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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. )
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TradeStation Group, Inc.
- --------------------------------------------------------------------------------[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
TRADESTATION GROUP, INC.
.................................................................................
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------.................................................................................
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(1)1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
(3).................................................................................
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amount on which the filing fee is calculated and state how it
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TRADESTATION GROUP, INC.
8700 WEST FLAGLERTRADESTATION BUILDING
8050 S.W. 10TH STREET
MIAMI,PLANTATION, FLORIDA 3317433324
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 2001SEPTEMBER 6, 2002
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To Our Shareholders:
The 20012002 annual meeting of shareholders (the "Annual Meeting") of
TradeStation Group, Inc. (the "Company") will be held on Monday, June 18, 2001,September 6, 2002, at
10:00 a.m., local time, at the Miami Airport Marriott, 1201 N.W. LeJeuneSheraton Hotel, 1825 Griffin Road, Miami,Dania, Florida
33126,33004, for the following purposes:
1. To elect eightsix directors of the Company to serve for a one-year
term expiring in 2002;2003;
2. To approve an amendment to the Company's Nonemployee Director
Stock Option Plan increasing the number of shares of the
Company's common stock, $.01 par value, reserved for issuance
under such plan from 175,000 to 350,000, subject to any
further antidilution adjustments, and increasing the number of
shares included in the options automatically granted to a
nonemployee director upon each annual reelection from 3,000 to
7,000;
3. To ratify the selection of Arthur AndersenErnst & Young LLP as the Company's
independent public accountants for the year ending December
31, 2001;2002; and
4.3. To transact such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
The Board of Directors has fixed Friday, May 11, 2001,July 31, 2002, as the record date for
the determination of shareholders entitled to vote at the Annual Meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the Annual Meeting or any postponement or adjournment
thereof.
Copies of the Company's Proxy Statement and annual report for the year
ended December 31, 20002001 accompany this notice.
You are cordially invited to attend the meeting in person. Whether or
not you expect to attend the meeting in person, you are urged to sign and date
the enclosed proxy and return it promptly in the envelope provided for that
purpose.
By Order of the Board of Directors
/s/ Marc J. Stone
---------------------------------------------------------------------
Marc J. Stone
Secretary
Miami,Plantation, Florida
May 18, 2001August 2, 2002
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TRADESTATION GROUP, INC.
8700 WEST FLAGLERTRADESTATION BUILDING
8050 S.W. 10TH STREET
MIAMI,PLANTATION, FLORIDA 3317433324
PROXY STATEMENT
INTRODUCTION
GENERAL
This Proxy Statement, which, together with the accompanying proxy card,
is first being mailed to shareholders on or about May 21, 2001,August 5, 2002, is furnished
to the shareholders of TradeStation Group, Inc. (the "Company") in connection
with the solicitation of proxies by the Board of Directors (sometimes referred
to as the "Board") of the Company for use in voting at the 20012002 annual meeting
of shareholders (the "Annual Meeting"), including any adjournment or
postponement thereof. Please note that, with respect to dates and periods prior to December
29, 2000, the "Company" means Omega Research, Inc., the publicly-traded
predecessor company to TradeStation Group, Inc. TradeStation Group, Inc. became
the successor publicly-traded company as a result of the December 29, 2000
combination by merger of Omega Research, Inc. and onlinetradinginc.com corp. As
part of that merger, Omega Research (which has been renamed TradeStation
Technologies, Inc.) and onlinetradinginc.com (which has been renamed
TradeStation Securities, Inc.) became wholly-owned operating subsidiaries of
TradeStation Group, Inc.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
e-mail, facsimile or other means by officers and/or regular employees of the
Company without additional compensation or remuneration therefor. Arrangements
have also been made with brokers, dealers, banks, voting trustees and other
custodians, nominees and fiduciaries to forward proxy materials and annual
reports to the beneficial owners of the shares held of record by such persons,
and the Company will, upon request, reimburse them for their reasonable expenses
in so doing.
A copy of the Company's annual report for the fiscal year ended
December 31, 20002001 (which has included therein audited financial statements for
the Company for the three fiscal years ended December 31, 2000)2001) is being mailed
to the Company's shareholders together with this Proxy Statement. Such annual
report is not, however, incorporated into this Proxy Statement nor is it to be
deemed a part of the proxy soliciting material.
VOTING PROCEDURES
Proxies in the form enclosed, if properly executed and received in time
for voting and not revoked, will be voted as directed in accordance with the
instructions thereon. In voting by proxy in regard to the election of eightsix
directors to serve until the 20022003 annual meeting of shareholders, shareholders
may vote in favor of all nominees or withhold their votes as to all or as to any
specific nominees. In voting by proxy in regard to (i) the approval of an
amendment to the Company's Nonemployee Director Stock Option Plan (the
"Nonemployee Director Stock Plan") increasing the number of shares of the
Company's common stock, $.01 par value ("Common Stock"), reserved for issuance
under, and increasing the number of shares included in the options automatically
granted to a nonemployee director (an "Independent Director") upon each annual
reelection pursuant to, the Nonemployee Director Stock Plan and (ii)
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selection of Arthur AndersenErnst & Young LLP as the Company's independent public accountants,
shareholders may vote for or against or abstain from voting. Any properly
executed and timely received proxy not so directing or instructing to the
contrary will be voted FOR (i) each of the Company's nominees as directors, (ii) approval of the amendment increasing the number of shares
reserved for issuance under, and
increasing the number of shares included in the
options automatically granted to an Independent Director upon each annual
reelection pursuant to, the Nonemployee Director Stock Plan, and (iii)(ii) ratification of the selection of Arthur AndersenErnst & Young LLP. See Proposals 1 2 and 32
herein. Sending in a signed proxy will not affect a shareholder's right to
attend the meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy may revoke it at any time before it is voted at the
Annual Meeting by, among other methods, giving notice of such revocation to the
Secretary of the Company, attending the Annual Meeting and voting in person or
by duly executing and returning a proxy bearing a later date.
The management knows of no other matters to be presented for action at
the Annual Meeting other than as mentioned herein. However, if any other matters
come before the Annual Meeting, the holders of the proxies intend to vote in
such manner as they decide in their sole discretion.
VOTING SECURITIES
At the close of business on Friday, May 11, 2001,July 31, 2002, the record date for the
determination of shareholders entitled to receive notice of and to vote at the
meeting (the "Record Date"), the Company's outstanding voting securities
consisted of 44,483,43344,568,524 shares of Common Stock. Holders of Common Stock are
entitled to one vote per share.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, as of the Record Date, by
(i) each person who is known to the Company to own beneficially more than 5% of
the Company's Common Stock, (ii) each of the Company's directors and nominees
for directors who own shares of Common Stock, (iii) the Company's Co-Chief
Executive Officers and its four most highly-compensated executive officers and one former
executive officer (each of whom are included in theother three Named Executive Compensation
Tables included in this Proxy Statement)Officers, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise described in the
footnotes and in "Voting Trust" below, theThe Company believes
that the beneficial owners of the Common Stock listed below, based on
information provided by such owners, have sole investment and voting power with
respect to such shares.
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SHARES BENEFICIALLY OWNED (1)
----------------------------------------
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT
---------------------------- -------------- -------------
William R. Cruz (2)(7)........................... 9,267,654 20.8%
Ralph L. Cruz (3)(7)............................. 9,156,554 20.6%
Benedict Gambino (7)............................. 4,680,960 10.5%
Farshid Tafazzoli (4)(7)......................... 4,680,960 10.5%
Andrew Allen (5)(7).............................. 4,356,960 9.8%
E. Steven zum Tobel (6)(7)....................... 763,199 1.7%
Salomon Sredni................................... 220,750 *
Marc J. Stone (7)................................ 128,000 *
Charles F. Wright (8)............................ 85,600 *
Lothar Mayer..................................... 38,637 *
Brian D. Smith................................... 26,000 *
Stephen C. Richards.............................. 22,333 *
All executive officers and
directors as a group (13 persons)(7)(9) 24,476,842 54.4%
SHARES BENEFICIALLY OWNED (1)
------------------------------
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT
---------------------------- ---------- -------
William R. Cruz (2) 10,928,838 24.5%
Ralph L. Cruz (3) 10,791,468 24.2%
Benedict Gambino 4,480,960 10.1%
Andrew Allen (4) 4,020,960 9.0%
Salomon Sredni 326,750 *
Charles F. Wright (5) 275,413 *
Marc J. Stone 184,000 *
David H. Fleischman 42,500 *
Stephen C. Richards 41,333 *
Michael W. Fipps 250 *
All executive officers and
directors as a group (8 persons)(6) 22,590,522 50.0%
- --------------------
* Less than 1%.
(1) The address of: William R. Cruz and Ralph L. Cruz is TradeStation Group,
Inc., 8700 West Flagler8050 S.W. 10th Street, Miami,Plantation, Florida 33174;33324; Benedict Gambino is
22356 Timberlea Lane, Kildeer, Illinois 60047; Farshid Tafazzoli is
TradeStation Securities, Inc., 2700 North Military Trail, Boca Raton,
Florida 33431; and Andrew A. Allen is 4939 N.W. 23rd Court, Boca Raton,
Florida 33431.One
Yellowstone Club Trail, Big Sky, Montana 59716. Beneficial ownership is
determined in accordance with the rules of the SECSecurities and Exchange
Commission ("SEC") that deem shares to be beneficially owned by any person
who has or shares voting or investment power with respect to such shares.
IncludesIt includes options held by executive officers and/or directors which are
exercisable within 60 days of the Record Date. Prior to May 1, 2002, the
shares beneficially owned by the Cruzes and Messrs. Allen and Gambino were
subject to a voting trust agreement. That agreement was terminated on May
1, 2002 and is of no further force or effect.
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(2) All but 100 shares are held by two Texas limited partnerships as to which
William R. Cruz possesses sole voting and dispositive powers through his
direct and/or indirect 100% ownership of the sole general partner of each
of such limited partnerships. In one limited partnership William R. Cruz is
the sole limited partner and in the other limited partnership William R.
Cruz and a grantor retained annuity trust for the benefit of William R.
Cruz and his family are the limited partners. Does not include 900 shares
owned by the spouse of William R. Cruz with respect to which Mr. Cruz
disclaims beneficial ownership.
(3) The shares are held by two Texas limited partnerships as to which Ralph L.
Cruz possesses sole voting and dispositive powers through his direct and/or
indirect 100% ownership of the sole general partner of each of such limited
partnerships. In one limited partnership Ralph L. Cruz is the sole limited
partner and in the other Ralph L. Cruz and his spouse are the limited
partners.
(4) The shares are held by Tafazzoli Family Limited Partnership as to which
Farshid Tafazzoli possesses sole voting and dispositive powers through
his 100% ownership of the sole general partner of such limited
partnership.
(5) Includes 3,969,0003,893,000 shares held by Andrew A. Allen Family Limited
Partnership as to which Andrew A. Allen possesses sole voting and
dispositive powers through his 100% ownership of the sole general partner
of such limited partnership.
(6) The(5) Includes 6,500 shares are held by zum Tobel Family Limited Partnership as to which
E. Steven zum Tobel possesses sole voting and dispositive powers through
his 100% ownership of the sole general partner of such limited
partnership.
(7) Shares of Common Stock are subject to the terms of a voting trust entered
into in conjunction with the merger of TradeStation Technologies and
TradeStation Securities. See "Voting Trust" below.
(8) 5,000 of the shares of Common Stock are held by Mr. Wright (a nominee for
director) as custodian for his son.
(9)the benefit of the sons of
Charles F. Wright.
(6) See other footnotes above.
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VOTING TRUST
In connection with entering into the merger, certain former
shareholders of TradeStation Technologies and TradeStation Securities entered
into a voting trust agreement effective as of December 29, 2000 pursuant to
which certain shares of Common Stock of TradeStation Group owned by them are
subject to the terms of a voting trust. The former shareholders of TradeStation
Technologies who entered into the voting trust agreement are Texas limited
partnerships beneficially owned by William R. Cruz and Ralph L. Cruz
(collectively, the "Cruz Group"). The Cruz Group collectively holds as of the
Record Date an aggregate of 18,313,108 shares of Common Stock that are subject
to the voting trust agreement, representing approximately 41.2% of the
outstanding shares of TradeStation Group's Common Stock. The former shareholders
of TradeStation Securities who entered into the voting trust agreement are
Andrew A. Allen, Andrew A. Allen Family Limited Partnership, Tafazzoli Family
Limited Partnership, zum Tobel Family Limited Partnership, Derek J. Hernquist
and Benedict S. Gambino (collectively, the "Online Group"). The Online Group
collectively holds as of the Record Date an aggregate of approximately
14,939,997 shares of Common Stock that are subject to the voting trust
agreement, representing approximately 33.6% of the outstanding shares of
TradeStation Group's Common Stock. The parties to the voting trust agreement
have agreed that, during the term of the voting trust agreement, the voting
trustee, Marc J. Stone, is required with respect to shares of TradeStation
Group's Common Stock subject to the voting trust to vote and abstain from voting
or otherwise to participate in shareholder actions, including executing written
consents, in all matters relating to TradeStation Group subject to and limited
by and as directed pursuant to the voting trust agreement.
The Cruz Group has the right to direct the voting trustee to vote all
of the shares subject to the voting trust in a manner such that five of the
total of eight directors constituting TradeStation Group's Board of Directors,
two of whom are required to be Independent Directors, are designated by the Cruz
Group. The Online Group has the right to direct the voting trustee to vote all
of the shares subject to the voting trust in a manner such that three of such
total number of eight directors, one of whom is required to be an Independent
Director, are designated by the Online Group. In the event that the number of
directors constituting TradeStation Group's Board of Directors is increased or
decreased, then each group of shareholders will be entitled to designate its
number of the total number of directors based upon a ratio of 62.5% for the Cruz
Group shareholders and 37.5% for the Online Group. If the foregoing ratio yields
other than whole numbers as to the number of directors for which each group of
shareholders is entitled to designate the shares to be voted, then the number of
directors which each such group is entitled to designate shall be rounded down
to the nearest whole number, and the one remaining directorship that this
rounding down will create shall be designated by the Cruz Group.
With respect to all matters other than the election of directors as to
which a vote (or written consent) of shareholders of TradeStation Group will be
made, the voting trustee will vote the shares owned by each shareholder who is a
party to the voting trust agreement as specifically instructed in writing by the
shareholder owning the beneficial interest in, and voting trust certificate
relating to, such shares. In the event that the voting trustee does not timely
receive such written voting instructions, in whole or in part, from a
shareholder, then the voting trustee shall abstain from voting the shares owned
by such shareholder with respect to any or all matters as to which the voting
trustee has not received written voting instructions.
The voting trust shall dissolve on the earliest of the following dates:
(i) December 29, 2002; (ii) the date when the voting trustee shall resign in
writing unless such vacancy is timely filled as provided under the voting trust
agreement; (iii) the date when the shareholders who are parties to the voting
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trust agreement holding 67% or more of the shares then subject to that agreement
shall execute a written instrument so declaring; or (iv) the date when less than
75% of the aggregate number of shares owned as of December 29, 2000 by either
the Cruz Group or the Online Group remains subject to the voting trust.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their
respective ages and positions with the Company as of the date of this Proxy
Statement are as follows:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
William R. Cruz 4041 Co-Chairman of the Board and Co-Chief Executive Officer
Ralph L. Cruz 3738 Co-Chairman of the Board and Co-Chief Executive Officer
Salomon Sredni 3335 President and Chief Operating Officer and Director
Sean M. Davis 35 Vice President of Investor and Media Relations
David H. Fleischman 5556 Chief Financial Officer, Vice President of Finance and Treasurer
Lothar Mayer (1) 61 Director
Janette Perez 43 Vice President of Advertising
Stephen C. Richards (1)(2) 47 Director
Roger L. Shaffer 34 Vice President of Brokerage Compliance
Brian D. Smith (1)(2) 56 Director
Marc J. Stone 4041 Vice President of Corporate Development, General Counsel and Secretary
Farshid Tafazzoli 28 Vice President of Brokerage Technology andStephen C. Richards (1)(2) 48 Director
E. Steven zum Tobel 34 Vice President of Brokerage Operations andCharles F. Wright (1)(2) 51 Director
Michael W. Fipps (1) 59 Director
- --------------------
(1) Member of the Audit Committee of the Board of Directors.Board.
(2) Member of the Compensation Committee of the Board of Directors.Board.
The directors hold office until the next annual meeting of
shareholders. Executive officers serve at the discretion of the Board of
Directors.Board.
WILLIAM R. CRUZ co-founded the Company with his brother, Ralph Cruz, in
1982 and has been a director since that time. He served as President from 1982
to September 1999. Mr. Cruz was appointed Co-Chairman of the Board and Co-Chief
Executive Officer of the Company in 1996. Mr. Cruz studied classical violin at
the University of Miami, which he attended on a full scholarship, and the
Juilliard School of Music, during which time he won numerous classical violin
competitions. Mr. Cruz has been primarily responsible for the conception and
management of the Company's products and product strategies.
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RALPH L. CRUZ co-founded the Company in 1982 and has been a director
since that time. Mr. Cruz was Vice President of the Company from 1982 until
1996, at which time he was appointed Co-Chairman of the Board and Co-Chief
Executive Officer. In December 2000, Mr. Cruz becamealso serves as a director of TradeStation
Securities, Inc., one of the Company's two
operating subsidiaries. Mr. Cruz studied classical violin at the University of
Miami, which he attended on a full scholarship, and Indiana University, during
which time he won numerous classical violin competitions. Mr. Cruz historically
has been responsible for the Company's marketing strategies.
SALOMON SREDNI joined the Company in December 1996 as its Vice
President of Operations and Chief Financial Officer and was named Treasurer and
a director of the Company in July 1997. In August 1999, he was named President
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and Chief Operating Officer. Mr. Sredni also serves as a director of each of the
Company's two operating subsidiaries. Before joining the company,Company, from August
1994 to November 1996, Mr. Sredni was Vice President of Accounting and Corporate
Controller at IVAX Corporation, a publicly-held pharmaceutical company, from August 1994 to November 1996.company. Prior to
that time, from January 1988 to August 1994, Mr. Sredni was with Arthur Andersen
LLP, an international accounting firm.LLP. Mr. Sredni is a Certified Public Accountant and a member of the American
Institute of Certified Public Accountants and the Florida Institute of Certified
Public Accountants. He has a bachelor's degree in Accounting from The
Pennsylvania State University.
SEAN M. DAVIS was appointed to his current position for the Company,
Vice President of Investor and Media Relations, in 2000, after the Company
acquired his previous employer, Window On WallStreet Inc. Mr. Davis joined
Window On WallStreet in 1995 and served as Senior Vice President, Marketing &
Business Development, from 1998 to 1999, Vice President from 1996 to 1998, and
Managing Director from 1995 to 1996. From 1994 to 1995, Mr. Davis was Channel
Sales Manager at American Power Conversion. From 1988 to 1994, Mr. Davis was
employed in corporate sales in the computer industry for several companies. Mr.
Davis has an Executive MBA from the University of Rhode Island with an emphasis
in management, and a bachelor's degree from Vassar College with an emphasis in
computer science.
DAVID H. FLEISCHMAN joined the Company as Chief Financial Officer, Vice
President of Finance and Treasurer onin February 1, 2001. Prior to joining the
Company, Mr. Fleischman was engaged as a Director of Crossroads LLC, a firm that
provides financial and management expertise and services to companies seeking to
maximize the efficiencies and performance of their management teams. From
January 1997 until September 2000, Mr. Fleischman served as Senior Vice
President, Chief Financial Officer and member of the Board of Advisors of The
SeaSpecialties Group. From 1992 to 1996, he served as Senior Vice President and
Treasurer of The Kislak Organization - J.I. Kislak, Inc., an organization that,
during those years, included the largest privately-held mortgage-banking company
in the United States. From 1983 to 1992, Mr. Fleischman served as a Director,
Vice President and Chief Financial Officer of the U.S. group of Berisford
International plc, a publicly-held United Kingdom company. From 1969 to 1983, he
held several positions with subsidiaries of Midland Bank plc, including London
American Finance Corporation and Drake America Corporation. He began his career
in 1967 in the audit division of a predecessor firm of Ernst & Young.Young LLP. Mr.
Fleischman has a bachelor's of science degree in accounting from The New York
Institute of Technology.
LOTHAR MAYER became a director of the Company and a member of the Audit
Committee of the Board of Directors in December 2000. Prior to that, he served
as a director of TradeStation Securities (then known as onlinetradinginc.com
corp.). Mr. Mayer is the President of Liberty Hardware Mfg. Corp., a subsidiary
of Masco Corp. (NYSE: MAS). He has held this position for over 23 years. He
owned Liberty Hardware until its sale to Masco. Mr. Mayer is also a chartered
and certified public accountant.
JANETTE PEREZ joined the Company in 1996 as Director of Public
Relations, and was named Vice President of Marketing (the title ultimately
changing to Vice President of Advertising) in June of 1998. Since 1998, Ms.
Perez has been responsible for the organization and management of the Company's
marketing campaigns. Prior to joining the Company, Ms. Perez served for 15 years
as a manager for Simon Bolivar International, a specialty advertising firm.
STEPHEN C. RICHARDS is Executive Vice President and Chief Financial
Officer of Network Associates, Inc. (Nasdaq: NETA), a provider of network
security and availability solutions for e-business. Previously he served as
Chief Online Trading Officer of E*TRADE Group, Inc., a position he held from
March 1999 to June 2000. From 1998 to February 1999, Mr. Richards served as
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Senior Vice President, Corporate Development and New Ventures at E*TRADE,
following two years as E*TRADE's Senior Vice President of Finance, Chief
Financial Officer and Treasurer. Prior to joining E*TRADE in April 1996, Mr.
Richards was Managing Director and Chief Financial Officer of Correspondent
Clearing at Bear Stearns & Companies, Inc., where he was employed for more than
11 years. He is also a former Vice President/Deputy Controller of Becker
Paribas, and former First Vice President/Controller of Jefferies and Company,
Inc. Mr. Richards also serves as a director of McAfee.com Corporation (Nasdaq:
MCAF), a provider of online PC management products and services, and Archipelago
LLC, a leading electronic communication network (ECN). He received a Bachelor of
Arts in Statistics and Economics from the University of California at Davis and
an MBA in Finance from the University of California at Los Angeles. Mr. Richards
is a Certified Public Accountant. Mr. Richards became a director of the Company
in August 1999, at which time he was also elected to the Compensation Committee
and the Audit Committee of the Board of Directors. He serves as Chairman of the
Audit Committee.
ROGER L. SHAFFER was appointed Vice President of Brokerage Compliance
of the Company in December 2000. Prior to that, commencing June 1999, he served
as General Counsel and Vice President of Business Development of TradeStation
Securities. From May 1995 to June 1999, Mr. Shaffer was a partner in the law
firm of Shaffer & Shaffer, P.A., where he limited his practice to business and
corporate transactions. Prior to that time, from 1988 to 1992, Mr. Shaffer was
an assistant controller for various privately held companies within the real
estate and securities industries. Mr. Shaffer received his law degree from the
University of Miami School of Law, being conferred cum laude, and received his
bachelor's degree in finance from Florida Atlantic University, graduating with
honors.
BRIAN DOUGLAS SMITH, currently retired, served from 1990 to 1996 as
President of Data Broadcasting Corporation (DBC), a leading provider of
financial market data services to the individual investor market. Prior to
becoming President of DBC, Mr. Smith, since 1983, held several key positions
with DBC and its predecessor companies. Prior to that, Mr. Smith worked for 13
years for General Electric Company in engineering, sales and management
positions, and for Texas Instruments in engineering. Mr. Smith also served as
Chief Executive Officer of Mobile Broadcasting Corp., a wireless communications
company, from December 1996 to December 1997. Mr. Smith became a director of the
company in December 1997, and was elected to the Compensation Committee and the
Audit Committee of the Board of Directors in January 1998. Mr. Smith is retiring
from his service to the Board and, therefore, has not been slated for
reelection.
MARC J. STONE joined the Company in May 1997 as its Vice President of
Corporate Development, General Counsel and Secretary. In December 2000, Mr. Stone became a director of TradeStation Securities, and continuesalso serves as a
director of TradeStation Technologies.the Company's two operating subsidiaries. From January 1993 to May
1997, Mr. Stone was a partner at a predecessor law firm of Bilzin Sumberg Dunn
Baena Price & Axelrod LLP, which currently serves as the company'sCompany's regular
outside counsel. Prior to that time, from 1985 to 1992, Mr. Stone was an
associate with that predecessor law firm. Mr. Stone is of counsel to Bilzin
Sumberg. Mr. Stone has bachelor's degrees in English and American Literature and
Theatre Arts and Dramatic Literature from Brown University, and received his law
degree from University of California (Boalt Hall) School of Law at Berkeley. Mr.
Stone is a member of the Bar of the State of New York, The Florida Bar, the
American Bar Association and the New York State Bar Association.
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FARSHID TAFAZZOLI becameSTEPHEN C. RICHARDS is Chief Operating Officer and Chief Financial
Officer of Network Associates, Inc. (NYSE:NET), a directorprovider of network security
and availability solutions for e-business. He served as Chief Online Trading
Officer of E*TRADE Group, Inc., a position he held from March 1999 to June 2000.
From 1998 to February 1999, Mr. Richards served as Senior Vice President,
Corporate Development and New Ventures at E*TRADE, following two years as
E*TRADE's Senior Vice President of Brokerage
Technology of the Company in December 2000,Finance, Chief Financial Officer and
continues as a director of its
operating subsidiary, TradeStation Securities.Treasurer. Prior to that,joining E*TRADE in April 1996, Mr. Tafazzoli
served as a directorRichards was Managing
Director and Chief InformationFinancial Officer of onlinetradinginc.com
corp.Correspondent Clearing at Bear Stearns &
Companies, Inc., the securities brokerage firm thatwhere he co-founded in September 1995was employed for more than 11 years. He is also a
4
former Vice President/Deputy Controller of Becker Paribas, and that is now owned by the Company.former First Vice
President/Controller of Jefferies and Company, Inc. Mr. Tafazzoli has over six years experience as
a systems specialist in the brokerage industry, including positions with Spear,
Leads and Kellogg and Gulfstream Partners. Mr. Tafazzoli has a Bachelor of
Science degree in Administrative Studies from Nova Southeastern University.
E. STEVEN ZUM TOBEL became a director and Vice President of Brokerage
Operations of the Company in December 2000, andRichards also serves as
a director of its
operating subsidiaries. Prior to December 2000,McAfee.com Corporation (Nasdaq:MCAF), a provider of online PC
management products and services. He received a Bachelor of Arts in Statistics
and Economics from the University of California at Davis and an MBA in Finance
from the University of California at Los Angeles. Mr. zum Tobel served as a
director and President of onlinetradinginc.com corp., the securities brokerage
firm acquired by the Company. Mr. zum Tobel has been with TradeStation
Securities since March 1998. Mr. zum Tobel has over 12 years experience in the
brokerage industry with areas of expertise in financial reporting, compliance
and operations, including serving from September 1996 to February 1998 as
managing partner of zum Tobel and Ling, LLP, an audit and tax practice
specializing in the brokerage industry, and from December 1994 to August 1996 as
Vice President of Securities Consultants International LLC, a national brokerage
consulting firm. Mr. zum TobelRichards is a Certified
Public Accountant. Mr. Richards became a director of the Company in August 1999,
at which time he was also elected to the Compensation Committee and the Audit
Committee of the Board.
CHARLES F. WRIGHT is the Chairman of Fall River Group, Inc., which owns
and operates a group of foundries in Wisconsin. He has been Chairman since 1984,
and has been associated with Fall River Group since 1973. He is also the
Chairman and a Principal of Fall River Capital, LLC, an investment advisory firm
that specializes in the trading of global financial and natural resource
futures. He has held these positions since 1999. Since 1997, Mr. Wright has also
been Chairman and a co-owner of Quaestus & Co., Inc., a merchant banking firm
located in Milwaukee, Wisconsin. Since 2001 he has been Chairman and co-owner of
Kilbourn Capital Management, Inc., which manages the Kilbourn Diversified
Strategy Fund, a hedge Fund of Funds. From 1992 until its acquisition by Cumulus
Media, Inc. in 1997, Mr. Wright served as Chairman of Caribbean Communications
Company Ltd., a developer and operator of a radio network throughout the
English-speaking Caribbean Islands. Mr. Wright serves as Chairman of Goodwill
Industries of Southeastern Wisconsin and Metropolitan Chicago, President of
Second Harvest Food Bank Foundation, a member of the Greater Milwaukee
Committee, and a director of the Private Industry Council of Milwaukee County.
Mr. Wright is registered with the CFTC and the NFA as a Commodity Trading
Advisor, and holds a Master's Degree in Business Administration from Harvard
University Graduate School of Business. Mr. Wright became a director of the
Company in June 2001, at which time he was also elected to the Compensation
Committee and Audit Committee of the Board. Mr. Wright has occasionally
performed consulting services for the Company under a 3-year agreement that
expires October 9, 2002. All compensation payable under that agreement was paid
in 1999, two years before he joined the Board.
MICHAEL W. FIPPS joined the Board, and became a member of the Audit
Committee, in March 2002. In April 2002 he joined Endeavor Pharmaceuticals, a
privately-held specialty pharmaceutical company, as Director of Finance. Prior
to that, from October 1997, he was semi-retired, working occasionally as an
independent consultant. From December 1998 through April 2000, he worked as an
independent consultant in association with Connally and Associates, a profit
recovery firm. Prior to that, from June 1994 to October 1997, he served as Chief
Financial Officer and Senior Vice President of IVAX Corporation, a publicly-held
pharmaceutical company. Before joining IVAX, Mr. Fipps served as Vice
President-Finance and Treasurer of Bergen Brunswig Corporation, a large
wholesale distributor of prescription pharmaceuticals and other health care
products, from 1973 to 1994. Mr. Fipps is a Certified Public Accountant and a
member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants. He has a bachelor'sbachelor of arts
degree in Finance and an MBA with a concentration in Finance from Florida Atlantic University.University of North Carolina.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held fivesix meetings and acted by unanimous written consent in
lieu of a meeting four times during the fiscal year ended December 31, 2000.
Effective as of the closing of the December 29, 2000 merger,2001.
The Board currently includes three (3) nonemployee, independent members
("Independent Directors, Brian D. Smith,Directors"), Stephen C. Richards, Charles F. Wright and Lothar Mayer,
have servedMichael W.
Fipps, all of whom serve on the Board of Directors of TradeStation Group. All three serve as
members of the Audit Committee of the Board of Directors.Board. The Audit
5
Committee's responsibilities and other matters related to the Audit Committee
are discussed in "Audit Committee Report" below.
Messrs.Mr. Richards and SmithMr. Wright also serve on the Compensation Committee of
the Board of Directors.Board. The Compensation Committee determines executive officers' salaries
and bonuses and administers the Company's Incentive Stock Plan and Employee
Stock Purchase Plan. The Compensation Committee held fivetwo meetings and the Co-Chief Executive Officers acted on behalfby
unanimous written consent in lieu of the Compensation
Committee fivea meeting four times during the fiscal year
ended December 31, 2000.
During 2000 prior to the merger, Messrs. Smith and Richards, and
Salomon Sredni, the President and Chief Operating Officer of the Company, served
on the Audit Committee, and Messrs. Smith and Richards served on the
Compensation Committee, of the Company's Board of Directors.2001.
The Board of Directors does not currently have a nominating committee or a committee
that performs similar functions.
8
11
DIRECTORS' COMPENSATION
The Company's Independent Directors receive $750 for attendance at each
meeting of the Board of Directors and, each committeeif held on a separate date, committees thereof, with
an additional $150 paid to the Chairmanchairman of the committee.committee meeting, provided that
it is chaired by an Independent Director. Pursuant to theour Nonemployee Director
Stock Option Plan, each Independent Director also receives an optionoptions to purchase
up to 75,000 shares of Common Stock upon initial election as a director, of the Company
as
determined by the Company's Board of Directors at such time, and subject to
the proposed amendment, an optionoptions to purchase 3,0007,000 shares of
Common Stock upon each re-election as an Independent Director at the Company's
annual meeting of shareholders. See "EXECUTIVE COMPENSATION --- Other
Compensation Arrangements--Nonemployee Director Stock Option Plan.Arrangements - NONEMPLOYEE DIRECTOR STOCK OPTION PLAN." All
directors may also be reimbursed for certain expenses in connection with
attendance at Board of
Directors and committee meetings. Other than with respect to
reimbursement of expenses, directors who are employees or officers of the Company dodid not
receive, and have never received, additional compensation for service as a
director. In connection with the
election of a new Independent Director to replace Mr. Smith, it is contemplated
that such new director will receive an option to purchase 25,000 shares of
Common Stock upon and subject to his election as a director of the Company at
the Annual Meeting. See Proposal 1 - "ELECTION OF DIRECTORS." The vesting of Mr.
Smith's options will, pursuant to the applicable provisions of the Nonemployee
Director Stock Plan and resolutions authorized by the Board of Directors, be
100% accelerated upon his retirement from the Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires officers (as defined under the Company's officersExchange Act) and
directors, and persons who own more than ten percent of a registered class of thea
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company and the Company's understanding that no Forms 5 were required, the
Company believes that during the fiscal year ended December 31, 20002001 all Section
16(a) filing requirements applicable to itsthe Company's officers, directors and
greater than ten-percentten percent beneficial owners were satisfied.satisfied, except that a Form 4
for Mr. Wright, one of the Company's Independent Directors, who made one
purchase of the Company's shares of Common Stock in September 2001, was, due to
an oversight, filed a few days late.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of the Company is composed of three
Independent Directors, Stephen C. Richards (Chairman), Brian
D. SmithCharles F. Wright and
Lothar Mayer,Michael W. Fipps, and operates under a written charter adopted by the Board which is attached as Appendix A to this Proxy Statement. Prior to the
December 29, 2000 merger, Salomon Sredni, President and COO of the Company,
served on the Audit Committee until replaced by Mr. Mayer upon closing of the
merger.Board. The
Audit Committee held fourfive meetings during fiscal year 2000.in 2001. The Board and the Audit Committee
believe that the Audit Committee's current member composition satisfies the
current rule of the National Association of Securities Dealers, Inc. that
governs audit committee composition, including the requirement that audit
6
committee members all be "independent directors" as that term is defined by NASD
Rule 4200(a)(14). The Audit Committee oversees the Company's financial reporting
process on behalf of the Board and reviews the independence of the Company's
auditors.
9
12
Management is responsible for the Company's financial statements,
systems of internal control and the financial reporting process. The independent
auditors are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and to issue a report thereon. The Audit Committee's responsibility is
to monitor and oversee these processes.
The Audit Committee has implemented procedures to ensure that during
the course of each fiscal year it devotes the attention it deems necessary or
appropriate to fulfill its oversight responsibilities under the Audit
Committee's charter. In this context, the Audit Committee has discussed with the
independent auditors, Arthur
Andersen LLP (the Company's independent auditors until replaced by Ernst & Young
LLP on May 13, 2002), the results of theirits examination, theirits evaluation of the
Company's internal controls, and the overall quality of the Company's financial
reporting.reporting for the year ended December 31, 2001.
Specifically, the Audit Committee has reviewed and discussed the
audited financial statements with the Company's management. In addition, the
Audit Committee has discussed with Arthur Andersen LLPthe independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committee," as amended, and any other matters required to be discussed
under generally accepted auditing standards. These discussions included the
scope of the auditors' responsibilities, significant accounting adjustments, any
disagreement with management and a discussion of the quality (not just the
acceptability) of accounting principles, reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
Arthur Andersen LLP hasThe independent auditors provided the Audit Committee with the written
disclosures and the letter required by Independence Standards Board No. 1,
"Independence Discussions with Audit Committees," and the Audit Committee
discussed with the independent auditors that firm's independence from the
Company and its management. During fiscal year 2000,2001, the Company retained its
then principal independent auditors, Arthur Andersen LLP, for the audit of the
fiscal year 20002001 and the reviews of the Company's 20002001 quarterly reports on FormsForm
10-Q.
Arthur Andersen LLP did not render any services related to financial information
systems design and implementation for the fiscal year ended December 31, 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 20002001 for filing with the SEC.
During the Company's 2001 fiscal year, Arthur Andersen LLP performed
services for the Company for fees and expenses as follows:
1. Audit Fees (including Review Fees) $115,500
2. Financial Information Systems Design and Implementation $ 0
3. All Other Fees $ 0
On May 13, 2002, Ernst & Young LLP replaced Arthur Andersen LLP as the
Company's independent public accountants. This engagement, which was recommended
by the Audit Committee and unanimously approved by the Board, followed a period
during which the Company sought and received proposals from independent
accountants for the audit of the Company's financial statements for the current
fiscal year. The Company selected Ernst & Young LLP over other
nationally-recognized accounting firms that made proposals based upon the Audit
7
Committee and Chief Financial Officer's judgment that this was the best choice
in light of relevant factors, including depth of experience, breadth of
resources, ability to handle transitional issues, and location of key personnel.
Neither report of Arthur Andersen LLP on the financial statements of the Company
for the 2000 and 2001 fiscal years contained an adverse opinion, or was
qualified or modified as to uncertainty, audit scope or accounting principles.
There were no disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
Submitted by the Audit Committee of the Board of Directors.
Stephen C. Richards, Chairman
Brian D. Smith
Lothar Mayer
10
13Charles F. Wright
Michael W. Fipps
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has established a Compensation Committee
consisting solely of Independent Directors. See "DIRECTORS AND EXECUTIVE
OFFICERS - Board Meetings and Committees of the Board" for a discussion of the
Compensation Committee and its responsibilities.
GENERAL COMPENSATION PHILOSOPHY
The Compensation Committee's strategy is to develop and implement an
executive compensation program that allows the Company to attract and retain
highly-qualified persons to manage the Company in order to enhance shareholders'
value.share value
of the Company's capital stock in a dedicated and responsible manner. The
objectives of this strategy are to provide a compensation policy that permits
the recognition of individual contributions and achievements as well as the
Company's operating results. Within this strategy, the Compensation Committee
considers it essential to the vitality of the Company to maintain levels of
compensation opportunity that are competitive with companies in the Company's
industry.
EXECUTIVE COMPENSATION
Executive compensation is comprised of base salary, potential annual
bonus compensation and long-term incentive compensation in the form of stock
options.
BASE SALARIES
Base salary levels for executive officers are designed to be consistent
with competitive practice and level of responsibility, although the Co-Chief
Executive Officers' base salary level in 20002001 was below market levels. The
Compensation Committee's strategy in general is to provide a competitive salary
for each executive officer with such salary increasing based on individual
performance, the Company's operating results, and changes in responsibility (if
applicable) and competitive markets.
8
ANNUAL BONUS COMPENSATION
During fiscal year 2000,2001, none of the executive officers received an
annual bonus from the Company (although two executive officers ofCompany. In 2002, the Company
who were executive officers of onlinetradinginc.com corp. priorPresident and Chief Financial
Officer each received a $20,000 bonus related to the December
29, 2000 merger did receive annual performance bonuses from onlinetradinginc.com
corp. based upon its pre-merger operating results).2001 performance. The
Compensation Committee's strategy is to provide an annual bonus for executive
officers that is strongly linked to the Company's operating performance. The
Compensation Committee believes that this strategy is consistent with the
approach typically taken by companies in high-tech industries. See "Other
Compensation Arrangements - Executive Officer Bonus Plan" for a discussion of
the Company's bonus plan for executive officers for fiscal year 2001.
LONG-TERM INCENTIVE COMPENSATION
The Compensation Committee believes that the use of equity-based
long-term compensation plans directly links executive officers' interests to
enhancing shareholders'share value. Stock options are an integral part of the Company's
executive compensation program in order to align the interests of the executive
officers with the interests of the Company's shareholders. Stock
11
14 option
compensation bears a direct relationship to corporate performance in that, over
the long term, share price appreciation depends upon corporate performance, and
without share price appreciation the stock options are of no value. Stock option
grants are generally provided to executive officers as a part of their initial
compensation package upon becoming an employee of the Company, and/or upon being
promoted, at levels commensurate with their experience and responsibility. In
addition, stock options are considered at least annually by the Compensation
Committee for all executive officers. In that regard, the Company awarded stock
options pursuant to its Incentive Stock Plan to executive officers of the
Company (other than the Co-Chief Executive Officers) during fiscal years 1998, 1999,
2000 and 20002001 as described in "Executive Compensation Tables - SUMMARY
COMPENSATION TABLE" and "- OPTION GRANTS IN 20002001 FISCAL YEAR."
Submitted by the Compensation Committee of the Board of Directors.
Brian D. Smith,Board.
Charles F. Wright, Chairman
Stephen C. Richards
EXECUTIVE COMPENSATION TABLES
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to all compensation
paid or earned for services rendered to the Company in the three years ended
December 31, 20002001 by the Company's Co-Chief Executive Officers and the fourits three
other most highly compensatedhighly-compensated executive officers (who, as a group, comprise all
of the executive officers of the Company) whose aggregate annual compensation
for 20002001 exceeded $100,000 as well as one additional individual
who would have been included in the four other most highly compensated executive
officers but for his not having served as an executive officer as of December
31, 2000 (together, the "Named Executive Officers"). The
Company did not have a pension plan or a long-term incentive plan, had not
issued any restricted stock awards and had not granted any stock appreciation
rights as of December 31, 2000.2001. The value of all perquisites and other personal
benefits received by each Named Executive Officer did not exceed 10% of the
Named Executive Officer's total annual compensation.
9
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------------------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (1) (#) SATION ($)
- --------------------------- ------- ---------------- ---------- --------------- ----------------
William R. Cruz......................... 20002001 $ 150,000 $ -- -- $ --
Co-Chief Executive Officer 1999 150,000 -- -- $ 5,400 (2)
1998 150,000 -- -- --
Ralph L. Cruz........................... 2000 150,000 -- -- --
Co-Chief Executive Officer
1999 150,000 -- -- 5,400 (2)
1998Ralph L. Cruz........................... 2001 $ 150,000 -- -- $ --
Co-Chief Executive Officer 2000 150,000 -- -- --
1999 150,000 -- -- 5,400 (2)
Salomon Sredni.......................... 2001 $ 238,208 $ 20,000 80,000 $ --
President and Chief Operating 2000 237,000 -- 60,000 --
President and Chief OperatingOfficer 1999 193,636 $ 25,000 100,000 6,000 (2)
David H. Fleischman..................... 2001 (3) $ 181,945 (3) $ 20,000 75,000 --
Chief Financial Officer, 1998 165,000 10,000 150,0002000 -- Farshid Tafazzoli....................... 2000 204,944 80,200-- -- --
Vice President of Brokerage TechnologyFinance 1999 193,333 -- -- -- 1998 72,000 293,100 --
--
12
15
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- -------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (1) (#) SATION ($)
- --------------------------- ------- ---------------- ---------- --------------- ----------------
and Treasurer
Marc J. Stone........................... 2000 197,2502001 $ 198,017 -- 40,000 --
Vice President of Corporate 2000 197,250 -- 40,000 --
Development, General Counsel 1999 186,323 -- -- --
Development, General Counsel 1998 165,000 10,000 130,000 --
and Secretary
E. Steven zum Tobel..................... 2000 147,500 80,200 -- --
Vice President of Brokerage Operations 1999 120,000 -- -- --
1998 (3) 60,000 55,000 -- 26,000 (4)
Andrew Allen............................ 2000 205,500 -- -- 200,000 (5)
Former Chief Executive Officer of 1999 200,000 -- -- --
TradeStation Securities 1998 74,000 525,000 -- --
- ------------------------------
(1) Represents shares of common stockCommon Stock issuable upon the exercise of options
granted under the Company's Incentive Stock Plan.
(2) Represents 401(k) Plan Company contributions on behalf of the Named
Executive Officer during the indicated year, but paid out during the
subsequent year.
(3) Mr. zum TobelFleischman began his employment with TradeStation Securities in March
1998.
(4) Represents the value of shares issued in conjunction with Mr. zum Tobel's
employment.
(5) Represents severance paid to Mr. Allen upon termination of his employment
in conjunction with the December 29, 2000 merger. Mr. Allen is to receive
two additional $200,000 severance payment installments, one December 29,
2001 and one December 29, 2002.Company on February 1, 2001.
OPTION GRANTS IN 20002001 FISCAL YEAR
The following table summarizes the options that were granted during the
fiscal year ended December 31, 20002001 to the Named Executive Officers.
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------------------- POTENTIAL REALIZABLERELIAZABLE
PERCENT OF VALUE AT ASSUMEDANNUAL RATE OF
NUMBER TOTAL ANNUAL RATE OFVALUE AT
OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE MARKET VALUE AT APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISEOR BASE PRICE GRANT-DATE OPTION TERM(1)
OPTIONS IN FISCAL OR BASEYEAR PRICE ON GRANT EXPIRATIONEXPPIRATION MARKET ---------------------------------------
NAME GRANTED (#)(2) YEAR (%) PRICE ($/SH)(3) DATE ($/SH) DATE PRICE 0% (3)($)(3) 5% 10%
- ---- -------------- ------------- --------------------------- ------------ ----------- ---------- -------------------------- -------------- -------- --------------------
William R. Cruz....Cruz -- -- -- -- -- -- -- --
Ralph L. Cruz......Cruz -- -- -- -- -- -- -- --
Salomon Sredni..... 60,000 (4) 5%Sredni 80,000 6% $ 6.632.13 $ 6.6252.50 1/15/102/11 $ 29,600 $155,379 $348,348
David H. Fleischman 75,000 6% 3.07 3.00 1/31/11 -- $ 249,686 $ 633,213
Farshid Tafazzoli.. -- -- -- -- -- -- -- --136,251 353,342
Marc J. Stone......Stone 40,000 (4) 4% 6.63 6.6253% 2.13 2.50 1/15/10 -- 166,457 422,142
E. Steven zum Tobel -- -- -- -- -- --
Andrew Allen....... -- -- -- -- -- -- -- --2/11 14,800 77,689 174,174
- -----------------------------------------
(1) Potential realizable value is based on the assumption that the Common Stock
price appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the option term. The amounts have been
calculated based on the requirements promulgated by the SEC. The actual
value, if any, a Named Executive Officer may realize will depend on the
excess, if any, of the stock price over the exercise price on the date the
option is exercised (if the executive officer were to sell the shares on
the date of exercise), so there is no assurance that the value realized, if
any, will be at or near the potential realizable value as calculated in
this table.
13
16
(2) These options vest and become exercisable ratably on an annual basis over
five years, beginning on the anniversary of the date of grant date, and
have a term of ten years from the date of grant, subject to acceleration
under certain circumstances.
10
(3) For purposes of andAll options were granted at "fair market value" as provideddefined under the
Incentive Stock Plan, "fair
market value" on the date of grant of any optionwhich is the average of the high and low sales prices
of a share of Common Stock on The Nasdaq National Market on the trading day
immediately preceding the date of grant. The Compensation Committee
believes this calculation more accurately reflects "fair market value" of
the Common Stock on any given day as compared to simply using the closing
market price on the date of grant. As a result, the closing market price on
the date of grant at
times may be different than the exercise price per share.
(4) Options become exercisable in one-fifth increments on January 16, 2001,
2002, 2003, 2004, and 2005.
AGGREGATED OPTION EXERCISES IN 20002001 FISCAL YEAR
AND 20002001 FISCAL YEAR-END OPTION VALUES
The following table provides information regarding the value of all options
exercised during 20002001 by the Named Executive Officers and of all unexercised
options held at December 31, 20002001 by the Named Executive Officers measured in
terms of the closing market price of the Common Stock on December 31, 2000.2001.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 20002001 (#) DECEMBER 31, 20002001 ($)(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXCERCISABLEUNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- --------------- ------------ -------------- ------------ ------------------------- -------------
William R. Cruz.......Cruz -- -- -- -- -- --
Ralph L. Cruz.........Cruz -- -- -- -- -- --
Salomon Sredni........Sredni -- -- 172,000 258,000 $ 71,020 $ 30,905
Farshid Tafazzoli.....262,000 248,000 $37,200 --
David H. Fleischman -- -- -- --75,000 -- --
Marc J. Stone.........Stone -- -- 94,000 146,000 $ 7,770 $ 11,655
E. Steven zum Tobel... -- -- -- -- -- --
Andrew Allen.......... -- -- -- --142,000 138,000 -- --
- -------------------------------
(1) Based on a per share price of $1.9375$1.56 on December 31, 2000,2001, which was the
closing market price of the Common Stock on the last day of the 20002001 fiscal
year.
EQUITY COMPENSATION PLAN INFORMATION
The following sets forth information as of December 31, 2001 with
respect to compensation plans under which the Company's Common Stock is
authorized for issuance:
--------------------------- ------------------------------- ------------------------------- ---------------------------
Plan category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding options, remaining available for
outstanding options, warrants warrants and rights future issuance under
and rights equity compensation plans
(excluding securities
reflected in column (a))
(a) (b) (c)
--------------------------- ------------------------------- ------------------------------- ---------------------------
Equity compensation plans
approved by security
holders 5,744,666 $3.49 3,017,780
--------------------------- ------------------------------- ------------------------------- ---------------------------
Equity compensation plans
not approved by security
holders -- -- --
--------------------------- ------------------------------- ------------------------------- ---------------------------
Total 5,744,666 $3.49 3,017,780
--------------------------- ------------------------------- ------------------------------- ---------------------------
11
OTHER COMPENSATION ARRANGEMENTS
EXECUTIVE OFFICER BONUS PLANPLAN. The Compensation Committee has authorizedof the Company
put in place an incentive bonus compensation program for certain executive
officers of the Company.Company for the 2001 and 2002 fiscal years. Under the program,
an executive officer will beis eligible to earn an annual bonus for 2001
of up to 20%a certain
percentage of his or her base salary. To be eligible for anyawarded a bonus in the Company's total revenues for 2001 must be at least 90% of the amount projectedprogram, certain
numbers contained in the Company's internal incentive budget. If that occurs, the Company's 2001
net lossbudget need to be met, or net income, if it achieves certain levels, will determine if the
executives are eligible for bonuses of
an amount between 5% to 20% of their
respective 2001 base salaries. The actual bonuses will then equal 25%, 50% or
100%may be paid as determined by, and in the discretion of, the
eligible amount, based upon certain other criteria evaluated byCompensation Committee. These internal incentive budget numbers were not met in
2001, however, the Compensation Committee decided that a $20,000 annual bonus
was appropriate for the President of the Company.and Chief Financial Officer.
INCENTIVE STOCK PLAN
ThePLAN. Pursuant to the Company's Incentive Stock Plan, pursuant to which
officers, employees and nonemployee consultants may be granted stock options,
stock appreciation rights, stock awards, performance shares and performance
units,
became operative December 29, 2000 upon closing of the merger and the Company's
14
17
assumption of TradeStation Technologies' Amended and Restated 1996 Incentive
Stock Plan, as amended. Each option issued under TradeStation Technologies' plan
was assumed and converted to one option to purchase the Company's Common Stock
at the original exercise price.units. The authorized number of shares of Common Stock for issuance under the
Incentive Stock Plan is 7,500,000, (which includes 245,839
shares already issued under the predecessor company's plan), subject to future antidilution adjustments.
As of December 31, 2000,2001, options to purchase 3,981,0444,817,265 shares were outstanding
and 3,273,1172,416,551 shares were available for issuance under the Company's Incentive
Stock Plan.
The Incentive Stock Plan is administered by the Compensation Committee
of the Board, of Directors, whose members must qualify as "nonemployee directors" (as such
term is defined in Rule 16b-3 under the Exchange Act). The Compensation
Committee is authorized to determine, among other things, the employees to whom,
and the times at which, options and other benefits are to be granted, the number
of shares subject to each option, the applicable vesting schedule and the
exercise price (provided that, for incentive stock options, the exercise price
shall not be less than 100% of the fair market value of the Common Stock on the
date of grant). The Compensation Committee also determines the treatment to be
afforded to a participant in the Incentive Stock Plan in the event of
termination of employment for any reason, including death, disability or
retirement, or change in control. Under the Incentive Stock Plan, the maximum
term of an incentive stock option is ten years and the maximum term of a
nonqualified stock option is fifteen years.
The Compensation Committee may delegate to the Company's Co-Chief
Executive OfficersCo-CEOs the
authority to grant options under the Incentive Stock Plan to employees (other
than officers) of the Company identified by the Co-Chief
Executive Officers.Co-CEOs. The Compensation
Committee has historically delegated to the Co-Chief Executive OfficersCo-CEOs the authority to grant
options covering up to 250,000 shares of common stockCommon Stock per annum, and retains the
ability to revoke the delegation at any time. No such authority is currently
delegated to the Co-Chief
Executive Officers.Co-CEOs.
The Board of Directors has the power to amend the Incentive Stock Plan from time to
time. Shareholder approval of an amendment is currently only required to the
extent that it is necessary to maintain the Incentive Stock Plan's status as a
protected plan under applicable securities laws or as a qualified plan under
applicable tax laws.
TRADESTATION SECURITIES ASSUMED OPTIONSOPTIONS. In connection with the
December 29, 2000 merger acquisition of TradeStation Securities, the Company
assumed the outstanding options under TradeStation Securities' 1999 incentive
stock plan. Each option issued under TradeStation Securities' plan was assumed
and converted to 1.7172 options to purchase the Company's Common Stock at the
original exercise price divided by 1.7172. As of December 31, 2000,2001, options to
purchase 792,895706,952 shares were outstanding.
12
WINDOW ON WALLSTREET ASSUMED OPTIONSOPTIONS. In October 1999, in connection
with the Company's merger acquisition of Window On WallStreet, TradeStation
Technologies assumed all outstanding stock options to purchase Window On
WallStreet common stock ("WOW Options"), which, based on an exchange ratio of
.210974..210974 shares of the TradeStation Technologies'Technologies common stock for each share of
Window On WallStreet common stock, were exercisable at the time of assumption
for an aggregate of 182,529 shares of common stock (82,783 shares of common
stock at an exercise price of $.48 per share, and 99,746 shares of common stock
at an exercise price of $8.06 per share). The WOW Options generally vest ratably
over a four-year period and their terms are ten years. After giving effect to
the company'sCompany's assumption of the WOW 15
18
Options pursuant to the Company's December
29, 2000 merger acquisition of TradeStation Securities, as of December 31, 20002001
there were 163,449 WOW Options outstanding.
NONEMPLOYEE DIRECTOR STOCK OPTION PLANPLAN. The Company's Nonemployee
Director Stock Option Plan, pursuant to which initial and annual grants of
nonqualified stock options are made to each Independent Director, became
operative December 29, 2000 upon the closing of the merger by, on that date,
assumption of the TradeStation Technologies'Technologies Nonemployee Director Stock Option
Plan and all options and option agreements issued thereunder. Upon initial
election to the Board, of Directors, each Independent Director may be granted an optionoptions to
purchase up to 75,000 shares of Common Stock as determined by the Board of Directors at such
time. Upon each reelectionre-election to the Board of
Directors at the annual meeting of shareholders,
each Independent Director will subject to the proposed amendment, be automatically granted an additional optionoptions to purchase 3,0007,000
shares of Common Stock. Each option will be granted at an exercise price equal
to the fair market value of the common stockCommon Stock on the date of grant. The Company
has subject to the proposed amendment, reserved 175,000350,000 shares of common stockCommon Stock for issuance under the Nonemployee
Director Stock Option Plan, subject to antidilution adjustments. Options granted
to date have a term of five years and vest in equal installments over three
years. As of December 31, 2000,2001, options to purchase 53,00057,000 shares were
outstanding and 47,000218,000 shares were available for issuance under the Nonemployee
Director Stock Option Plan.
For a summary of all ofThe Board has the material terms ofpower to amend the Nonemployee Director Stock Option
Plan andfrom time to time. Shareholder approval of an amendment is currently only
required to the extent that it is necessary to maintain the Nonemployee Director
Stock Option Plan's status as a discussion of the proposed amendment to suchprotected plan increasing to
350,000 the number of shares reserved for issuance and increasing to 7,000 the
number of shares included in the options automatically granted to an Independent
Director upon each annual reelection, which is to be voted upon at the Annual
Meeting, see "Proposal 2 - APPROVAL OF AMENDMENT TO THE TRADESTATION GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN."under applicable securities laws.
OUTSTANDING OPTIONSOPTIONS. As of December 31, 2000,2001, options to purchase a
total of 4,990,3885,744,666 shares were outstanding under all stock option plans
(inclusive of all options assumed under the plans discussed above), of which
options to purchase 1,121,639865,000 shares had been granted to executive officers (including one former executive
officer).officers.
During 2000,2001, options granted to executive officers totaled options to purchase
236,516195,000 shares of Common Stock, which were granted at exercise prices ranging
from $2.66$2.13 to $6.63$3.07 per share. In general, options granted under the Incentive
Stock Plan and the other incentive stock plans described above vest at the rate
of 20% per year and have a total term of ten years (except for the WOW Options,
which vest ratably over four4 years). Options which have been granted under the
Incentive Stock Plan to certain executive officers may immediately vest and
become exercisable upon termination of employment due to death or permanent
disability, or, underin certain circumstances, upon a sale or a change in control
of the Company.circumstances. The options to purchase the shares
granted and assumed under theall plans discussed above that were outstanding as of
December 31, 20002001 have a weighted average exercise price of $3.90$3.49 per share.
EMPLOYEE STOCK PURCHASE PLANPLAN. The Employee Stock Purchase Plan became operative December 29, 2000
upon the closing of the merger and the assumption of TradeStation Technologies'
Employee Stock Purchase Plan. TheCompany's Employee Stock Purchase
Plan provides for the
16
19 issuance of a maximum of 500,000 shares of Common Stock
pursuant to the exercise of nontransferable options granted to participating
employees. The Employee Stock Purchase Plan is administered by the Compensation
Committee of the Board of Directors.Board.
13
All employees whose customary employment is more than 20 hours per week
and more than five months in any calendar year and who have completed at least
three months of employment are eligible to participate in the Employee Stock
Purchase Plan. Employees who would immediately after the grant own 5% or more of
the total combined voting power or value of the Company's stock,Common Stock, and the
Independent Directors, may not participate in the Employee Stock Purchase Plan.
To participate in the Employee Stock Purchase Plan, an employee must authorize
the Company to deduct an amount (not less than one percent noror more than ten
percent of a participant's total cash compensation) from his or her pay during
six-month periods (each, a "Plan Period"). The maximum number of shares of
Common Stock an employee may purchase in any Plan Period is 500 shares. The
exercise price for the option for each Plan Period is 85% of the lower of the
market price of the Common Stock on the first and last business day of the Plan
Period. If an employee is not a participant on the last day of the Plan Period,
such employee is not entitled to exercise his or her option, and the amount of
his or her accumulated payroll deductions will beis refunded. An employee's rights
under the Employee Stock Purchase Plan terminate upon his or her voluntary
withdrawal from the Employee Stock Purchase Plan or upon termination of
employment. The first Plan Period (giving effect to the assumption of the predecessor company's plan) began January 1, 1998. During the years ended
December 31, 2001, 2000 and 1999, 50,470, 30,209 and 1998,
30,210, 23,585 and 12,506 shares,
respectively, of Common Stock were issued under the plan at average prices of
$1.49, $2.07 $3.27 and $3.06,$3.27, respectively. As of December 31, 2000,2001, there were
433,699383,229 shares available for issuance under the Employee Stock Purchase Plan.
The Board of Directors has the power to amend or terminate the Employee Stock
Purchase Plan. Shareholder approval of an amendment is currently only required
to the extent that it is necessary to maintain the Employee Stock Purchase
Plan's status as a protected plan under applicable securities laws or as a
qualified plan under applicable tax laws.
401(k) PLANPLAN. The Company has a defined contribution retirement plan
which complies with Section 401(k) of the Internal Revenue Code. All employees
with at least three months of continuous service are eligible to participate and
may contribute up to 15% of their compensation. Company contributions are vested
20% for each year of service. Matching contributions accrued under the 401(k)
Plan amounted to approximately $242,000 in 1999. There were no matching
contributions accrued in 20002001 or 1998.2000.
EMPLOYMENT AGREEMENTS
Historically, the Company has entered into employment agreements with
officers solely in connection with mergers and acquisitions pursuant to which an
officer of the acquired company is already a party to an existing employment
agreement with the acquired company and then continues as one of the Company's
officers. These employment agreements with those who are currently executive
officersNo current employee of the Company consist of the following:
In connection with the December 29, 2000 merger with TradeStation
Securities, Farshid Tafazzoli, Vice President of Brokerage Technology, E. Steven
zum Tobel, Vice President of Brokerage Operations, and Roger L. Shaffer, Vice
President of Brokerage Compliance, each received a two-yearis party to an employment
agreement
with base salaries of $200,000, $150,000 and $125,000 per annum, respectively,
17
20
and the right to participate in the incentive bonus compensation plans that are
made available to certain other executive officers of the Company. In connection
with the October 1999 acquisition of Window On WallStreet, Sean M. Davis, Vice
President of Investor and Media Relations, received a two-year employment
agreement under which his base salary (originally $100,000 per annum) is
currently $125,000 per annum.
All of these agreements contain confidentiality, non-solicitation and
two-year non-compete covenants each in form and substance substantially similar
to the non-competition agreements described below. Mr. Tafazzoli and Mr. zum
Tobel, in their capacities as selling shareholders of TradeStation Securities,
have each signed separate non-compete agreements for four- and two-year periods,
respectively.agreement.
SEVERANCE AGREEMENTAGREEMENTS
Andrew A. Allen, the former Chairman of the Board and Chief Executive
Officer of TradeStation Securities, is entitled under an employment agreement
with TradeStation Securities to a severance payment of $600,000 because he
elected to terminate his employment followingE. Steven zum Tobel, the change in controlformer President of
TradeStation Securities, produced byand Farshid Tafazzoli, a former Vice President of
TradeStation Securities, each receive severance payments in connection with the
merger.termination of their respective employments (Mr. Allen left the Company in
December 2000 and Messrs. zum Tobel and Tafazzoli in July 2001) pursuant to
their employment and related severance or separation agreements. Those severance
payments were approximately $456,000 in the aggregate for 2001 ($200,000 to Mr.
Allen, has already been paid
$200,000$139,000 to Mr. Tafazzoli and $117,000 to Mr. zum Tobel) and will be
paid an additionalapproximately $550,000 in the aggregate for 2002 ($200,000 to Mr. Allen,
$200,000 on eachto Mr. Tafazzoli and $150,000 to Mr. zum Tobel). All severance payment
obligations expire by the end of December 29, 2001
and December 29, 2002.
14
NON-COMPETITION AGREEMENTS
Virtually all employees, including the Named Executive Officers, have
entered into agreements with the Company which generally contain certain non-competition,
non-disclosure and non-solicitation restrictions and covenants, including a
provision prohibiting such employees from competing with the Company during
their employment and for a period of at least two years thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was formed in December 2000, at
which time two of the Independent Directors were appointed as members. These same two independent directors had also served on the predecessor
company's Compensation Committee during 2000.One has since
been replaced by another Independent Director. The compensation (including
salaries, bonuses and stock options) of the Company's executive officers for
20002001 was determined by the predecessor company's Compensation Committee. In 2000, neither2001, no member of the
Compensation Committee of the Board of Directors of
the Company (or the predecessor company) had any relationship with the Company
(or the predecessor company)
requiring disclosure under Item 404 of Regulation S-K.
PERFORMANCE GRAPH
The following graph shows a monthly comparison for the period covering
October 1, 1997 through December 31, 20002001 of cumulative total returns to
shareholders of TradeStation Group and its predecessor, Omega Research, Inc. (TradeStation Group's predecessor, which
was publicly-traded from October 1, 1997 until trading commenced January 2, 2001
for TradeStation Group),
Center for Research in Security Prices ("CRSP") Index for NASDAQ Stock Market
(U.S. Companies) and CRSP Index for NASDAQ Stocks (SIC 6210-6219 U.S. Companies)
of U.S. security brokers, dealers, and flotation companies.
18
21
[PERFORMANCE GRAPH]
The following table presents in tabular form the data set forth in the
performance graph to be included in this Proxy Statement:
CRSP TOTAL RETURNS INDEX FOR:
-----------------------------
NASDAQ STOCKS (SIC
6210-6219 U.S.
COMPANIES) IN U.S.
SECURITY BROKERS,
NASDAQ STOCK MARKET SECURITY BROKERS, DEALERS, AND FLOTATION
DATE COMPANY (US COMPANIES) AND FLOTATION COMPANIES
----------- ------------ --------------------- ------------------------------------ ---------------------- -------------------------------
10/01/1997 $100.0 $100.0 $100.0$ 100.0 $ 100.0 $ 100.0
10/31/1997 70.2 94.5 91.4
11/28/1997 43.6 95.0 89.3
12/31/1997 45.7 93.3 84.6
01/30/1998 26.1 96.3 84.5
02/27/1998 29.8 105.4 90.9
03/31/1998 31.9 109.3 94.7
04/30/1998 47.3 111.1 100.7
05/29/1998 41.5 104.9 93.3
06/30/1998 35.6 112.3 96.5
07/31/1998 29.3 110.9 98.7
08/31/1998 19.1 88.9 73.1
09/30/1998 18.1 101.3 75.3
10/30/1998 13.3 105.7 81.4
11/30/1998 18.1 116.5 96.5
12/31/1998 25.5 131.6 115.5
15
NASDAQ STOCKS (SIC
6210-6219 U.S.
COMPANIES) IN U.S.
NASDAQ STOCK MARKET SECURITY BROKERS, DEALERS,
DATE COMPANY (US COMPANIES) AND FLOTATION COMPANIES
----------- ----------- ---------------------- -------------------------------
01/29/1999 37.2 150.7 189.0
02/26/1999 101.1 137.2 173.5
03/31/1999 91.0 147.6 219.1
04/30/1999 80.9 152.4152.3 400.7
05/28/1999 80.9 148.1148.0 313.7
06/30/1999 93.6 161.5161.3 331.8
07/30/1999 86.2 158.6158.4 251.9
08/31/1999 52.7 165.3165.1 208.3
09/30/1999 33.0 165.5165.2 191.7
10/29/1999 48.9 178.8178.5 193.1
11/30/1999 49.2 200.5200.1 243.5
12/31/1999 51.1 244.6244.1 234.7
01/31/2000 54.3 235.5235.1 192.5
02/29/2000 46.8 280.3279.9 221.5
03/31/2000 39.4 274.5274.2 254.7
04/28/2000 27.1 230.9230.6 197.3
05/31/2000 27.7 203.1202.8 157.8
06/30/2000 25.5 238.7238.4 169.9
07/31/2000 24.9 225.8225.5 159.5
08/31/2000 25.5 252.5252.2 188.6
09/29/2000 22.3 219.7219.4 189.7
10/31/2000 19.7 201.6201.4 175.4
11/30/2000 14.9 155.3155.2 120.0
12/29/2000 16.5 147.0146.9 121.8
01/31/2001 26.6 164.7 149.5
02/28/2001 19.1 127.5 131.8
03/30/2001 17.0 109.7 118.9
04/30/2001 30.6 126.0 129.1
05/31/2001 31.7 125.9 133.7
06/29/2001 45.1 129.3 131.7
07/31/2001 27.0 121.0 118.1
08/31/2001 21.3 107.9 113.8
09/28/2001 20.9 89.7 93.9
10/31/2001 16.5 101.2 95.8
11/30/2001 14.9 115.6 103.9
12/31/2001 13.3 116.6 112.0
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 10/01/1997.
1916
22
CERTAIN TRANSACTIONS
Marc J. Stone, the Vice President of Corporate Development, General
Counsel and Secretary, was a partner in a predecessor law firm to Bilzin Sumberg
Dunn Baena Price & Axelrod LLP until immediately prior to joining the Company in
May 1997. Thereafter, Mr. Stone was of counsel to the predecessor firm and is
currently of counsel to Bilzin Sumberg. Bilzin Sumberg and its predecessor firms
have acted as the Company's regular outside legal counsel since 1994. The total
fees and costs paid by the Company to Bilzin Sumberg in 20002001 were approximately
$263,000.$833,000, $679,000 of which consisted of fees and costs relating to the December
29, 2000 merger acquisition of TradeStation Securities. The Company believes
that the fees paid are no less favorable than could be obtained from comparable
law firms in the Miami area.south Florida.
PROPOSAL 1
ELECTION OF DIRECTORS
EightSix directors, which constitute the entire Board, are to be elected at
the Annual Meeting to hold office until the annual meeting of shareholders next
succeeding their election and until their respective successors are elected and
qualified or as otherwise provided in the Bylaws of the Company. The nominees
for directors who receive a plurality of the votes cast by the holders of
outstanding shares of Common Stock entitled to vote at the Annual Meeting will
be elected. Abstentions (withheld authority) and broker non-votes are not
counted in determining the number of shares voted for or against any nominee for
director.
It is expected that the
Cruz Group and Online Group will cause all of their shares of Common Stock
subject to the voting trust agreement among them, which represents approximately
74.8% of the outstanding shares of the Company as of the Record Date, to be
voted for all of the nominees for directors. Accordingly, their election is
assured. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -
Voting Trust."
The Board of Directors has designated the persons listed to be nominees for election
as directors. Each of the nominees (other than Charles F. Wright) is currently serving as a director of the
Company and each has consented to being named in the Proxy Statement and to
serve if elected. Mr. Wright, who is
not currently serving as a director, has been nominated to replace Brian D.
Smith, who is retiring. The Company has no reason to believe that any of the nominees
will be unavailable for election; however, should any nominee become unavailable
for any reason, the Board of Directors may designate a substitute nominee or theauthorize a
lower number of authorized directors may be reduced.directors. Each proxy will be voted for the election to the
Board of Directors of all of the Board of
Directors'Board's nominees unless authority is withheld to vote for
all or any of those nominees.
NAME DIRECTOR SINCE
---- --------------
Ralph L. Cruz 1982
William R. Cruz 1982
Lothar Mayer 2000Michael W. Fipps 2002
Stephen C. Richards 1999
Salomon Sredni 1997
Farshid Tafazzoli 2000
E. Steven zum Tobel 2000
Charles F. Wright --
20
232001
For biographical and other information (including their respective principal occupations
for at least the past five years) regarding all of the nominees, (other than Charles F. Wright), see "DIRECTORS
AND EXECUTIVE OFFICERS,OFFICERS."
and regarding Charles F. Wright, see below.
CHARLES F. WRIGHT, age 50, is the Chairman of Fall River Group, Inc.,
which owns and operates a group of foundries in Wisconsin. He has been Chairman
since 1984, and has been associated with Fall River Group since 1973. He is also
the Chairman and a Principal of Fall River Capital, LLC, an investment advisory
firm that specializes in the trading of global financial and natural resource
futures. He has held these positions since 1999. Since 1997, Mr. Wright has also
been Chairman and a co-owner of Quaestus & Co., Inc., a merchant banking firm
located in Milwaukee, Wisconsin. From 1992 until its acquisition by Cumulus
Media, Inc. in 1997, Mr. Wright served as Chairman of Caribbean Communications
Company Ltd., a developer and operator of a radio network throughout the
English-speaking Caribbean Islands. Mr. Wright serves as Chairman of Goodwill
Industries of Southeastern Wisconsin and Metropolitan Chicago, President of
Second Harvest Food Bank Foundation, trustee of University School of Milwaukee,
and a director of the Private Industry Council of Milwaukee County. Mr. Wright
is registered with the CFTC and the NFA as a Commodity Trading Advisor, and
holds a Master's Degree in Business Administration from Harvard University
Graduate School of Business.
In October 1999, Mr. Wright entered into a three-year consulting
agreement to provide certain consulting services to TradeStation Technologies
related to the development of educational software in the area of securities
trading. At the time of entering into such agreement and in full consideration
for all services rendered, Mr. Wright was paid $30,000 and granted options to
purchase 30,000 shares of common stock at a price of $4.22 per share (the fair
market value on the date of grant), which vest in annual one-third increments
and have a term of ten years. It is contemplated that Mr. Wright will serve on
both the Audit Committee and Compensation Committee of the Board of Directors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES
LISTED ABOVE.
17
PROPOSAL 2
APPROVALRATIFICATION OF AMENDMENT TO THE
TRADESTATION GROUP, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
SUMMARYSELECTION OF
PLAN
PURPOSEINDEPENDENT PUBLIC ACCOUNTANTS
The Board submits to the shareholders for their approval an amendment
to the Nonemployee Director Stock Plan (i) to increase the numberaccounting firm of shares
reserved for issuance under the Nonemployee Director Stock Plan from 175,000
shares of Common Stock to 350,000 shares of Common Stock, subject to future
antidilution adjustments, and (ii) to increase the number of shares of options
automatically granted to an Independent Director upon each annual reelection
from 3,000 shares of Common Stock to 7,000 shares of Common Stock. The material
provisions of the Nonemployee Director Stock Plan are summarized below. The
purpose of the Nonemployee Director Stock Plan is to provide incentives which
21
24
will attract and retain outstanding individuals to serveArthur Andersen LLP acted as Independent
Directors. It is intended to enable Independent Directors to own stock in the
Company, thereby strengthening the mutuality of interest between them and the Company's
shareholders.
NUMBER OF SHARESindependent public accountants for the Company's fiscal year ended December 31,
2001. The Company originally reserved 175,000 shares of Common Stock for
issuance of nonqualified stock options under the Nonemployee Director Stock
Plan, subject to further antidilution adjustments. Of such 175,000 shares, only
22,000 shares remain available for future option grants as of the Record Date as
a result of prior exercises of options and outstanding option grants. See
"Outstanding Awards" below. The proposed amendment to the Nonemployee Director
Stock Plan would increase the number of shares reserved for issuance under the
Nonemployee Director Stock Plan to 350,000 shares of Common Stock, subject to
further antidilution adjustments.
ADMINISTRATION
The Nonemployee Director Stock Plan is administered by the Board of
Directors. The Board of Directors is authorized to determine, among other
things, the number of shares, up to 75,000 shares, of Common Stock an
Independent Director will be granted the option to purchase upon initial
election to the Board.
ELIGIBILITY
Only Independent Directors are eligible to participate in the
Nonemployee Director Stock Plan.
TYPES OF AWARDS
The Nonemployee Director Stock Plan permits only the grant of
nonqualified stock options ("NSOs") to Independent Directors. NSOs do not
qualify for preferred tax treatment under Section 422 of the Internal Revenue
Code. See "Federal Income Tax Consequences" below. These stock options are
described below.
STOCK OPTIONS
The stock options are granted to Independent Directors in the form of
agreements which enable the optionee to purchase a specific number of shares of
Common Stock at set terms and a fixed purchase price. The grant upon initial
election to the Board of Directors may not exceed 75,000 shares, and is
determined by the Board at such time. Subject to the proposed amendment, upon
each reelection to the Board of Directors an Independent Director is
automatically awarded NSOs to purchase 3,000 shares of Common Stock. The
proposed amendment would increase that number to 7,000 shares. An annual option
upon reelection may not be granted if the date of reelection is not at least 12
months later than the date of the initial grant.
The fixed purchase price is required to be the fair market value of the
Common Stock on the date of the grant, which is defined as the average of the
highest and lowest sale prices of shares of Common Stock as reported on The
Nasdaq National Market on the trading day immediately preceding the date of
grant.
22
25
The vesting schedule of any option grant that is authorized is
one-third, ratably over the first three anniversaries of the date of grant,
provided that an option becomes fully vested and exerciseable upon an
Independent Directors's death or retirement from the Board if such event occurs
on or after the first anniversary of the date the option is granted. The
Nonemployee Director Stock Plan defines "retirement" as an Independent
Director's termination of service as a director after reaching the age of 70 or
any time with the consentAudit Committee of the Board of Directors. The exercise date may not
be later than the tenth anniversary of the date of grant or such shorter period
as determined byCompany recommended and the Board
of Directors upon grant, provided that upon ceasingresolved not to engage Arthur Andersen LLP as the Company's independent public
accountants for the Company's fiscal year ending December 31, 2002. The Audit
Committee recommended and the Board resolved to engage Ernst & Young LLP to
serve as an Independent Director the Independent Director (or his estate)
only has up to 90 days (up to 180 days if a retirement and up to oneCompany's independent public accountants for the fiscal year if
death) to exercise the options that are vested and exerciseableending
December 31, 2002. Such independent accountants will serve at the timepleasure of
the Independent Director's terminationBoard. A representative of service.
Options are deemed exercised on the date written notice of exerciseErnst & Young LLP is received by the Secretary of the Company accompanied by (i) a check for the
purchase price of the sharesexpected to be purchased; (ii) delivery of shares of Common
Stock that have been owned bypresent at
the Independent Director for at least six months
having a fair market value on the date of exercise equal to the purchase price
of the shares to be purchased; or (iii) a combination of items (i) and (ii).
OTHER TERMS
Awards granted under the Nonemployee Director Stock Plan are
non-transferable by the participant, other than as required by law (including a
qualified domestic relations order as defined by the Internal Revenue Code or
Title I of the Employment Retirement Income Security Act, or the rules
thereunder), by will or the laws of descent and distribution or to the
participant's immediate family (which is limited to the participant's spouse,
children, grandchildren or other lineal descendents), or to one or more trusts
or family partnerships for the benefit of such immediate family members. Except
with respect to a qualified domestic relations order, stock options may be
exercised during the lifetime of the participant only by the participant or the
participant's guardian or legal representative.
If the Company at any time changes the number of issued Common Stock
without new consideration to the Company (such as by stock dividend or stock
split), the total number of shares available for stock options under the
Nonemployee Director Stock Plan shall be appropriately adjusted and the number
of shares covered by each outstanding stock option grant and the exercise price
for each outstanding stock option grant shall be adjusted so that the aggregate
consideration payable to the Company and the value of each option shall not be
changed.
In the event any sale of assets, merger, consolidation, reorganization
or other similar transaction which results in the outstanding Common Stock being
converted into or exchanged for different securities, cash or other property,
the Board of Directors shall cause adequate provision to be made whereby the
optionee will be entitled to receive, upon exercise of the stock option grant,
an equivalent amount of securities, cash or other property received with respect
to the Common Stock in such transaction as would have been received upon
exercise of the stock option grant immediately prior to such transaction.
The Nonemployee Director Stock Plan and actions taken in connection
therewith are governed by and construed in accordance with the laws of the State
of Florida (regardless of the law that might otherwise govern under applicable
Florida principles of conflicts of laws).
23
26
The Board may amend, suspend or discontinue the Nonemployee Director
Stock Plan at any time, but such amendment, suspension or discontinuation may
not adversely affect any outstanding stock option without the consent of the
holder.
Stock option grants and the exercise thereof are subject to any
additional applicable restrictions under Rule 16b-3.
REGISTRATION OF UNDERLYING COMMON STOCK
The Company has filed a Registration Statement on Form S-8 with the SECAnnual Meeting in order to registerhave the numberopportunity to make a statement, if such
representative desires to do so, and to be available to respond to appropriate
questions. No representative of shares of Common Stock reserved for issuance
under the Nonemployee Director Stock Plan which were available for issuance as
of the effective date of the merger. To the extent that such Registration
StatementArthur Andersen LLP is effective under the Securities Act of 1933, as amended (the
"Securities Act"), shares of Common Stock issued upon the exercise of
outstanding stock options granted under the Nonemployee Director Stock Plan will
be immediately and freely tradable without restriction under the Securities Act,
subjectexpected to applicable volume limitations, if any, under Rule 144 promulgated
under the Securities Act and Section 16 of the Exchange Act. Subject to theattend.
Shareholder approval of the Company's auditors is not required under
Florida law. The Board is submitting its selection of Ernst & Young LLP to the
Company's shareholders of this Proposal 2, it is currently
contemplated that at the appropriate time the Company will file an additional
Registration Statement on Form S-8for ratification in order to registerdetermine whether the
additional 175,000
shares of Common Stock reserved for issuance under the Nonemployee Director
Stock Plan.
OUTSTANDING AWARDS
Asshareholders generally approve of the Record Date, options to purchase 78,000 shares were
outstanding under the Nonemployee Director Stock Plan. An additional 75,000
options have been exercised which, without giving effect to the proposed
amendment, leaves 22,000 shares reserved for issuance. In general, the options
that have been granted under the Nonemployee Director Stock Plan vest at the
rateCompany's auditors. If selection of 33 1/3% per year and have a total term of five years. The options which
have been granted under the Nonemployee Director Stock Plan immediately vest and
become exercisable upon termination of the directorship due to death or
retirement.
The options to purchase shares granted under the Nonemployee Director
Stock Plan that were outstanding as of the Record Date have a weighted average
exercise price of approximately $3.17 per share.
RECENT PRICE OF COMMON STOCK
On May 15, 2001, the closing sale price of the Common Stock on The
Nasdaq National Market was $4.30 per share.
FEDERAL INCOME TAX CONSEQUENCES
The followingErnst
& Young LLP is a brief summary of the applicable federal income tax
consequences of options granted under the Nonemployee Director Stock Plan based
on U.S. federal income tax laws in effect on the date of this Proxy Statement.
THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF ANY INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH A GRANTEE MAY RESIDE.
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With respect to the options (all of which are NSOs): (i) generally, no
income is recognizednot approved by the optionee at the time the option is granted; (ii)
generally, at exercise, ordinary income is recognized by the optionee in an
amount equal to the difference between the option exercise price paid for the
shares and the fair market value of the shares on the date of exercise, and the
Company is entitled to a tax deduction in the same amount; and (iii) upon
disposition of the shares, any gain or loss recognized (after increasing the
basis of such shares by the amount of any ordinary income previously recognized)
is treated as short-term or long-term capital gain or loss (as the case may be)
depending on how long such shares are held. To qualify for long-term capital
gain treatment, such shares will have to be held for more than one year and, if
not, any short-term capital gain shall be taxable at ordinary income tax rates.
AMENDMENT TO THE NONEMPLOYEE DIRECTOR STOCK PLAN
PROPOSAL
Becauseshareholders, the Board considerswill reconsider its
selection.
Ernst & Young LLP replaced Arthur Andersen LLP as the Nonemployee Director Stock Plan a very
effective meansCompany's
independent public accountants on May 13, 2002. Prior to attract and retain outstanding individuals to servethat time, since 1997,
Arthur Andersen acted as Independent Directors, which the Board believes is important for the success and
future growth and developmentindependent accountants of the Company the Board, on May 17, 2001,
approved an amendment to the Nonemployee Director Stock Plan, subject to the
approval of the Company's shareholders. The Board seeks the approval of the
Company's shareholders to increase the number of shares of Common Stock issuable
pursuant to the Nonemployee Director Stock Plan from 175,000 shares to 350,000
shares and to increase the number of shares of options automatically granted to
an Independent Director upon each annual reelection from 3,000 to 7,000.
PURPOSE OF THE AMENDMENT
The purpose for increasing the number of shares available for issuanceits
consolidated subsidiaries (as and the annual reelection grants under the Nonemployee Director Stock Plan is to
ensure that the Company will continue to be able to grant stock options as
incentives to attract and retain outstanding individuals as Independent
Directors.when acquired).
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting which cast a vote on
Proposal 2 is necessary for the adoption and approval of the proposed amendment
to the Nonemployee Director Stock Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
NONEMPLOYEE DIRECTOR STOCK PLAN.
PROPOSAL 3
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP acted as the Company's
independent public accountants for the Company's fiscal year ended December 31,
2000. The Audit Committee of the Board of Directors of the Company recommended
and the Board resolved that Arthur Andersen LLP serve as the Company's
independent public accountants for the fiscal year ending December 31, 2001,
subject to finalizing the terms of engagement of Arthur Andersen LLP for fiscal
year 2001. Such independent accountants will continue to serve at the pleasure
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of the Board. A representative of Arthur Andersen LLP is expected to be present
at the Annual Meeting in order to have the opportunity to make a statement, if
such representative desires to do so, and to be available to respond to
appropriate questions relating to the examination by Arthur Andersen LLP of the
Company's 2000 financial statements.
Shareholder approval of the Company's auditors is not required under
Florida law. The Board is submitting its selection of Arthur Andersen LLP to the
Company's shareholders for ratification in order to determine whether the
shareholders generally approve of the Company's auditors. If selection of Arthur
Andersen LLP is not approved by the shareholders, the Board will reconsider its
selection.
Arthur Andersen LLP has acted as independent accountants of the Company
and its consolidated subsidiaries (as and when acquired) since 1997. In
addition, during the Company's 2000 fiscal year, Arthur Andersen LLP consulted
with the Company on various matters and performed services for the Company for
fees and expenses as follows:
1. Audit Fees (including Review Fees) $ 145,000
2. Financial Information Systems
Design and Implementation $ 0
3. All Other Fees $ 295,000
The Audit Committee has considered whether the provision of the
services provided by Arthur Andersen LLP covered by All Other Fees above is
compatible with maintaining the firm's independence.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting which cast a vote on
Proposal 3 is necessary for the ratification of the selection of the independent
public accountants.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF ARTHUR
ANDERSENERNST
& YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
SHAREHOLDER PROPOSALS FOR 20022003 ANNUAL MEETING
Shareholder proposals intended to be presented at the 20022003 annual
meeting of shareholders must be submitted to the Secretary of the Company, at
the principal executive offices of the Company, 8700 West FlaglerTradeStation Building, 8050 S.W.
10th Street, Miami,Plantation, Florida 33174,33324, no later than January 18, 2002,17, 2003 in order
to receive consideration for inclusion in the Company's 20022003 proxy materials.
Any such shareholder proposal must comply with the requirements of Rule 14a-8
promulgated under the Securities Exchange Act.
The persons named as proxies for the 20022003 annual meeting of
shareholders will generally have discretionary authority to vote on any matter
presented by a shareholder for action at that meeting. Generally, in the event
that the Company receives notice of any shareholder proposal no later than the
close of business on the sixtieth (60th) day, norand no earlier than the close of
business on the ninetieth (90th) day, prior to the first anniversary of the date
of the Annual Meeting, then, soas long as the Company includes in its proxy
18
statement for the 20022003 annual meeting of shareholders advice on the nature of
the matter and how the named proxies intend to vote the shares for which they
have received discretionary authority, such proxies may exercise discretionary
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authority with respect to such matter, subject to, and except to the extent
limited by, the rules of the SEC governing shareholder proposals.
OTHER MATTERS
EACH PERSON SOLICITED HEREUNDER CANMAY OBTAIN, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITH EXHIBITS), AS AMENDED, FOR THE COMPANY'S
FISCAL YEAR ENDED DECEMBER 31, 2000,2001, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, BY SENDING A WRITTEN REQUEST TO MARC J. STONE, VICE PRESIDENT OF
CORPORATE DEVELOPMENT, GENERAL COUNSEL AND SECRETARY OF THE COMPANY, AT THE
COMPANY'S EXECUTIVE OFFICES LOCATED AT 8700 WEST FLAGLERTRADESTATION BUILDING, 8050 S.W. 10TH
STREET, MIAMI,PLANTATION, FLORIDA 33174.33324.
By Order of the Board
of Directors
/s/ Marc J. Stone
---------------------------------------------------------
Marc J. Stone
Secretary
May 18, 2001
27August 2, 2002
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30
"APPENDIX A"
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
-----------------------------------------------------
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to
assist the Board of Directors (the "Board") in fulfilling its
responsibilities relating to the company's accounting and financial
reporting practices by providing a channel of communication between the
Board and the company's independent accountants and internal auditors
(if any) and by reviewing the company's financial reports and its
auditing, accounting and financial reporting processes generally.
Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the
company's policies, procedures and practices at all levels. The
Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to monitor the
company's financial reporting process and internal control
system.
o Review and appraise the audit efforts of the company's
independent accountants and internal auditing department (if
any).
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department (if any), and the Board of Directors.
The Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a
member of the Committee; provided, however, that prior to June 14, 2001
only two of the three directors are required to be independent
directors.
An independent director will not include a director who:
(i) is an officer or employee of the company or its
subsidiaries;
31
(ii) has been employed by the corporation or any of its
affiliates in the current year or any of the past
three years;
(iii) accepted compensation from the company or any of its
affiliates in excess of $60,000 during the previous
fiscal year, other than compensation for board
service, benefits under a tax-qualified retirement
plan, or non-discretionary compensation;
(iv) is a member of the immediate family of an individual
who is, or has been in any of the past three years,
employed by the company or any of its affiliates as
an executive officer;
(v) is a partner, controlling shareholder, or executive
officer of any for-profit business organization to
which the company made or from which the company
received payments that exceed five percent of such
business organization's consolidated gross revenues
for that year or $200,000, whichever is more, in any
of the past three years; or
(vi) is employed as an executive of another entity where
any of the company's executives are on that entity's
compensation committee.
All members of the Committee shall have a working familiarity with
basic finance and accounting practices, including the ability to read
and understand the company's fundamental financial statements, and at
least one member of the Committee shall have accounting or related
financial management expertise.
Committee members shall be selected by majority vote of the Board. The
Committee shall elect by majority vote a Chairperson from its members.
III. MEETINGS
The Committee shall meet annually, or more frequently as circumstances
dictate. As part of its job to foster open communication, the Committee
may meet with management, the director of the internal auditing
department (if any) and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the
Committee or at least its Chairperson should meet with the independent
accountants and management quarterly to review the company's financial
statements consistent with Section IV below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review, and if necessary update, this Charter at
least annually.
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32
2. Review the company's quarterly and annual financial
statements.
3. Review the regular internal reports to management
prepared by the internal auditing department (if any)
and management's response.
4. Review with financial management and the independent
accountants any Form 10-Q or 10-K prior to its filing
or prior to the release of earnings. The Chair of the
Committee may represent the entire Committee for
purposes of this review.
5. Inform the Board of its determination whether or not
to recommend that the audited financial statements be
included in the company's Annual Report on Form 10-K.
6. Prepare a report for inclusion in the company's
annual proxy statement stating that the Committee
has:
(i) reviewed and discussed the audited
financial statements with management;
(ii) discussed with the independent
accountants the matters relating to the conduct of
the audit;
(iii) received from the independent
accountants written disclosure and a letter regarding
the accountants' independence, and discussed with the
accountants their independence; and
(iv) recommended to the Board that the
audited financial statements be included in the
company's Annual Report on Form 10-K.
INDEPENDENT ACCOUNTANTS
1. Recommend to the Board the selection of the
independent accountants, considering independence and
effectiveness and approve the fees and other
compensation to be paid to the independent
accountants.
2. Obtain from the independent accountants a written
statement describing all relationships between the
accountants and the company.
3. Review and discuss with the accountants on an annual
basis all significant relationships the accountants
have with the company to determine the accountants'
independence.
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33
4. Review the performance of the independent accountants
and approve any proposed discharge of the independent
accountants when circumstances warrant.
5. Periodically consult with the independent accountants
out of the presence of management about internal
controls and the fullness and accuracy of the
company's financial statements.
6. Consider and approve, if appropriate, actions
required to maintain the independence of the
accountants.
FINANCIAL REPORTING PROCESSES
1. In consultation with the independent accountants and
the internal auditors (if any), review the integrity
of the company's financial reporting processes, both
internal and external.
2. Consider the independent accountants' judgments about
the quality and appropriateness of the company's
accounting principles as applied in its financial
reporting.
3. Consider and approve, if appropriate, major changes
to the company's auditing and accounting principles
and practices as suggested by the independent
accountants, management, or the internal auditing
department (if any).
4. Review with the independent accountants the scope of
their annual and quarterly examinations and the
accounting principles used in conducting the
examinations.
PROCESS IMPROVEMENT
1. Establish regular and separate systems of reporting
to the Committee by each of management, the
independent accountants and the internal auditors (if
any) regarding any significant judgments made in
management's preparation of the financial statements
and the view of each as to the appropriateness of
such judgments.
2. Following completion of the annual audit, review
separately with each of management, the independent
accountants and the internal auditing department (if
any) any significant difficulties encountered during
the course of the audit, including any restrictions
on the scope of work or access to required
information.
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34
3. Review any significant disagreement among management
and the independent accountants or the internal
auditing department (if any) in connection with the
preparation of the financial statements.
4. Review with the independent accountants, the internal
auditing department (if any) and management the
extent to which changes or improvements in financial
or accounting practices, as approved by the
Committee, have been implemented. This review should
be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided
by the Committee.
5. Review activities, organizational structure, and
qualifications of the internal audit department (if
any).
6. Provide a focal point for communications among
non-Committee directors, the company's management,
and the independent accountants.
7. Review with independent accountants, the company's
internal auditor (if any), and financial and
accounting personnel, the adequacy and effectiveness
of the accounting and financial controls of the
company, and elicit any recommendations for the
improvement of such internal control procedures or
particular areas where new or more detailed controls
or procedures are desirable.
8. Meet with independent accountants to appraise the
effectiveness of the audit effort. Such appraisal
shall include a discussion of the overall approach to
and the scope of the examination, with particular
attention to those areas on which either the
committee or the auditors believed emphasis was
necessary or desirable.
REPORTING
1. Annually, report to the Board its activities during
the past year. This report shall discuss any specific
actions the Committee has taken as well as the
Committee's plans for the coming year. Additionally,
during the year, as appropriate, the Committee shall
report significant matters and findings to the Board.
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35
PROXY
TRADESTATION GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints William R. Cruz and
Ralph L. Cruz, and each of them, with full power of substitution, as attorneys
and proxies to appear and to vote all shares of common stockCommon Stock of TradeStation
Group, Inc. (the "Company") which the undersigned may be entitled to vote at the
Annual Meeting of Shareholders of the Company to be held at the Miami Airport
Marriott, 1201 N.W. LeJeuneSheraton Hotel,
1825 Griffin Road, Miami,Dania, Florida 33126,33004 on Monday, June 18,
2001,September 6, 2002, at 10:00 a.m.
(local time), and at any postponements or adjournments thereof. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
the Proxy Statement, each dated May 18, 2001,August 2, 2002, and instructs its attorneys and
proxies to vote as set forth on this Proxy.
(TO BE SIGNED ON REVERSE SIDE)
[X] Please mark your
votes as in this
example.
FOR WITHHELD NOMINEES: Ralph L. Cruz
1. ELECTION OF [ ] [ ] William R. Cruz
DIRECTORS Lothar MayerMichael W. Fipps
(PROPOSAL 1) Stephen C. Richards
Salomon Sredni
FOR, EXCEPT vote withheld from the Salomon SredniCharles F. Wright
following nominee(s): ______________________ Farshid Tafazzoli
____________________________________________ E. Steven zum Tobel
Charles F. Wright___________________________________
__________________________________________________________
2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S NONEMPLOYEE DIRECTOR STOCK
OPTION PLAN INCREASING THE NUMBER OF SHARES OF THE COMPANY'S COMMON
STOCK RESERVED FOR ISSUANCE UNDER SUCH PLAN FROM 175,000 TO 350,000,
SUBJECT TO ANY FURTHER ANTIDILUTION ADJUSTMENTS, AND INCREASING THE
NUMBER OF SHARES INCLUDED IN THE OPTIONS AUTOMATICALLY GRANTED TO A
NONEMPLOYEE DIRECTOR UPON EACH ANNUAL REELECTION FROM 3,000 TO 7,000
(PROPOSAL 2)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE SELECTION OF ARTHUR ANDERSENERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 20012002
(PROPOSAL 3)2)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
36
4.3. In their discretion, to transact such other business as may properly
come before the meeting or any postponement or adjournment thereof.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED FOR EACH OF PROPOSALS 1 2 AND 32 ABOVE. THIS
PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED IN ORDER TO
HAVE YOUR SHARES VOTED.
PLEASE NOTE ANY CHANGE OF ADDRESS.
PLEASE MAIL IN THE ENVELOPE PROVIDED.
Signature_______________________________
Date____________________________________
Signature_______________________________
Date____________________________________Signature______________________________
Date___________________________________
Signature______________________________
Date___________________________________
NOTE: Please sign exactly as your name
appears above. Joint owners should each
sign. When signing as attorney,
executor, administrator, trustee, etc.,
indicate title. If the signer is a
corporation, partnership or other
entity, sign in the corporate,
partnership or other entity name by a
duly authorized representative.