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 (Amendment No. )
Filed by the Registrant X
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Filed by a Party other than the Registrant
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Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
|_| Definitive Proxy Statement Commission Only (as permitted by
|_| Definitive Additional Materials Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
LADENBURG THALMANN FINANCIAL SERVICES INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PPayment 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:
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|_| 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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(4) Date Filed:
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LADENBURG THALMANN FINANCIAL SERVICES INC.
590 Madison Avenue, 34th Floor
New York, New York 10022
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NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 6, 2002
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NOTICE IS HEREBY GIVEN that an annual meeting of shareholders of
Ladenburg Thalmann Financial Services Inc., a Florida corporation, will be held
at the offices of our general counsel, Graubard Miller, 600 Third Avenue, 32nd
Floor, New York, New York, on Wednesday, November 6, 2002, at 10:00 a.m., for
the following purposes, all as more fully described in the attached proxy
statement:
1. To elect nine directors to our board of directors to hold
office until the next annual meeting of shareholders and until
their successors are elected and qualified;
2. To authorize an amendment to our articles of incorporation to
increase the number of authorized shares of our common stock
from 100,000,000 shares to 200,000,000 shares;
3. To authorize an amendment to our 1999 Performance Equity Plan
to increase the number of shares of common stock available for
issuance under the plan from 5,500,000 shares to 10,000,000
shares and to increase the limit on grants to individuals in
any one year;
4. To approve the adoption of the Ladenburg Thalmann Financial
Services Inc. Qualified Employee Stock Purchase Plan; and
5. To transact such other business as may properly come before
the meeting, and any or all postponements or adjournments
thereof.
Only shareholders of record at the close of business on September 9,
2002, will be entitled to notice of, and to vote at, the meeting and any
postponements or adjournments.
You are urged to read the attached proxy statement, which contains
information relevant to the actions to be taken at the meeting. Whether or not
you expect to attend the meeting in person, please sign and date the
accompanying proxy card and mail it promptly in the enclosed addressed,
postage-prepaid envelope. You may revoke your proxy if you so desire at any time
before it is voted.
By Order of the Board of Directors
Victor M. Rivas, President and
Chief Executive Officer
New York, New York
October 3, 2002
LADENBURG THALMANN FINANCIAL SERVICES INC.
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 6, 2002
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This proxy statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by our board directors for use at an
annual meeting of shareholders to be held on November 6, 2002, and any
postponements or adjournments.
On or about October 3, 2002, this proxy statement and the accompanying
form of proxy are being mailed to each shareholder of record at the close of
business on September 9, 2002.
What matters am I voting on?
o The election of nine directors to hold office until the next
annual meeting of shareholders and until their successors are
elected and qualified;
o The authorization of an amendment to our articles of
incorporation to increase the number of authorized shares of
common stock from 100,000,000 shares to 200,000,000 shares;
o The authorization of an amendment to our 1999 Performance
Equity Plan to increase the number of shares of common stock
available for issuance under the plan from 5,500,000 shares to
10,000,000 shares and to increase the limit on grants to
individuals in any one year;
o The authorization of the adoption of the Ladenburg Thalmann
Financial Services Inc. Qualified Employee Stock Purchase
Plan; and
o Any other business that may properly come before the meeting.
The Annual Meeting
The information provided in the "question and answer" format below is
for your convenience only and is merely a summary of the information contained
in this proxy statement. You should read this proxy statement carefully,
including the attached appendix and the documents we refer to in this proxy
statement.
Who is entitled to vote?
Holders of our common stock as of the close of business on September 9,
2002, the record date, are entitled to vote at the meeting. As of the record
date, we had issued and outstanding 42,025,211 shares of common stock, our only
class of voting securities outstanding. Each holder of our common stock is
entitled to one vote for each share held on the record date.
What is the effect of giving a proxy?
Proxies in the form enclosed are solicited by and on behalf of our
board. The persons named in the proxy have been designated as proxies by our
board. If you sign and return the proxy in accordance with the procedures set
forth in this proxy statement, the persons designated as proxies by the board
will vote your shares at the meeting as specified in your proxy.
If you sign and return your proxy in accordance with the procedures set
forth in this proxy statement but you do not provide any instructions as to how
your shares should be voted, your shares will be voted as follows:
o FOR the election as directors of the nominees listed below
under Proposal 1;
o FOR the approval of the amendment to our articles of
incorporation to increase the number of authorized shares of
our common stock from 100,000,000 shares to 200,000,000 shares
as described below under Proposal 2;
o FOR the approval of the amendment to our 1999 Performance
Equity Plan to increase the number of shares of common stock
available for issuance under the plan from 5,500,000 shares to
10,000,000 shares and to increase the limit on grants to
individuals in any one year as described below under Proposal
3; and
o FOR the approval of the adoption of the Ladenburg Thalmann
Financial Services Inc. Qualified Employee Stock Purchase Plan
as described below under Proposal 4.
If you give your proxy, your shares also will be voted in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the meeting.
Can I change my vote after I return my proxy card?
You may revoke your proxy at any time before it is exercised by:
o delivering written notification of your revocation to our
secretary;
o voting in person at the meeting; or
o delivering another proxy bearing a later date.
Please note that your attendance at the meeting will not alone serve to
revoke your proxy.
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What is a quorum?
A quorum is the minimum number for shares required to be present at the
meeting for the meeting to be properly held under our bylaws and Florida law.
The presence, in person or by proxy, of a majority of all outstanding shares of
common stock entitled to vote at the meeting will constitute a quorum at the
meeting. A proxy submitted by a shareholder may indicate that all or a portion
of the shares represented by the proxy are not being voted ("shareholder
withholding") with respect to a particular matter. Similarly, a broker may not
be permitted to vote stock ("broker non-vote") held in street name on a
particular matter in the absence of instructions from the beneficial owner of
the stock. The shares subject to a proxy which are not being voted on a
particular matter because of either shareholder withholding or broker non-vote
will not be considered shares present and entitled to vote on that matter. These
shares, however, may be considered present and entitled to vote on other matters
and will count for purposes of determining the presence of a quorum if the
shares are being voted with respect to any matter at the meeting. If the proxy
indicates that the shares are not being voted on any matter at the meeting, the
shares will not be counted for purposes of determining the presence of a quorum.
Abstentions are voted neither "for" nor "against" a matter but are counted in
the determination of a quorum.
How may I vote?
You may vote your shares by mail. Date, sign and return the
accompanying proxy in the envelope enclosed for that purpose (to which no
postage need to be affixed if mailed in the United States). You may specify your
choices by marking the appropriate boxes on the proxy card. If you attend the
meeting, you may deliver your completed proxy card in person or fill out and
return a ballot that will be supplied to you.
How many votes are needed for approval of each matter?
The election of directors requires a plurality vote of the shares of
common stock voted at the meeting. "Plurality" means that the individuals who
receive the largest number of votes cast "FOR" are elected as directors.
Consequently, any shares not voted "FOR" a particular nominee (whether as a
result of a direction of the securities holder to withhold authority,
abstentions or a broker non-vote) will not be counted in such nominee's favor.
As there are nine directors to be elected, the nine persons receiving the
highest votes will be elected if nominees other than those nominated by the
board are presented.
Each of the other proposals being voted on at the annual meeting must
be approved by a majority of the votes cast at the meeting with respect to the
proposal.
Abstentions and shares deemed present at the meeting but not entitled
to vote with respect to each of the proposals (because of either shareholder
withholding or broker non-vote) are not deemed voted and therefore will have no
effect on such vote.
Annual Report
We will provide, without charge, a copy of our Annual Report on Form
10-K for the fiscal year ended December 31, 2001, which includes our audited
financial statements, upon the written request of any person stating that (s)he
is a beneficial holder of our common stock. Further, we will furnish a copy of
the exhibits to the Annual Report upon such written request at a charge of $.35
per page, plus $5.00 postage and handling charge, paid in advance. We will
indicate the number of pages to be charged upon each inquiry we receive.
Requests for copies and inquiries should be sent in writing to Investor
Relations Department, Ladenburg Thalmann Financial Services Inc., 590 Madison
Avenue, New York, New York 10022.
3
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of September 9,
2002 with respect to the beneficial ownership of our common stock by (i) those
persons or groups known to beneficially own more than 5% of our voting
securities, (ii) each of our directors, (iii) each of the executive officers
named in the Summary Compensation Table below and (iv) all of our current
directors and executive officers as a group. Except as otherwise stated, the
business address of each of the below listed persons is c/o Ladenburg Thalmann
Financial Services Inc., 590 Madison Avenue, 34th Floor, New York, New York
10022.
Percent of Class
Amount and Nature of of Voting
Name of Beneficial Owner Beneficial ownership(1) Securities
---------------------------------- ----------------------- ----------------
Phillip Frost, M.D. (2) 8,070,941(3) 16.6%
Berliner Effektengesellschaft AG(4) 5,575,556(5) 13.0%
Bennett S. LeBow 4,378,715(6) 10.4%
Richard J. Rosenstock 3,790,854(7) 9.0%
New Valley Corporation(8) 3,944,216(9) 8.6%
Carl C. Icahn(10) 3,396,258(11) 8.1%
Howard M. Lorber 1,535,878(12) 3.7%
Mark Zeitchick 1,524,771(13) 3.6%
Vincent Mangone 1,524,771(14) 3.6%
Victor M. Rivas 346,133(15) *
Joseph Berland(16) 89,508(17) *
Richard J. Lampen 38,367(18) *
Robert J. Eide 31,367(19) *
Henry C. Beinstein 31,361(20) *
J. Bryant Kirkland III 17,265(21) *
All directors and executive 13,219,482(22) 30.9%
officers as a group (10 persons)
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* Less than 1 percent.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. The information concerning the
shareholders is based upon numbers reported by the owner in documents
publicly filed with the SEC, publicly available information or
information made known to us. Except as otherwise indicated, all of the
shares of common stock are owned of record and beneficially and the
persons identified have sole voting and investment power with respect
thereto.
(2) The business address of Dr. Frost is c/o IVAX Corporation, 4400
Biscayne Boulevard, Miami, Florida 33137. Effective July 8, 2002,
Phillip Frost, M.D. resigned from our board of directors due to his
other existing responsibilities.
4
(3) Represents (i) 1,453,466 shares of common stock held by Frost Gamma
Limited Partnership, a Nevada limited partnership, (ii) 100,000 shares
of common stock issuable upon exercise of an immediately exercisable
warrant held by Frost Gamma, (iii) 6,497,475 shares of common stock
issuable upon conversion of a senior convertible promissory note held
by Frost-Nevada, Limited Partnership, a Nevada limited partnership and
(iv) 20,000 shares of common stock issuable upon exercise of currently
exercisable options held by Dr. Frost. Dr. Frost is the sole limited
partner of Frost Gamma Limited Partnership and is the sole shareholder
of Frost-Nevada Corporation, the sole shareholder of Frost Gamma Inc.,
the general partner of Frost Gamma Limited Partnership. Dr. Frost is
also one of the two limited partners of Frost-Nevada, Limited
Partnership and is the sole shareholder of Frost-Nevada Corporation,
the general partner of Frost-Nevada, Limited Partnership. Record
ownership of these shares may be transferred from time to time among
Dr. Frost and, in addition to other entities that he may control, any
or all of Frost Gamma Limited Partnership, Frost Gamma Inc.,
Frost-Nevada, Limited Partnership and Frost-Nevada Corporation.
Accordingly, solely for purposes of reporting beneficial ownership of
these shares pursuant to Section 13(d) of the Exchange Act, each of
these parties will be deemed to be the beneficial owner of the shares
held by any other of the parties. The foregoing information was derived
from an Amendment to Schedule 13D filed with the SEC on September 10,
2001 as well as from information made known to us.
(4) The business address for Berliner Effektengesellschaft AG is
Kurfustendamm 119, 10711 Berlin, Germany.
(5) Includes 955,055 shares of common stock issuable upon conversion of a
senior convertible promissory note held by Berliner.
(6) Represents (i) 758,205 shares of common stock held directly by Mr.
LeBow, (ii) 3,325,200 shares of common stock held by LeBow Gamma
Limited Partnership, a Nevada limited partnership, (iii) 110,336 shares
of common stock held by LeBow Alpha LLLP, a Delaware limited liability
limited partnership, (iv) 164,974 shares of common stock held by The
Bennett and Geraldine LeBow Foundation, Inc., a Florida not-for-profit
corporation and (v) 20,000 shares of common stock issuable upon
exercise of currently exercisable options held by Mr. LeBow. LeBow
Holdings Inc., a Nevada corporation, is the sole stockholder of LeBow
Gamma Inc., a Nevada corporation, which is the general partner of LeBow
Gamma Limited Partnership, and is the general partner of LeBow Alpha
LLLP. Mr. LeBow is a director, officer and sole stockholder of LeBow
Holdings Inc. and a director and officer of LeBow Gamma Inc. Mr. LeBow
and family members serve as directors and executive officers of the
Foundation. The foregoing information was derived from an Amendment to
Schedule 13D filed with the SEC on December 21, 2001 as well as from
information made known to us.
(7) Represents 3,701,346 shares of common stock held of record by The
Richard J. Rosenstock Revocable Living Trust Dated 3/5/96, of which Mr.
Rosenstock is the sole trustee and beneficiary, and 89,508 shares of
common stock issuable upon exercise of currently exercisable options
held by Mr. Rosenstock. Does not include 260,492 shares of common stock
issuable upon exercise of options held by Mr. Rosenstock that are not
currently exercisable and that will not become exercisable within the
next 60 days.
(8) The business address for New Valley Corporation is 100 S. E. Second
Street, Miami, Florida 33131.
(9) Represents (i) 3,844,216 shares of common stock issuable upon
conversion of a senior convertible promissory note held by New Valley
and (ii) 100,000 shares of common stock issuable upon exercise of
immediately exercisable warrants held by New Valley.
(10) The business address for Mr. Icahn is c/o Icahn Associates Corp., 767
Fifth Avenue, 47th Floor, New York, New York 10153.
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(11) Represents (i) 2,148,725 shares of common stock held by High River
Limited Partnership, (ii) 1,227,773 shares of common stock held by
Tortoise Corp. and (iii) 19,760 shares of common stock held by Little
Meadow Corp. Each of these entities are either directly or indirectly
100% owned by Mr. Icahn. As such, Mr. Icahn is in a position to
directly and indirectly determine the investment and voting decisions
made by these entities. Accordingly, Mr. Icahn may be deemed to be the
beneficial owner of these shares for purposes of reporting beneficial
ownership pursuant to Section 13(d) of the Exchange Act. However, Mr.
Icahn disclaims beneficial ownership of these shares for all other
purposes. The foregoing information was derived from a Schedule 13D
filed with the SEC on December 28, 2001.
(12) Represents (i) 1,392,251 shares of common stock held directly by Mr.
Lorber, (ii) 118,560 shares of common stock held by Lorber Alpha II
Partnership, a Nevada limited partnership, (iii) 5,067 shares of common
stock held by the Lorber Charitable Fund, a New York not-for-profit
corporation, and (iv) 20,000 shares of common stock issuable upon
exercise of currently exercisable options held by Mr. Lorber. Lorber
Alpha II, Inc., a Nevada corporation, is the general partner of Lorber
Alpha II Partnership. Mr. Lorber is the director, officer and principal
stockholder of Lorber Alpha II, Inc. Mr. Lorber and family members
serve as directors and executive officers of Lorber Charitable Fund and
Mr. Lorber possesses shared voting power and shared dispositive power
with the other directors of the fund with respect to the fund's shares
of our common stock. The foregoing information was derived from an
Amendment to Schedule 13D filed with the SEC on December 21, 2001 as
well as from information made known to us.
(13) Includes 98,460 shares of common stock issuable upon exercise of
currently exercisable options held by Mr. Zeitchick. Does not include
251,540 shares of common stock issuable upon exercise of options held
by Mr. Zeitchick that are not currently exercisable and that will not
become exercisable within the next 60 days.
(14) Represents (i) 1,426,311 shares of common stock held of record by The
Vincent A. Mangone Revocable Living Trust Dated 11/5/96, of which Mr.
Mangone is the sole trustee and beneficiary, and (ii) 98,460 shares of
common stock issuable upon exercise of currently exercisable options
held by Mr. Mangone. Does not include 251,540 shares of common stock
issuable upon exercise of options held by Mr. Mangone that are not
currently exercisable and that will not become exercisable within the
next 60 days.
(15) Includes 333,333 shares of common stock issuable upon exercise of
currently exercisable options held by Mr. Rivas. Does not include
966,667 shares of common stock issuable upon exercise of options held
by Mr. Rivas that are not currently exercisable and that will not
become exercisable within the next 60 days.
(16) The business address for Mr. Berland is c/o Ladenburg Capital
Management Inc., 1055 Stewart Avenue, Bethpage, New York 11714.
(17) Represents 89,508 shares of common stock issuable upon exercise of
currently exercisable options held by Mr. Berland. Does not include
10,492 shares of common stock issuable upon exercise of options held by
Mr. Berland that are not currently exercisable and that will not become
exercisable within the next 60 days.
(18) Does not include 20,000 shares of common stock issuable upon exercise
of options held by Mr. Lampen that are not currently exercisable and
that will not become exercisable within the next 60 days.
(19) Includes 20,000 shares of common stock issuable upon exercise of
currently exercisable options held by Mr. Eide.
(20) Includes (i) 823 shares of common stock held of record in the
individual retirement account of Mr. Beinstein's spouse and (ii) 20,000
shares of common stock issuable upon exercise of currently exercisable
options held by Mr. Beinstein.
(21) Does not include 35,000 shares of common stock issuable upon exercise
of options held by Mr. Kirkland that are not currently exercisable and
that will not become exercisable within the next 60 days.
(22) Includes 699,761 shares of common stock issuable upon exercise of
currently exercisable options. See notes 6, 7, 12, 13, 14, 15, 19 and
20. Excludes 1,750,239 shares of common stock issuable upon exercise of
options that are not currently exercisable and that will not become
exercisable within the next 60 days. See notes 7, 13, 14, 15 and 18.
6
Recent Developments
Stock purchase agreement and related transactions
In May 2001, we consummated a stock purchase agreement, as amended,
with New Valley Corporation, Berliner Effektengesellschaft AG and Ladenburg
Thalmann & Co. On the same date, New Valley and Frost-Nevada, Limited
Partnership consummated several individual stock purchase agreements with five
of our present and former directors, officers and key employees. As a result of
the stock purchase agreements and the various related transactions, New Valley
acquired beneficial ownership of approximately 57.6% of our common stock
becoming our largest shareholder, and Ladenburg Thalmann & Co. became our wholly
owned subsidiary. The stock purchase agreements are discussed in greater detail
below under the caption "Certain Relationships and Related Transactions."
As a condition to consummating the stock purchase agreements, we
changed our name from "GBI Capital Management Corp." to "Ladenburg Thalmann
Financial Services Inc." We also changed our American Stock Exchange symbol to
"LTS."
Shareholder Distributions
In December 2001, New Valley distributed a total of 22,543,158 shares
of our common stock held by New Valley to its stockholders as a dividend. Vector
Group Ltd., which holds approximately 56% of New Valley's common stock, received
approximately 12.7 million of these shares and, in turn, immediately distributed
them to its stockholders. As a result of the distributions, New Valley's
beneficial ownership of our common stock decreased from approximately 57.6% to
approximately 8.6% and the number of beneficial holders of our common stock
increased from approximately 350 beneficial holders to approximately 13,800
beneficial holders.
7
PROPOSAL I
ELECTION OF DIRECTORS
At this year's annual meeting of shareholders, nine directors will be
elected to hold office for a term of one year expiring at the next annual
meeting of shareholders. Each director will be elected to serve until a
successor is elected and qualified or until the director's earlier resignation
or removal.
Unless authority is withheld, the proxies solicited by the board of
directors will be voted FOR the election of these nominees. Our articles of
incorporation do not provide for cumulative voting. In case any of the nominees
becomes unavailable for election to the board of directors, an event which is
not anticipated, the persons named as proxies, or their substitutes, will have
full discretion and authority to vote or refrain from voting for any other
candidate in accordance with their judgment. The nine nominees for directors,
their current positions with us, their term of office and their business
background are set forth below.
Howard M. Lorber, 54 years old, has been chairman of our board of
directors since May 2001. Since November 1994, he has been president, chief
operating officer and a member of the board of directors of New Valley. From
January 1994 to January 2001, Mr. Lorber was a consultant to Vector Group Ltd.,
a New York Stock Exchange-listed holding company, and since January 2001 has
served as its president, chief operating officer and a member of its board of
directors. Mr. Lorber has been a stockholder and a registered representative of
Aegis Capital Corp., a broker-dealer and a member firm of the NASD since 1984.
Since 1990, Mr. Lorber has been chairman of the board of directors of Nathan's
Famous, Inc., a chain of fast food restaurants, and has been its chief executive
officer since 1993. Since 1991, he has been a director and member of the audit
committee of United Capital Corp., a real estate investment and diversified
manufacturing company. Since May 1994, he has been a director and member of the
audit committee of Prime Hospitality Corp., a company doing business in the
lodging industry. He is also a trustee of Long Island University and Babson
College.
Victor M. Rivas, 58 years old, has been our president and chief
executive officer and a member of our board of directors since May 2001. Mr.
Rivas has been affiliated with Ladenburg Thalmann & Co. since September 1997 and
has been its chairman and chief executive officer since July 1999. He has also
been co-chairman of the board of directors of Ladenburg Capital Management since
November 2001. Since October 1999, he has been a member of the board of
directors of New Valley. Prior to joining Ladenburg Thalmann & Co., Mr. Rivas
served as an executive officer of the brokerage firms of Rickel & Associates,
Inc. from March 1997 to September 1997 and Janssen-Meyers Associates, L.P. from
January 1996 to March 1997. Mr. Rivas had previously served as chairman of the
board and chief executive officer of Conquest Industries Inc. and its
subsidiary, Conquest Airlines Corp.
Richard J. Rosenstock, 50 years old, has been vice chairman of our
board of directors since May 2001 and our chief operating officer since August
1999. He was also our president from August 1999 until May 2001. Mr. Rosenstock
has been affiliated with Ladenburg Capital Management since 1986. He has served
as Ladenburg Capital Management's chief executive officer since May 2001. From
January 1994 until May 1998, Mr. Rosenstock was an executive vice president of
Ladenburg Capital Management and was its president from May 1998 until November
2001.
Vincent A. Mangone, 37 years old, has been our executive vice president
and a member of our board of directors since August 1999. Mr. Mangone has also
been affiliated with Ladenburg Capital Management since October 1993 and has
been an executive vice president since September 1995.
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Mark Zeitchick, 37 years old, has been our executive vice president and
a member of our board of directors since August 1999. Mr. Zeitchick has also
been affiliated with Ladenburg Capital Management since October 1993. Mr.
Zeitchick has been Ladenburg Capital Management's co-chairman since November
2001. From September 1995 until November 2001, he was an executive vice
president of Ladenburg Capital Management. From May 2001 until November 2001, he
served as chairman of Ladenburg Capital Management, and became co-chairman in
November 2001.
Henry C. Beinstein, 59 years old, has been a member of our board of
directors since May 2001. Mr. Beinstein has been a director of New Valley since
1994. From August 1997 until August 2002, Mr. Beinstein was the executive
director of Schulte Roth & Zabel LLP, a New York-based law firm. In August 2002,
Mr. Beinstein retired from this position. Prior to joining Schulte Roth & Zabel,
Mr. Beinstein had served as the managing director of Milbank, Tweed, Hadley &
McCloy LLP, a New York-based law firm, commencing in November 1995. From April
1985 through October 1995, Mr. Beinstein was the executive director of Proskauer
Rose LLP, a New York-based law firm. Mr. Beinstein is a certified public
accountant in New York and New Jersey and prior to joining Proskauer was a
partner and national director of finance and administration at Coopers &
Lybrand.
Robert J. Eide, 49 years old, has been a member of our board of
directors since May 2001. He has also been the chairman and treasurer of Aegis
Capital Corp. since before 1988. Mr. Eide also serves as a director of Nathan's
Famous and Vector Group.
Richard J. Lampen, 48 years old, has been a member of our board of
directors since January 2002. He has been the executive vice president and
general counsel of New Valley since October 1995 and a member of its board of
directors since July 1996. Since July 1996, Mr. Lampen has served as executive
vice president of Vector Group. Since January 1997, Mr. Lampen has served as a
director of CDSI Holdings Inc., a company with interests in the marketing
services business, and since November 1998 has been its president and chief
executive officer. From May 1992 to September 1995, Mr. Lampen was a partner at
Steel Hector & Davis, a law firm located in Miami, Florida. From January 1991 to
April 1992, Mr. Lampen was a managing director at Salomon Brothers Inc., an
investment bank, and was an employee at Salomon Brothers from 1986 to April
1992. Mr. Lampen has served as a director of a number of other companies,
including U.S. Can Corporation, The International Bank of Miami, N.A., Spec's
Music Inc. and Panaco, Inc., as well as a court-appointed independent director
of Trump Plaza Funding, Inc.
Bennett S. LeBow, 64 years old, has been a member of our board of
directors since May 2001. Since June 1990, Mr. LeBow has been the chairman of
the board of directors and chief executive officer of Vector Group, and has been
a member of its board of directors since October 1986 and currently holds
various positions with Vector Group's subsidiaries, including Vector Tobacco
Inc. He has been chairman of the board of directors of New Valley since January
1988 and chief executive officer since November 1994.
Other Executive Officer
J. Bryant Kirkland III, 37 years old, has served as our chief financial
officer since June 2001. Mr. Kirkland has been vice president, treasurer and
chief financial officer of New Valley since January 1998, and since November
1994 has served in various financial capacities with New Valley and Vector
Group. Since January 2001, Mr. Kirkland has served as vice president of Vector
Group. Mr. Kirkland has served as vice president and chief financial officer of
CDSI since January 1998 and as a director of CDSI since November 1998.
9
Board and Committee Information
During the fiscal year ended December 31, 2001, our board of directors
met four times and acted by unanimous written consent twelve times. Our entire
board participated in each of the four meetings. We have standing audit and
compensation committees of the board of directors. We do not have a standing
nominating committee.
Notwithstanding anything to the contrary set forth in our previous
filings under the Securities Act or the Exchange Act that might incorporate
future filings made by us under those statutes, the sections set forth below
under the captions entitled "Compensation Committee Report on Executive
Compensation," "Audit Committee Information and Report" and "Stock Price
Performance Graph" will not be incorporated by reference in any of those prior
filings or any future filings by us.
Compensation Committee Information and Report
The compensation committee was established in November 1999 and is
currently comprised of Howard M. Lorber, Henry C. Beinstein and Robert J. Eide.
The compensation committee is responsible for administering our Annual Incentive
Bonus Plan ("Bonus Plan"), our Special Performance Incentive Plan ("Incentive
Plan") and our 1999 Performance Equity Plan ("Equity Plan"). During the fiscal
year ended December 31, 2001, the compensation committee met three times and
acted by unanimous written consent twice.
Compensation Committee Report on Executive Compensation
This report is made by our compensation committee, which consists of
three non-employee directors. The responsibilities of the committee include:
o establishing the general compensation policy for our executive
officers, including our chief executive officer;
o administering our Bonus Plan, Incentive Plan and Equity Plan,
each of which is designed to comply with the requirements of
Section 162(m) of the Internal Revenue Code; and
o in administering each of these plans, the committee determines
who participates in the plans, establishes performance goals,
if any, and determines specific grants and bonuses to the
participants.
The committee's executive compensation policies are generally designed
to provide competitive levels of compensation that integrate pay with our annual
performance and reward above average corporate performance, recognize individual
initiative and achievements, and assist us in attracting and retaining qualified
executives.
Prior to the establishment of the compensation committee, we entered
into employment agreements with Messrs. Rosenstock, Zeitchick and Mangone
pursuant to which they receive compensation that is based upon four components
as set forth in each of these officers' employment agreements. In May 2001, we
amended these agreements and entered into an employment agreement with Mr. Rivas
that provides for similar compensation to be paid to Mr. Rivas. The agreements
provide them with a base salary, which is not anticipated to be the sole
component of their total annual cash compensation, brokerage commissions with
respect to customer accounts for which they are the designated account
representatives, participation in our Bonus Plan and Incentive Plan that is
designed to provide additional cash compensation based upon our achieving
specific criteria and performance targets and a grant of stock options under our
Equity Plan.
10
Our Bonus Plan is a performance-based compensation plan which provides
for the payment of bonuses to participants selected by the committee if
performance targets established by the committee are met within the specified
performance periods. For the fiscal year ended December 31, 2001, the committee
determined at the beginning of the period that participating employees would
participate in a bonus pool equal to 25% of our net income before taxes and
before the accrual of compensation payable under this plan, provided that we
achieved a 10% return on equity before taxes at the end of the fiscal year. For
the fiscal year ended December 31, 2001, the predetermined target was not met
and no awards were made under this plan.
Our Incentive Plan is similar in nature to our Bonus Plan in that
participants selected by the committee at the beginning of the year are
permitted to receive bonuses upon reaching performance targets established by
the committee within specific performance periods, which performance targets can
be based upon one or more selected business criteria. For the fiscal year ended
December 31, 2001, the committee determined that the participants would be
entitled to receive a bonus that is based upon total consolidated revenues
provided that specified commission levels are achieved. These bonuses are paid
monthly, based on the average monthly revenues to such date. Final awards
reflecting the performance for the last month of the fiscal year and the fiscal
year overall are not paid until the financial results for the year are
reconciled and the committee has approved and certified that the established
performance requirements have been achieved. During the fiscal year ended
December 31, 2001, the performance targets were achieved and bonuses were paid
to the participants based upon percentages established by the committee when it
selected the participants.
Our Equity Plan was adopted by our shareholders in August 1999 under
which our officers, directors, key employees and consultants are eligible to
receive stock options, stock appreciation rights, restricted stock awards and
other stock based awards. Prior to the establishment of the committee, and in
connection with entering into the employment agreements with Messrs. Rosenstock,
Zeitchick and Mangone, options to purchase common stock were granted to each of
these individuals. In May 2001, in connection with us entering into the
employment agreement with Mr. Rivas, our shareholders approved our issuing an
option to purchase shares of common stock to Mr. Rivas. In January 2002, options
to purchase common stock were granted to each of Messrs. Rivas, Rosenstock,
Zeitchick and Mangone as consideration for their continued employment with us.
Subsequent stock option grants to other officers and employees will continue to
be based on recommendations made by our senior management to the committee.
Compensation of the Chief Executive Officer
Victor Rivas's base salary for the fiscal year ended December 31, 2001
was determined in accordance with the employment agreement that we entered into
in May 2001. Mr. Rivas' base salary is at the rate of $500,000 per year subject
to periodic increases as determined by our board of directors or our
compensation committee. As a portion of his compensation for the fiscal year
ended December 31, 2001, Mr. Rivas received a bonus of $500,000. The committee
also awarded to Mr. Rivas a cash bonus of $367,826 under our Incentive Plan. As
discussed above, this bonus level was determined by the committee based upon us
achieving specified performance targets during the fiscal year ended December
31, 2001. These performance targets were based on objective criteria that were
determined by the committee. During 2001, New Valley paid Mr. Rivas a $750,000
fee, half of which was reimbursed by Ladenburg Thalmann & Co., for his services
in connection with the closing of the stock purchase agreement with New Valley
and Berliner, whereby Ladenburg Thalmann & Co. became our wholly owned
subsidiary.
Prior to May 2001, Mr. Berland was employed by us as our chief
executive officer. Mr. Berland's base salary for the fiscal year ended December
31, 2001 was determined in accordance with his employment agreement in effect
before that year. Mr. Berland's base salary was at the rate of $150,000 per
annum. As a portion of his compensation for the fiscal year ended December 31,
2001, the committee awarded to Mr. Berland a cash bonus of $36,614 under our
Incentive Plan.
11
The Members of the Compensation Committee
-----------------------------------------
Howard M. Lorber
Henry C. Beinstein
Robert J. Eide
Compensation Committee Interlocks and Insider Participation
Our compensation committee is comprised of Messrs. Lorber, Beinstein
and Eide. None of these individuals served as officers of our company or of our
subsidiaries.
Victor M. Rivas, our president and chief executive officer, served as a
member of New Valley's board of directors, of which Mr. Lorber is president,
chief operating officer and a director. Mr. Lorber is a member of our
compensation committee. Additionally, Bennett S. LeBow, New Valley's chairman of
the board of directors and chief executive officer, and Richard J. Lampen, New
Valley's executive vice president, general counsel and director, are members of
our board of directors. New Valley's board of directors does not have a separate
compensation committee and acts on compensation matters as an entire body.
Accordingly, Mr. Rivas, as a member of the board of directors of New Valley,
participates in decisions regarding the compensation of Messrs. Lorber, LeBow
and Lampen for their roles with New Valley.
Audit Committee Information and Report
Our audit committee was established in November 1999 and is currently
comprised of Richard J. Lampen, Henry C. Beinstein and Robert J. Eide. During
the fiscal year ended December 31, 2001, the audit committee met three times and
acted by unanimous written consent once.
Audit Fees
For the fiscal year ended December 31, 2001, the aggregate fees billed
for professional services rendered for the audit of our annual financial
statements and the reviews of our financial statements included in our quarterly
reports totaled $445,067.
Financial Information Systems Design and Implementation Fees
For the fiscal year ended December 31, 2001, there were no fees billed
for professional services by our independent auditors rendered in connection
with, directly or indirectly, operating or supervising the operation of our
information system or managing our local area network.
All Other Fees
For the fiscal year ended December 31, 2001, the aggregate fees billed
for all other professional services rendered by our independent auditors totaled
$108,670.
12
Audit Committee Report
Each member of the audit committee is an "independent director" and is
"financially literate" as defined under the recently adopted American Stock
Exchange listing standards. These listing standards define an "independent
director" generally as a person, other than an officer of the company, who does
not have a relationship with the company that would interfere with the
director's exercise of independent judgment. The listing standards define
"financially literate" as being able to read and understand fundamental
financial statements (including a company's balance sheet, income statement and
cash flow statement).
Pursuant to the audit committee's written charter, which was adopted on
June 29, 2000, our audit committee's responsibilities include, among other
things:
o reviewing our annual audited financial statements with our
management and our independent auditors and the adequacy of
our internal accounting controls;
o reviewing analyses prepared by our management and independent
auditors concerning significant financial reporting issues and
judgments made in connection with the preparation of our
financial statements;
o making recommendations concerning the engagement of the
independent auditor;
o reviewing the independence of the independent auditors;
o reviewing our auditing and accounting principles and practices
with the independent auditors and reviewing major changes to
our auditing and accounting principles and practices as
suggested by the independent auditor or our management;
o recommending the appointment of the independent auditor to the
board of directors, which firm is ultimately accountable to
the audit committee and the board of directors;
o approving professional services provided by the independent
auditors, including the range of audit and nonaudit fees; and
o reviewing all related party transactions on an ongoing basis
for potential conflict of interest situations.
Our audit committee has met and held discussions with management and
our independent auditors. Management represented to the committee that our
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the committee has reviewed and discussed the
consolidated financial statements with management and the independent auditors.
The committee discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). Our independent auditors also provided the audit committee with the
written disclosures required by Independence Standards Board Standard No.
1(Independence Discussions with Audit Committees) and the committee discussed
with the independent auditors and management the auditors' independence,
including with regard to fees for services rendered during the fiscal year and
for all other professional services rendered by our independent auditors. Based
upon the committee's discussion with management and the independent auditors and
the committee's review of the representations of management and the report of
the independent auditors to the audit committee, the committee recommended that
the board of directors include the audited consolidated financial statements in
our annual report on Form 10-K for the fiscal year ended December 31, 2001.
13
The Members of the Audit Committee
----------------------------------
Richard J. Lampen
Henry C. Beinstein
Robert J. Eide
Executive Compensation
The following table shows the compensation paid by us to our chief
executive officer and to our other four most highly compensated executive
officers (collectively, the "Named Executive Officers") for the fiscal year
ended December 31, 2001, for the period from October 1, 2000 until December 31,
2000 ("Stub Period"), for the period from August 25, 1999 until September 30,
2000 and for the period from September 1, 1998 until August 24, 1999.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Fiscal ----------------------- ---------------------- All Other
Name and Principal Position Period Salary ($) Bonus ($) Options (#) Compensation
----------------------------------------- --------------- -------------- --------------- ----------------------- -------------------
Victor M. Rivas 2001 500,000(1) 867,826(2) 1,000,000 375,000(3)
President and Chief Executive
Officer
----------------------------------------- --------------- -------------- --------------- ----------------------- -------------------
Richard J. Rosenstock 2001 237,041 138,351(4) -0- -0-
Vice Chairman and Chief Stub Period 30,000 87,535(4) -0- 18,885(5)
Operating Officer 2000 130,000 1,780,372(6) -0- 236,746(7)
1999 217,672 63,761 100,000 407,838(8)
----------------------------------------- --------------- -------------- --------------- ----------------------- -------------------
Mark Zeitchick 2001 66,500 379,681(4) -0- 15,458(5)
Executive Vice President Stub Period 30,000 150,651(4) -0- 2,981(5)
2000 130,000 2,482,017(6) -0- 278,394(7)
1999 -0- 221,622 100,000 960,837(9)
----------------------------------------- --------------- -------------- --------------- ----------------------- -------------------
Vincent A. Mangone 2001 66,500 379,681(4) -0- 10,752(5)
Executive Vice President Stub Period 30,000 150,651(4) -0- 7,436(5)
2000 130,000 2,482,017(6) -0- 278,510(7)
1999 -0- 221,622 100,000 958,041(10)
----------------------------------------- --------------- -------------- --------------- ----------------------- -------------------
Joseph Berland 2001 103,050(11) 36,614(4) -0- 6,931(5)
Former Chairman of the Board Stub Period 30,000 87,535(4) -0- -0-
and Chief Executive Officer 2000 130,000 1,780,372(6) -0- 297,734(7)
1999 233,058 56,404 100,000 407,838(8)
----------------------------------------- --------------- -------------- --------------- ----------------------- -------------------
(1) Represents $173,973 of salary paid by Ladenburg Thalmann & Co. prior to
the consummation of the stock purchase agreement with New Valley,
Berliner and Ladenburg Thalmann & Co. on May 7, 2001 and $326,027 of
salary paid thereafter by us.
(2) Represents (i) a $173,973 bonus paid by Ladenburg Thalmann & Co., (ii)
a $326,027 bonus paid by us pursuant to his employment agreement and
(iii) a $367,826 bonus paid by us under our Incentive Plan.
(3) Represents the portion of a fee paid by New Valley to Mr. Rivas which
was reimbursed by Ladenburg Thalmann & Co., for his services in
connection with the closing of the stock purchase agreement with New
Valley, Berliner and Ladenburg Thalmann & Co.
14
(4) Represents a bonus paid to the individual under our Incentive Plan.
(5) Represents commissions earned from customer accounts for which the
individual is a designated account representative.
(6) Represents bonuses paid under our Bonus Plan and Incentive Plan as
follows:
Annual Incentive ($) Special Performance ($)
-------------------- -----------------------
Rosenstock 821,128 959,244
Zeitchick 821,128 1,660,889
Mangone 821,128 1,660,889
Berland 821,128 959,244
(7) Represents commissions earned from customer accounts for which the
individual is a designated account representative, together with
override commissions earned in the following amounts: Rosenstock -
$39,841, Zeitchick - $67,925, Mangone - $67,925 and Berland - $39,881.
(8) Represents override commissions.
(9) Represents $108,534 of commissions earned from customer accounts for
which Mr. Zeitchick is a designated account representative and $852,303
of override commissions.
(10) Represents $105,738 of commissions earned from customer accounts for
which Mr. Mangone is a designated account representative and $852,303
of override commissions.
(11) Represents salary earned by Mr. Berland as our chairman of the board
and chief executive officer through May 7, 2001. In connection with the
stock purchase agreement through which Ladenburg Thalmann & Co. became
our wholly owned subsidiary, we entered into an amendment to Mr.
Berland's employment agreement which called for Mr. Berland to only be
employed by Ladenburg Capital Management.
Compensation Arrangements for Current Executive Officers
Victor Rivas is currently employed by us as our president and chief
executive officer until August 2004 under an employment agreement with Ladenburg
Thalmann & Co. The employment agreement provides for an annual base salary of
$500,000 subject to periodic increases as determined by our board of directors
or our compensation committee. The agreement also provides for a guaranteed
minimum annual bonus of $500,000. Mr. Rivas is entitled to participate in our
Bonus Plan and receive an override (as defined in our Incentive Plan) in
accordance with the terms of each plan. However, our compensation committee may
limit Mr. Rivas' participation in the plans so that:
o he may not receive in excess of 32.5% of the bonus pool available under
the Bonus Plan; and
o he may not receive an override in excess of a certain percentage of our
total consolidated revenues earned in each year of the agreement
ranging from 0.6167% for revenues up to $150,000,000 to 0.5% for
revenues over $270,000,000.
Additionally, the committee may determine that $400,000 of Mr. Rivas' guaranteed
bonus will be credited against any amounts owed to him under the Incentive Plan.
The agreement also provides that Mr. Rivas will not compete with us or our
subsidiaries for a period of one year from the date of his termination.
15
In connection with the agreement, we granted Mr. Rivas an option to
purchase 1,000,000 shares of our common stock. The option was granted under our
Equity Plan and is exercisable at a price of $3.05 per share. The options vest
in three annual installments commencing on May 7, 2002 and expire on May 7,
2011. The options provide that if a change of control occurs, all options not
yet vested will vest and become immediately exercisable.
Mr. Rosenstock is currently employed by us as our vice chairman and
chief operating officer until August 2004 under an employment agreement with us
and Ladenburg Capital Management. The agreement provides for an annual base
salary of $340,000 subject to periodic increases as determined by our board of
directors or our compensation committee. Mr. Rosenstock is entitled to
participate in the Bonus Plan and receive an override under the Incentive Plan
in accordance with the terms of each plan. However, our compensation committee
may limit Mr. Rosenstock's participation in the plans so that:
o he may not receive in excess of 22.5% of the bonus pool
available under the Bonus Plan (if Mr. Rosenstock does not
receive 22.5% of the bonus pool available under the Bonus
Plan, he may terminate the employment agreement for "reason"
which entitles him to certain severance benefits); and
o he may not receive an override in excess of a certain
percentage of our total consolidated revenues earned in each
year of the agreement ranging from 0.22% for revenues up to
$150,000,000 to 0.1784% for revenues over $270,000,000.
Mr. Rosenstock is also entitled to receive 0.25% of all retail and
institutional brokerage commissions generated from certain specified brokers
employed by our subsidiaries. The agreement also provides that Mr. Rosenstock
will not compete with us or our subsidiaries for a period of one year from the
date of his termination.
Messrs. Zeitchick and Mangone are currently employed by us as executive
vice presidents until August 2004 under employment agreements with us and
Ladenburg Capital Management. Each of these officers receive an annual base
salary of $90,000 subject to periodic increases as determined by our board of
directors or our compensation committee. Pursuant to the agreements, Messrs.
Zeitchick and Mangone are entitled to participate in our Bonus Plan and receive
an override under the Incentive Plan in accordance with the terms of each plan.
However, our compensation committee may limit each of their participation in the
plans so that:
o neither may receive in excess of 22.5% of the bonus pool
available under the Bonus Plan (if either Messrs. Zeitchick or
Mangone receive less than 22.5% of the bonus pool available
under the Bonus Plan, he may terminate the employment
agreement for "reason" which entitles him to certain severance
benefits); and
o neither may receive an override in excess of a certain
percentage of our total consolidated revenues earned in each
year of the agreement ranging from 0.5067% for revenues up to
$150,000,000 to 0.4108% for revenues over $270,000,000.
The agreements also provide that neither will not compete with us or
our subsidiaries for a period of one year from the date of their respective
terminations.
16
Joseph Berland, our former chairman of the board and chief executive
officer, was previously employed by us and Ladenburg Capital Management pursuant
to a five-year employment agreement dated August 24, 1999. On February 8, 2001,
we entered into an amendment to Mr. Berland's agreement that provided for him to
no longer be employed by us. However, he will continue to be employed by
Ladenburg Capital Management as its executive vice president of corporate
finance at an annual base salary of $150,000. The agreement provides that Mr.
Berland will not compete with us or our subsidiaries for a period of one year
from the date of his termination, but allows him to deal with any of his prior
or then existing customers or clients without any restriction.
Compensation Arrangements for Directors
Directors who are employees of ours receive no cash compensation for
serving as directors. We pay our non-employee directors an annual fee of
$12,000, payable in quarterly installments, for their service on our board of
directors. Additionally, upon election or re-election, as the case may be, we
grant our non-employee directors ten-year options under our Equity Plan to
purchase 20,000 shares of our common stock at fair market value on the date of
grant. All of our directors are reimbursed for their costs incurred in attending
meetings of the board of directors or of the committees on which they serve.
Option Grants
The following table represents the stock options granted in the fiscal
year ended December 31, 2001, to the Named Executive Officers.
STOCK OPTION GRANTS IN 2001
----------------------------------------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options Granted to
Underlying Options Employees in Exercise Price Grant Date
Name of Executive Granted (#) Fiscal Year (%) of Options ($) Expiration Date Present Value (1)($)
------------------------- -------------------- -------------------- ----------------- ---------------- ---------------------------
Victor M. Rivas 1,000,000(2) 66.0 3.05 5/7/11 $2,610,000
------------------------- -------------------- -------------------- ----------------- ---------------- ---------------------------
(1) The estimated present value at grant date of the options granted to Mr.
Rivas has been calculated using the Black-Scholes option pricing model,
based upon the following assumptions: volatility of 83.58%, a risk-free
rate of 4.884%, an expected life of 10 years, a dividend rate of 0%,
and no forfeiture. The approach used in developing the assumptions upon
which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
(2) These options become exercisable in three annual installments beginning
on May 7, 2002.
17
The following table sets forth the fiscal year-end option values of
outstanding options at December 31, 2001, and the dollar value of unexercised,
in-the-money options for the Named Executive Officers. There were no stock
options exercised by any of the Named Executive Officers in 2001.
AGGREGATED FISCAL YEAR-END OPTION VALUES
---------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Dollar Value of Unexercised
Unexercised Options at in-the-money Options at
Fiscal Year End: Fiscal Year End:
------------------------------ ------------------------------------------- ------------------------------------------
Name Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
------------------------------ ------------------- ----------------------- ------------------- ----------------------
Victor M. Rivas -0- 1,000,000 -0- -0-
------------------------------ ------------------- ----------------------- ------------------- ----------------------
Richard J. Rosenstock 67,131 32,869 -0- -0-
------------------------------ ------------------- ----------------------- ------------------- ----------------------
Mark Zeitchick 73,845 26,155 -0- -0-
------------------------------ ------------------- ----------------------- ------------------- ----------------------
Vincent A. Mangone 73,845 26,155 -0- -0-
------------------------------ ------------------- ----------------------- ------------------- ----------------------
Joseph Berland 67,131 32,869 -0- -0-
------------------------------ ------------------- ----------------------- ------------------- ----------------------
Annual Incentive Bonus Plan
On August 23, 1999, our shareholders adopted the Bonus Plan, which is a
performance-based compensation plan for our executive officers and other key
employees. The plan is administered by our compensation committee and is
intended to comply with the regulations issued under Section 162(m) of the
Internal Revenue Code. Under this plan, bonuses are paid to participants
selected by our compensation committee if performance targets established by our
compensation committee are met within the specified performance periods. For the
fiscal year ended December 31, 2001 and for the fiscal year ending December 31,
2002, our compensation committee determined that participating employees would
share in a bonus pool equal to 25% of our net income before taxes and before the
accrual of compensation payable under this plan provided that we achieve a 10%
return on equity before taxes at the end of the fiscal year. The maximum award
payable annually to any participant under this plan is limited to a percentage
of the bonus pool created and is subject to the maximum limit of $5,000,000 for
any person. The maximum award available to Victor M. Rivas under the Plan is
limited to 32.5% of the Pool and the maximum award available to any other
participant under the plan is limited to 22.5% of the Pool. No awards were made
under the Bonus Plan for fiscal 2001 to Messrs. Rivas, Rosenstock, Zeitchick and
Mangone, the participants in the Bonus Plan. The compensation committee has
selected these same persons to participate in the Bonus Plan for fiscal 2002.
Special Performance Incentive Plan
On August 23, 1999, our shareholders adopted our Incentive Plan. The
Incentive Plan is similar in nature to the Bonus Plan in seeking to provide
performance-based compensation within the meaning of Section 162(m) of the
Internal Revenue Code. Executive officers and key employees selected by our
compensation committee may receive bonuses upon reaching performance targets
established by our compensation committee within specific performance periods,
which performance targets may be based upon one or more selected business
criteria. For the fiscal year ended December 31, 2001 and for the fiscal year
ending December 31, 2002, the compensation committee has determined that
participants are entitled to receive an incentive award that is based on our
total consolidated revenues provided that specified commission levels are
achieved. Awards are payable monthly, based on the average monthly revenues to
such date. However, final awards reflecting the performance for the last month
of the fiscal period and the fiscal period overall are not paid until all
financial results for the year are reconciled and the compensation committee has
approved and certified that the established performance requirements have been
achieved. The maximum award payable for any fiscal period to any participant is
the lesser of $5,000,000 or a set percentage for the individual participants as
disclosed elsewhere in this report. Messrs. Rivas, Rosenstock, Zeitchick,
Mangone and Berland received bonuses under the Incentive Plan for fiscal 2001 as
disclosed in the Summary Compensation table above. The compensation committee
has determined that Messrs. Rivas, Rosenstock, Zeitchick and Mangone will
currently be entitled to participate in the Incentive Plan for fiscal 2002.
18
1999 Performance Equity Plan
On August 23, 1999, our shareholders adopted the Equity Plan covering
3,000,000 shares of our common stock, under which our officers, directors, key
employees and consultants are eligible to receive incentive or non-qualified
stock options, stock appreciation rights, restricted stock awards, deferred
stock, stock reload options and other stock based awards. On May 7, 2001, our
shareholders approved an amendment increasing the number of shares available for
issuance under the plan to 5,500,000 shares and our shareholders are being asked
at this year's annual meeting to approve a further increase to 10,000,000 shares
as described below under Proposal III. The Performance Equity Plan will
terminate when no further awards may be granted and awards granted are no longer
outstanding, provided that incentive options may only be granted until May 26,
2009. The plan is intended to comply with the regulations issued under Section
162(m) of the Internal Revenue Code and is administered by our compensation
committee. To the extent permitted under the provisions of the plan, the
compensation committee has authority to determine the selection of participants,
allotment of shares, price, and other conditions of awards.
Equity Compensation Plan Information
The following table sets forth certain information at December 31, 2001
and at August 31, 2002 with respect to our equity compensation plans that
provide for the issuance of options, warrants or rights to purchase our
securities.
--------------------------------------- --------------------------- -------------------------- -------------------------------------
Number of Securities Remaining
Number of Securities to Weighted-Average Available for Future Issuance under
be Issued upon Exercise Exercise Price of Equity Compensation Plans (excluding
of Outstanding Options, Outstanding Options, securities reflected in the first
Plan Category Warrants and Rights Warrants and Rights column)
--------------------------------------- --------------------------- -------------------------- -------------------------------------
Equity Compensation Plans Approved by
Security Holders (at 12/31/01) 2,912,104 $3.16 2,587,896
--------------------------------------- --------------------------- -------------------------- -------------------------------------
Equity Compensation Plans Approved by
Security Holders (at 8/31/02) 4,857,164 $2.10 642,836
--------------------------------------- --------------------------- -------------------------- -------------------------------------
Equity Compensation Plans Not
Approved by Security Holders (at 200,000 $1.00 -0-
12/31/01 and 8/31/02)
--------------------------------------- --------------------------- -------------------------- -------------------------------------
On August 31, 2001, New Valley and Frost-Nevada each loaned us
$1,000,000. As consideration for the loans, we issued to each of them a
five-year, immediately exercisable warrant to purchase 100,000 shares of our
common stock at an exercise price of $1.00 per share. These two warrants are our
only equity compensation "plans" not approved by our shareholders.
19
Stock Price Performance Graph
The graph below compares the cumulative total return of our common
stock from October 29, 1997 (the day on which our common stock began trading on
the NASD OTC Bulletin Board) through December 31, 2001 with the cumulative total
return of companies comprising the Amex Composite Index (formerly the Amex
Market Value Index), a former peer group selected by us based on comparative
market capitalization and a current peer group selected by us based on
comparative revenue. The graph plots the growth in value of an initial
investment of $100 in each of our common stock, the Amex Composite Index and the
peer groups selected by us over the indicated time periods, and assuming
reinvestment of all dividends, if any, paid on our the securities. We have not
paid any cash dividends and, therefore, the cumulative total return calculation
for us is based solely upon stock price appreciation and not upon reinvestment
of cash dividends. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
The old market capitalization peer group selected by us was comprised
of companies engaged in the same business that we are, each with market
capitalization then comparable to ours, and consisted of the following
companies: Shochet Holding Corp., Olympic Cascade Financial Corp., Paulson
Capital Corp., Morgan Keegan, Inc., First Albany Companies Inc., Stifel
Financial Corp., Hoenig Group Inc., Globalnet Financial.com, Inc., Tucker
Anthony Sutro, Kirlin Holding Corp. and JB Oxford Holdings, Inc. The new peer
group selected by us is comprised of companies engaged in the same business that
we are, each with revenues comparable to ours, and consists of the following
companies: First Albany Companies, Inc., First Montauk Financial Corp., Hoenig
Group, Inc., The John Nuveen Co., Kirlin Holding Corp., M.H. Meyerson & Co.,
Inc., Olympic Cascade Financial Corp., Paulson Capital Corp., Siebert Financial
Corp. and Stifel Financial Corp. We changed our peer group as a result of
changes in the businesses of certain of the constituent companies. Additionally,
we believe that the new peer group that we selected using similar revenues, as
opposed to market capitalization, leads to a more accurate comparison of our
company's operations.
Cumulative Total Return
----------------------------------------------------------
10/29/97 9/98 9/99 9/00 12/01
LADENBURG THALMANN FINANCIAL SERVICES INC. 100.00 44.57 59.78 45.65 15.13
AMEX COMPOSITE 100.00 91.81 116.53 141.08 125.31
NEW PEER GROUP 100.00 108.32 177.00 155.15 157.38
OLD PEER GROUP 100.00 89.73 174.25 151.77 98.65
20
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our officers, directors and persons who beneficially own more than ten
percent of our common stock to file reports of ownership and changes in
ownership with the SEC. These reporting persons are also required to furnish us
with copies of all Section 16(a) forms they file. To our knowledge, based solely
on our review of the copies of these forms furnished to us and representations
that no other reports were required, all Section 16(a) reporting requirements
were complied with during the fiscal year ending December 31, 2001.
Certain Relationships and Related Transactions
On May 7, 2001, we consummated the stock purchase agreement, as
amended, with New Valley Corporation, Berliner Effektengesellschaft AG and
Ladenburg Thalmann & Co. in which we acquired all of the outstanding common
stock of Ladenburg Thalmann & Co. As partial consideration for the common stock
of Ladenburg Thalmann & Co., we issued:
o 18,598,098 shares of common stock and $8.01 million aggregate
principal amount of our senior convertible promissory notes,
currently convertible into 3,844,216 shares of common stock,
to New Valley; and
o 4,620,501 shares of common stock and $1.99 million aggregate
principal amount of our senior convertible promissory notes,
currently convertible into 955,055 shares of common stock, to
Berliner.
The stock purchase agreement provides that we may be required to issue an
additional number of shares of common stock to New Valley and Berliner on or
about May 7, 2003 pending a final resolution of all pre-closing litigation
adjustments. Therefore, the final number of shares to be issued cannot be
determined until May 7, 2003. We also paid New Valley and Berliner $8.01 million
and $1.99 million in cash, respectively. The cash portion of the consideration
paid to New Valley and Berliner was obtained pursuant to a loan agreement with
Frost-Nevada, Limited Partnership under which Frost-Nevada provided us with $10
million in cash in exchange for $10 million aggregate principal amount of our
senior convertible promissory notes, currently convertible into 6,497,475 shares
of common stock.
As a result of these transactions, the following individuals became
affiliated with us:
o Howard M. Lorber, president and chief operating officer of New
Valley, is now the chairman of our board of directors;
o Bennett S. LeBow, chairman and chief executive officer of New
Valley, is now a member of our board of directors;
o Victor M. Rivas, chairman and chief executive officer of
Ladenburg Thalmann & Co. and a member of the board of
directors of New Valley, is now our president and chief
executive officer;
o J. Bryant Kirkland III, vice president, treasurer and chief
financial officer of New Valley, is now our chief financial
officer;
o Richard J. Lampen, executive vice president, general counsel
and a member of the board of directors of New Valley, is now a
member of our board of directors;
o Henry C. Beinstein, a member of the board of directors of New
Valley, is now a member of our board of directors; and
o Robert J. Eide, a member of the board of directors of Vector
Group, the parent of New Valley, is now a member of our board
of directors.
21
Upon becoming members of our board of directors in May 2001, each of Messrs.
Lorber, LeBow, Beinstein and Eide were granted a ten-year option to purchase
20,000 shares of common stock at $3.05 per share. The options vest in full on
May 7, 2002. Upon becoming a member of our board of directors in January 2002,
Mr. Lampen was granted a ten-year option to purchase 20,000 shares of common
stock at $0.88 per share. This option vests in full on January 10, 2003. Each of
these grants were made under our Equity Plan.
Pursuant to the employment agreement with Mr. Rivas in which he became
our president and chief executive officer, Mr. Rivas is entitled to receive an
annual base salary of $500,000, subject to periodic increases as determined by
LTS' board of directors, as well as a guaranteed minimum annual bonus of
$500,000. Mr. Rivas will also be entitled to participate in our Bonus Plan and
Incentive Plan in accordance with the terms of the plan and Mr. Rivas'
employment agreement. Additionally, we granted Mr. Rivas an option to purchase
1,000,000 shares of common stock at $3.05 per share under our Equity Plan. The
option vests in three equal annual installments commencing on May 7, 2002. The
option also provides that if a change of control occurs, the portion of the
option not yet vested will vest and become immediately exercisable.
The notes issued to New Valley and Berliner bear interest at a rate of
7.5% per year, payable quarterly, and are secured by a pledge of the shares of
common stock of Ladenburg Thalmann & Co. The notes are convertible, in whole or
in part, at any time, into that number of shares of common stock determined by
dividing the principal and interest to be converted by the "conversion price."
The "conversion price" is $2.0836498 and is subject to anti-dilution adjustment
for stock splits, dividends and other similar events. The conversion price is
also subject to adjustment on or about May 7, 2003 in the same manner as the
number of shares we issued to New Valley and Berliner described above.
Additionally, if, during any period of 20 consecutive trading days, the closing
sale price of our common stock is at least $8.00, the principal and all accrued
interest on the notes will be automatically converted into shares of common
stock at the conversion price then in effect. The notes also provide that if a
change of control occurs, as defined in the notes, we must offer to purchase all
of the outstanding notes at a purchase price equal to the unpaid principal
amount of the notes and the accrued interest.
The note issued to Frost-Nevada has the same terms as the notes issued
to New Valley and Berliner, except that the conversion price of the note is
$1.5390594 and pays interest at a rate of 8.5% per year. The note issued to
Frost-Nevada is also secured by a pledge of the shares of common stock of
Ladenburg Thalmann & Co.
On June 28, 2002, New Valley, Berliner and Frost-Nevada agreed to
forbear until May 15, 2003 payment of the interest due to them under the notes
on the interest payment dates commencing June 30, 2002 through March 31, 2003.
Interest on the deferred amounts accrues at 8.0% per year on the notes held by
New Valley and Berliner and 9.0% per year on the note held by Frost-Nevada. We
agreed, however, to apply any net proceeds from any subsequent public offerings
to any such deferred amounts owed to the holders of the notes to the extent
possible.
Concurrently with the closing of the stock purchase agreement, New
Valley purchased 3,945,060 of our common stock at $1.00 per share from Joseph
Berland, our former chairman and chief executive officer. Additionally, on the
same date, Frost-Nevada purchased a total of 550,000 shares of our common stock
at $1.00 per share from Richard Rosenstock, our vice chairman and chief
operating officer, Mark Zeitchick and Vincent Mangone, our executive vice
presidents, and David Thalheim, our former administrator. In connection with
these sales, our board waived lock-up agreements between us and the individuals
in which the individuals had agreed that they would not, without our board's
prior written consent, sell, transfer or otherwise dispose of any of their
shares of our common stock until August 2001.
22
In connection with these transactions, we also entered into amendments
to the existing employment agreements with each of Messrs. Berland, Rosenstock,
Zeitchick and Mangone. Pursuant to the amendments:
o Mr. Berland resigned from his positions with us and became the
executive vice president of corporate finance of Ladenburg
Capital Management through May 2003 at an annual base salary
of $150,000;
o Mr. Rosenstock became our vice chairman and chief operating
officer and Ladenburg Capital Management's chief executive
officer through August 2004 at an annual base salary of
$340,000;
o Mr. Zeitchick remained as an executive vice president of ours
and became Ladenburg Capital Management's co-chairman of the
board through August 2004 at an annual base salary of $90,000;
and
o Mr. Mangone remained as an executive vice president of ours
and Ladenburg Capital Management through August 2004 at annual
base salary of $90,000.
Each of Messrs. Rosenstock, Zeitchick and Mangone continue to be entitled to
participate in our Bonus Plan and Incentive Plan in accordance with the terms of
the respective plans and their respective employment agreements.
Prior to the consummation of the foregoing transactions, New Valley
maintained office space at Ladenburg Thalmann & Co.'s principal offices. In
connection with the consummation of the transactions, New Valley entered into a
license agreement with Ladenburg Thalmann & Co. in which New Valley will
continue to occupy this space at no cost to New Valley. The license agreement is
for one year and is automatically renewed for successive one year periods unless
terminated by New Valley.
Since June 2001, J. Bryant Kirkland III has served as our chief
financial officer. Mr. Kirkland serves on a part-time basis devoting such time
as is necessary to perform his duties as our chief financial officer. The
majority of his business time is devoted to his positions with New Valley, where
he serves as chief financial officer, Vector Group, New Valley's parent, and
their subsidiaries. Both Ladenburg Thalmann & Co. and Ladenburg Capital
Management have a full-time chief financial officer and accounting staff devoted
to each respective broker-dealer's operations.
On August 31, 2001, New Valley and Frost-Nevada each loaned us
$1,000,000. The loans were evidenced by promissory notes that matured on the
earlier of February 28, 2002 and the next business day after we received our
federal income tax refund for the fiscal year ending September 30, 2001. The
promissory notes bore interest at the Prime Rate as published in the Wall Street
Journal plus 1%. As consideration for the loans, we issued to each of New Valley
and Frost-Nevada a five-year, immediately exercisable warrant to purchase
100,000 shares of our common stock at an exercise price of $1.00 per share.
These loans were repaid in January 2002.
23
On March 27, 2002, we borrowed $2,500,000 from New Valley. The loan,
which bears interest at 1% above the prime rate, is due on the earlier of
December 31, 2003 or the completion of one or more equity financings where we
receive at least $5,000,000 in total proceeds. The promissory note states that
we will not, so long as any amount under the note remains outstanding and
unpaid, incur or assume any indebtedness that is not subordinated in all
respects to the note without the prior written consent of the holder. On July
16, 2002, we borrowed an additional $2,500,000 from New Valley on the same terms
as the March 2002 loan. We may from time to time borrow additional funds on a
short-term basis from New Valley or from other parties, including our
shareholders and clearing brokers, in order to supplement the liquidity of our
broker-dealer operations.
Howard Lorber is chairman of the board of directors of Hallman & Lorber
Assoc., Inc., a private consulting and actuarial firm. During 2001, Hallman &
Lorber and its affiliates received ordinary and customary insurance commissions
aggregating approximately $119,000 on various insurance policies issued for us
and our subsidiaries.
Several members of the immediate families of our executive officers and
directors are employed as registered representatives of Ladenburg Thalmann & Co.
and Ladenburg Capital Management. As such, they receive a percentage of
commissions generated from customer accounts for which they are designated
account representatives and are eligible to receive bonuses in the discretion of
management. The arrangements we have with these individuals are similar to the
arrangements we have with our other registered representatives. Oscar Sonkin and
Richard Sonkin, the father-in-law and brother-in-law, respectively, of Richard
J. Rosenstock, received $104,131 and $149,704, respectively, in compensation
during the fiscal year ended December 31, 2001. Steven Zeitchick, the brother of
Mark Zeitchick, received $136,140 in compensation during the fiscal year ended
December 31, 2001. It is anticipated that each of these individuals will receive
in excess of $60,000 in compensation for the fiscal year ending December 31,
2002.
24
PROPOSAL II
TO APPROVE AN AMENDMENT TO OUR ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK
FROM 100,000,000 SHARES TO 200,000,000 SHARES
We are currently authorized by our articles of incorporation to issue
100,000,000 shares of common stock and 2,000,000 shares of preferred stock. As
of the record date, 42,025,211 shares of common stock were outstanding and no
shares of preferred stock were outstanding. In addition, we are obligated to
reserve 4,857,164 shares of common stock for issuance under our Equity Plan,
200,000 shares of common stock for issuance upon exercise of warrants held by
New Valley and Frost-Nevada and 11,296,746 shares of common stock for issuance
upon conversion of the senior convertible promissory notes held by New Valley,
Berliner and Frost-Nevada. We will also need to reserve 5,000,000 shares of
common stock for issuance under the Ladenburg Thalmann Financial Services Inc.
Qualified Employee Stock Purchase Plan described below under Proposal IV.
Based on the number of shares of common stock outstanding as of the
record date, the need to reserve the shares of common stock as set forth above
and the current limit set by our articles of incorporation on the number of
shares of common stock we are authorized to issue, our board of directors has
determined that there is an inadequate number of authorized shares of common
stock for our management to be able to meet our current obligations and to plan
for our future growth and development. Accordingly, our board of directors
proposes to amend the articles of incorporation to increase the authorized
number of shares of our common stock by an additional 100,000,000 shares of
common stock to 200,000,000 shares of common stock.
Our board of directors believes approval of the amendment to the
articles of incorporation to increase the authorized capital is in our and our
shareholders' best interests. The authorization of additional shares of common
stock will enable us to meet our obligations under our various employee benefit
plans, and issue securities convertible, exercisable or exchangeable for common
stock in the future. Further, the authorization of additional shares will enable
our board of directors to have the flexibility to authorize the issuance of
shares of common stock in the future for financing our business, for acquiring
other businesses, for forming strategic partnerships and alliances and for stock
dividends and stock splits. Although we review various transactions that could
result in the issuance of our common stock from time to time, we currently have
no agreements or plans to issue any shares of common stock in connection with
any acquisition of other business, including by way of an asset purchase or
merger, combination or consolidation or for forming any partnerships or
alliances, except as otherwise described above.
Approval of the proposal will permit our board of directors to issue
additional shares of common stock without further approval of our shareholders,
unless otherwise required by applicable law or stock market or exchange
requirements. Unless we are required by law or stock market or exchange
requirements, our board of directors does not intend to seek the approval of our
shareholders prior to any issuance of the authorized capital stock.
Other than limited provisions in our bylaws, we do not have in place
provisions which may have an anti-takeover effect. This proposal to increase our
authorized capital has not resulted from our knowledge of any specific effort to
accumulate our securities or to obtain control of our company by means of a
merger, tender offer, proxy solicitation in opposition to management or
otherwise. We are not submitting this proposal to enable us to frustrate any
efforts by another party to acquire a controlling interest or to seek board
representation.
25
In certain instances, the issuance of additional shares of common stock
will have a dilutive effect on earnings per share and on the equity and voting
power of existing security holders of our capital stock. It may also adversely
affect the market price of the common stock. However, if additional shares are
issued in transactions whereby favorable business opportunities are provided and
allow us to pursue our business plans, the market price may increase.
The holders of our common stock are entitled to one vote for each share
held of record on all matters to be voted on by our shareholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares of our common stock voted in an
election of directors can elect all of our directors. The holders of our common
stock are entitled to receive dividends when, as, and if declared by our board
of directors out of legally available funds. We have never paid cash dividends
on our shares of common stock. In the event of our liquidation, dissolution or
winding up, the holders of our shares of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the common stock. Holders of our common stock have
no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the common stock.
The affirmative vote of a majority of the votes cast at the meeting is
required to approve the amendment to our articles of incorporation.
If the proposal to amend our articles of incorporation is approved, the
third article of our articles of incorporation will be amended promptly after
the meeting to increase the number of shares of our common stock we are
authorized to issue to 200,000,000 shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF OUR COMMON STOCK FROM 100,000,000 SHARES TO 200,000,000
SHARES.
26
PROPOSAL III
TO APPROVE AN AMENDMENT TO OUR 1999 PERFORMANCE
EQUITY PLAN TO INCREASE THE NUMBER SHARES ISSUABLE
UPON GRANTS OF AWARDS UNDER THE PLAN AND TO INCREASE
THE LIMIT ON GRANTS TO INDIVIDUALS IN ANY ONE YEAR
On August 23, 1999, our shareholders adopted the Equity Plan covering
3,000,000 shares of our common stock, under which our officers, directors, key
employees and consultants are eligible to receive incentive or non-qualified
stock options, stock appreciation rights, restricted stock awards, deferred
stock, stock reload options and other stock based awards. On May 7, 2001, our
shareholders amended the plan to increase the number of shares authorized for
issuance under the plan to 5,500,000 shares. As of the record date, there were
outstanding grants of options under the Equity Plan to purchase a total of
4,857,164 shares of common stock. Accordingly, we have only 642,836 shares of
common stock available for future grant under the plan. Our board proposes to
amend the plan to increase the number of shares issuable under the plan by an
additional 4,500,000 shares as well as to increase the limit on grants under the
plan to individuals in any one calendar year from 300,000 shares to 1,000,000
shares. The board believes that the increase in the size of the plan is
necessary to enable us to continue to attract and retain employees and
consultants of the highest caliber and provide increased incentive for them to
promote our well-being through the grant of options.
If the plan, as summarized below, is amended as proposed, then, if all
the shares reserved thereunder were issued upon the exercise of options and
other awards, such shares would constitute 23.8% of the total shares that would
then be outstanding (assuming no exercise or conversion of outstanding options,
warrants or other convertible securities and no other stock issuances).
Summary of the Equity Plan
The following summary of the Equity Plan does not purport to be
complete, and is subject to and qualified in its entirety by reference to the
Equity Plan.
Administration
Our Equity Plan is administered by our compensation committee
designated by our board of directors to administer the plan. Each member of our
compensation committee will be a "non-employee director" as defined in Rule
16b-3 promulgated under the Exchange Act and an "outside director" as defined in
regulations issued under Section 162(m) of the Internal Revenue Code.
Eligibility for Awards
The purpose of our Equity Plan is to enable us to offer to our key
employees, officers, directors and consultants who have made, or who have the
potential for making important contributions to us and our subsidiaries an
opportunity to acquire an ownership interest our company.
27
Shares Available under Plan
A total of 5,500,000 shares of our common stock have currently been
reserved and are available for grant under our Equity Plan. Shares of our common
stock that are awarded under the Equity Plan may be either treasury shares or
authorized but unissued shares. Shares of our common stock reserved for issuance
pursuant to stock options that cease to be subject to such options, and any
shares of stock subject to other awards that are forfeited or otherwise
terminated will be available for future award grants under the plan.
Notwithstanding any other provision of the Equity Plan, the compensation
committee will not grant to any one holder in any one calendar year awards for
more than 300,000 shares of common stock in the aggregate; provided, however,
that on May 7, 2001, our shareholders approved an amendment to the plan to
authorize our compensation committee to make a one-time grant to Victor Rivas,
our president and chief executive officer, of an option to purchase 1,000,000
shares of our common stock. We are now requesting that shareholders approve an
amendment to the plan to allow our compensation committee to grant awards to
holders in any one calendar year up to 1,000,000 shares of common stock in the
aggregate. We believe that this increased limit is appropriate given the
proposed increase in the number of shares available for issuance under the plan.
Under the Equity Plan, on a change in the shares of our common stock as
a result of a stock split, reverse stock split, stock dividend payable on our
shares of common stock, combination or exchange of shares, or other
extraordinary event occurring after the grant of an award, our compensation
committee may determine whether such change equitably requires adjusting the
terms of the award or the aggregate number of shares reserved for issuance under
the Equity Plan.
Types of Awards
Stock options. Under the Equity Plan, our compensation committee may
award to participants stock options that:
o are intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Code;
o options that are not intended to be so qualified.
Incentive stock options may only be awarded to our employees and those of our
subsidiaries. To the extent that any stock option intended to qualify as an
incentive stock option does not so qualify, it will constitute a non-incentive
stock option.
Our compensation committee will fix the term of each stock option.
However, an incentive stock option may be granted only within the ten-year
period commencing from the effective date of the Equity Plan and may only be
exercised within ten years from the date of grant, or five years from the date
of grant in the case of a participant who at the time the stock option is
granted owns more than 10% of the total combined voting power of all of our
classes of voting securities.
The exercise price of stock options granted under the Equity Plan will
be determined by our compensation committee at the time of the grant, but in no
event will the price be less than the fair market value of the underlying common
stock on the last trading day prior to the date the stock option is granted.
However, the exercise price of an incentive stock option granted to a 10%
shareholder will not be less than 110% of the fair market value of the shares on
the last trading day prior to the date the stock option is granted. The number
of shares covered by incentive stock options which may be exercised by
participants in any year cannot have an aggregate fair market value in excess of
$100,000, measured at the date of grant.
The compensation committee will determine the terms and conditions of
stock options and when they will become exercisable. Any requirement that
options be exercised in installments may be waived in whole or in part by the
compensation committee.
28
Payment of the exercise price may be made in cash, in shares of our
common stock owned by the participant, in a combination of the two, or
otherwise, as reflected in the applicable award agreement. Additionally, the
compensation committee may permit a participant to elect to pay the exercise
price by irrevocably authorizing a third party to sell shares of common stock,
or a sufficient portion of the shares, acquired upon exercise of the stock
option and pay to us a sufficient portion of the sale proceeds to pay the entire
exercise price and any tax withholding resulting from the exercise. A
participant has no rights as a shareholder with respect to the shares of our
common stock underlying stock option granted under the Equity Plan until shares
are actually issued upon exercise of the stock option.
Stock options may not be assigned or transferred by a participant
except by will or by the laws of descent and distribution, and during the
lifetime of a participant, the stock options may only be exercisable by the
person to whom it was granted, or, to the extent of legal incapacity or
incompetency, the participant's guardian or legal representative.
Notwithstanding the foregoing, with the approval of the compensation committee,
a participant may transfer a stock option:
o by gift, for no consideration, or pursuant to a domestic
relations order, in either case, to or for the benefit of the
participant's immediate family; or
o to an entity in which the participant or members of the
participant's immediate family own more than fifty percent of
the voting interest, in exchange for an interest in that
entity,
provided that the transfer is being made for estate, tax or personal planning
purposes and will not have any adverse tax consequences to us. Additionally, the
transfer will be subject to any additional limits that the compensation
committee may establish and the execution of any documents that the compensation
committee may require. If a transfer of this nature is made, the transferee
shall remain subject to all the terms and conditions applicable to the stock
option prior to the transfer.
If the employment of a participant who is an employee of ours or a
subsidiary of ours is terminated by reason of the participant's death or
disability, any stock option held by the participant will become fully vested
and may be exercised by the disabled participant, or by his legal representative
or legatee, as the case may be, for a period of one year or a greater or lesser
period as may be specified by the compensation committee in the grant, from the
date of the death or disability, or until the expiration of the exercise period
for the stock option, which ever is shorter.
Unless otherwise provided in the grant of a stock option, if a
participant's employment with us or any of our subsidiaries is terminated for
any reason other than due to death or disability, the participant's stock option
will automatically terminate. However, if the participant's employment is
terminated without cause or due to retirement on or after the age of 65, then
the portion of his or her stock option which has vested as the date of
termination may be exercised:
o for three months after termination or for the balance of the
stock option's exercise period, which ever is shorter; or
o for a greater or lesser period as may be specified by the
compensation committee in the grant.
29
Stock appreciation rights. Under the Equity Plan, our compensation
committee may grant stock appreciation rights to participants who have received
stock options. A stock appreciation right entitles the holder to surrender to us
all or a portion of a stock option in exchange for a number of shares of our
common stock determined by multiplying the excess of the fair market value per
share of our common stock on the exercise date over the exercise price per share
by the number of shares subject to the stock option and then dividing it by the
fair market value of the common stock on the date the stock appreciation right
is exercised. In the case of an incentive stock option, a stock appreciation
right may only be granted simultaneously with the grant of the underlying
incentive stock option. In the case of non-incentive stock option, a stock
appreciation right may be granted at or after the time of the grant of the
underlying non-incentive stock option. A stock appreciation right will terminate
upon termination or exercise of the related stock option. Upon exercise of a
stock appreciation right, the underlying stock option will be deemed to have
been exercised, and the related shares of our common stock will no longer be
available for issuance under the Equity Plan.
Restricted stock awards. Our compensation committee may award shares of
our common stock which are subject to restrictions as the compensation committee
may determine in addition to, or in lieu of, other awards granted to
participants under the Equity Plan. The compensation committee will determine at
the time of the award, the period during which the award may be subject to
forfeiture and the vesting schedule of the shares under the award. A participant
will have the right to vote the restricted stock granted to him and to receive
dividend payments distributed on the shares in the form of cash or cash
equivalents. However, during the time that restricted stock is subject to
forfeiture and until the restricted stock is fully vested, we will retain
custody of the stock certificate representing the restricted shares and will
retain custody of all distributions, other than payment of dividends in cash or
in cash equivalents, made or declared with respect to the restricted stock. If
the participant breaches the terms or conditions set forth in the Equity Plan or
in the award agreement pertaining to the restricted stock award, or if the
restricted stock otherwise does not vest, then the participant will forfeit the
award of restricted stock and any distributions which were retained by us
relating to the restricted stock.
Deferred stock. Our compensation committee may award shares of our
common stock to be received at the end of a specified deferral period and upon
satisfaction of any other applicable restrictions, terms and conditions provided
for in the grant of the award. Any deferred stock that does not vest will be
forfeited. Deferred stock awards granted under the plan may not be sold,
exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of
other than to us during the applicable deferral period. A participant will not
have any rights as a shareholder by virtue of the award of deferred stock until
the expiration of the applicable deferral period and the issuance by of a stock
certificate evidencing the award of the deferred stock. A participant may
request that the compensation committee defer issuance of an award of deferred
shares for an additional specified period, subject to certain conditions.
Stock reload options. Our compensation committee may grant to a
participant, concurrently with the grant of an incentive stock option, and at or
after the time of grant in the case of a non-incentive stock option, an option
covering a number of shares up to the amount of shares of our common stock held
by the participant for at least six months and used to pay all or part of the
exercise price of an option, and any shares withheld by us as payment for
withholding taxes. Any stock reload option will have an exercise price equal to
the fair market value of our common stock as of the date of grant of the stock
reload option. Unless otherwise provided in the stock reload option grant, a
stock reload option may be exercised commencing one year after it is granted and
will expire on the date of expiration of the stock option to which the reload
option is related.
Other stock-based awards. Our compensation committee may award other
stock-based awards, subject to limitations under applicable law, in addition to,
or in lieu of, other awards granted to participants under the Equity Plan. These
other stock-based awards are payable in, valued in, or otherwise based on, or
related to, our shares of common stock. These other stock-based awards may be in
the form of the right to purchase shares of our common stock which are not
subject to any restrictions or conditions, convertible or exchangeable
debentures or other rights convertible into shares of our common stock, as well
as awards valued by reference to the value of securities of, or the performance
of, one of our subsidiaries. Subject to the terms of the Equity Plan, the
compensation committee has complete discretion to determine the terms and
conditions of other stock-based awards. Other stock-based awards may be awarded
either alone, in addition to, or in tandem with any other awards under the
Equity Plan or any other plan in effect.
30
Accelerated Vesting and Exercisablility of Awards
Unless otherwise provided in the grant of an award, if any "person," as
is defined in Sections 13(d) and 14(d) of the Exchange Act, is or becomes the
"beneficial owner," as referred in Rule 13d-3 under the Exchange Act, directly
or indirectly, of our securities representing 25% or more of the combined voting
power of our then outstanding voting securities in one or more transactions, and
our board of directors does not authorize or approve the acquisition, then the
vesting periods with respect to options and awards granted and outstanding under
the Equity Plan will be accelerated and will immediately vest, and each
participant of an option and award will have the immediate right to purchase and
receive all shares of our common stock subject to the option and award in
accordance with the terms set forth in the Equity Plan and in the corresponding
award agreements.
Unless otherwise provided in the grant of an award, the compensation
committee may, in the event of an acquisition of substantially all of our assets
or at least 50% of the combined voting power of our then outstanding securities
in one or more transactions, including by way of merger or reorganization, which
has been approved by our board of directors, accelerate the vesting of any and
all stock options and other awards granted and outstanding under the plan.
Repurchases
Unless otherwise provided in the grant of an award, the compensation
committee may, in the event of an acquisition of substantially all of our assets
or at least 50% of the combined voting power of our then outstanding securities
in one or more transactions, including by way of merger or reorganization, which
has been approved by our board of directors, require a holder of any award
granted under the plan to relinquish the award to us upon payment by us to the
holder of cash in an amount equal to the fair market value of the award.
Forfeitures
Unless otherwise provided in the grant of an award, if a participant's
employment with us or a subsidiary of ours is terminated for any reason and
within 18 months of the termination, the person either:
o accepts employment with any competitor of, or otherwise
engages in competition with, our business;
o solicits any of our or our subsidiaries' customers or
employees to do business with or render services to the person
or any business with which the person becomes affiliated or to
which the person renders services; or
o discloses to anyone outside our company or uses any of our or
our subsidiaries' confidential information or material in
violation of our policies or any agreement between the person
and us or any of our subsidiaries,
the compensation committee may require the participant to return to us the
economic value of any award which was obtained by the participant during the
period beginning six months prior to the date the participant's employment with
us was terminated. Unless otherwise provided in the grant of an award, if a
participant is terminated for cause, the compensation committee may require that
the participant return to us the economic value of any award which was obtained
by the participant during the six month period. Shares of our common stock
available for award under the Equity Plan have not been registered under the
Securities Act, and we are not required to so register the stock.
31
Withholding taxes
We may withhold, or require participants to pay us, an amount
sufficient to satisfy any federal, state or local withholding tax requirements
associated with awards under the Equity Plan. If permitted by our compensation
committee, tax withholding may be settled with shares of our common stock,
including shares that are part of the award that gives rise to the withholding
requirement.
Term and amendments
The Equity Plan will terminate when there are no awards outstanding and
when no further awards may be granted, provided that incentive options may only
be granted until May 26, 2009. Our board of directors has the right to amend,
suspend or discontinue any provision of the Equity Plan, provided that the
action may not adversely affect awards previously granted between a participant
and us without the participant's consent.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of
participation in the Equity Plan is only a summary of the general rules
applicable to the grant and exercise of stock options and other awards and does
not give specific details or cover, among other things, state, local and foreign
tax treatment of participation in the Equity Plan. The information contained in
this section is based on present law and regulations, which are subject to being
changed prospectively or retroactively.
Incentive Stock Options
Participants will recognize no taxable income upon the grant or
exercise of an incentive stock option. The participant will realize no taxable
income when the incentive stock option is exercised if the participant has been
an employee of our company or our subsidiaries at all times from the date of the
grant until three months before the date of exercise, one year if the
participant is disabled. The excess, if any, of the fair market value of the
shares on the date of exercise of an incentive stock option over the exercise
price will be treated as an item of adjustment for a participant's taxable year
in which the exercise occurs and may result in an alternative minimum tax
liability for the participant. We will not qualify for any deduction in
connection with the grant or exercise of incentive stock options. Upon a
disposition of the shares after the later of two years from the date of grant or
one year after the transfer of the shares to a participant, the participant will
recognize the difference, if any, between the amount realized and the exercise
price as long-term capital gain or long-term capital loss, as the case may be,
if the shares are capital assets.
If common stock acquired upon the exercise of an incentive stock option
is disposed of prior to the expiration of the holding periods described above:
o the participant will recognize ordinary compensation income in
the taxable year of disposition in an amount equal to the
excess, if any, of the lesser of the fair market value of the
shares on the date of exercise or the amount realized on the
disposition of the shares, over the exercise price paid for
the shares; and
o we will qualify for a deduction equal to any amount
recognized, subject to the limitation that the compensation be
reasonable.
32
In the case of a disposition of shares earlier than two years from the date of
the grant or in the same taxable year as the exercise, where the amount realized
on the disposition is less than the fair market value of the shares on the date
of exercise, there will be no adjustment since the amount treated as an item of
adjustment, for alternative minimum tax purposes, is limited to the excess of
the amount realized on the disposition over the exercise price, which is the
same amount included in regular taxable income.
Non-Incentive stock options
With respect to non-incentive stock options:
o upon grant of the stock option, the participant will recognize
no income provided that the exercise price was not less than
the fair market value of our common stock on the date of
grant;
o upon exercise of the stock option, if the shares of common
stock are not subject to a substantial risk of forfeiture, the
participant will recognize ordinary compensation income in an
amount equal to the excess, if any, of the fair market value
of the shares on the date of exercise over the exercise price,
and we will qualify for a deduction in the same amount,
subject to the requirement that the compensation be
reasonable; and
o we will be required to comply with applicable federal income
tax withholding requirements with respect to the amount of
ordinary compensation income recognized by the participant.
On a disposition of the shares, the participant will recognize gain or loss
equal to the difference between the amount realized and the sum of the exercise
price and the ordinary compensation income recognized. The gain or loss will be
treated as capital gain or loss if the shares are capital assets and as
short-term or long-term capital gain or loss, depending upon the length of time
that the participant held the shares.
If the shares acquired upon exercise of a non-incentive stock option
are subject to a substantial risk of forfeiture, the participant will recognize
ordinary income at the time when the substantial risk of forfeiture is removed,
unless the participant timely files under the Code, Section 83(b), to elect to
be taxed on the receipt of shares, and we will qualify for a corresponding
deduction at that time. The amount of ordinary income will be equal to the
excess of the fair market value of the shares at the time the income is
recognized over the amount, if any, paid for the shares.
Stock appreciation rights
Upon the grant of a stock appreciation right, the participant
recognizes no taxable income and we receive no deduction. The participant
recognizes ordinary income and we receive a deduction at the time of exercise
equal to the cash and fair market value of common stock payable upon the
exercise.
Restricted stock
A participant who receives restricted stock will recognize no income on
the grant of the restricted stock and we will not qualify for any deduction. At
the time the restricted stock is no longer subject to a substantial risk of
forfeiture, a participant will recognize ordinary compensation income in an
amount equal to the excess, if any, of the fair market value of the restricted
stock at the time the restriction lapses over the consideration paid for the
restricted stock. A participant's shares are treated as being subject to a
substantial risk of forfeiture so long as his or her sale of the shares at a
profit could subject him or her to a suit under Section 16 (b) of the Exchange
Act. The holding period to determine whether the participant has long-term or
short-term capital gain or loss begins when the restriction period expires, and
the tax basis for the shares will generally be the fair market value of the
shares on this date.
33
A participant may elect under Section 83(b) of the Code, within 30 days
of the transfer of the restricted stock, to recognize ordinary compensation
income on the date of transfer in an amount equal to the excess, if any, of the
fair market value on the date of transfer of the shares of restricted stock, as
determined without regard to the restrictions, over the consideration paid for
the restricted stock. If a participant makes an election and thereafter forfeits
the shares, no ordinary loss deduction will be allowed. The forfeiture will be
treated as a sale or exchange upon which there is realized loss equal to the
excess, if any, of the consideration paid for the shares over the amount
realized on such forfeiture. The loss will be a capital loss if the shares are
capital assets. If a participant makes an election under Section 83(b), the
holding period will commence on the day after the date of transfer and the tax
basis will equal the fair market value of shares, as determined without regard
to the restrictions, on the date of transfer.
On a disposition of the shares, a participant will recognize gain or
loss equal to the difference between the amount realized and the tax basis for
the shares.
Whether or not the participant makes an election under Section 83(b),
we generally will qualify for a deduction, subject to the reasonableness of
compensation limitation, equal to the amount that is taxable as ordinary income
to the participant, in its taxable year in which the income is included in the
participant's gross income. The income recognized by the participant will be
subject to applicable withholding tax requirements.
Dividends paid on restricted stock which is subject to a substantial
risk of forfeiture generally will be treated as compensation that is taxable as
ordinary compensation income to the participant and will be deductible by us
subject to the reasonableness limitation. If, however, the participant makes a
Section 83(b) election, the dividends will be treated as dividends and taxable
as ordinary income to the participant, but will not be deductible by us.
Deferred stock
A participant who receives an award of deferred stock will recognize no
income on the grant of the award. However, he or she will recognize ordinary
compensation income on the transfer of the deferred stock, or the later lapse of
a substantial risk of forfeiture to which the deferred stock is subject, if the
participant does not make a Section 83(b) election, in accordance with the same
rules as discussed above under the caption "Restricted stock."
Other stock-based awards
The federal income tax treatment of other stock-based awards will
depend on the nature and restrictions applicable to the award.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO AMEND THE PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE UPON THE GRANT OF
OPTIONS AND OTHER AWARDS THEREUNDER.
34
PROPOSAL IV
APPROVAL OF THE ADOPTION OF THE
LADENBURG THALMANN FINANCIAL SERVICES INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Our board of directors has adopted the Ladenburg Thalmann Financial
Services Inc. Qualified Employee Stock Purchase Plan, subject to approval by our
shareholders. The plan provides, among other things, that our compensation
committee, which administers the plan, may permit our employees and certain of
our officers to acquire shares of our common stock during option periods at a
discount of up to 15% below the then current market price of the common stock.
The plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended.
Our board of directors believes that the plan will encourage broader
stock ownership by our employees and thereby provide an incentive for employees
to contribute to the continued profitability and success of our company. In
particular, the board intends that the plan offer a convenient means for
employees who might not otherwise purchase and hold our common stock to do so
and that the discounted sale feature of the plan provide a meaningful inducement
to participate. The board believes that employees' continuing economic interest,
as shareholders, in the performance and success of our company will enhance the
entrepreneurial spirit of Ladenburg Thalmann Financial Services, which can
greatly contribute to our long-term profitability.
Summary of the Employee Stock Purchase Plan
Set forth below is a summary of certain important features of the stock
purchase plan, which summary is qualified in its entirety by reference to the
complete text of the plan attached as Appendix A to this proxy statement.
Administration
The employee stock purchase plan will be administered by our
compensation committee. Among other things, the compensation committee will have
full discretionary authority to define, prescribe, amend and rescind rules,
procedures, terms and conditions relating to the plan, and to interpret,
administer and construe the plan and make all other determinations necessary or
advisable for the administration of the plan. The committee may, consistent with
the requirements of the plan, designate an administrator to perform certain
day-to-day administration of the plan, and to maintain records of the plan.
Except as otherwise expressly provided in the plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the plan, any participation in the plan, or any participation agreement or
certificate relating to the plan, will be in the sole discretion of the
committee, may be made at any time, and will be final, conclusive, and binding
on all participants in the plan.
We will pay all costs and expenses associated with the operation of the
plan including expenses of issuance and sale of shares, but excluding brokerage
commissions on the sale of shares.
35
Eligibility
Each employee who is regularly scheduled to work for us or one of our
subsidiaries for at least 20 hours each week and at least five months each
calendar year will be eligible to participate in and will be offered the
opportunity to purchase common stock under the plan as of the later of 90 days
following the employee's last date of hire and the effective date of the plan.
Notwithstanding the foregoing, no eligible employee may participate in the plan
if, immediately after the grant, the employee would own shares or hold
outstanding options to purchase shares totaling five percent or more of the
total combined voting power or value of all classes of our stock. Additionally,
the committee may in its sole discretion exclude from participation in the plan
any eligible employee who is a "highly compensated employee" (as defined in the
Internal Revenue Code) (generally one of our highest compensated employees
making in excess of $90,000 per year). Currently, approximately 466 employees
would be eligible to participate in the plan.
Enrollment
Every employee who wishes to participate in the plan will provide the
compensation committee (or any officer authorized by the committee) with a
request form setting forth instructions on what percentage of his or her salary
should be deducted during each option period. These instructions must be
received by the compensation committee (or any officer authorized by the
committee) prior to the month in which the next regularly scheduled option
period is set to begin.
Each participating employee will be able to have between one and 15
percent of the participating employee's total annual compensation deducted to
purchase shares of common stock, as determined by the compensation committee.
However, no eligible employee may make purchases under the plan that would
enable him to purchase under all qualified employee stock purchase plans (which
excludes stock option plans), in any one year, more than $25,000 of our stock,
with this determination to be made based on the fair market value of the shares
determined at the time such grant is made, subject to certain accumulation rules
contained in the Internal Revenue Code. Payroll deductions and any shares
purchased by employees under the plan will be credited to an account maintained
on behalf of each participating employee. No interest will be credited on
payroll contributions pending purchases in our common stock.
Purchases under the plan
The maximum number of shares of common stock that may be purchased
under the plan is 5,000,000 shares. However, the number of shares authorized for
issuance under the plan, the number of shares subscribed for and the purchase
price per share are subject to adjustment in the event of a dividend on the
common stock payable in shares of common stock, a stock split or combination of
the common stock, a recapitalization or other change in our capitalization, in
each case affecting all outstanding shares of common stock as a whole.
The compensation committee will establish the option periods during
which employees are granted the right to purchase shares of our common stock to
be funded through regularly scheduled payroll deductions. The committee has the
power to set the number and duration of the option periods in any way it sees
fit. On the last day of each option period, all accumulated payroll deductions
will be used to purchase shares of our common stock. The price at which the
common stock is purchased may not be below the lesser of 85% of the fair market
value of a share of common stock on the date the option period begins or on the
date the employee purchases the common stock (generally the last day of the
option period).
A participating employee will have none of the rights or privileges
of a shareholder until the full purchase price of the participating employee's
shares has been paid and the participating employee has been issued the shares
of common stock.
36
Transferability
The committee may impose restrictions on the transferability of the
shares of common stock acquired pursuant to the plan, and the restrictions, if
any, would apply uniformly to all participating employees with respect to each
offering of options to purchase common stock. Generally, no right under the plan
will be assignable, alienable, saleable, or transferable by a participating
employee. Additionally, no employee purchasing shares under the plan may resell,
transfer by any means or otherwise dispose of any of the shares acquired under
the plan except in accordance with our Insider Trading Policy.
Changes in participation
Generally, a participant may terminate his or her enrollment in the
plan at any time, effective for payroll periods or offering periods beginning
after the filing of a Change or Discontinuance Form. However, the compensation
committee has the power to require the employee to maintain his or her then
current participation in the plan. Enrollment will also terminate upon
termination of a participant's employment by us or one of our subsidiaries.
A participant may decrease his or her payroll deductions at any time,
effective for payroll periods or offering periods beginning after the filing of
a Change or Discontinuance Form. However, a participating employee may not
increase his or her payroll deductions during an option period.
Amendment and termination
The committee may, from time to time, alter, amend, suspend or
discontinue the plan for the purpose of meeting any changes in legal
requirements or for any other purpose permitted by law. However, except for any
adjustment authorized under the plan, the maximum number of shares that may be
offered under the plan may not be increased without appropriate shareholder
approval. Under its terms, the plan will terminate if its adoption is not
approved by the holders of at least a majority of our outstanding shares of
common stock not later than May 20, 2003. Once adopted by our shareholders, it
will remain in effect until the tenth anniversary of its effectiveness or until
there are no longer any shares available for purchase under the plan.
Federal Income Tax Consequences
The following discussion addresses only the general federal income tax
consequences of the employee stock purchase plan. It does not address the impact
of state and local taxes, the federal alternative minimum tax, and securities
laws restrictions, and is not intended as tax advice to participants in the
stock purchase plan. The information contained in this section is based on
present law and regulations, which are subject to being changed prospectively or
retroactively.
The employee stock purchase plan is intended to qualify as an employee
stock purchase plan within the meaning of Section 423 of the Internal Revenue
Code. Accordingly, no taxable income will be recognized by an employee who
elects to participate when the option is granted or when it is exercised and the
shares purchased are issued to him. A participant will, however, recognize
taxable income in the year in which there is a sale or other disposition of the
purchased shares, or the participant dies.
37
If an employee disposes of the purchased shares (i) more than two years
from the date on which he is granted the option to purchase the shares and (ii)
more than one year after the issuance of the shares to him, or (iii) if the
employee dies (whichever occurs first), and the option price on the date of
grant was equal to or greater than 85% and less than 100% of the fair market
value of the stock, the employee will be required to include in income, as
compensation for the year in which such disposition or death occurs, an amount
equal to the lesser of (i) the excess of the fair market value of such shares at
the time of disposition over the option price or (ii) the excess of the fair
market value of such shares at the time the option was granted over the option
price. The employee's basis in those shares in his hands at the time of such a
disposition will be his purchase price for the shares increased by the amount so
includable in his income as compensation, and any additional gain or loss
computed with reference to such adjusted basis which is recognized at the time
of the disposition will be long-term capital gain or loss. In such event, we
will not be entitled to any deduction from income.
If any employee disposes of the shares purchased under the plan within
(i) two years of the date of grant of the option or (ii) one year from the date
of issuance of the shares to him, the employee will be required to include in
income, as compensation for the year in which such disposition occurs, an amount
equal to the difference between the fair market value of the shares on the date
of exercise of the option and the exercise price of the option. The employee's
basis in such shares at the time of disposition will be increased by the amount
includable in his income as compensation, and any additional gain or loss
computed with reference to such adjusted basis which is recognized at the time
of disposition will be capital gain or loss, either short-term or long-term,
depending on the capital gain holding period for such shares. Generally, the
holding period for such shares begins on the date the shares are purchased. In
the event of a disposition prior to the expiration of the two- or one-year
statutory period, we will be entitled to a deduction from income equal to the
amount the employee is required to include in income as compensation as a result
of such disposition. To the extent this compensation is subject to income tax
withholding, Social Security taxes and other employment taxes, we will make such
provision as we deem appropriate for the withholding or other payment of such
taxes.
Employees will not be entitled to any deduction from income for payroll
deductions authorized under the plan. Cash dividends paid on shares held under
the Plan will be taxable to the employee for income tax purposes.
The federal income tax rules relating to employee stock purchase plans
qualifying under Section 423 of the Internal Revenue Code are complex.
Accordingly, the foregoing outline is intended to summarize only certain major
federal income tax rules concerning employee stock purchase plans, and should
not be construed as specific tax advice.
38
Independent Auditors
PricewaterhouseCoopers LLP has been our independent auditors since May
2001. We anticipate that we will select PricewaterhouseCoopers LLP as our
auditors for the fiscal year ending December 31, 2002, although no formal
recommendation has been made to our board of directors by the audit committee as
of the date of this proxy statement. A representative of PricewaterhouseCoopers
LLP is expected to be present at the annual meeting. The representative of
PricewaterhouseCoopers will have the opportunity to make statements and will be
available to respond to appropriate questions from shareholders.
On May 7, 2001, we dismissed Goldstein Golub Kessler LLP as our
independent auditors. Our board of directors participated in and approved the
decision to change independent auditors. Goldstein Golub Kessler's reports on
our financial statements for the past two fiscal years did not contain any
adverse opinion or a disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles. In connection with its
audits for the two most recent fiscal years and review of unaudited financial
statements through May 7, 2001, there were no disagreements with Goldstein Golub
Kessler on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Goldstein Golub Kessler would have caused them to make
reference to the subject matter of the disagreement in connection with their
report. During the two most recent fiscal years and through May 7, 2001, there
were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K
promulgated by the SEC. A copy of Goldstein Golub Kessler's letter stating that
it agreed with the foregoing statements was filed with the SEC on May 14, 2001.
Solicitation of Proxies
The solicitation of proxies in the enclosed form is made on behalf of
our board of directors and we are paying the cost of this solicitation. In
addition to the use of the mails, proxies may be solicited personally or over
the telephone by our directors, officers and regular employees at nominal cost.
We will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for expenses incurred in sending proxy material to beneficial owners
of our stock.
2003 Annual Meeting Shareholder Proposals
In order for any shareholder proposal to be presented at the annual
meeting of shareholders to be held in 2003 or to be eligible for inclusion in
our proxy statement for such meeting, it must be received by us at our principal
executive offices by June 5, 2003. Pursuant to Rule 14a-4 promulgated by the
Securities and Exchange Commission, shareholders are advised that our management
shall be permitted to exercise discretionary voting authority under proxies it
solicits and obtains for our 2003 annual meeting of shareholders with respect to
any proposal presented by a shareholder at such meeting, without any discussion
of the proposal in our proxy statement for such meeting, unless we receive
notice of such proposal at our principal office in New York, New York, not later
than August 19, 2003.
39
Other Matters
The board of directors knows of no matter which will be presented for
consideration at the special meeting other than the matters referred to in this
proxy statement. Should any other matter properly come before the special
meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
Victor M. Rivas, President and
Chief Executive Officer
New York, New York
October 3, 2002
40
Appendix A
LADENBURG THALMANN FINANCIAL SERVICES INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
BACKGROUND
1.1. Establishment of the Plan: Ladenburg Thalmann Financial Services
Inc. (the "Corporation") hereby establishes a stock purchase plan, effective on
the Effective Date (as defined herein), to be known as the "LADENBURG THALMANN
FINANCIAL SERVICES INC. QUALIFIED EMPLOYEE STOCK PURCHASE PLAN" (the "Plan"), as
set forth in this document. The Plan is intended to be a qualified employee
stock purchase plan within the meaning of Section 423 of the Internal Revenue
Code of 1986, as amended, and the regulations and rulings thereunder. The Plan
shall not be construed as constituting an employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended.
1.2 Applicability of the Plan: The provisions of this Plan are
applicable only to certain individuals who are Employees, as defined in the
Plan.
1.3 Purpose of the Plan: The purpose of the Plan is to provide
employees of the Corporation and its Subsidiaries with an opportunity to
purchase Common Stock of the Corporation through accumulated payroll deductions,
enabling such persons to acquire or increase a proprietary interest in the
Corporation in order to strengthen the mutuality of interests between such
persons and the Corporation's shareholders, and to provide a benefit that will
assist the Corporation in competing to attract and retain employees of high
quality.
ARTICLE II
DEFINITIONS
Whenever capitalized in this document, the following terms shall have
the respective meanings set forth below. Except when otherwise indicated by the
context, the definition of any term herein in the singular may also include the
plural.
2.1 Administrator: Administrator shall mean the person or persons (who
may be officers or employees of the Corporation) selected by the Committee to
operate the Plan, perform day-to-day administration of the Plan, and maintain
records of the Plan.
2.2 Board: Board shall mean the Board of Directors of the Corporation.
2.3 Change of Control: Change of Control shall mean: (a) the sale,
lease, transfer, conveyance, merger, consolidation or other disposition (other
than a merger or consolidation that does not result in any change in the
Corporation's stock and in which a majority of the successor's voting securities
is held by holders of the Corporation's Common Stock immediately before such
transaction ), in one or a series of related transactions, of all or
substantially all the assets of the Corporation and its Subsidiaries, taken as a
whole, to any Person, (b) the consummation of any transaction (including any
merger or consolidation) the result of which is that any Person, directly or
indirectly, becomes the beneficial owner (as determined in accordance with Rules
13d-3 and 13d-5 of the Exchange Act) of more than 50% of the Voting Securities
of the Corporation, or (c) the first day on which a majority of the members of
the Board are not Continuing Directors.
2.4 Code: Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto and the regulations thereunder.
2.5 Committee: Committee shall mean the Compensation Committee of the
Board or any other committee which consists of members of the Board and which
has been designated by the Board to have the general responsibility for the
administration of the Plan. Subject to the express provisions of the Plan, the
Committee shall have plenary authority in its sole and absolute discretion to
interpret and construe any and all provisions of the Plan, to adopt rules and
regulations for administering the Plan, and to make all other determinations
necessary or advisable for administering the Plan. The Committee's
determinations on the foregoing matters shall be conclusive and binding upon all
persons.
2.6 Common Stock: Common Stock shall mean Common Stock, par value
$.0001 per share, of the Corporation.
2.7 Compensation: Compensation shall mean, for any Participant, for any
period, the Participant's total salary, wages, commissions and bonuses to be
paid to the Participant for the respective period. Compensation shall be
determined before giving effect to any salary reduction amounts contributed
pursuant to a Participant's election under a plan maintained by an Employer
under Code Section 401(k) or under Code Sections 125 or 129.
2.8 Continuing Directors: The individuals who constituted the Board on
the Effective Date (the "Incumbent Directors"); provided that any individual
becoming a director after the date hereof shall be considered to be an Incumbent
Director if such individual's election, appointment or nomination was
recommended or approved by at least two-thirds of the other Incumbent Directors
continuing in office following such election, appointment or nomination present,
in person or by telephone, at any meeting of the Board, after the giving of a
sufficient notice to each Incumbent Director so as to provide a reasonable
opportunity for such Incumbent Directors to be present at such meeting.
2.9 Corporation: Corporation shall mean Ladenburg Thalmann Financial
Services Inc. or any successor thereto.
2.10 Date of Grant: Date of Grant shall mean the first day of each
Option Period, or the last day of each Participation Cycle, as determined by the
Committee.
2.11 Effective Date: Effective Date shall mean __________, 2002, or
such later date as shall be established by the Committee.
2.12 Employee: Employee shall mean a person employed by an Employer who
is classified by the Employer as an employee (and not as an independent
contractor no matter how characterized by a court or administrative agency).
2.13 Employer: Employer shall mean the Corporation and each Subsidiary
other than a Subsidiary designated by the Committee as not being an Employer for
purposes of the Plan.
2.14 Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Securities and Exchange Commission thereunder.
2.15 Exercise Date: Exercise Date shall mean the last day of each
Option Period or Participation Cycle, as determined by the Committee, but in no
event later than the last date permitted under Code Section 423(b)(7).
2.16 Fair Market Value: Fair Market Value, as of any given date, shall
mean, unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder: (i) if the Common Stock is listed on a national
securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap
Market, the last sale price of the Common Stock in the principal trading market
for the Common Stock on the relevant date or, in the absence of a sale on such
date, the last trading day preceding such relevant date, as reported by the
exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not listed
on a national securities exchange or quoted on the Nasdaq National Market or
Nasdaq SmallCap Market, but is traded in the over-the-counter market, the
closing bid price for the Common Stock on the relevant date or, in the absence
of a sale on such date, the last trading day preceding such relevant date, for
which such quotations are reported by the OTC Bulletin Board or the National
Quotation Bureau, Incorporated or similar publisher of such quotations; and
(iii) if the fair market value of the Common Stock cannot be determined pursuant
to clause (i) or (ii) above, such price as the Committee shall determine, in
good faith.
2.17 Option: Option shall mean a right to purchase Common Stock under
the Plan granted by the Committee in accordance with Section 5.1.
2.18 Option Period: Option Period shall mean the period of time between
the Date of Grant and the Exercise Date.
2.19 Option Price: Option Price shall mean the purchase price per share
of Common Stock determined under Section 5.2.
2.20 Participant: Participant shall mean any Employee who has elected
to participate in the Plan under Section 3.3 and who has an account balance
under the Plan.
2.21 Participation Cycle: Participation Cycle shall mean the period of
time between Exercise Dates, if the Date of Grant and Exercise Date are the
same.
2.22 Person: Any individual, entity or group within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act.
2.23 Plan: Plan shall mean the Ladenburg Thalmann Financial Services
Inc. Qualified Employee Stock Purchase Plan, as amended and in effect from time
to time.
2.24 Request Form: Request Form shall mean an Employee's authorization
form, specifying the Employee's payroll deduction percentage in accordance with
Section 6.2, and containing such terms and provisions as may be required by the
Administrator.
2.25 Subsidiary: Subsidiary shall mean any present or future
Corporation which is a "subsidiary corporation" of the Corporation as defined in
Code Section 424.
2.26 Voting Securities: Voting Securities shall mean securities of the
Corporation ordinarily having the power to vote for the election of directors of
the Corporation.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility: Each Employee who is regularly scheduled to work for
an Employer at least 20 hours each week and at least five months each calendar
year shall be eligible to participate in the Plan as of the later of:
(i) the next Option Period or Participation Cycle commencing after
90 days following the Employee's last date of hire by an
Employer; or
(ii) the Effective Date.
Notwithstanding the foregoing: (i) the Committee may (but need not), in its sole
discretion, exclude from participation in the Plan any group of Employees who
are highly compensated employees within the meaning or Code Section 414(q),
including, without limitation, any Employee who as of the date of determination
is, or during any portion of the preceding six months was, a "reporting person"
within the meaning of Section 16 of the Exchange Act; and (ii) no Employee shall
participate in the Plan with respect to any Option grant if, immediately after
the Option grant, the Employee would own stock, and/or hold outstanding options
or rights to purchase stock (whether under the Plan or otherwise), possessing
five percent or more of the total combined voting power or value of all classes
of outstanding stock of the Corporation or any Subsidiary. For purposes of this
Section, the attribution rules of Code Section 424(d) shall apply in determining
stock ownership of any Employee.
3.2 Calendar Year $25,000 Limit: Notwithstanding anything else
contained herein, no Employee may be granted an Option which permits such
Employee's rights to purchase Common Stock under the Plan (and any other
qualified employee stock purchase plan, within the meaning of Code Section 423,
of the Corporation and its Subsidiaries, collectively, "Other ESPPs") to accrue
at a rate which exceeds $25,000 (or such lower rate as is designated by the
Committee) of Fair Market Value of such Common Stock for each calendar year in
which an Option is outstanding at any time. In such event, the Employee's
contributions will be adjusted downward to the extent necessary to avoid
exceeding such calendar year limit. For purposes of this Section 3.2, Fair
Market Value shall be determined as of the Date of Grant.
3.3 Initial Participation: An Employee eligible to participate in the
Plan under Section 3.1 may submit a Request Form to the Administrator for an
Option Period or Participation Cycle. The Request Form shall authorize a regular
after-tax payroll deduction from the Employee's Compensation for such Option
Period or Participation Cycle. The authorization set forth in such Request Form
shall continue in effect indefinitely, but subject to modification or
discontinuance at a later date, in accordance with Article VI. The Committee may
(but need not), in its sole discretion, elect to allow Participants to
participate by submitting payment in other forms such as lump sum cash payments.
ARTICLE IV
STOCK AVAILABLE
4.1 Number of Shares: Subject to adjustment in accordance with Sections
4.2 and 4.3, an aggregate of 5,000,000 shares of Common Stock shall be available
for purchase by Participants pursuant to the provisions of the Plan. These
shares may be authorized and unissued shares, shares issued and held by the
Corporation as treasury stock or may be shares issued and subsequently acquired
by the Corporation, as may be determined from time to time by the Committee. If
an Option under the Plan expires or terminates for any reason without having
been exercised in whole or in part, the shares subject to such Option that are
not purchased shall again be available for subsequent Option grants under the
Plan. If the total number of shares of Common Stock for which Options are
exercised on any Exercise Date exceeds the maximum number of shares available
for the Option Period, the Committee shall make a pro rata allocation of the
shares available in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable, and the balance of the cash credited to
Participants' accounts shall be distributed to the Participants as soon as
practicable.
4.2 Adjustment in Event of Changes in Capitalization: In the event of a
common stock dividend on the Common Stock, a common stock split or combination
of shares of Common Stock, recapitalization or other change in the Corporation's
capitalization, in each case affecting all outstanding shares of Common Stock as
a whole, an appropriate and proportionate adjustment may, to the extent it deems
appropriate, be made by the Committee in the number and kind of shares as to
which outstanding Options or portions thereof then unexercised shall be
exercisable and in the available shares set forth in Section 4.1. Any adjustment
in outstanding Options shall be made without change in the total price
applicable to the unexercised portion of such Options and with a corresponding
adjustment in the Option Price per share.
4.3 Dissolution, Liquidation, Merger or Similar Transaction: Upon the
dissolution or liquidation of the Corporation, or upon a reorganization, merger,
or consolidation of the Corporation with one or more corporations in which the
Corporation is not the surviving corporation, or upon sale of substantially all
of the property or stock of the Corporation to another corporation, the holder
of each Option then outstanding under the Plan shall be entitled to receive, at
the next Exercise Date and upon the exercise of such Option, for each share of
Common Stock for which such Option is exercisable, as nearly as reasonably may
be determined, the cash, securities, or property which a holder of one share of
the Common Stock was entitled to receive upon and at the time of such
transaction.
ARTICLE V
OPTION PROVISIONS
5.1 Options: The Committee may grant Options to eligible Employees
during the term of the Plan. The number, Date of Grant and Exercise Date of any
Options shall be determined by the Committee in its sole discretion. The Option
Period or Participation Cycle need not be the same for each grant and more than
one Option may commence or terminate on the same date if the Committee so
provides. The Committee may at any time suspend or accelerate an Option if
required by law or deemed by the Committee to be in the best interests of the
Corporation, including in the event of a Change of Control.
5.2 Option Price: The Option Price of a share of Common Stock purchased
for a Participant pursuant to the exercise of an Option for any Option Period or
Participation Cycle shall be set by the Committee from time to time but shall be
no less than the lesser of:
(i) eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock on the Date of Grant; or
(ii) eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock on the Exercise Date.
ARTICLE VI
PURCHASING COMMON STOCK
6.1 Participant's Account:
(a) The Administrator shall establish a book account in the name of
each Participant. A Participant's payroll deductions and dividends on the Common
Stock, if any, credited to his or her account, as discussed in Section 6.2
below, shall be credited to the Participant's account, without interest, until
such cash is withdrawn, distributed, or used to purchase Common Stock as
described below.
(b) Until the exercise of an Option pursuant to Section 6.5 below, all
Participant funds received or held by the Corporation under the Plan shall be
held by the Corporation for the credit of the Participant as part of the
Corporation's general funds and may be used by the Corporation for any corporate
purpose. The Corporation shall not be obligated to segregate any assets with
respect to the Plan. All funds received by the Corporation as consideration for
purchases of Common Stock hereunder may be used by the Corporation for any
corporate purpose.
6.2 Payroll Deductions:
(a) Payroll Deductions: Subject to Section 3.2, by submitting a Request
Form before the beginning of any month in which an Option Period or
Participation Cycle begins and in accordance with rules adopted by the
Committee, an Employee eligible to participate in the Plan under Section 3.1
may, initially in accordance with Section 3.3, or thereafter authorize an
after-tax payroll deduction to purchase Common Stock under the Plan for such
Option Period or Participation Cycle. The payroll deduction shall be in any
whole percentage from 1 to 15 percent (or such higher or lower limit as is
designated by the Committee) of such Employee's Compensation payable each pay
period, and at any other time an element of Compensation is payable. A
Participant's payroll deduction, however, shall be at least ten dollars ($10.00)
(or such higher or lower limit as is designated by the Committee) each payroll
period.
(b) Duration: A Participant's Request Form submitted under Section 3.3
or 6.2(a) shall remain effective until modified or discontinued under Section
6.3 or such Participant is no longer eligible to participate in the Plan
pursuant to the terms hereof or until the Plan is terminated.
(c) Suspension of Participation Following Hardship Distribution: No
Participant shall make any elective contribution or employee contribution to
this Plan (within the meaning of Treasury Regulation Section
1.401(k)-1(d)(2)(iv)(B)(4)) for a period of 12 months after the Participant's
receipt of a hardship distribution from a plan of the Employer or a party that
is aggregated with the Employer under Code Section 414(b), (c), (m) or (o)
containing a cash or deferred arrangement under Code Section 401(k).
6.3 Deduction Modifications and Discontinuance:
(a) A Participant may not increase his or her payroll deduction under
Section 6.2 during an Option Period or Participation Cycle. A Participant may
increase his or her payroll deductions for future Option Periods or
Participation Cycles, effective as of the first payroll period of any month by
filing a new Request Form in accordance with and subject to such advance notice
requirements and other rules and procedures as may be established from time to
time by the Committee hereunder.
(b) A Participant may decrease or completely discontinue his or her
payroll deductions at any time by filing a new Request Form with the
Administrator. This decrease or discontinuance shall be effective on the first
payroll period of any month after receipt of the Request Form by the
Administrator in accordance with and subject to such advance notice requirements
and other rules and procedures as may be established from time to time by the
Committee hereunder. Any modification or discontinuance under this Section 6.3
shall be deemed a revocation of any and all prior Request Forms filed by the
Participant.
6.4 Transfer to Ineligible Status:
(a) If a Participant becomes employed by a Subsidiary not participating
in the Plan, or remains employed with an Employer but is no longer customarily
scheduled to work at least 20 hours each week and at least five months each
calendar year, the Participant shall cease to be eligible for payroll deductions
pursuant to Section 3.3 or 6.2(a). The cash standing to the credit of the
Participant's account shall become subject to the provisions of Section 7.1.
(b) If the Participant again becomes an Employee of an Employer and is
customarily scheduled to work at least 20 hours each week and at least five
months each calendar year, the Participant shall not be eligible to participate
in the Plan until he or she has filed a new Request Form in accordance with the
Plan and the rules and procedures established from time to time by the Committee
hereunder.
6.5 Exercise of Option:
(a) Unless the cash credited to a Participant's account is withdrawn or
distributed as provided in ARTICLE VII, his or her Option shall be deemed to
have been exercised automatically on the Exercise Date for the purchase of the
number of full shares of Common Stock which the cash credited to his or her
account at that time will purchase at the Option Price.
(b) Fractional shares of Common Stock shall not be issued or purchased
under the Plan. Any accumulated cash balances which would have been used to
purchase fractional shares shall be held in the Participant's account for
application in the next Option Period or Participation Cycle if a valid Request
Form is in effect for such Option Period or Participation Cycle or otherwise
distributed to the Participant without interest as soon as practicable.
(c) The Committee, in its sole discretion, may determine that, upon
exercise of Options, shares of Common Stock shall be delivered by the
Corporation by (i) issuing and delivering to the Participant a certificate for
the number of shares of Common Stock purchased by the Participant on an Exercise
Date or (ii) issuing and delivering a certificate or certificates or other
evidence of ownership of the number of shares of Common Sock purchased by all
Participants on an Exercise Date, as determined by the Committee, to a brokerage
firm selected by the Committee from time to time which is a member of the
National Association of Securities Dealers (the "Selected Brokerage Firm"),
which may be a subsidiary of the Company. Any such shares so delivered to the
Selected Brokerage Firm shall be maintained by such firm in a separate brokerage
account for each Participant. The issuance and delivery of shares hereunder
shall occur monthly or at such other intervals as the Committee may determine,
consistent with the requirements of the Code.
6.6 Listing, Registration and Qualification of Shares: The granting of
Options for, and the sale and delivery of, Common Stock under the Plan shall be
subject to the effecting by the Corporation of any listing, registration, or
qualification of the shares of such Common Stock upon any securities exchange or
under any federal or state law, as determined by the Committee in its sole
discretion, or the obtaining of the consent or approval of any governmental body
which the Committee deems necessary or desirable for the issuance or purchase of
the shares covered.
ARTICLE VII
WITHDRAWALS AND DISTRIBUTIONS
7.1 Discontinuance of Deductions and Transfer to Ineligible Status: In
the event of a Participant's complete discontinuance of payroll deductions under
Section 6.3 for any reason (including termination of the Participant's
employment by the Employer for any reason, leave of absence or other
ineligibility of such Participant), the cash balance then standing to the credit
of the Participant's account, if any, shall be returned to the Participant, in
cash, without interest, as soon as practicable.
7.2 Designation of Beneficiary: A Participant shall designate his or
her beneficiary in the event of the Participant's death, on his or her Request
Form. This designation of beneficiary may be changed by the Participant at any
time by written notice to the Administrator received prior to the participants
death. In the event of the death of the Participant in the absence of a validly
designated beneficiary under the Plan who is living at the time of the
Participant's death, the estate of the Participant shall be deemed the
Participant's beneficiary.
7.3 Registration of Certificates; Restrictions on Transfer: The Common
Stock certificates or other evidence of shares, when withdrawn or distributed
under this ARTICLE VII or Section 6.5, shall be registered only in the name of
the Participant (or beneficiary, if applicable) or, if so specified in timely
written instructions to the Administrator, in the name of the Participant (or
beneficiary, if applicable) and any other person as joint tenants with right of
survivorship. The Committee may permit a Participant who is a resident of a
jurisdiction which does not recognize such joint tenancy to have such
certificates or other evidence of shares registered in the Participant's name as
tenant in common with a member of such Participant's immediate family, without
right of survivorship. No other names may be included in the Common Stock
registration. Each Common Stock certificate distributed under the Plan shall
bear a legend prohibiting any transfer by the Participant (or joint or common
tenant or beneficiary or estate of any of them, as applicable) of any share of
Common Stock represented by such certificate during the 90 day period following
the Exercise Date as of which such share was purchased, other than by will or by
the laws of descent and distribution. The restrictions and limitations on the
sale of Common Stock imposed under this Section 7.3 shall apply equally to any
shares of Common Stock delivered to the Selected Brokerage Firm pursuant to
Section 6.5, whether or not such shares are represented by a certificate.
ARTICLE VIII
ADMINISTRATION; AMENDMENT, TERM AND TERMINATION
8.1 Administration: The Plan shall be administered by the Committee,
which shall have plenary authority, in its sole discretion, to:
(i) define, prescribe, amend and rescind rules, regulations,
procedures, terms and conditions relating to the Plan; and
(ii) interpret, administer and construe the Plan and make all other
determinations necessary or advisable for the administration
of the Plan, including but not limited to correcting defects,
reconciling inconsistencies and resolving ambiguities.
The interpretation by the Committee of the terms and conditions of the Plan, and
its administration of the Plan and all action take by the Committee hereunder,
shall be final, binding and conclusive on the Corporation, its stockholders,
Subsidiaries, all Participants and Employees, and upon their respective
successors and assigns, and upon all other persons claiming under or through any
of them or otherwise under the Plan.
8.2 Amendment: The Committee shall have the right to amend or modify
the Plan, in full or in part, at any time and from time to time; provided,
however, that no amendment or modification shall:
(i) affect any right or obligation with respect to any grant
previously made, unless required by law, including for
continued satisfaction of the requirements of the Code, or
(ii) unless previously approved by the stockholders of the
Corporation, if such approval is necessary to satisfy federal
securities laws, the Code, or the rules of any stock exchange
on which the Corporation's Common Stock is listed:
(1) in any manner materially affect the eligibility
requirements set forth in Sections 3.1, or change the
definition of Employer as set forth in Section 2.11,
or
(2) increase the aggregate number of shares of Common
Stock issuable upon the exercise of Options or other
grants under the Plan (except as provided in Sections
4.2 and 4.3), or
(3) materially increase the benefits to Participants
under the Plan.
8.3 Termination: The Committee may suspend or terminate the Plan at any
time in its sole and absolute discretion. The Plan shall be suspended or
terminated by the Committee if at any time the number of shares of Common Stock
authorized for purposes of the Plan is not sufficient to meet all purchase
requirements, except as specified in Section 4.1. Upon suspension or termination
of the Plan, the Administrator shall give notice thereof to all Participants and
shall terminate all payroll deductions. Cash balances then credited to
Participants' accounts shall be distributed promptly, without interest.
8.4 Term of Plan: Unless previously terminated pursuant to Section 8.3,
the Plan shall terminate on and no grants shall be made after, the date on which
all shares authorized for issuance under the Plan have been issued hereunder or
on the 10th anniversary of the Effective Date, whichever occurs first.
Notwithstanding the foregoing, the Plan will terminate and will not become
effective if it is not approved by the Corporation's shareholders in accordance
with Section 9.1.
ARTICLE IX
MISCELLANEOUS
9.1 Shareholder Approval: The Plan shall be submitted for approval and
ratification by the shareholders of the Corporation, as required by Treasury
regulation Section 1.423-2(c), not later than May 20, 2003.
9.2 No Employment Rights: Neither the establishment of the Plan, nor
the grant of any Options thereunder or the exercise thereof, shall be deemed to
give to any Employee the right to be retained in the employ of the Corporation
or any Subsidiary or to interfere with the right of the Corporation or any
Subsidiary to discharge any employee or otherwise modify the employment
relationship at any time.
9.3 Tax Withholding: The Administrator may make appropriate provisions
for withholding of federal, state, and local income taxes, and any other taxes,
from a Participant's Compensation to the extent the Administrator deems such
withholding to be required.
9.4 Rights Not Transferable: Rights and Options granted under this Plan
are not transferable by the Participant other than by will or by the laws of
descent and distribution and are exercisable only by the Participant during his
or her lifetime (or his or her beneficiary or estate, if applicable). Except as
set forth in the preceding sentence, no interest of the Participant under the
Plan may be assigned, transferred, pledged, mortgaged or otherwise alienated or
anticipated, nor shall any such interest be subject to garnishment, attachment,
execution or levy or any kind or any other legal process, whether by virtue of
bankruptcy, insolvency or other operation of law, prior to delivery of shares of
Common Stock to the Participant or the Selected Brokerage Firm.
9.5 No Repurchase of Stock by Corporation: The Corporation is under no
obligation to repurchase from any Participant any shares of Common Stock
acquired under the Plan.
9.6 Restrictions on Transfer of Purchased Shares: Neither the
establishment of the Plan, nor the grant of any Options thereunder or the
exercise thereof, shall be deemed to release any Employee from the restrictions
and obligations imposed on such individual pursuant to the Corporation's Insider
Trading Policy regarding the sale and disposition of securities owned by
employees and/or directors of the Corporation. Further, the Committee shall
require each Participant to acknowledge in his or her respective Request Form
that such individual will not sell, transfer by any means or otherwise dispose
of any shares of Common Stock acquired under the Plan except in accordance with
such Policy.
9.7 Governing Law: The Plan shall be governed by and construed in
accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws of such State or of any other
jurisdiction) except to the extent such laws are preempted by the laws of the
United States.
9.8 Indemnification: With respect to liabilities arising under or
relating to the Plan, the Corporation shall indemnify each member of the Board
and the Committee and each other officer or employee of the Corporation,
including the Administrator, to whom any duty or power relating to the Plan may
be allocated or delegated, in each case to the fullest extent permitted by the
law and the Corporation's Certificate of Incorporation and Bylaws.
9.9 Administrative Costs: The Corporation shall pay all administrative
expenses associated with the operation of the Plan including expenses of
issuance and sale of shares, but excluding brokerage commissions on the sale of
shares.
LADENBURG THALMANN FINANCIAL SERVICES INC. - PROXY
Solicited By The Board Of Directors
for Annual Meeting To Be Held on November 6, 2002,
The undersigned Shareholder(s) of Ladenburg
Thalmann Financial Services Inc., a Florida corporation
P ("Company"), hereby appoints Howard M. Lorber, Victor M.
Rivas, Richard J. Rosenstock or J. Bryant Kirkland III, or
any of them, with full power of substitution and to act
without the others, as the agents, attorneys and proxies of
R the undersigned, to vote the shares standing in the name of
the undersigned at the Annual Meeting of Shareholders of the
Company to be held on November 6, 2002 and at all
adjournments thereof. This proxy will be voted in accordance
with the instructions given below. If no instructions are
O given, this proxy will be voted FOR all of the following
proposals.
1. Election of the following Directors:
X FOR all nominees listed below except WITHHOLD AUTHORITY to vote
as marked to the contrary for all nominees listed
below |_| below |_|
Y
Howard M. Lorber, Victor M. Rivas, Richard J. Rosenstock,
Vincent A. Mangone, Mark Zeitchick, Henry C. Beinstein,
Robert J. Eide, Richard J. Lampen and Bennett S. LeBow
INSTRUCTIONS: To withhold authority for any individual nominee,
write that nominee's name in the space below.
-----------------------------------------------------
2. To approve an amendment to the Articles of Incorporation to
increase the number of authorized shares of common stock from
100,000,000 shares to 200,000,000 shares.
FOR |_| AGAINST |_| ABSTAIN |_|
3. To approve an amendment to the 1999 Performance Equity
Plan to increase the number of shares of common stock
available for issuance under the plan from 5,500,000 shares
to 10,000,000 shares and to increase the limit on grants to
individuals in any one year from 300,000 shares to 1,000,000
shares.
FOR |_| AGAINST |_| ABSTAIN |_|
4. To approve the adoption of the Ladenburg Thalmann Financial
Services Inc. Qualified Employee Stock Purchase Plan.
FOR |_| AGAINST |_| ABSTAIN |_|
5. In their discretion, the proxies are authorized to vote upon
such other business as may come before the meeting or any
adjournment thereof.
FOR |_| AGAINST |_| ABSTAIN |_|
|_| I plan on attending the Annual Meeting.
Date ______________________________
___________________________________
Signature
___________________________________
Signature if held jointly
Please sign exactly as name appears above. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.