of such series shall be
subject to the operation of a retirement or sinking fund and, if so, the extent
to and manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(vii) whether the shares of such series shall be
convertible into, or exchangeable for, shares of Preferred Stock of any other
series or any other class or classes of stock of the Corporation or any series
of any such class or any other securities and, if so, the price or prices or the
rate or rates of conversion or exchange and the method, if any, of adjusting the
same, and any other terms and conditions of such conversion or exchange;
(viii) the limitations and restrictions, if any, to
be effective while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of, the Common Stock or
shares of Preferred Stock of any other series or any other class or classes of
stock of the Corporation or any series of any such class;
(ix) the conditions or restrictions, if any, to be
effective while any shares of such series are outstanding upon the creation of
indebtedness of the Corporation or upon the issuance of any additional stock,
including additional shares of such series or of any other series of Preferred
Stock or of any other class or classes of stock of the Corporation or any series
of any such class; and
(x) any other powers, designations, preferences and
relative, participating, optional or other special rights, and any
qualifications, limitations or restrictions thereof.
The powers, designations, preferences and relative,
participating, optional or other special rights of each series of Preferred
Stock, and the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding. The Board
of Directors is hereby expressly authorized from time to time to increase (but
not above the total number of authorized shares of Preferred Stock) or decrease
(but not below the number of shares thereof then outstanding) the number of
shares of stock of any series of Preferred Stock.
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SIXTH: (a) The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors except as
otherwise provided herein, in the by-laws of the Corporation or as required by
law.
(b) Election of directors need not be by written
ballot unless the by-laws of the Corporation shall so provide.
(c) The number of directors of the Corporation shall
be fixed by, or in the manner provided in, the by-laws of the Corporation.
Commencing on the effective time of the merger (the "Merger") of THCG, Inc., a
Utah corporation and the parent of the Corporation, with and into the
Corporation, the directors, other than those who may be elected by the holders
of any series of Preferred Stock, shall be classified, with respect to the term
for which they severally hold office, into three classes, as nearly equal in
number as possible. The initial Class I, II and III directors shall be appointed
by the Board of Directors upon the effective time of the Merger. The initial
Class I directors shall serve until the first annual meeting of stockholders
after the Merger. The initial Class II directors shall serve until the second
annual meeting of stockholders after the Merger. The initial Class III directors
shall serve until the third annual meeting of stockholders after the Merger.
Members of each class shall hold office until their successors are duly elected
and qualified or until their earlier death, disqualification, resignation or
removal. At each succeeding annual meeting of the stockholders of the
Corporation, the successors of the class of directors whose term expires at that
meeting shall be elected by a plurality vote of all votes cast at such meeting
to hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election and until their successors
are duly elected and qualified or until their earlier death, disqualification,
resignation or removal.
Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filing of
vacancies and other features of such directorships shall be governed by the
provisions of this Certificate of Incorporation applicable thereto, such
directors so elected shall not be divided into classes pursuant to this Article
SIXTH and the number of such directors shall not be counted in determining the
maximum number of directors permitted under the foregoing provisions of this
Article SIXTH, in each case unless expressly provided by such provisions.
(d) No director of the Corporation shall be removed
from office as a director by vote, consent or other action of the stockholders
or otherwise except for cause.
SEVENTH: (a) Any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called annual or
special meeting of the stockholders and may not be effected by a consent in
writing by any such stockholders.
(b) Special meetings of the stockholders of the
Corporation may be called only by a Co-Chief Executive Officer of the
Corporation, the Chief Executive Officer of the Corporation, if there is one, or
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of directors then in office.
EIGHTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after the date hereof to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. No amendment
to
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or repeal of this Article EIGHTH shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment.
NINTH: (a) The Corporation shall to the fullest extent
permitted by Delaware law, as in effect from time to time (but, in the case of
any amendment of the Delaware General Corporation Law, only to the extent that
such amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment),
indemnify each person who is or was a director or officer of the Corporation (or
any predecessor) or of any of its wholly-owned subsidiaries who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, or was or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that such director of officer is or was a director, officer, employee or
agent of the Corporation or of any of its subsidiaries, or is or was at any time
serving, at the request of the Corporation, any other corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against all expense, liability and loss (including,
but not limited to, attorneys' fees, judgments, fines, excise taxes or penalties
with respect to any employee benefit plan or otherwise, and amounts paid or to
be paid in settlement) incurred or suffered by such director or officer in
connection with such proceeding; provided, however, that the Corporation shall
not be obligated to indemnify any person under this Article NINTH in connection
with a proceeding (or part thereof) if such proceeding (or part thereof) was
initiated by such person, but was not authorized by the Board of Directors of
the Corporation against (i) the Corporation or any of its subsidiaries, (ii) any
person who is or was a director, officer, employee or agent of the Corporation
or any of its subsidiaries and/or (iii) any person or entity which is or was
controlled, controlled by or under common control with the Corporation or has or
had business relations with the Corporation or any of its subsidiaries.
(b) Expenses incurred by a person who is or was a director or
officer of the Corporation (or any predecessor) or any of its wholly-owned
subsidiaries in defending a proceeding shall be paid by the Corporation as they
are incurred in advance of the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation. Such expenses incurred by former directors or
officers may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
(c) For purposes of this Article NINTH, the term "Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed by the
Corporation in a consolidation or merger; the term "other enterprise" shall
include, without limitation, any corporation, partnership, joint venture,
limited liability company, trust or employee benefit plan; service "at the
request of the Corporation" shall include, without limitation, service as a
director, officer or employee of the Corporation or any of its subsidiaries
which imposes duties on, or involves service by, such director, officer or
employee with respect to an employee benefit plan, its participants or
beneficiaries; any excise taxes assessed on a person with respect to an employee
benefit plan shall be deemed to be indemnifiable expenses; and action by a
person with respect to any employee benefit plan which such person reasonably
believes to be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action in or not opposed to the best interests of the
Corporation.
(d) Notwithstanding any other provision of this Certificate of
Incorporation or the by-laws of the Corporation, no action by the Corporation,
either by amendment to or repeal of this Article NINTH or the by-laws of the
Corporation or otherwise shall diminish or adversely affect any right or
protection granted under this Article NINTH to any director or officer or former
director or officer of the Corporation (or any predecessor) or of any of its
wholly-owned subsidiaries which shall have become vested as aforesaid prior to
the date that any such amendment, repeal or other corporate action is taken.
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TENTH: (a) Except as provided otherwise by law or in the
by-laws of the Corporation, the by-laws of the Corporation may be amended or
repealed or new by-laws (not inconsistent with any provision of law or this
Certificate of Incorporation) may be adopted by the Board of Directors.
(b) The by-laws of the Corporation may be amended or repealed
at any annual meeting of stockholders, or special meeting of stockholders called
for such purpose, by the affirmative vote of a majority of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class.
Signed at New York, New York
on April 6, 2000
/s/ Sherri Hawkins
-------------------
Sherri Hawkins
Sole Incorporator
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APPENDIX F
UTAH REVISED BUSINESS CORPORATION ACT
SECTIONS 16-10A-1301 THROUGH 16-10A-1331
UTAH CODE
TITLE 16. CORPORATIONS
CHAPTER 10a. REVISED BUSINESS CORPORATION ACT
PART 13. DISSENTERS' RIGHTS
16-10a-1301. Definitions.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when and
in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section
15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10a-1302. Right to dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
from, and obtain payment of the fair value of shares held by him in the event
of, any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104; (b) consummation of a plan of share exchange to
which the corporation is a party as the corporation whose
shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a shareholder
vote is required under Subsection 16-10a-1202(1), but not including a sale for
cash pursuant to a plan by which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders within one year after the date
of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the corporation
if the shareholders of the corporation were entitled to vote upon the consent of
the corporation to the disposition pursuant to Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
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(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution of
the board of directors, and subject to the limitations set forth in Subsection
(4), a shareholder is not entitled to dissent and obtain payment under
Subsection (1) of the fair value of the shares of any class or series of shares
which either were listed on a national securities exchange registered under the
federal Securities Exchange Act of 1934, as amended, or on the National Market
System of the National Association of Securities Dealers Automated Quotation
System, or were held of record by more than 2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange; (b) shares of a corporation which at the
effective date of the plan of merger or share exchange either will
be listed on a national securities exchange registered under the federal
Securities Exchange Act of 1934, as amended, or on the National Market System of
the National Association of Securities Dealers Automated Quotation System, or
will be held of record by more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash in
lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the
entitlement unless the action is unlawful or fraudulent with respect to him or
to the corporation.
16-10a-1303. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if the shareholder dissents with respect
to all shares beneficially owned by any one person and causes the corporation to
receive written notice which states the dissent and the name and address of each
person on whose behalf dissenters' rights are being asserted. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the shareholder dissents and the other shares held of record by him were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of which
he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
beneficial shareholder must certify to the corporation that both he and the
record shareholders of all shares owned beneficially by him have asserted, or
will timely assert, dissenters' rights as to all the shares unlimited on the
ability to exercise dissenters' rights. The certification requirement must be
stated in the dissenters' notice given pursuant to Section 16-10a-1322.
16-10a-1320. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must be sent to all shareholders of the corporation as of the applicable
record date, whether or not they are entitled to vote at the meeting. The notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this part. The notice must be accompanied by a copy of this part
and the materials, if any, that under this chapter are required to be given the
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as required by this subsection does not affect any action taken at
the shareholders' meeting for which the notice was to have been given.
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(2) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized without a meeting of shareholders pursuant to Section
16-10a-704, any written or oral solicitation of a shareholder to execute a
written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
16-10a-1321. Demand for payment - Eligibility and notice of intent.
(1) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed action
is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized without a meeting of shareholders pursuant to Section
16-10a-704, a shareholder who wishes to assert dissenters' rights may not
execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders, if shareholder approval is required, or as of
the effective date of the corporate action if the corporate action is authorized
other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10a-1322. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no later
than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective date
or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment demands
and an address at which certificates for certificated shares must be deposited;
(c) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a dissenter
to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer than
30 nor more than 70 days after the date the dissenters' notice required by
Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
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16-10a-1323. Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice described in Section
16-10a-1322, who meets the requirements of Section 16-10a-1321, and wishes to
assert dissenters' rights must, in accordance with the terms of the dissenters'
notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance
with the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described in
Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in writing,
in or with the payment demand, whether or not he or the person on whose behalf
he asserts dissenters' rights acquired beneficial ownership of the shares before
the date of the first announcement to news media or to shareholders of the terms
of the proposed corporate action creating dissenters' rights under Section
16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for the
shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share certificates
as required, by the date or dates set in the dissenters' notice, is not entitled
to payment for shares under this part.
16-10a-1324. Uncertificated shares.
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
16-10a-1325. Payment.
(1) Except as provided in Section 16-10a-1327, upon the later of the
effective date of the corporate action creating dissenters' rights under Section
16-10a-1302, and receipt by the corporation of each payment demand pursuant to
Section 16-10a-1323, the corporation shall pay the amount the corporation
estimates to be the fair value of the dissenter's shares, plus interest to each
dissenter who has complied with Section 16-10a-1323, and who meets the
requirements of Section 16-10a-1321, and who has not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a) (i) (A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than 16
months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and a
statement of cash flow for that year, if the corporation customarily provides
such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i) must
be audited if the corporation customarily provides audited financial statements
to shareholders;
(b) a statement of the corporation's estimate of the fair value of
the shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under Section
16-10a-1328; and
(d) a copy of this part.
F-4
<PAGE>
16-10a-1326. Failure to take action.
(1) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 does not occur within 60 days after the date
set by the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, the corporation shall return all
deposited certificates and release the transfer restrictions imposed on
uncertificated shares, and all shareholders who submitted a demand for payment
pursuant to Section 16-10a-1323 shall thereafter have all rights of a
shareholder as if no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10a-1327. Special provisions relating to shares acquired after announcement
of proposed corporate action.
(1) A corporation may, with the dissenters' notice given pursuant to Section
16-10a-1322, state the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating dissenters'
rights under Section 16-10a-1302 and state that a shareholder who asserts
dissenters' rights must certify in writing, in or with the payment demand,
whether or not he or the person on whose behalf he asserts dissenters' rights
acquired beneficial ownership of the shares before that date. With respect to
any dissenter who does not certify in writing, in or with the payment demand
that he or the person on whose behalf the dissenters' rights are being asserted,
acquired beneficial ownership of the shares before that date, the corporation
may, in lieu of making the payment provided in Section 16-10a-1325, offer to
make payment if the dissenter agrees to accept it in full satisfaction of his
demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
16-10a-1328. Procedure for shareholder dissatisfied with payment or offer.
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own estimate of
the fair value of his shares and demand payment of the estimated amount, plus
interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section 16-10a-1325
or offered under Section 16-10a-1327 is less than the fair value of the shares;
(b) the corporation fails to make payment under Section 16-10a-1325 within
60 days after the date set by the corporation as the date by which it must
receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section unless
he causes the corporation to receive the notice required by Subsection (1)
within 30 days after the corporation made or offered payment for his shares.
16-10a-1330. Judicial appraisal of shares - Court action.
(1) If a demand for payment under Section 16-10a-1328 remains unresolved,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
F-5
<PAGE>
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties to
the proceeding commenced under Subsection (2) as an action against their shares.
All such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be made otherwise
as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair
value of his shares, plus interest, exceeds the amount paid by the
corporation pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under Section
16-10a-1327.
16-10a-1331. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under Section 16-10a-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds that the dissenters acted arbitrarily, vexatiously,
or not in good faith in demanding payment under Section 16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
F-6
<PAGE>
THCG, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of THCG, Inc. ("THCG") hereby appoints
Joseph D. Mark, Adi Raviv and Shai Novik, each of them, as proxies of the
undersigned, with full power of substitution to each, to vote all shares of THCG
which the undersigned is entitled to vote at THCG's Annual Meeting of
Shareholders to be held at 2:00 p.m., local time, at The New York Helmsley
Hotel, located at 212 East 42nd Street, New York, New York 10017, and at any
adjournment thereof, hereby ratifying all that said proxies or their substitutes
may do by virtue hereof, and the undersigned authorizes and instructs said
proxies or their substitutes to vote as follows:
1. ELECTION OF DIRECTORS: To elect the nominees listed below to the Board
of Directors;
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
|_| |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
JOSEPH D. MARK
EVAN M. MARKS
STANLEY B. STERN
LARRY W. SMITH
2. APPROVAL OF THE THCG 2000 STOCK INCENTIVE PLAN;
|_| FOR |_| AGAINST |_| ABSTAIN
3. APPROVAL OF THE THCG 2000 EMPLOYEE STOCK PURCHASE PLAN;
|_| FOR |_| AGAINST |_| ABSTAIN
4. APPROVAL OF THE THCG 2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN;
|_| FOR |_| AGAINST |_| ABSTAIN
5. To approve the Agreement and Plan of Merger, dated April 6, 2000, by
and between THCG and THCG, Inc. a Delaware corporation and wholly-owned
subsidiary of THCG, pursuant to which THCG will be reincorporated in
Delaware.;
|_| FOR |_| AGAINST |_| ABSTAIN
6. APPROVAL OF AUDITORS: To ratify the appointment of Arthur Andersen LLP
as independent auditors for THCG for the fiscal year ending December
31, 2000;
|_| FOR |_| AGAINST |_| ABSTAIN
and in their discretion, upon any other matter that may properly come before the
meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED UNDER "ELECTION
OF DIRECTORS" AND FOR PROPOSALS 2, 3, 4, 5 AND 6.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER AND IN THE DISCRETION OF THE PROXIES, ON
ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED UNDER "ELECTION OF DIRECTORS" AND FOR PROPOSALS 2 , 3, 4, 5 AND 6.
(Continued and to be dated and signed on the other side.)
<PAGE>
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and Annual
Report of THCG accompanying the same is hereby acknowledged.
Dated:,_____________________________________
2000
____________________________________________
(Signature of Shareholder)
____________________________________________
(Signature of Shareholder)
Please sign exactly as your name(s) appears
on your stock certificate. If signing as
attorney, executor, administrator, trustee
or guardian, please indicate the capacity in
which signing. When signing as joint
tenants, all parties to the joint tenancy
must sign. When the proxy is given by a
corporation, it should be signed by an
authorized officer.
I plan to attend the Annual Meeting in person: |_| Yes |_| No
