SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to Section 240.14a-12

 

Broadpoint Gleacher Securities Group, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

þ  No fee required.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadpoint Gleacher Securities Group, Inc.

1290 Avenue of the Americas

New York, NY 10104

 

April 26, 2010

 

Dear Shareholder:

 

You are cordially invited to attend the 2010 annual meeting of shareholders (the “Annual Meeting”) of Broadpoint Gleacher Securities Group, Inc. (the “Company”) to be held at 10:00 a.m., local time, on May 27, 2010 at our new principal offices located at 1290 Avenue of the Americas, New York, NY 10104. Enclosed are the proxy materials for the Annual Meeting. Please read those materials carefully.

 

At the Annual Meeting, you will be asked (1) to elect three Class III directors and one Class II director to the Board of Directors; (2) to consider and act upon a proposal to reincorporate the Company in Delaware; (3) to consider and act upon a proposal to amend the Company’s Certificate of Incorporation to eliminate the classified structure of the Company’s Board of Directors and to make related technical changes; (4) to consider and act upon a proposal to amend the Company’s Certificate of Incorporation to change the name of the Company to “Gleacher & Company, Inc.”; and (5) to ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010. The Board of Directors unanimously recommends a vote FOR each of these proposals.

 

All holders of record of our outstanding shares of common stock at the close of business on April 14, 2010 are entitled to notice of and to vote at the Annual Meeting. A list of shareholders entitled to vote will be available for examination at the meeting.

 

Your participation in the Annual Meeting, in person or by proxy, is important. Whether or not you plan to attend the Annual Meeting in person, we urge you to complete, sign, date and return the enclosed proxy card promptly in the accompanying postage-paid envelope. In addition to using the traditional proxy card, most shareholders also have the choice of voting over the Internet or by telephone.

 

We look forward to seeing those of you who will be able to attend the meeting.

 

Sincerely yours,

 

Broadpoint Gleacher Securities Group, Inc.

1290 Avenue of the Americas

New York, NY 10104

 

 

 

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held May 27, 2010

 

 

 

 

NOTICE IS HEREBY GIVEN that the 2010 annual meeting of the shareholders (the “Annual Meeting”) of Broadpoint Gleacher Securities Group, Inc. (the “Company”) will be held at the offices of the Company, 1290 Avenue of the Americas, New York, NY 10104, on May 27, 2010 at 10:00 a.m., local time, for the following purposes:

 

(1) To elect three Class III directors and one Class II director to the Board of Directors;

 

(2) To consider and act upon a proposal to reincorporate the Company in Delaware;

 

(3) To consider and act upon a proposal to amend the Company’s Certificate of Incorporation to eliminate the classified structure of the Company’s Board of Directors and to make related technical changes;

 

(4) To consider and act upon a proposal to amend the Company’s Certificate of Incorporation to change the name of the Company to “Gleacher & Company, Inc.”;

 

(5) To consider and act upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010; and

 

(6) To consider and act upon such other business as may properly come before the meeting or any adjournment thereof.

 

We ask that you give these matters your careful attention.

 

The Broadpoint Gleacher Securities Group, Inc. Board of Directors unanimously recommends that the shareholders vote (1) “FOR” the election of the four persons named as nominees under “Election of Directors”; (2) “FOR” the reincorporation of the Company in Delaware; (3) “FOR” the amendment to the Company’s Certificate of Incorporation to eliminate the classified structure of the Company’s Board of Directors and to make related technical changes; (4) “FOR” the amendment of the Company’s Certificate of Incorporation to change the name of the Company; and (5) “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010.

 

Your participation in the Annual Meeting, in person or by proxy, is important. For the election of directors, the four nominees receiving the most “FOR” votes from the shares present and entitled to vote at the Annual Meeting, either in person or by proxy, will be elected. For Proposal No. 2 to be approved, it must receive “FOR” votes constituting two-thirds of all outstanding shares of our common stock entitled to vote thereon. For Proposal No. 3 to be approved, it must receive “FOR” votes constituting at least 80% of the outstanding voting stock entitled to vote thereon. For Proposal No. 4 to be approved, it must receive “FOR” votes constituting a majority of our common stock outstanding and entitled to vote thereon at the Annual Meeting. For Proposal No. 5 to be approved, it must receive “FOR” votes constituting a majority of the votes cast at the Annual Meeting with respect to shares entitled to vote thereon.

 

Holders of common stock of record as of the close of business on April 14, 2010 are entitled to receive notice of and vote at the Annual Meeting. A list of such shareholders may be examined at the Annual Meeting.

 

Important Notice Regarding the Availability of Proxy Materials: The Proxy Statement and the Proxy Card relating to the Annual Meeting and the Company’s 2010 Annual Report, and any amendments to the

foregoing materials that are required to be furnished to shareholders, are available for you to review online at www.bpsg.com under the heading “Investor Relations — Proxy.”

 

Pursuant to recent amendments to the New York Stock Exchange rules, if you hold your shares in street name, beginning this year brokers will not have discretion to vote your shares on the election of directors. Accordingly, if your shares are held in street name and you do not submit voting instructions to your broker, your shares will not be counted in determining the outcome of important matters submitted to the shareholders at the Annual Meeting, including the election of directors. We encourage you to provide voting instructions to your brokers if you hold your shares in street name so that your voice is heard in these important matters.

 

We hope that you are planning to attend the Annual Meeting personally, and we look forward to seeing you there. Whether or not you are able to attend in person, it is important that your shares be represented at the Annual Meeting. For that reason we ask that you promptly sign, date, and mail the enclosed proxy card in the return envelope provided. In addition to using the traditional proxy card, most shareholders also have the choice of voting over the Internet or by telephone. Please refer to your proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you. Shareholders who attend the Annual Meeting may withdraw their proxies and vote in person.

 

By Order of the Board of Directors,

 

 

Patricia A. Arciero-Craig

Secretary

 

New York, New York

April 26, 2010

Table of Contents

 

Broadpoint Gleacher Securities Group, Inc.

1290 Avenue of the Americas

New York, NY 10104

 

 

ANNUAL MEETING OF SHAREHOLDERS

 

 

Annual Meeting of Shareholders

 

This Proxy Statement is being furnished to the shareholders of Broadpoint Gleacher Securities Group, Inc. (the “Company”) in connection with the solicitation by the Board of Directors of proxies for use at the 2010 annual meeting of shareholders (the “Annual Meeting”) to be held at the Company’s offices, located at 1290 Avenue of the Americas, New York, NY 10104 on May 27, 2010 at 10:00 a.m., local time, and any postponements or adjournments thereof. The mailing address of the Company’s principal offices is 1290 Avenue of the Americas, New York, NY 10104. The telephone number at that address is (212) 273-7100.

 

At the Annual Meeting, the shareholders of the Company will be asked: (1) to elect the four persons named as nominees under “Election of Directors”; (2) to consider and act upon a proposal to reincorporate the Company in Delaware; (3) to consider and act upon a proposal to amend the Company’s Certificate of Incorporation to eliminate the classified structure of the Company’s Board of Directors and to make related technical changes; (4) to consider and act upon a proposal to amend the Company’s Certificate of Incorporation to change the name of the Company to Gleacher & Company, Inc.; and (5) to consider and act upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010.

 

Proxy Solicitation

 

This Proxy Statement and the enclosed form of proxy are expected to be mailed on or about April 26, 2010. In addition to these mailed proxy materials, our directors, officers and other employees may also solicit proxies in person, by telephone or by other means of communication. The Company will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record by such persons.

 

The distribution and solicitation of proxy materials will also be supplemented through the services of MacKenzie Partners, Inc., a proxy solicitation firm.

 

Voting by Proxy, Internet or Telephone

 

Shareholders who cannot attend the Annual Meeting in person can be represented by proxy. To vote by proxy, shareholders may complete the proxy card in the form enclosed and mail it in the envelope provided. Most shareholders also have a choice of voting over the Internet or by using a toll-free telephone number. Please refer to your proxy card or the information forwarded by your bank, broker or other nominee to see which options are available to you.

 

A proxy may be revoked at any time before it is exercised by giving notice of revocation to the Company’s Corporate Secretary, by executing a later-dated proxy, by voting over the Internet or by telephone or by attending and voting in person at the Annual Meeting. The execution of a proxy will not affect a shareholder’s right to attend the Annual Meeting and vote in person, but attendance at the Annual Meeting will not, by itself, revoke a proxy. Proxies properly completed and received prior to the Annual Meeting and not revoked will be voted at the Annual Meeting.

 

Proxies will be voted as specified or, if no direction is indicated on a proxy, will be voted (1) “FOR” the election of the four persons named as nominees under “Election of Directors”; (2) “FOR” the reincorporation of the Company in Delaware; (3) “FOR” the amendment to the Company’s Certificate of Incorporation to eliminate the classified structure of the Company’s Board of Directors and to make related technical changes; (4) “FOR” the amendment to the Company’s Certificate of Incorporation to change the name of the Company to Gleacher & Company, Inc.; and (5) “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010.

 

As to any other matter or business which may be brought before the Annual Meeting, including any adjournment(s) or postponement(s), a vote may be cast pursuant to the proxy in accordance with the judgment of the person or persons voting the same. As of the date hereof, the Board does not know of any such other matter or business.

 

The Board has fixed the close of business on April 14, 2010 as the record date for the determination of shareholders entitled to vote at the Annual Meeting. As of that date, 128,294,480 shares of common stock were outstanding. Each shareholder will be entitled to cast one vote, in person or by proxy, for each share of common stock held. There are no other shares of outstanding stock of the Company conferring voting rights on the matters to be taken up at the Annual Meeting. The presence, in person or by proxy, of the holders of at least a majority of the shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker non-votes (as described below) and votes to “withhold authority” may be counted in determining whether a quorum has been reached on a particular matter. Votes to withhold authority are treated the same as abstentions for purposes of the voting requirements described below.

 

If you hold your shares in “street name” through a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to certain matters, including the election of directors. Thus, if you do not give your broker or nominee specific instructions, your shares may not be voted on those matters and will not be counted in determining the number of shares necessary for approval.

 

The proposals submitted for your consideration and action at the Annual Meeting each require different percentages of votes in order to be approved:

 

 

 

The Board unanimously recommends that the shareholders vote (1) “FOR” the election of the four persons named as nominees under “Election of Directors”; (2) “FOR” the reincorporation of the Company in Delaware; (3) “FOR” the amendment to the Company’s Certificate of Incorporation to eliminate the classified structure of the Board of Directors and to make related technical changes; (4) “FOR” the amendment to the Company’s Certificate of Incorporation to change the name of the Company; and (5) “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2010.

 

QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING

	•	To vote by proxy, you may complete the proxy card in the form enclosed and mail it in the envelope provided. Most shareholders also have a choice of voting over the Internet or using a toll-free telephone number. Please refer to your proxy card to see which options are available to you.
	•	To vote in person, come to the Annual Meeting, and we will give you a ballot when you arrive.

	•	To vote by proxy, you may complete the proxy card in the form enclosed and mail it in the envelope provided. Most shareholders also have a choice of voting over the Internet or using a toll-free telephone number. Please refer to your proxy card or the information forwarded by your bank, broker or other nominee to see which options are available to you.
	•	To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials or contact your broker or bank to request a proxy form.

	•	You may submit another properly completed proxy card with a later date.

	•	For most shareholders, you may vote by Internet or telephone.

	•	You may send a written notice that you are revoking your proxy to Broadpoint Gleacher Securities Group, Inc., 1290 Avenue of the Americas, New York, NY 10104, Attn: Corporate Secretary.
	•	You may attend the Annual Meeting and vote in person, to the extent you are eligible. Simply attending the meeting will not, by itself, revoke your proxy.

	•	For the election of directors, the four nominees receiving the most “FOR” votes from the shares present and entitled to vote at the Annual Meeting, either in person or by proxy, will be elected. Abstentions will be counted for purposes of determining whether a quorum is present but will not be treated as votes cast at the Annual Meeting for such purpose. Broker non-votes will not be treated as votes cast at the Annual Meeting for such purpose and will have no effect on the voting of this proposal.

	•	To be approved, Proposal No. 2 must receive “FOR” votes constituting two-thirds of our common stock outstanding and entitled to vote thereon at the Annual Meeting. If you abstain from voting, it will have the same effect as an “AGAINST” vote. Broker non-votes will not be treated as votes cast at the Annual Meeting for such purpose and, consequently, will have the same effect as an “AGAINST” vote.
	•	To be approved, Proposal No. 3 must receive “FOR” votes constituting 80% of all outstanding shares of our common stock outstanding and entitled to vote thereon at the Annual Meeting. If you abstain from voting, it will have the same effect as an “AGAINST” vote. Broker non-votes will not be treated as votes cast at the Annual Meeting for such purpose and, consequently, will have the same effect as an “AGAINST” vote.
	•	To be approved, Proposal No. 4 must receive “FOR” votes constituting a majority of our common stock outstanding and entitled to vote thereon at the Annual Meeting. If you abstain from voting, it will have the same effect as an “AGAINST” vote. Broker non-votes will not be treated as votes cast at the Annual Meeting for such purpose and, consequently, will have the same effect as an “AGAINST” vote for such purpose.
	•	To be approved, Proposal No. 5 must receive “FOR” votes constituting a majority of votes cast at the Annual Meeting. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present but will not be treated as votes cast at the Annual Meeting for such purpose and consequently will have no effect on the voting of this proposal.

DISCUSSION OF PROPOSALS

 

 

 

 

 

Introduction

 

Four nominees for director are to be elected as directors at the Annual Meeting, three of which are being elected as Class III directors and one of which is being elected as a Class II director. The Class III nominees are Mr. Peter J. McNierney, Dr. Henry Bienen and Mr. Bruce Rohde, who was appointed to the Board in 2009. The term of the Class III directors will expire at the annual meeting of shareholders in 2013. The Class II nominee is Mr. Marshall Cohen, who was appointed to the Board in 2009. The term of the Class II director will expire at the annual meeting of shareholders in 2012. The terms of Mr. Victor Mandel and Mr. Frank S. Plimpton, both Class III directors, expire at this Annual Meeting, and they will not continue as directors thereafter. Note that if Proposal No. 3 is approved by the shareholders, our Board will no longer be classified, and directors elected at this meeting, as well as those with continuing terms, will have only a one-year term expiring at our 2011 Annual Meeting of Shareholders. The Board has nominated each of the nominees for election as directors and recommends that shareholders vote “FOR” the election of these nominees.

 

If the enclosed proxy card is duly executed and received in time for the Annual Meeting, and if no contrary specification is made as provided therein, it will be voted in favor of the election of the persons nominated as directors by the Board.

 

Each of the nominees has consented to serve as a director if elected. Should any nominee for director become unable or unwilling to accept election, proxies will be voted for a nominee selected by the Board, or the size of the Board may be reduced accordingly. The Board does not believe that any of the nominees will be unable or unwilling to serve if elected to office. Any vacancy occurring during the term of office of any director may be filled by the remaining directors for a term expiring at the next meeting of shareholders at which the election of directors is in the regular order of business. Other than Dr. Bienen, each of the nominees is presently a director of the Company.

 

Set forth below is certain information furnished to the Company by the director nominees and by each of the incumbent directors.

 

Directors and Director Nominee of the Company

 

The persons nominated for election as Class III directors, with a term expiring at the annual meeting of shareholders in 2013, are as follows:

 

PETER J. MCNIERNEY, age 44, is President and Chief Operating Officer of the Company and Chief Executive Officer of Broadpoint Capital, Inc. He joined Broadpoint Capital, Inc. in 2002 as the Director of Investment Banking, and served as President and Chief Executive Officer of the Company and Broadpoint Capital, Inc. from June 2006 until September 2007. Mr. McNierney has been a director of the Company since June 2006. Prior to joining Broadpoint Capital, Inc., Mr. McNierney was a Managing Director of the Healthcare and Communications Services groups at the investment bank Robertson Stephens & Company. Prior to that, Mr. McNierney was a Vice President in the Healthcare Group at Smith Barney, Harris, Upham & Co, Inc. Mr. McNierney received a BA and a JD/MBA from the University of Texas at Austin. During his tenure at the Company, Mr. McNierney has been integral to the growth of the investment banking practice. In addition, he has strengthened the Company’s corporate client relationships, enhanced the firm’s execution capabilities and played an integral role in the continued development and transformation of the Company by playing a key role in the design and execution of the Company’s strategic plan. Mr. McNierney has been nominated as a director because of his financial and business development skills, his knowledge of the industry and his commitment to and understanding of the Company’s value proposition as a whole.

HENRY S. BIENEN, age 70, is Vice Chairman of Rasmussen College and President Emeritus of Northwestern University. From 1995 to 2009, Dr. Bienen served as the President of Northwestern University, where he was one of the first three presidents awarded the Carnegie Corporation’s award for academic leadership. Prior to becoming president of Northwestern, Dr. Bienen served as dean of the Woodrow Wilson School of Public and International Affairs at Princeton University. While at Princeton, he was named the William Stewart Tod Professor of Public and International Affairs in 1969 and the James S. McDonnell Distinguished University Professor in 1986. Dr. Bienen is a member of the board of directors of the Council on Foreign Relations, serving on the executive committee and chairing the nominating and governance committee, as well as the board of directors of the Chicago Council on Global Affairs and serves on its executive committee. In addition, Dr. Bienen serves as chairman of the United Football League’s board of directors, chairman of the Ithaka Harbors board of trustees and serves on the board of Onconova Therapeutics. In the past, Dr. Bienen has served as chair of the executive committee of the Association of American Universities. He is a member of the Knight Commission on Intercollegiate Athletics as well as the American Political Science Association, for which he also serves as a member of the investment committee. Dr. Bienen previously served on the boards of directors of The Bear Stearns Companies Inc. until its purchase by JP Morgan Chase & Co. in 2008, and SPSS Inc. from 2007 until 2009 when the company was sold to IBM Corporation. Dr. Bienen received a bachelor’s degree with honors from Cornell University and a master’s degree and Ph.D., both from the University of Chicago. Dr. Bienen has been nominated by the Board of Directors at the recommendation of the Committee on Directors and Corporate Governance. He was recommended as a director because of his extensive career running or overseeing large organizations and experience and relationships in the international arena, which will provide a fresh perspective to our Board discussions and decisions and assist us in international initiatives. In addition, his extensive experience as a member of the boards of directors of various institutions has given him broad exposure to the various issues boards face and facilitates his contribution to oversight in these areas.

 

BRUCE ROHDE, age 61, has been a director of the Company since July 2009. He is the Chair of the Committee on Directors and Corporate Governance and a member of the Audit Committee and Executive Compensation Committee. He has served in multiple roles with ConAgra Foods, Inc. since 1984, including General Counsel, President, Vice Chairman, Chairman and Chief Executive Officer, and retired from that role as Chairman and CEO Emeritus. Mr. Rohde is the Managing Partner of Romar Capital Group and of counsel to Jones, Jones, Vines & Hunkins. Mr. Rohde holds two degrees from Creighton University, a Bachelor of Science degree in Business Administration, and a Juris Doctor, cum laude. He also serves as Vice Chairman of Creighton University Board of Directors, on Harvard University’s Private and Public, Scientific, Academic and Consumer Food Policy Committee, as a Presidential Appointee to the National Infrastructure Advisory Council and a director of Preventive Medicine Research Institute. Mr. Rohde holds many court admissions and also holds a certified public accountant certificate. We believe Mr. Rohde’s qualifications to sit on our board of directors include his independence, background in law, finance, accounting and operational and capital management. In addition, his history of senior executive leadership at ConAgra, a large public company, and his membership on the boards of other public companies has resulted in Mr. Rohde’s significant contributions to the Board.

 

The Board recommends a vote “FOR” the Class III director nominees.

 

The person nominated for election as a Class II director, with a term expiring at the annual meeting of shareholders in 2012, is as follows:

 

MARSHALL COHEN, age 74, has been a director since July 2009. He currently is a member of the Executive Compensation Committee and the Board’s Committee on Directors and Corporate Governance. He is counsel at Cassels, Brock & Blackwell LLP, Barristers and Solicitors, a full service law firm in Toronto, which he joined in 1996. Mr. Cohen was President and Chief Executive Officer of The Molson Companies Ltd. from 1988 through 1996. Prior to that, he was a senior official with the Government of Canada for 15 years, holding various appointments including Deputy Minister of Energy, Industry Trade & Commerce, and Finance. Mr. Cohen serves on the Boards of Directors of Barrick Gold Corporation, TD Ameritrade and TriMas Corporation. During the past 5 years, Mr. Cohen has also served

on the boards of Toronto Dominion Bank, Collins & Aikman, Inc., Metaldyne Inc., American International Group, Inc., Premcor, Inc. and Lafarge Corporation NA, Inc. In addition, Mr. Cohen recently retired as Chairman of the Board of Governors of York University and is an honorary director or governor of a number of non-profit organizations, including the C.D. Howe Institute and Mount Sinai Hospital. Mr. Cohen is an Officer of the Order of Canada. Mr. Cohen brings valuable legal, financial, operational, strategic and compliance-based expertise to our Board with his past experience as the chief executive officer of a large Canadian public company with international operations. In addition, his independence and experience serving on the boards of other public companies has enhanced the Board’s ability to lead the Company.

 

The Board recommends a vote “FOR” the Class II director nominee.

 

The persons serving as Class II directors with terms expiring at the annual meeting of shareholders in 2012 are as follows:

 

ERIC J. GLEACHER, age 69, was elected Chairman of the Board in 2009 in connection with the Company’s acquisition of Gleacher Partners, Inc., and was elected Chief Executive Officer in February, 2010. Mr. Gleacher was the founder of Gleacher Partners in 1990 and acted as its Chairman. Previously, Mr. Gleacher founded the Mergers & Acquisitions department at Lehman Brothers Holdings Inc. in 1978 and headed Global Mergers & Acquisitions at Morgan Stanley & Co. Inc. from 1985 to 1990. Mr. Gleacher is Chairman of the Institute for Sports Medicine Research at the Hospital for Special Surgery in New York, Chairman of the Ransome Scholarship Trust for St. Andrews University in St. Andrews, Scotland, and a member of the Board of Trustees of Northwestern University. Mr. Gleacher received an MBA from The University of Chicago Booth School of Business and a BA from Northwestern University and served as a U.S. Marine infantry officer in the 1960s. The Board elected Mr. Gleacher as Chairman of the Board in recognition of his experience and knowledge base in the Company’s newly expanded investment banking and M&A capabilities as a result of the acquisition of Gleacher Partners Inc., as well as his experience and proven success as an entrepreneur and founder of Gleacher Partners LLC, the Mergers & Acquisitions department at Lehman Brothers and the head of Global Mergers & Acquisitions at Morgan Stanley. Mr. Gleacher’s qualifications have brought to the leadership of the Company both breadth and depth of his expertise and understanding of the markets in which the Company operates, which the Board determined to be particularly important in the increasingly complex business and market conditions of the financial sector.

 

CHRISTOPHER R. PECHOCK, age 45, became a director of the Company following the completion of the Company’s private placement with MatlinPatterson in September 2007. He has been a partner at MatlinPatterson Global Advisors LLC since its inception in July 2002. Mr. Pechock has been active in the securities markets for over 17 years. Prior to July 2002, Mr. Pechock was a member of Credit Suisse’s Distressed Group, which he joined in 1999. Before joining Credit Suisse, Mr. Pechock was a Portfolio Manager and Research Analyst at Turnberry Capital Management, L.P. (1997-1999), a Portfolio Manager at Eos Partners, L.P. (1996-1997), a Vice President and high yield analyst at PaineWebber Inc. (1993-1996) and an analyst in risk arbitrage at Wortheim Schroder & Co., Incorporated (1987-1991). Mr. Pechock holds an MBA from Columbia University Graduate School of Business (1993) and a BA in Economics from the University of Pennsylvania (1987). Mr. Pechock serves on the Boards of Goss International, Renewable Biofuels Inc., XL Health Corporation, Leprechaun Holding Company LLC and Foamex Innovations, Inc. He previously served on the Boards of COMSYS IT, Compass Aerospace and Huntsman Corporation. Mr. Pechock has brought to our Board his experience as a partner of MatlinPatterson Global Advisors LLC and expertise in the securities markets and continues to provide key insight to the Board. Furthermore, given Mr. Pechock’s relationship with MatlinPatterson, the Board believes that his interests will be closely aligned to those of the Company’s shareholders.

 

The persons serving as Class I directors with terms expiring at the annual meeting of shareholders in 2011 are as follows:

 

ROBERT A. GERARD, age 65, has been a director of the Company since April 2009. Mr. Gerard is Chair of the Executive Compensation Committee and a member of the Audit Committee and

Committee on Directors and Corporate Governance. He is the General Partner and Investment Manager of GFP, L.P., a private investment partnership. Since 2004, Mr. Gerard has been Chairman of the Management Committee and Chief Executive Officer of Royal Street Communications, LLC, a licensee, developer and operator of wireless telecommunications systems in Los Angeles and Central Florida. From 1974 to 1977, Mr. Gerard served in the United States Department of the Treasury, completing his service as Assistant Secretary for Capital Markets and Debt Management. From 1977 until his retirement in 1991, he held senior executive positions with the investment banking firms Morgan Stanley & Co., Dillon Read & Co. and The Bear Stearns Companies Inc. Mr. Gerard is a graduate of Harvard College and holds MA and JD degrees from Columbia University. Mr. Gerard is a member of the Board of Directors of H&R Block, Inc., serving as Chairman of the Governance and Nominating Committee and a member of the Finance Committee of such board. We believe Mr. Gerard’s qualifications to sit on our board of directors include his extensive experience in the financial services industry as well as his eligibility to serve as an independent member of the Board. Mr. Gerard brings many years of experience in senior management and as a member of the boards of other public companies. In addition, Mr. Gerard is familiar with corporate governance matters and brings valuable insight to our Board.

 

MARK R. PATTERSON, age 58, became a director of the Company following the completion of the Company’s private placement with MatlinPatterson in September 2007. He is a member of the Executive Compensation Committee. Mr. Patterson is Chairman of MatlinPatterson Global Advisors LLC which he co-founded in July 2002. Mr. Patterson has over 35 years of financial markets experience, principally in merchant, investment and commercial banking at Credit Suisse (where he was Vice Chairman from 2000 to 2002), Scully Brothers & Foss L.P., Salomon Brothers Inc. and Bankers Trust Company. Mr. Patterson holds degrees in law (BA, 1972) and economics (BA Honors, 1974) from South Africa’s Stellenbosch University and an MBA (with distinction, 1986) from New York University’s Stern School of Business. Mr. Patterson also serves on the Board of Directors of Allied World Assurance in Bermuda (Chairman of the Investment Committee) and on the Dean’s Executive Board of the NYU Stern School of Business. Mr. Patterson serves on the Board of Flagstar Bancorp, Inc. and Polymer Group, Inc. He previously served on the Boards of NRG Energy, Inc., Compass Aerospace, Thornburg Mortgage Inc., and Oxford Automotive, Inc. Mr. Patterson has significant experience, expertise and background in the financial markets. With his experience as a member of the boards of other public companies, Mr. Patterson continues to provide key insight to our Board. Furthermore, given Mr. Patterson’s relationship with MatlinPatterson, the Board believes that his interests will be closely aligned to those of the Company’s shareholders.

 

ROBERT S. YINGLING, age 48, has been a director of the Company since September 2007 and is Chair of the Audit Committee. He has been Chief Executive Officer of Lifetopia Corporation since May 2009, prior to which from March 2008 he was a consultant to Lifetopia and other technology companies. Previously, Mr. Yingling was Vice President and Chief Financial Officer of WRC Media Inc. from September 2004 to March 2008, and he was Chief Financial Officer of Duncan Capital Group LLC from March through July 2004. From March 2003 until February 2004, he was Director of Finance of Smiths Group plc. Prior to that he was Chief Financial Officer of BigStar Entertainment, Inc., where he led their Initial Public Offering. Mr. Yingling was a manager in the Audit and Business Advisory Division of Arthur Andersen and Director of Finance at Standard Microsystems Corporation, as well as Chief Financial Officer of GDC International, Inc. Mr. Yingling has served as a director of SA International, from April 2004 through December 2008. Mr. Yingling holds an MBA from the Columbia University Graduate School of Business and a BS in Accounting from Lehigh University. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the New York State Society of CPAs. We believe Mr. Yingling’s qualifications to sit on the Board of Directors include his extensive financial expertise. His diverse experience with the financial reporting process, gained as an auditor with a leading public accounting firm advising public companies with regard to accounting and reporting issues, and as the chief financial officer of various public companies, gives him the expertise to Chair our Audit Committee and serve on the Board. Mr. Yingling has maintained the continuing professional education requirements of CPAs, including courses focused on the issues facing broker

dealers and public company financial experts, which, combined with the foregoing practical experience, provide him the expertise to Chair our Audit Committee and serve on our Board.

 

Messrs. Mandel and Plimpton have terms which expire this year and they will not continue as directors after the Annual Meeting. The Company is grateful to Messrs. Mandel and Plimpton for their years of service to the Company:

 

VICTOR MANDEL, age 45, has been a director of the Company since October 2008 and is a member of the Audit Committee and the Committee on Directors and Corporate Governance. He is the founder and managing member of Criterion Capital Management, an investment company established in 2001. From 1999 to 2000, Mr. Mandel was Executive Vice President, Finance and Development of Snyder Communications, Inc., with operating responsibility for its publicly-traded division, Circle.com. Prior to Snyder Communications, Mr. Mandel was a Vice President in the Investment Research department at Goldman Sachs & Co., covering emerging growth companies. Mr. Mandel has been a member of the board of directors of Comys IT Partners, Inc. since 2003. We believe that Mr. Mandel’s qualifications to sit on our Board included his experience in the financial services industry, knowledge of corporate governance and expertise in accounting and financial reporting matters. Mr. Mandel will not continue as a director after the Annual Meeting.

 

FRANK S. PLIMPTON, age 56, became a director of the Company following the completion of the Company’s private placement with MatlinPatterson in September 2007. He has over 28 years of experience in reorganizations, investment banking and investing. Mr. Plimpton served as a partner of MatlinPatterson Global Advisors LLC from its inception in July 2002 through 2008. Prior to July 2002, Mr. Plimpton was a member of the Distressed Securities Group at Credit Suisse First Boston. Mr. Plimpton holds a BA in Applied Mathematics and Economics from Harvard College (cum laude, 1976). Mr. Plimpton received a law degree from the University of Chicago Law School (1981), and an MBA (1980) from the University of Chicago Booth School of Business. As a director, Mr. Plimpton brought his experience in private equity, reorganizations, investment banking and investing to our Board. Mr. Plimpton will not continue as a director after the Annual Meeting.

 

Introduction

 

At the Annual Meeting, the shareholders of the Company will be asked to consider and vote upon a proposal to change the Company’s state of incorporation from New York to Delaware (the “Reincorporation”) pursuant to an Agreement and Plan of Merger by and between the Company and wholly-owned subsidiary of the Company, Gleacher & Company, Inc., a Delaware corporation (“Newco”). The Agreement and Plan of Merger is described below and included in Appendix A to this proxy statement (the “Merger Agreement”). Newco would be the holding company for all of the business operations of the Company following the Reincorporation and will not have engaged in any activities prior to the Reincorporation except in connection with the Reincorporation.

 

Under the Merger Agreement, the Company will be merged with and into Newco (the “Merger”). Upon the effectiveness of the Merger, the Company will cease to exist, and Newco will continue to operate the Company’s business under the name Gleacher & Company, Inc. The Company’s officers and directors immediately before the merger will be Newco’s directors and officers immediately after the Merger.

 

For the reasons set forth below, the Board believes that approval of the Reincorporation is in the best interests of the Company and its shareholders and has approved the Reincorporation. Under applicable law, approval of the Reincorporation by shareholders representing two-thirds of the votes of all outstanding shares entitled to vote is required for approval of the Merger Agreement, the Merger and all related transactions effecting the change of the legal domicile of the Company. Pursuant to New York law, if the Reincorporation is approved by the shareholders of the Company, shareholders who dissent from the Reincorporation will not be entitled to appraisal rights with respect to their shares of the Company.

 

Reasons for the Reincorporation

 

The purpose of the Reincorporation is to change the Company’s state of incorporation from New York to Delaware. The Reincorporation is intended to cause, and will have the effect of causing, the Company to be governed by the Delaware General Corporation Law (the “DGCL”) rather than by the New York Business Corporation Law (the “NYBCL”).

 

Delaware has historically been a leader in adopting and interpreting comprehensive and flexible corporate laws responsive to the legal and business needs of corporations. Companies choosing to incorporate or reincorporate in Delaware commonly cite the following as reasons for their decision:

 

 

The Board has considered each of the foregoing and other reasons and concluded that reincorporation in Delaware is in the best interests of the Company and its shareholders. Therefore, the Board recommends that the shareholders vote “FOR” Proposal No. 2 to reincorporate the Company in Delaware.

Effect of the Merger

 

To effect the Reincorporation, at the effective time of the Merger:

 

 

Certain material differences between the corporations law of New York and Delaware, and between the certificates of incorporation and bylaws of the Company and Newco, are discussed below under the heading “Comparison of Shareholders Rights under Delaware and New York Corporate Law and Charter Documents.” A copy of the existing certificate of incorporation and bylaws of the Company are available for inspection by shareholders of the Company on the Company’s EDGAR page on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov or by written request to Corporate Secretary at the offices of the Company at 1290 Avenue of the Americas, New York, NY 10104. Newco will be governed by the Certificate of Incorporation substantially in the form included as Appendix B (the “Delaware Certificate”) and the Bylaws substantially in the form included as Appendix C (the “Delaware Bylaws,” and collectively with the Delaware Certificate, the “Delaware Charter Documents”). As described more fully in Proposal No. 3 to this proxy statement, the Company is also seeking to amend its existing Restated Certificate of Incorporation to eliminate the classification of its Board of Directors. Where applicable, the Delaware Charter Documents included in Appendices B and C include alternative provisions — those that will govern the composition of the Board of Directors if Proposal No. 3 is adopted at the Annual Meeting and those that will govern if Proposal No. 3 is not adopted. The final Delaware Charter Documents will include only the provisions with regard to the composition of the Board of Directors that are consistent with the outcome of the vote on Proposal No. 3.

 

Approval

 

The Reincorporation and the terms of the Merger Agreement have been approved by the Board. Pursuant to applicable law, the Reincorporation and the Merger are subject to the further approval by the Company’s shareholders constituting two-thirds of all outstanding shares of common stock entitled to vote thereon.

 

Exchange of Stock

 

If Proposal No. 2 is approved, and the Company proceeds with the Reincorporation, the Company’s shares of common stock and preferred stock will each automatically convert on a one-for-one basis into shares of common stock and preferred stock, respectively, of Newco (respectively the “Newco Common Stock” and the “Newco Preferred Stock,” and collectively, the “Newco Capital Stock”) at the effective time of the Reincorporation (the “Effective Time”) without any further action required by the Company’s shareholders. At the Effective Time:

 

 

 

 

Effective Time

 

The Reincorporation will become effective upon the filing of the Delaware Certificate of Merger with the Secretary of State of Delaware and the New York Certificate of Merger with the Secretary of State of New York. These filings are anticipated to be made as soon as practicable after receiving the requisite shareholder approval and all other necessary approvals.

 

Operations Following the Reincorporation

 

Newco will continue the business of the Company after the Merger, and the Reincorporation will have no effect on the Company’s operations.

 

Federal Income Tax Consequences of the Reincorporation

 

The following summary addresses the material U.S. federal income tax consequences of the Reincorporation to holders of shares of the Company’s capital stock (“Holders”). This summary is based on the current provisions of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”), applicable Treasury Regulations, judicial authority and administrative rulings, all of which are subject to change, possibly with retroactive effect. Any such change could alter the tax consequences described herein. No ruling from the Internal Revenue Service (the “IRS”) has been or will be sought with respect to federal income tax consequences of the Reincorporation under the Internal Revenue Code. There can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the Reincorporation or that any such contrary position would not be sustained by a court. This summary is only for the general information of Holders and does not purport to consider all potential tax consequences of the Reincorporation. In addition, this summary does not address the U.S. federal income tax consequences of the Reincorporation to Holders subject to special tax treatment under the Internal Revenue Code, such as dealers in securities, holders of stock options or those Holders who acquired their capital stock of the Company upon the exercise of stock options.

 

The Company expects to receive an opinion from our counsel Dewey & LeBoeuf LLP confirming that the Reincorporation will constitute a reorganization under Section 368(a) of the Internal Revenue Code. Assuming the Reincorporation constitutes such a reorganization, the following consequences will generally result: (a) no gain or loss will be recognized by Holders upon the conversion of their shares of Company capital stock into Newco Capital Stock in the Reincorporation; (b) a Holder’s basis in a share of Newco Capital Stock will be the same as the Holder’s basis in the corresponding share of Company capital stock held

at the time of the Reincorporation; (c) a Holder’s holding period in a share of Newco Capital Stock will include the period during which the Holder held the corresponding share of Company capital stock prior to the Reincorporation, provided the Holder held the corresponding share as a capital asset at the time of the Reincorporation; and (d) neither the Company nor Newco will recognize gain or loss as a result of the Reincorporation.

 

The tax opinion of Dewey & LeBoeuf LLP will be based on, among other things, current law and certain representations by the Company. Any change in current law, which may be retroactive, or the failure of any representation by the Company to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel in the tax opinion. Moreover, the tax opinion is not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions reached in the tax opinion.

 

A successful IRS challenge to the reorganization status of the Reincorporation could result in a Holder recognizing gain, and perhaps loss, with respect to each share of Company capital stock exchanged in the Reincorporation equal to the difference between the Holder’s basis in such shares and the fair market value, as of the time of the Reincorporation, of the shares of Newco Capital Stock received in exchange therefor. In such event, a Holder’s aggregate basis in the shares of Newco Capital Stock received in the exchange would generally equal their fair market value on such date, and the Holder’s holding period for such shares would not include the period during which the Holder held shares of Company capital stock prior to the Reincorporation.

 

State, local, or foreign income tax consequences to Holders may vary from the federal tax consequences described above. Holders should consult their own tax advisors as to the effect of the Reincorporation under applicable federal, state, local, or foreign income tax laws.

 

Accounting Treatment

 

The Reincorporation is expected to be accounted for as a transaction between entities under common control in which the net assets of the Company will be transferred into Newco at their carrying values and the shares of the Company’s common stock and preferred stock will each automatically convert on a one-for-one basis into shares of Newco Common Stock and Newco Preferred Stock, respectively. Therefore, no gain or loss will be recognized.

 

Regulatory Approvals

 

The Reincorporation will not occur until the Company has received all required consents of governmental authorities, including the filing and acceptance of the Delaware Certificate of Merger with the Secretary of State of Delaware, the filing and acceptance of the New York Certificate of Merger with the Secretary of State of New York, and satisfied applicable requirements of the NASDAQ Global Market and the Financial Industry Regulatory Authority, Inc.

 

Securities Act Consequences

 

Pursuant to Rule 145(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), a merger which has the sole purpose of changing an issuer’s domicile within the United States does not involve a sale of securities for the purposes of the Securities Act. Accordingly, separate registration of the offer and sale of shares of the Newco Capital Stock will not be required.

 

Capital Stock and Voting Rights

 

The Company’s authorized capital stock consists of 200,000,000 shares of common stock, $0.01 par value per share, and 1,500,000 shares of preferred stock, $1.00 par value per share. On April 14, 2010, there were 128,294,480 shares of common stock and 1,000,000 shares of preferred stock of the Company outstanding. Each share of common stock entitles the holder thereof to one vote. Holders of shares of preferred stock are not entitled to vote on the Reincorporation, as such, but have certain consent rights.

The Delaware Certificate provides that the authorized capital stock of Newco consists of 200,000,000 shares of common stock, $0.01 par value per share, and 1,500,000 shares of preferred stock, $1.00 par value per share.

 

The Merger Agreement provides that each outstanding share of the Company’s common stock and preferred stock will be exchanged for one share of Newco Common Stock and Newco Preferred Stock, respectively. Accordingly, the interests of the shareholders relative to one another will not be affected by the Merger.

 

Abandonment of the Reincorporation

 

The Board will have the right, at any time before the Effective Time, to abandon the Merger and thus the Reincorporation and take no further action towards reincorporating the Company in Delaware, even after shareholder approval, if for any reason the Board determines that it is not advisable to proceed with the Reincorporation.

 

Comparison of Shareholder Rights Under Delaware and New York Corporate Law and Charter Documents

 

Subject to shareholder approval prior to the Effective Time, the Company will change its state of incorporation to Delaware and will thereafter be governed by the DGCL and by the Delaware Charter Documents. As a result, at the Effective Time, the Delaware Charter Documents will effectively replace the Company’s Restated Certificate of Incorporation (as amended and restated, the “Company Certificate”) and the Company’s Amended and Restated Bylaws (the “Company Bylaws,” and together with the Company Certificate, the “Company Charter Documents”). In addition, holders of common stock will become holders of Newco Common Stock, which will result in their rights as shareholders being governed by the laws of the State of Delaware instead of the laws of the State of New York.

 

The following is a summary of some of the significant rights of the shareholders under New York and Delaware law and under the Company Charter Documents and the Delaware Charter Documents. This summary is not a complete description of all differences between the rights of a shareholder of the Company and those of Newco. This summary is qualified in its entirety by reference to the full text of such documents and laws.

 

Amendment of Certificate of Incorporation

 

Under the NYBCL, except for certain ministerial changes, and except as otherwise required under a certificate of incorporation, a certificate of incorporation may be amended only if authorized by the board of directors and by the vote of the holders of a majority of the shares of stock entitled to vote on such amendment. The DGCL allows a board of directors to recommend an amendment for approval by shareholders, and a majority of the shares entitled to vote at a shareholders’ meeting are normally enough to approve that amendment. Both the NYBCL and the DGCL also require that if a particular class or series of stock is adversely affected by certain types of amendments, then such class or series also must authorize such amendment in order for it to become effective. The NYBCL and the DGCL both allow a corporation to require a higher proportion of votes in order to authorize amendments to a certificate of incorporation, if so provided in the certificate. Both the Company Certificate and the Delaware Certificate provide that they shall not be amended in any manner which would affect the powers, preferences or special rights of the Company’s Series B Preferred Stock (the “Series B Preferred Stock”) without the affirmative vote of the holders of at

least two-thirds of the outstanding shares of Series B Preferred Stock, voting together as a single class. The Company does not believe that the Reincorporation would affect the powers, preferences or rights of the Series B Preferred Stock.

 

Amendment of Bylaws

 

Under the NYBCL, a corporation’s bylaws may be amended by the vote of the holders of a majority of the votes cast in the election of any directors or, if permitted under the corporation’s certificate of incorporation or a bylaw adopted by the shareholders, additionally by the board of directors. Under the DGCL, the power to adopt, amend or repeal the bylaws is vested in the stockholders entitled to vote or, if permitted under the corporation’s certificate of incorporation, by the board of directors.

 

Both the Company Bylaws and the Delaware Bylaws may be amended by the Board, or by the vote of a majority of the shareholders entitled to vote thereon at an annual or special meeting. However, each of the Company Charter Documents and the Delaware Charter Documents require the affirmative vote of the holders of at least 80% of the Company’s outstanding voting stock for the amendment by the shareholders of provisions relating to: (i) special meetings of shareholders; (ii) notice of shareholder business and nominations; (iii) the number, election and terms of directors; (iv) the removal of directors; and (v) newly created directorships and vacancies.

 

Who May Call Special Meetings of Shareholders

 

Under both the NYBCL and the DGCL, the board of directors or anyone authorized in the certificate of incorporation or bylaws may call a special meeting of shareholders. Currently, the Company Bylaws provide that special meetings may be called by the Chief Executive Officer, the President or by resolution of the Board. The Delaware Bylaws will provide that special meetings may be called by the Chairman of the Board, by resolution of the Board, by the Chief Executive Officer, by the President or by the Secretary of Newco.

 

Action by Written Consent of Shareholders In Lieu of a Shareholder Meeting

 

The NYBCL permits shareholder action in lieu of a meeting by unanimous written consent of those shareholders who would have been entitled to vote on a given action at a meeting, unless otherwise specified in the certificate of incorporation. The DGCL permits shareholders to take action by the written consent of holders collectively owning at least the minimum number of votes (generally, a majority) that would be required for action at a shareholders’ meeting at which holders of all shares entitled to vote on the action were present and voted. The Company Certificate and Delaware Certificate each allow shareholder action by written consent if signed by holders collectively owning at least the minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote on the action were present and voted.

 

Notice of Shareholder Business and Nominations

 

The Company Bylaws and the Delaware Bylaws each allow shareholders to nominate directors and propose other business to be brought before the annual meeting of shareholders and any special meeting of shareholders if timely written notice is given to the Secretary of the Company and such business is a proper subject for shareholder action under the NYBCL and the DGCL, respectively. For notice to be timely under the Company Bylaws, in general it must be delivered in writing to the Corporate Secretary of the Company at the principal offices of the Company not less than 70 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting or prior to such special meeting as the case may be. For notice to be timely under the Delaware Bylaws, written notice generally must be delivered not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting or prior to such special meeting, as the case may be.

Right of Shareholders to Inspect Shareholder List

 

Under the NYBCL, a shareholder of record may inspect the list of record shareholders upon giving at least five days’ written demand to do so. The inspection may be denied if the shareholder refuses to give an affidavit that such inspection is not desired for a purpose which is in the interest of a business other than the business of the corporation and that the shareholder has not been involved in selling or offering to sell any list of shareholders of any corporation within the preceding five years. Under the DGCL, any stockholder may upon making a demand under oath stating the purpose thereof, inspect the stockholders’ list for any purpose reasonably related to the person’s interest as a shareholder. In addition, for at least 10 days prior to each stockholders meeting, a Delaware corporation must make available for examination a list of stockholders entitled to vote at the meeting.

 

Vote Required for Certain Transactions

 

Under the NYBCL, to engage in a merger, consolidation or sale of all or substantially all of its assets, the Company must obtain the approval of at least two-thirds of the outstanding stock entitled to vote thereon. Under the DGCL, corporations are generally required to obtain the approval of only a majority of the outstanding stock entitled to vote on such transaction. However, in the case of a merger under the DGCL, stockholders of the surviving corporation do not have to approve the merger at all, unless the certificate of incorporation provides otherwise, if three conditions are met:

 

 

Proxies

 

Unless the proxy provides for a longer period, a proxy under the NYBCL can be voted or acted upon for eleven months, compared with three years under the DGCL.

 

Number of Directors

 

Under both the NYBCL and the DGCL, corporations must have at least one director. Under the NYBCL, the exact number of directors is required to be fixed in the bylaws, by the shareholders or by the board of directors, if authorized in a shareholder-adopted bylaw. Under the DGCL, the exact number of directors is required to be fixed in the certificate of incorporation or in (or in the manner provided by) the bylaws. Both the Company Bylaws and Delaware Bylaws provide for a minimum of one director and a maximum of fifteen directors, with the actual number of directors to be set by the Board from time to time.

 

Classified Board of Directors

 

Both the NYBCL and the DGCL permit “classified” boards of directors, which means the directors may have staggered terms that do not all expire at once. The NYBCL and the DGCL require that classified boards of directors be authorized in the corporation’s certificate of incorporation or in a shareholder-adopted bylaw. The NYBCL allows for as many as four different classes of directors, all as nearly equal in number as possible, while the DGCL allows for up to three different classes of directors. The Company Certificate provides for three classes of directors, and also provides that without the affirmative vote of the holders of at least 80% of the voting power of the then-outstanding voting stock of the Company, the provisions of the Company Certificate relating to board classification cannot be amended or repealed nor can any provision inconsistent with such provisions be adopted. In Proposal No. 3 to this proxy statement, the Board is proposing that you vote in favor of amending the Company Certificate to eliminate our Board classification and to require instead that all directors be elected or re-elected annually. If Proposal No. 3 is adopted at the

Annual Meeting, the Delaware Charter Documents will require that all directors be elected or reelected annually and will remove the requirement that 80% of the voting power of the then outstanding voting stock of the Company approve any changes to the provisions relating to the number and election of directors. If Proposal No. 3 is not adopted at the Annual Meeting, the Delaware Charter Documents will provide for three classes of directors for the Company and contain the same restrictions relating to amending such provisions as currently exist in the Company Certificate.

 

Removal of Directors by Shareholders

 

Under the NYBCL, directors may be removed for cause by the shareholders owning a majority of the shares entitled to vote. In addition, if provided for in the certificate of incorporation, directors can be removed by the shareholders of a New York corporation without cause or by the board of directors for cause. Under the DGCL, unless the board is divided into classes, shareholders may remove directors, with or without cause, by a vote of shareholders owning a majority of the outstanding shares entitled to vote or by such greater vote requirement as may be set forth in the certificate of incorporation. Directors of a classified board may only be removed for cause, unless the certificate of incorporation provides otherwise. The Company Bylaws and Delaware Bylaws each allow for the removal of any director, with or without cause but only by the affirmative vote of the holders of at least 80% of the then-outstanding voting stock, voting together as a single class. As described above under “Classified Board of Directors,” if Proposal No. 3 in this proxy statement is adopted at the Annual Meeting, the Delaware Charter Documents will not provide for a classified Board and, if Proposal No. 3 is not adopted, the Board will be divided into three classes. Regardless of the outcome of the vote on Proposal No. 3, the Delaware Charter Documents will allow for the removal of any director, with or without cause but only by the affirmative vote of the holders of at least 80% of the then-outstanding voting stock, voting together as a single class.

 

Limitation of Directors’ Liability

 

Both states permit the limitation of a director’s personal liability while acting in his or her official capacity, but only if the limitation is contained in the corporation’s certificate of incorporation. Under the NYBCL, the certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors to the corporation or its shareholders for breach of duty. However, no provision can eliminate or limit:

 

 

The Company Certificate and Delaware Certificate each contain a provision limiting the personal liability of directors.

 

The DGCL also requires a certificate of incorporation provision in order to limit or eliminate a director’s liability. However, the DGCL precludes any limitation or elimination of liability if the director breaches his or her duty of loyalty to the corporation or its shareholders, or if his or her acts or omissions are not in good faith or involve intentional misconduct or a knowing violation of law or if he or she receives an improper personal benefit from the corporation, or authorized a dividend or stock repurchase that was forbidden by the DGCL.

 

Due to the variations in the NYBCL and the DGCL, there may be circumstances where, despite the inclusion of certificate of incorporation provisions seeking the maximum director exculpation permitted by applicable law, a director could remain liable under the NYBCL for conduct that would not expose him or her to liability under the DGCL, or vice versa.

Loans to, and Guarantees of Obligations of, Directors

 

Under the NYBCL, a corporation may not lend money to, or guarantee the obligation of, a director unless the disinterested shareholders of such corporation approve the transaction. For purposes of the shareholder approval, the holders of a majority of the votes of the shares entitled to vote constitute a quorum, but shares held by directors who are benefited by the loan or guarantee are not included in the quorum.

 

Under the DGCL, a board of directors may authorize loans by the corporation to, and guarantees by the corporation of any obligations of, any director of the corporation who is also an officer or other employee of the corporation whenever, in the judgment of the board of directors, such loan or guarantee may reasonably be expected to benefit the corporation.

 

Transactions with Interested Directors

 

Under the NYBCL, a corporation may establish the validity of transactions between it and its interested directors through one of several methods, including the approval by a majority of the disinterested directors who are not involved in the transaction. The DGCL provides that no transaction between a corporation and an interested director is void or voidable solely because that director is present at or participates in the meeting where such transaction is considered or because that director’s votes are counted if the material facts of that director’s interest are known to the board of directors and the board of directors in good faith authorizes the transaction by a vote of a majority of the disinterested directors, or if that director’s interest is disclosed to the stockholders and the stockholders in good faith approve the transaction, or if the contract or transaction at issue is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the shareholders. Both the Company Bylaws and Delaware Bylaws allow for the approval of such transactions where the director’s interest in the transaction is either (1) disclosed in good faith or known to the Board, and the Board or a committee of the Board approves the transaction by a majority without counting the vote of any interested director or, if the votes of the disinterested directors are insufficient to constitute the vote of a majority of the Board, then by unanimous vote of the disinterested directors; or (2) disclosed in good faith or known to the shareholders entitled to vote thereon, and the transaction is approved by a vote of such shareholders.

 

Dividends; Redemption of Stock

 

Subject to its certificate of incorporation provisions, under both the NYBCL and the DGCL a corporation may generally pay dividends, redeem shares of its stock or make other distributions to shareholders if the corporation is solvent and would not become insolvent because of the dividend, redemption or distribution. The assets applied to such a distribution may not be greater than the corporation’s “surplus.”

 

Under the NYBCL, dividends may be paid or distributions made out of surplus or, in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, so that the net assets of the corporation remaining after such payment or distribution shall be at least equal to the amount of its stated capital. The NYBCL defines surplus as the excess of net assets over stated capital and permits the board of directors to adjust stated capital. The DGCL defines surplus as the excess of net assets over stated capital and lets the board of directors adjust capital. If there is no surplus, the DGCL allows a corporation to apply net profits from the current or preceding fiscal year, or both, with certain exceptions.

 

In general, with certain restrictions, the NYBCL permits a corporation to provide in its certificate of incorporation for redemption (at the option of the corporation or the shareholder or in certain other circumstances) of one or more classes or series of its shares. One such restriction provides that common stock may be issued or redeemed, with certain exceptions, only when the corporation has an outstanding class of common shares that is not subject to redemption. The DGCL permits redemptions only when the corporation has outstanding one or more shares of one or more classes or series of stock, which share or shares have full

voting powers. Under each of the Company Certificate and Delaware Certificate, so long as the Series B Preferred Stock remains outstanding, the Company is prohibited from paying any dividend, other than dividends payable to the holders of the Company’s Series B Preferred Stock, without first obtaining the vote or written consent of a majority in interest of the then outstanding shares of the Series B Preferred Stock. Additionally, cash dividends of 10 percent per annum must be paid on the Series B Preferred Stock quarterly, while an additional dividend of 4 percent per annum accrues and is cumulative, if not otherwise paid quarterly at the option of the Company.

 

Appraisal Rights

 

The NYBCL generally provides that a dissenting shareholder has the right to receive the fair value of his shares if he complies with certain procedures and objects to:

 

(i)   certain mergers and consolidations;

 

(ii)  certain dispositions of assets requiring shareholder approval;

 

(iii) certain share exchanges; or

 

(iv)  certain amendments to the certificate of incorporation which adversely affect the rights of such shareholder.

 

The DGCL provides such appraisal rights only in the case of shareholders objecting to certain mergers or consolidations, unless additional appraisal rights are provided in the certificate of incorporation.

 

The NYBCL provides that dissenting shareholders have no appraisal rights if their shares are listed on a national securities exchange or designated as a market system security on an interdealer quotation system by the NASDAQ Stock Market. Appraisal rights may also be unavailable under the NYBCL in a merger between a parent corporation and its subsidiary where only one of them is a New York corporation, or in a merger between a parent and subsidiary where both are New York corporations, and the parent owns at least 90% of the subsidiary. Also, appraisal rights are available to shareholders who are not allowed to vote on a merger or consolidation and whose shares will be canceled or exchanged for cash or something else of value other than shares of the surviving corporation or another corporation. When appraisal rights are available, the shareholder may have to request the appraisal and follow other required procedures. Pursuant to the NYBCL, if the Reincorporation is approved by the shareholders of the Company, dissenting shareholders will not be entitled to appraisal rights with respect to their shares.

 

Similarly, under the DGCL, appraisal rights are not available to a shareholder if the corporation’s shares are listed on a national securities exchange or held by more than 2,000 shareholders of record, or if the corporation will be the surviving corporation in a merger which does not require the approval of the surviving corporation’s shareholders.

 

Business Combinations with Interested Stockholders

 

Provisions in both the NYBCL and the DGCL may help to prevent or delay changes of corporate control. In particular, both the NYBCL and the DGCL restrict or prohibit an “interested stockholder” from entering into certain types of “business combinations” unless the board of directors approves the transaction in advance. The two laws define these two terms differently.

 

Under the NYBCL, an interested shareholder is generally prohibited from entering into certain types of business combinations with a New York corporation for a period of five years after becoming an interested shareholder, unless before such date the board of directors approves either the business combination or the acquisition of stock by the interested shareholder before the interested shareholder acquires his or her shares. An “interested shareholder” under the NYBCL is generally a beneficial owner of at least 20% of the corporation’s outstanding voting stock. “Business combinations” under the NYBCL include:

 

 

 

After a five-year period, the NYBCL allows such business combination if it is approved by a majority of the voting stock not owned by the interested shareholder or by an affiliate or associate of the interested shareholder. Business combinations are also permitted when certain statutory “fair price” requirements are met and in certain other circumstances.

 

Section 203 of the DGCL generally prohibits an interested stockholder from entering into certain types of business combinations with a Delaware corporation for three years after becoming an interested stockholder. An “interested stockholder” under the DGCL is any person other than the corporation and its majority-owned subsidiaries who owns at least 15% of the outstanding voting stock, or who is an affiliate or associate of a corporation and who owned at least 15% of the outstanding voting stock within the preceding three years. In summary, the prohibited combinations include:

 

 

Section 203 does not apply in the following cases:

 

 

The Board recommends that the Company’s shareholders vote “FOR” the reincorporation of the Company in Delaware.

 

Introduction

 

At the Annual Meeting, the shareholders of the Company will be asked to consider and vote upon a proposal to amend the Company’s Restated Certificate of Incorporation (the “Company Certificate”) to eliminate separate classes of directors and require that directors be elected annually.

 

Current Board Structure

 

Article EIGHTH of the Company Certificate currently provides that the Board of Directors be divided into three classes, with approximately one-third of our directors elected each year. The successors of the class of directors whose term expires at each annual meeting of the shareholders are elected for a three-year term.

 

Rationale for Elimination of Board Classification

 

The Board of Directors, together with the Committee on Directors and Corporate Governance, has considered the merits of an annually elected and a classified board, taking a variety of perspectives into account. In the past, the Board supported a classified board, in part due to the perceived continuity and stability this structure could provide. The Board believes that it can achieve these objectives without a classified board and, recognizing the merits of annual elections, believes that shareholders should have the opportunity to vote on the performance of the entire board each year. As a result, the Committee on Directors and Corporate Governance and the Board of Directors has approved, and is recommending that shareholders approve, this proposal.

 

The Amendment

 

If the proposed amendment is approved, the Board classification will be eliminated. The current directors, including the directors elected at the Annual Meeting, will serve one-year terms expiring at the 2011 annual meeting of the shareholders, and beginning with the 2011 annual meeting of the shareholders, all directors will be elected for one-year terms at each annual meeting.

 

If the amendment is approved, Article EIGHTH, paragraph (C) of the Company Certificate will be amended to read in its entirety as follows:

 

EIGHTH:

 

(C) The directors, other than those who may be elected by the holders of shares of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation, shall serve one year terms. Commencing with the 2011 annual meeting of shareholders, and at each succeeding annual meeting of shareholders, directors shall be elected at each annual meeting of shareholders.

 

The amendment will not affect the Board’s authority under the Company Certificate to fill vacancies on the Board for the full term of any director whose departure from the Board creates a vacancy, if any. Any director chosen as a result of the newly created directorships or to fill a vacancy on the Board will hold office until the next annual meeting of the shareholders.

 

In addition, Article EIGHTH, paragraph (G) of the Company Certificate, which requires the affirmative vote of the holders of at least 80% of the voting power of the then outstanding voting stock, voting together as a single class, to amend or repeal or adopt any provision inconsistent with Article EIGHTH, paragraph (C), will be deleted in its entirety. If the proposed amendment to Article EIGHTH, paragraph (C) is approved, this related technical change is necessary so as to not unintentionally hinder the Company in the absence of a classified Board.

Relationship to Proposal No. 2

 

At the Annual Meeting, the shareholders of the Company will also be voting on Proposal No. 2, a proposal to reincorporate the Company in Delaware. If Proposal No. 2 is adopted, the surviving Delaware corporation will be governed by a Delaware certificate of incorporation and bylaws. If Proposal No. 2 is adopted but this Proposal No. 3 is not adopted, the surviving Delaware corporation will have a classified Board. If both Proposal No. 2 and this Proposal No. 3 are adopted at the Annual Meeting, the surviving Delaware corporation will not have a classified Board. If Proposal No. 2 is not adopted, but this Proposal No. 3 is adopted, the Company will not have a classified Board. We are seeking shareholder approval to eliminate the classified structure of the Board of Directors independent of Proposal No. 2 so that if Proposal No. 2 is not approved but this proposal is approved, we will nevertheless declassify our Board of Directors.

 

Shareholder Approval Required

 

The Company Certificate requires the affirmative vote of the holders of at least 80% of the voting power of the then-outstanding voting stock, voting together as a single class, to amend the Company Certificate to eliminate the classified structure of the Board of Directors. In the event that less than 80% of the outstanding shares of common stock entitled to vote at the Annual Meeting vote in favor of this Proposal No. 3, the Company Certificate will not be amended to eliminate the classified structure of the Board of Directors.

 

The Board recommends that the Company’s shareholders vote “FOR” the proposal to amend the Company Certificate to eliminate the classified structure of the Board of Directors.

 

Introduction

 

At the Annual Meeting, the shareholders of the Company will be asked to consider and vote upon a proposal to amend the Company’s Restated Certificate of Incorporation (the “Company Certificate”) to change the name of the Company from “Broadpoint Gleacher Securities Group, Inc.” to “Gleacher & Company, Inc.”

 

Rationale for the Name Change

 

We are proposing to change our name in order to more closely align our corporate name with our brand and our focus on investment banking. The Company believes that the Gleacher name has become synonymous with high-quality investment banking services and is the strongest brand for us to unify under in marketing to clients.

 

The Amendment

 

The full text of Article FIRST of the Company Certificate, as proposed to be amended, will read as follows:

 

FIRST: The name of the corporation shall be Gleacher & Company, Inc. It was formed under the name First Albany Companies Inc.

 

If the proposal to amend the Company Certificate to change our name to “Gleacher & Company, Inc.” is approved by our shareholders at the Annual Meeting, an amendment to the Company Certificate will be filed with the Secretary of State of the State of New York to effect the name change as soon as practicable after the annual meeting.

 

Change in Stock Symbol

 

If our shareholders approve the name change amendment at the Annual Meeting, we intend to change our NASDAQ Global Market trading symbol from “BPSG” to “GLCH.” Shareholders will not be required to submit their stock certificates for exchange if the proposed name change is approved. Following the effective date of the name change, all new stock certificates issued by us will reflect our new name.

 

Relationship to Proposal No. 2

 

At the Annual Meeting, the shareholders of the Company will also be voting on Proposal No. 2, a proposal to reincorporate the Company in Delaware. If Proposal No. 2 is adopted, the surviving Delaware corporation will be governed by a Delaware certificate of incorporation and bylaws, which will provide that the Company’s name will be Gleacher & Company, Inc. If Proposal No. 2 is not adopted, but this Proposal No. 4 is adopted, the Company will remain as a New York domiciled corporation but its name will be changed to “Gleacher & Company, Inc.” We are seeking shareholder approval to change the Company’s name independent of Proposal No. 2 so that if Proposal No. 2 is not approved but this proposal is approved, we will nonetheless change the Company name.

 

Shareholder Approval Required

 

The NYBCL requires the affirmative vote of the holders of a majority of all outstanding shares entitled to vote thereon at the Annual Meeting, to amend the Company Certificate to change the name of the Company.

 

The Board recommends that the Company’s shareholders vote “FOR” the proposal to amend the Certificate of Incorporation to change the name of the Company to Gleacher & Company, Inc.

 

Introduction

 

The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010. We are submitting the selection of the independent registered public accounting firm for shareholder ratification at the Annual Meeting.

 

A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting, will have the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions from shareholders.

 

Our organizational documents do not require that our shareholders ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm. We are doing so because we believe it is a matter of good corporate practice. If our shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but still may retain them. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders. The Audit Committee, or a designated member thereof, has pre-approved each audit and non-audit service rendered by PricewaterhouseCoopers LLP to the Company.

 

The Board recommends that the Company’s shareholders vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010.

 

Principal Accounting Firm Fees

 

The following table shows information about fees billed to the Company by PricewaterhouseCoopers LLP for the periods indicated:

 

 

 

 

Audit Committee Pre-Approval Policies and Procedures

 

All audit and non-audit services performed for the Company by the Company’s independent registered public accounting firm are pre-approved by the Audit Committee. In so doing, the Audit Committee is permitted to delegate pre-approval authority to one or more of its members, and has delegated such authority to the Audit Committee Chairman. For audit services, the Audit Committee meets with representatives of the independent registered public accounting firm to discuss the scope, terms and conditions of the audit services. For non-audit services, the Chairman of the Audit Committee discusses with management the nature, scope, need and other relevant aspects of the non-audit services and any decisions made are discussed at the Audit Committee’s next scheduled meeting. The Audit Committee Chairman signs all engagement letters on behalf of the Company with respect to audit or non-audit services. The Audit Committee has not delegated to management its responsibilities to pre-approve services performed by the independent registered public accounting firm.

Ultimate responsibility for management of the Company’s business and affairs rests with the Board of Directors. The Board currently consists of 10 directors, divided into three classes, with each class having a three-year term. If the persons nominated for election as directors in Proposal No. 1 are elected at the Annual Meeting, the size of the Board shall be reduced to nine directors, effective upon the final voting results. The Board has constituted three committees, the Audit Committee, the Executive Compensation Committee and the Committee on Directors and Corporate Governance, and delegated specific governance responsibilities to them. The Board of Directors held 10 meetings during the Company’s fiscal year ended December 31, 2009. The committees of the Board each held the number of meetings noted below under the heading “Committees of the Board of Directors.” During 2009, no director attended fewer than 75% of the meetings of the Board or committees, and most directors attended in excess of 90% in each case. Directors are encouraged to attend each annual meeting of shareholders, and all of our directors attended last year’s meeting either in person or via teleconference.

 

 

The Board seeks to achieve a leadership structure that most efficiently addresses the purpose and mission of the Company and facilitates the oversight of management’s implementation of the Company’s plans. The Board believes that its structure:

 

 

Mr. Gleacher serves as both the Company’s Chief Executive Officer (“CEO”) and Chairman of the Board. The Board determined that the combined role of Chairman and CEO presents advantages including fostering clear accountability, effective decision-making and alignment on corporate strategy, which the Board believes are vital to the Company’s current business needs and development. The combined role also promotes strategy development and execution, and facilitates information flow between management and the Board.

 

The Company does not have a fixed policy with respect to the separation of the roles of Chairman of the Board and CEO and has in its past operated under both the combined and separated Chairman/CEO structure. The Board believes that the optimal leadership structure in that regard will depend on the business needs of the Company at the time as well as the then-makeup of the Board of Directors. As a result, the Board believes that the Company’s leadership structure is likely to evolve with the Company, and the Board intends to reassess and may modify the Company’s leadership structure from time to time.

 

Assuming the election of the directors recommended by the Board, our board will be comprised of five independent directors and four directors whom the Board has determined are not independent. When Mr. Gleacher assumed the position of CEO, and the offices of Chairman of the Board and CEO were combined, the Board’s Committee on Directors and Corporate Governance (the “Directors Committee”), which consists of four independent directors, considered the desirability of appointing a lead independent director. The Directors Committee concluded that this was an administrative action that was not currently necessary for effective board functioning. The Directors Committee’s decision was based in part on the size of the Board and the Company, the efficiency of communication among the independent directors and the frequency of executive sessions of the Board, in which only independent directors participate. During executive sessions of the independent directors or at meetings where the Chairman is unavailable, the chair of the Directors

Committee presides unless the Board determines that another director should lead discussions due to the subject matter of the meeting.

 

The full Board of Directors reviewed the Directors Committee’s findings on our Board leadership structure and concurred. The Board believes that having a combined role of Chairman and CEO, and a separate presiding independent director at meetings without the Chairman, provides the appropriate balance between strategy development and independent oversight of management. In addition, each of the standing committees of our Board is chaired by an independent director, each of our Audit Committee and Directors Committee is comprised entirely of independent directors, and three of the four members of our Executive Compensation Committee are independent. To further promote independent oversight, the board has adopted a number of governance practices, including executive sessions of the independent directors and annual self-assessments of the Board and its committees.

 

In addition, we have two directors, Messrs. Patterson and Pechock, who are affiliated with MatlinPatterson FA Acquisition LLC (“MatlinPatterson”). As of February 28, 2010, MatlinPatterson controlled approximately 28% of our common stock and was our largest stockholder. As a result, we believe that as directors, Messrs. Patterson and Pechock represent on the Board a unique perspective as significant shareholders of the Company.

 

 

From our recapitalization in 2007 until June 2009, we operated as a “controlled company” under applicable NASDAQ listing rules due to MatlinPatterson’s majority ownership of our outstanding common stock. “Controlled company” status exempted us from certain NASDAQ corporate governance requirements, including requirements that:

 

 

Following the consummation of the Gleacher transaction on June 5, 2009, we ceased to be a “controlled company” and NASDAQ rules permitted us a one-year phase-in period within which to become fully compliant with its corporate governance requirements. In order to comply with the NASDAQ corporate governance rules, we have appointed independent directors to our committees. Currently, our Audit Committee and Directors Committee are composed entirely of independent directors, and three of the four members of our Executive Compensation Committee are independent (we do not consider Mr. Patterson to be independent). Although NASDAQ rules generally require a compensation committee to be wholly independent, there is an exception which may be claimed for up to two years that allows one member of a company’s compensation committee to be non-independent. We believe we are eligible for this exception. For further information on this exception, please refer to our discussion under the heading “Committees of the Board of Directors — The Executive Compensation Committee.” Consequently, we believe we are fully compliant with NASDAQ’s corporate governance requirements as they apply to the Executive Compensation Committee. Moreover, if the directors nominated for office at the Annual Meeting are elected by the shareholders, a majority of our Board of Directors will consist of independent directors, and we would at that time be fully compliant with NASDAQ’s corporate governance rules.

 

 

The Board determined that each of Messrs. Cohen, Gerard, Mandel, Rhode and Yingling qualify as an “independent director” under the applicable NASDAQ listing standards and in the Company’s Corporate

Governance Guidelines. The term of Mr. Mandel expires at this Annual Meeting, and he will not continue as a director after the Annual Meeting. The Board also determined that Dr. Bienen, a nominee for director, also qualified as an “independent director”. In considering Dr. Bienen’s independence, the Directors Committee and the Board reviewed the fact that while Dr. Bienen was President of Northwestern University, Mr. Gleacher, our CEO and Chairman, served on the Board of Trustees of Northwestern University. In addition, the Board was apprised of the fact that Mr. Gleacher has made numerous and substantial charitable contributions to Northwestern University, including a contribution to Northwestern University that was allocated to the Northwestern School of Music, which now bears the Bienen name. The Committee and Board also noted that, as Dr. Bienen is no longer an executive officer of Northwestern University, and Mr. Gleacher’s charitable support of Northwestern University was made by Mr. Gleacher in his personal capacity, rather than by the Company, Dr. Bienen would not be disqualified as an independent member of the Board of Directors for purposes of the NASDAQ rules. After deliberation of these facts and the fact that Mr. Gleacher’s history of charitable support of Northwestern University has spanned a long period of time, and is reflective of and motivated by Mr. Gleacher’s appreciation for the education he received from such institution, the Board determined that Dr. Bienen satisfies applicable independence standards.

 

As described above, the Board of Directors has three standing committees: the Audit Committee, the Executive Compensation Committee and the Committee on Directors and Corporate Governance, each of which operates under a written charter that has been approved by the Board. Each of these charters, as well as our Corporate Governance Guidelines, is posted on our website at www.bpsg.com under the heading “About Us — Corporate Governance.”

 

The Audit Committee

 

The Audit Committee operates pursuant to a written charter that the Committee and the Board reviews each year to assess its adequacy. Our Audit Committee assists the Board of Directors in fulfilling its responsibility to:

 

 

In addition, the Audit Committee has the sole authority and responsibility to appoint, retain (subject to such shareholder ratification as the Company deems desirable), compensate, evaluate and, where appropriate, terminate the Independent Auditor. The Audit Committee also pre-approves all audit, audit-related, tax and other services, if any, to be provided by the Independent Auditor and also prepares the Audit Committee report required by the rules of the SEC for inclusion in the Company’s annual proxy statement.

 

Currently, the Audit Committee is comprised of Messrs. Yingling, who serves as Chair, Gerard, Mandel and Rohde. Each member of the Audit Committee is an “independent director” as defined in the NASDAQ listing standards and is independent within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Company’s Corporate Governance Guidelines. The Board

has determined that all Audit Committee members are financially literate in accordance with the NASDAQ listing standards. Messrs. Yingling, Mandel and Rohde are each qualified as an audit committee financial expert within the meaning of Item 401(h) of Regulation S-K under the Exchange Act, and the Board has determined that they have accounting and related financial management expertise within the meaning of the NASDAQ listing standards. The term of Mr. Mandel expires at this Annual Meeting, and he will not continue as a director after the Annual Meeting. The Audit Committee met ten times during 2009.

 

The Audit Committee is also responsible for overseeing the investigation of any reports made under the Company’s Procedures for Reporting Violations of Compliance Standards (the “Reporting Policy”). The full text of the Reporting Policy is available on our website at www.bpsg.com under the heading “About Us — Corporate Governance.”

 

The Audit Committee’s procedures for the pre-approval of the audit and permitted non-audit services are described herein under the heading “Proposal No. 5 — Ratification of Selection of Independent Registered Public Accounting Firm — Audit Committee Pre-Approval Policy.”

 

The Executive Compensation Committee

 

The Executive Compensation Committee operates pursuant to a written charter adopted by the Board. The Executive Compensation Committee’s primary purpose is to discharge the responsibilities of the Board relating to compensation, such as:

 

 

In carrying out its responsibilities, the Committee:

 

 

In addition, the Executive Compensation Committee also prepares its report regarding Compensation Discussion and Analysis included in our proxy statements or annual reports on Form 10-K as required by the rules and regulations of the SEC. The Executive Compensation Committee may form, and delegate authority to, subcommittees when it deems appropriate. During 2009, the Committee met 13 times.

 

The Executive Compensation Committee has the authority to retain and terminate compensation consultants to assist in the evaluation of executive officer compensation, including sole authority to approve the consultants’ fees and other retention terms. The Executive Compensation Committee also has authority to obtain advice and assistance from any officer or employee of the Company or any outside legal expert or other adviser. In 2009, the Committee retained a compensation consultant, Frederic W. Cook & Co., Inc. (“Cook & Co.”), to assist the Committee in fulfilling its responsibilities. The services that Cook & Co. performed for the Company were related to executive compensation and were primarily in support of decision-making by the Committee. No other services were provided by Cook & Co.

 

The Executive Compensation Committee is currently comprised of Mr. Gerard, who joined the Board and the Committee in April 2009 and was at that time elected Chair of the Committee, Mr. Cohen, Mr. Patterson

and Mr. Rohde. Messrs. Gerard, Cohen and Rohde qualify as “independent directors” under the applicable NASDAQ listing standards. Mr. Patterson is the Chairman of MatlinPatterson Global Advisors LLC, an entity affiliated with MatlinPatterson, which in addition to being one of our largest shareholders, has engaged in commercial transactions with us. Consequently, Mr. Patterson is not considered an independent director.

 

Mr. Patterson has been a member of our Executive Compensation Committee since July 2009. From our recapitalization in 2007 to June 2009, our “controlled company” status under the NASDAQ rules exempted us from the NASDAQ requirement that each member of our Executive Compensation Committee be independent. Since we are no longer a “controlled company,” we must comply with the NASDAQ requirements within the required phase-in period. However, under NASDAQ Rule 5605(d)(3), a NASDAQ-listed company is permitted to have, under limited and exceptional circumstances, one non-independent director on its compensation committee if the board determines that such membership is in the best interests of the shareholders and the Company. We are applying this exemption to Mr. Patterson. Mr. Patterson’s experience as an executive officer of other financial institutions has provided him with valuable insight as to the workings of compensation arrangements. In addition, Mr. Patterson joined the Board during the Company’s restructuring and repositioning of its business and as such, Mr. Patterson brings valuable historical context and continuity to compensation deliberations. Furthermore, given Mr. Patterson’s relationship with MatlinPatterson, the Board believes that his interests will be closely aligned to those of the Company’s shareholders. As such, the Board has determined that not having Mr. Patterson on the Executive Compensation Committee would be detrimental to our shareholders and the Company and that keeping Mr. Patterson on the Executive Compensation Committee is in the best interests of our shareholders and the Company. In accordance with NASDAQ rules, Mr. Patterson will not serve as a non-independent member of the Executive Compensation Committee for longer than two years.

 

The Committee on Directors and Corporate Governance

 

The Committee on Directors and Corporate Governance (the “Directors Committee”) operates under a written charter adopted by the Board and is guided by the Company’s Corporate Governance Guidelines. Responsibilities of our Directors Committee include:

 

 

The Directors Committee is comprised solely of “independent directors” under applicable NASDAQ listing standards. Currently, the members of the Directors Committee are Mr. Rohde, who serves as Chair, Mr. Cohen, Mr. Gerard and Mr. Mandel. The term of Mr. Mandel expires at this Annual Meeting, and he will not continue as a director after the Annual Meeting. The Directors Committee held four meetings during 2009.

 

In identifying and recommending nominees for positions on the Board of Directors, the Directors Committee is guided by prescribed criteria set forth in the charter of the Directors Committee and in our Corporate Governance Guidelines. These criteria include, among other things, independence, judgment, business experience, skills and availability. The Directors Committee also takes into account diversity of viewpoints, backgrounds, experiences and other relevant demographics. In determining whether to recommend a director for reelection, the Directors Committee considers past attendance at meetings and contribution to the activities of the Board and its committees. The Directors Committee also takes into consideration annual self-assessments conducted by the Board and each of its committees to evaluate board performance and identify personal characteristics that could contribute to the Board’s effectiveness. These criteria are not applied in a formulaic manner and are not necessarily given equal weight with respect to each candidate. Rather, the Directors Committee considers these criteria in the context of current board composition and the perceived needs of the Company at the time.

The Company does not have a formal policy with respect to diversity, although diversity of viewpoint, background and experiences is a factor considered when evaluating director candidates.

 

The Directors Committee does not have a separate policy for director recommendations by shareholders, as they would be reviewed in the same manner as those made by the Directors Committee. To recommend a prospective nominee for the Directors Committee’s consideration, shareholders should submit the candidate’s name and qualifications in writing to the following address: Broadpoint Gleacher Securities Group, Inc., 1290 Avenue of the Americas, New York, NY 10104, Attn: Corporate Secretary.

 

Management is responsible for the day-to-day management of risk, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management.

 

The Audit Committee has been designated to take the lead in overseeing risk management at the board level and is responsible for overseeing the Company’s management of market, credit, liquidity, funding, operational, legal and reputational risks. In this capacity, the Audit Committee defines and prioritizes risks and evaluates the adequacy of the Company’s policies and procedures designed to respond to and mitigate risks. The Audit Committee also oversees risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements and discusses policies with respect to risk assessment and risk management. In this role, the Audit Committee receives reports from senior management and our Internal Audit, Compliance and Legal departments on a periodic basis. The Audit Committee receives these reports and reports to the full Board.

 

In addition, the Board, as a whole and through its committees, considers the risks within its areas of responsibilities. For example, the full Board is involved in any strategic, operational and reputational risks and exposures; major litigation and regulatory exposures and other matters that may present material risk to the Company’s operations, plans, prospects or reputation; acquisitions and divestitures and senior management succession planning. The Committee on Directors and Corporate Governance assesses risks and exposures related to corporate governance, director succession planning, board organization, membership and structure. The Compensation Committee is also involved in assessing the risks associated with executive compensation programs and arrangements, including incentive plans and the Company’s compensation practices and policies generally.

 

The Company has a Code of Business Conduct and Ethics (the “Code”) applicable to all employees of the Company and members of the Board of Directors. The Code is available on the Company’s website at www.bpsg.com. The Company intends to satisfy the disclosure requirements regarding any amendments or waivers to its Code by filing Current Reports on form 8-K with the SEC.

 

Shareholders may send communications to one or more members of the Board of Directors by writing to such director(s) or to the whole Board of Directors at the following address: Broadpoint Gleacher Securities Group, Inc., 1290 Avenue of the Americas, New York, NY 10104, Attn: Corporate Secretary. Any such communications will be promptly distributed by the Corporate Secretary to such individual director(s) or to all directors if addressed to the whole Board of Directors.

 

The following table sets forth, for the fiscal year ended December 31, 2009, certain information regarding the compensation of (i) each person who was a non-employee director of the Company (the “Non-Employee Directors”) in 2009 and (ii) George C. McNamee, who served as an employee director of the Company at the time of his resignation in April 2009. Compensation information with respect to Messrs. Fensterstock, Gleacher and McNierney, each of whom served as a director of the Company in 2009, is discussed below under the heading “Compensation of Executive Officers.”

 

 

 

 

The Company’s practice in 2008 with regard to Non-Employee Directors was to pay each Non-Employee Director an annual retainer consisting of $25,000 in cash and to grant each Non-Employee Director $25,000 in restricted stock, with the Chair of the Audit Committee receiving an additional $25,000 in cash. Effective as of the 2009 Annual Meeting, the Company changed its policy with respect to Non-Employee Director compensation. Under the new policy, the Company pays Non-Employee Directors an annual cash retainer of $50,000, an additional annual cash retainer of $25,000 to the Chair of the Audit Committee and the Chair of the Executive Compensation Committee and an additional annual cash retainer of $15,000 to each member of the Audit Committee (other than the Chair). The directors may elect to receive their retainers in the form of stock options or restricted stock rather than cash. The Company also grants to Non-Employee Directors either an award of stock options worth $50,000 (as determined by the Board) or $50,000 of restricted shares as elected by the Non-Employee Director. Directors who are not Non-Employee Directors do not receive any compensation for their service as members of the Board.

 

In connection with the annual review of director compensation by the Directors Committee, the vesting terms of the Non-Employee Director restricted stock awards and stock options under the Company’s 2003 Non-Employee Directors Stock Plan were reviewed. Based on this review and discussions with Cook & Co., it was concluded that the historic practice of a multi-year vesting schedule for Non-Employee Director equity awards was not consistent with the general purpose of annual director compensation and should be reconsidered. Upon review of the practices at other financial institutions, it was determined that the Company’s practice was uncommon and should be altered to provide for a vesting schedule that more closely reflected the annual nature of the director compensation. In March 2010, the Directors Committee recommended to the Board, and the Board approved, the following vesting schedules, to be applied retroactively to previously granted Non-Employee Director equity awards and to all future Non-Employee Director equity awards:

 

 

The application of the foregoing vesting schedules to previously granted awards resulted in the immediate vesting of some awards (or portions thereof) and will result in other awards vesting more quickly than under the original multi-year schedule. The Directors Committee is continuing to review the other elements of the director compensation program with the assistance of the consultants from Cook & Co.

 

 

 

The following table sets forth certain information with respect to our current executive officers:

 

 

 

 

Lee Fensterstock served as our Chief Executive Officer during 2009 and resigned February 21, 2010. Robert I. Turner served as our Chief Financial Officer during 2009 and resigned March 31, 2010. In accordance with the rules of the SEC, compensation information for Messrs. Fensterstock and Turner is included herein.

 

JEFFREY H. KUGLER has been Controller and Chief Operations Officer of Broadpoint Capital, Inc., a subsidiary of the Company, since March 2008 and was appointed Acting Chief Financial Officer of the Company in March 2010. Mr. Kugler has over 20 years of experience in the securities and financial services industries. From 2003 to 2007, Mr. Kugler worked at Pershing LLC (a subsidiary of the Bank of New York Mellon), the largest correspondent services and clearance corporation, as a vice president of their account management group. From 1996 to 2002, Mr. Kugler worked at Gruntal & Co., LLC, a full service independent broker dealer, in various capacities, serving as Corporate Controller, Chief Administrative Officer of Capital Markets and a member of the firm’s credit committee. From 1995 to 1996, Mr. Kugler was responsible for broker dealer reporting at Prudential Securities Incorporated. From 1989 to 1995, Mr. Kugler was a Divisional Vice President at PaineWebber Incorporated, serving in a variety of financial management positions in finance, regulatory reporting and merchant banking. Mr. Kugler received his B.A. from Rutgers University and is a registered C.P.A. in the states of New York and New Jersey.

 

PATRICIA ARCIERO-CRAIG joined the Company in 1997. She has been General Counsel and Secretary of the Company and Broadpoint Capital, Inc. since 2007. From 2003 to 2007, Ms. Arciero-Craig served as Deputy General Counsel of Broadpoint Capital and, prior to 2003, she served as Associate General Counsel. Prior to joining Broadpoint Capital in 1997, she was an attorney with the law firm of Harris Beach PLLC, where she practiced in the fields of commercial litigation, bankruptcy and restructuring. Ms. Arciero-Craig received a JD from Albany Law School of Union University and a Bachelor of Arts degree from Fairfield University. Ms. Arciero-Craig is a member of the Securities Industry and Financial Markets Association.

 

Overview

 

This Compensation Discussion and Analysis describes the material elements of our executive compensation program for 2009 relating to the Company’s executive officers who are named in the tables below and who are referred to as our “named executive officers” or “NEOs.” The Executive Compensation Committee is responsible for approving all compensation awarded to our NEOs.

 

Since 2007, we have substantially repositioned our business by raising capital, eliminating underperforming or non-strategic businesses, reducing costs and hiring or acquiring high-potential business units. During that time, our leadership executed a strategy of controlled growth through a series of acquisitions and financing transactions. These transactions have transformed the Company dramatically. In 2009, under the

management of our NEOs, the Company continued to pursue this strategy with a focus on further integrating, utilizing and developing the new Company platform that resulted from this restructuring. Despite difficult and uncertain market conditions, our financial results improved from the prior year, and we have compensated our NEOs under our pay-for-performance philosophy accordingly.

 

Compensation Philosophy and Objectives

 

The Company’s compensation practices are predicated on a pay-for-performance philosophy. The compensation philosophy is determined by the Executive Compensation Committee and is designed to:

 

 

Review and Process

 

The Executive Compensation Committee reviewed all compensation elements awarded to NEOs in 2009.

 

The Executive Compensation Committee determines the overall compensation package for each NEO. Other than with respect to Mr. Fensterstock, whose 2009 compensation was determined in accordance with the terms of an employment agreement and related amendments thereto, in determining the 2009 compensation of the NEOs, the Executive Compensation Committee considered the following factors:

 

 

As part of the review process, the CEO considers each NEO’s performance and provides a compensation recommendation for each NEO, other than himself, to the Executive Compensation Committee. The CEO does not make recommendations with respect to his own compensation, but he does evaluate his own performance for the year and present a summary of accomplishments to the Executive Compensation Committee. The Executive Compensation Committee considers the CEO’s recommendations in determining compensation of each of the other NEOs and makes the ultimate decisions regarding their compensation.

 

The Executive Compensation Committee believes that there are multiple, dynamic factors that contribute to success at an individual and business level. The Executive Compensation Committee therefore has avoided adopting strict formulas and has relied primarily on a discretionary approach that allows the Executive Compensation Committee to set executive compensation levels on a case-by-case basis taking into account all relevant factors, other than in the case of Mr. Fensterstock’s 2009 annual incentive award, as described below.

 

Role of Independent Compensation Consultant

 

In 2009, the Executive Compensation Committee engaged Cook & Co. as its independent executive compensation consultant. In this capacity, Cook & Co. provides competitive data on market compensation levels and practices, and also assists the Executive Compensation Committee in the design of variable

incentives, including cash and equity-based annual and long-term incentive awards. Cook & Co. also assists the Executive Compensation Committee with issues related to indirect compensation, such as employment agreements and severance compensation. Representatives of Cook & Co. attend meetings of the Executive Compensation Committee upon request. Cook & Co. has no other financial relationships with the Company and works with management only at the request of the Executive Compensation Committee to obtain data and other information necessary to its activities in advising and supporting the Committee.

 

Peer Group Companies

 

To provide competitive context to the Executive Compensation Committee, in 2009, Cook & Co. analyzed executive compensation levels and incentive program structures and design within a peer group of similarly sized, publicly traded investment banking and brokerage firms. Cook & Co. determined the membership of the peer group with input from the Executive Compensation Committee and management. The peer group consisted of the following companies:

 

 

 

At the time Cook & Co. conducted this competitive analysis, relative to the peer group, the Company ranked near the median in annual revenues and market capitalization, above median in total assets, above the 75th percentile in net income during the previous four quarters and below the 25th percentile in number of employees.

 

Cook & Co.’s analysis of executive compensation examined the following:

 

 

The Executive Compensation Committee reviewed the peer group data provided by Cook & Co. to gain an understanding of market practices with regard to the design and magnitude of executive compensation. However, the Executive Compensation Committee did not use this information to directly determine specific compensation levels, nor did it target a specific percentile positioning versus the peers for NEO compensation. The Executive Compensation Committee considered Cook & Co.’s competitive analysis together with all other factors discussed in this Compensation Discussion & Analysis.

 

Compensation Elements

 

Our compensation package for our NEOs focuses on the following principal elements:

 

 

We believe that the compensation of our NEOs should be structured to link the executives’ financial reward directly to their performance and the performance of the Company as a whole, or, as the case may be, to the performance of the business units they lead.

 

A large portion of total compensation paid to our NEOs has historically been delivered in the form of incentive compensation (cash and equity) based upon our annual financial and operational performance and upon each NEO’s performance. This practice is intended to ensure that fixed costs remain low and that overall compensation varies significantly from year to year to reflect the Company’s overall financial performance.

 

Base Salaries.  Base salaries at the Company are predominantly market-driven because they typically are set at levels that the Executive Compensation Committee believes are generally competitive with those of executives in similar positions at comparable financial services companies. Base salaries occasionally are raised as a reward for superior performance or as a means to attract or retain necessary executive talent. The base salaries of Messrs. Fensterstock, Gleacher, McNierney and Turner for 2009 were agreed upon in their employment agreements. Ms. Arciero-Craig’s salary in 2009 remained unchanged from the prior year.

 

Cash Bonuses.  Cash bonuses are intended to reward successful achievement of objectives over the course of the applicable fiscal year. With the exception of the bonus paid to our Chief Executive Officer for 2009, bonuses for our NEOs are not based on specific formulas, but rather are dependent on the discretion of the Executive Compensation Committee, which considers all of the factors described above under the heading “Review and Process.”

 

Long-Term Equity Incentives.  Equity-related grants are designed to focus executives on long-term Company performance, to support continued tenure and to ensure that realized compensation is tied to changes in shareholder value. Each of the NEOs received equity incentives in recognition of their efforts and performance during 2009. As a result, the predominant portion of our executive officers’ compensation is directly related to short- and long-term corporate performance and changes in shareholder value. These awards are granted under our 2007 Incentive Compensation Plan (the “ICP”). The ICP was approved by shareholders initially on September 21, 2007, and was subsequently amended and restated in 2009.

 

For 2009, our long-term equity incentives were delivered in restricted stock units (“Equity-based Awards”). The Executive Compensation Committee approves all Equity-based Awards made to executive officers. Equity-based Awards generally are granted as of the date of approval, although the restricted stock units granted in respect of the 2009 annual incentive awards were granted on a future date and based on a 30 trading day average price as described below under the heading “Annual Incentive Awards in Respect of 2009 Performance.” For 2009, the Executive Compensation Committee made Equity-based Awards to the NEOs on three bases: (a) outright grants of restricted stock units that were intended to ensure an appropriate level of unvested direct ownership; (b) grants of restricted stock units pursuant to existing employment agreements with the NEOs, as applicable; and (c) as a form of payment of annual bonuses to reflect 2009 Company and individual performance for the fiscal year. Outright grants were intended to support retention-related objectives and to ensure that an executive’s overall level of equity ownership was reasonably aligned with typical market practice.

 

Equity-based Awards that were made as a form of payment to reflect 2009 performance were delivered in the form of restricted stock units (“RSUs”), which vest in equal installments at each of the first three anniversaries following the grant date (although the vested shares generally are not delivered until the third anniversary of the date of grant). By paying a portion of earned annual bonuses in the form of RSUs, executives are held accountable for the long-term impact of their short-term decisions because the ultimate realized value of annual bonus compensation depends on both short-term and long-term performance. To ensure that executives with the highest degree of responsibility to shareholders are held most accountable for changes in shareholder value, the portion of the annual bonus delivered in RSUs varies with each NEO’s level of responsibility. Actual allocation between cash awards and RSUs is not predetermined, but rather is addressed by the Executive Compensation Committee annually to reflect a variety of considerations, such as the size of the total award, each NEO’s stock ownership level and the views of our Chief Executive Officer and the Executive Compensation Committee at that time.

 

In addition, pursuant to their respective employment agreements, on each of January 1, 2009 and 2010 and on June 30, 2009, Mr. Fensterstock was awarded 250,000 restricted stock units and Mr. McNierney was awarded 125,000 restricted stock units.

 

Employment Agreements

 

Messrs. Gleacher and McNierney each have an employment agreement with the Company. These arrangements are intended to attract and retain qualified executives who may have other employment alternatives that may appear to them to be less risky absent these arrangements. Ms. Arciero-Craig does not have an employment agreement with us, but has entered into a non-compete and non-solicit agreement with us. Please see “Narrative Disclosure and Employment Agreements” below for more information.

 

Amendment to Mr. Fensterstock’s Employment Agreement.  In the spring of 2009, the Executive Compensation Committee commenced discussions with Mr. Fensterstock regarding the compensation arrangements currently in place for him, including his equity awards and annual bonus incentive structure. After extensive discussion, negotiation and deliberation, the Executive Compensation Committee agreed that (1) Mr. Fensterstock’s equity ownership interest in the Company should be increased through the grant of a restricted stock unit award in order to bring his total equity stake in the Company to approximately 5% (a level the Executive Compensation Committee considered appropriate for a “founding CEO”) and (2) Mr. Fensterstock’s 2009 annual incentive formula should be based on a percentage of the Company’s pre-tax income before bonuses to the Company’s NEOs and that the percentage should increase with increases in pre-tax return on equity for the year. The Executive Compensation Committee concluded that these two distinct approaches to Mr. Fensterstock’s incentive compensation arrangements provided an incentive structure that appropriately balanced the long- and short-term growth of the Company and further aligned Mr. Fensterstock’s interests with those of the Company’s shareholders. These discussions resulted in an amended employment agreement with Mr. Fensterstock, effective August 21, 2009, which generally provided for (a) a 2009 annual incentive award (payable in a combination of cash and RSUs) based on a formula described under the heading “Annual Incentive Awards in Respect of 2009 Performance — Performance of NEOs — Mr. Fensterstock,” and (b) the grant of RSUs in respect of 832,147 shares of the Company’s common stock, generally vesting in three equal annual installments.

 

When negotiating and finally determining to enter into the 2009 amendment, the Executive Compensation Committee considered a variety of factors, in addition to the goal of retaining Mr. Fensterstock’s continued services at that time. The primary factors considered were:

 

 

Separation Letter with Mr. Fensterstock.  On February 21, 2010, the Company and Mr. Fensterstock reached a mutual agreement under which Mr. Fensterstock resigned as a director and Chief Executive Officer of the Company. In connection with his departure, Mr. Fensterstock generally is entitled to 12 months of continued base salary and health care benefits, the outstanding equity award agreements governing Mr. Fensterstock’s outstanding RSUs provide for the continued vesting of such awards and Mr. Fensterstock’s

outstanding unvested stock options became immediately exercisable. Pursuant to a letter agreement governing his separation, Mr. Fensterstock may not compete with the Company for twelve months following his employment termination date, subject to limited exceptions. Mr. Fensterstock’s severance benefits and his rights in connection with the equity incentive awards are conditioned upon his continued compliance with certain post-employment restrictive covenants set forth in his employment agreement and the noncompetition restriction contained in the letter agreement governing his separation. After Mr. Fensterstock’s departure, Eric J. Gleacher assumed the position of Chief Executive Officer in addition to his role as Chairman of the Board of Directors of the Company.

 

2009 Mid-Year Cash Bonuses

 

In July 2009, in recognition of the Company’s progress and achievements during the first two quarters of that year, and in anticipation of the strenuous effort and commitment required going forward at a time of change and growth at the Company, it was determined that it would be in the best interests of the Company to acknowledge the efforts and commitment of our employees, including the NEOs. As such, the Company awarded mid-year cash bonuses to our NEOs, other than Mr. Gleacher, who became an NEO on June 5, 2009, upon the closing of the Gleacher Partners acquisition. Messrs. Fensterstock, McNierney and Turner and Ms. Arciero-Craig received mid-year cash bonuses of $787,500, $400,000, $200,000 and $100,000, respectively. In making these determinations, the Executive Compensation Committee took into account the expectation that 2009 performance would exceed performance in prior years.

 

Annual Incentive Awards in Respect of 2009 Performance

 

Background.  Annual incentive awards in respect of 2009 performance are comprised of a combination of annual cash bonuses and long-term equity awards as discussed above and described more fully below. To ensure that annual incentive awards for 2009 would be considered performance-based compensation under Section 162(m) (and therefore fully tax-deductible to the Company), the Executive Compensation Committee established a threshold performance goal for each NEO under the ICP. Pursuant to Section 162(m), as a
pre-requisite to paying 2009 annual incentive awards to our NEOs, the Company had to achieve net revenues in excess of $100 million. Other than the Section 162(m) threshold goal, in 2009, the Executive Compensation Committee did not predicate the annual incentive awards of our NEOs (other than Mr. Fensterstock) on the achievement of specific corporate objectives, but rather considered the function, responsibilities and contributions of each of our NEOs and exercised substantial discretion in assessing both the contribution potential of each of our NEOs and the extent to which such potential was achieved. As discussed above, Mr. Fensterstock’s 2009 annual incentive award was determined based on the formula set forth in his amended employment agreement, and as such, the Executive Compensation Committee’s discretion was limited to the parameters set forth in the employment agreement amendment.

 

In 2009, Mr. Fensterstock, as CEO, received the highest compensation among our NEOs. The Executive Compensation Committee believes that the responsibilities and obligations of the CEO, including oversight of business unit performance, execution of strategy, oversight of the other executive officers and the ultimate responsibility for the performance of the Company, are greater than those of any other NEO. For these reasons, among others (as described more fully above under the heading “Employment Agreement — Amendment to Mr. Fensterstock’s Employment Agreement”), the Company entered into an amendment to Mr. Fensterstock’s employment agreement in 2009, which provided Mr. Fensterstock with compensation that significantly exceeded the compensation we paid to any of the other NEOs in 2009.

 

Following Mr. Fensterstock, Mr. McNierney, the President and Chief Operating Officer (“COO”) of the Company, received the next highest amount of compensation of our NEOs. The Executive Compensation Committee believes that the President and COO, as the NEO largely responsible for implementing the Company’s strategic plans and for oversight of day-to-day operations Company-wide, is generally entitled to be the second highest paid NEO. Mr. McNierney also was very involved in important business development initiatives, including the Gleacher transaction and financing activities during 2009. Mr. Turner and Ms. Arciero-Craig received compensation that was less than that paid to Messrs. Fensterstock and McNierney due largely to the fact that their responsibilities are inherently more limited in the breadth of Company

functions for which they are accountable. Mr. Gleacher did not receive a 2009 annual incentive award for the reasons discussed below under the heading “Performance of NEOs — Mr. Gleacher.” While these considerations impacted the 2009 compensation of our NEOs, the Executive Compensation Committee has substantial discretion in setting 2010 compensation and may place greater weight on different criteria in the future.

 

2009 Annual Incentive Award Determinations.  Set forth below is a description of the actual amounts paid to each NEO for 2009 performance and an explanation of the factors considered by the Executive Compensation Committee in determining those amounts. The awards described below were approved and paid in 2010, in respect of 2009 performance, and consist of a combination of cash payments and RSU grants. In accordance with SEC reporting rules, the cash payments described below, as well as the 2009 mid-year cash bonuses described above, are reflected in the Summary Compensation Table for 2009, but the RSUs granted in 2010 and described below for all NEOs other than Mr. Fensterstock are not reflected in the Summary Compensation Table or the other compensation tables for 2009, but rather will be reported in those tables for 2010. The RSUs granted to Mr. Fensterstock in 2009 are reflected in the Summary Compensation Table and other compensation tables for 2009 because the awards have been determined to be granted in 2009 under ASC 718.

 

The number of RSUs granted to the NEOs was determined by dividing the total amount of the non-cash portion of the 2009 annual incentive award by the average of the closing sales prices of a share of Company common stock for the 30 consecutive trading days prior to the date of grant. The 30-day average is used to ensure that short-term volatility in share price does not create an artificially high or low number of RSUs when converting from a dollar value to equivalent shares.

 

Performance of NEOs — Mr. Fensterstock.  As described above, in connection with the 2009 amendment to Mr. Fensterstock’s employment agreement, the Executive Compensation Committee determined that Mr. Fensterstock’s 2009 annual incentive formula should be based on a percentage of the Company’s pre-tax income before bonuses for the Company’s NEOs. The formula, which was based on various levels of pre-tax return on equity (“ROE”), provided for no bonus if ROE was below 8% and a bonus of up to 12% of pre-tax income before bonuses for the Company’s NEOs if ROE exceeded 20%.

 

Pursuant to the 2009 amendment, the Executive Compensation Committee had the discretion to increase or decrease the amount of Mr. Fensterstock’s 2009 annual incentive award prescribed by the above formula by as much as 20%, again subject to the limits under the ICP. Mr. Fensterstock’s 2009 annual incentive award was payable in an equal combination of cash and RSUs, except that once Mr. Fensterstock’s cash compensation for 2009 (based on the cash component of his annual incentive award, his base salary and his mid-year bonus) reached $3.5 million, the balance of his 2009 award would be paid in RSUs. The purpose of this approach was to ensure that the majority of Mr. Fensterstock’s compensation was delivered in the form of Equity-based Awards that were tied to a multi-year vesting schedule and that would fluctuate in value based on changes in stock price.

 

In 2009, we achieved a pre-tax return on equity of 28.83% and pre-tax net income before NEO bonuses of $67.6 million. The formula described above produced a 2009 fiscal year annual incentive award target of $8.1 million. The Executive Compensation Committee determined to grant Mr. Fensterstock a 2009 annual incentive award valued at $6,362,500, consisting of a $2,362,500 cash bonus and $4,000,000 of RSUs (with a grant date fair market value of $3,755,292). The Executive Compensation Committee’s decision to reduce the award from the target amount was based on three factors: a reduction in the rate of earnings growth in the 4th quarter, the decline in the Company’s share price over the same period and the fact that Mr. Fensterstock had received a substantial mid-year cash bonus.

 

Performance of NEOs — Mr. McNierney.  As described under the heading “Annual Incentive Awards in Respect of 2009 Performance — Background” above, other than with respect to the threshold goal that was required to be met in order for the NEOs to be eligible for 2009 annual incentive awards, the Executive Compensation Committee did not establish a specific formula to determine the level of 2009 annual incentive

awards for Mr. McNierney. To determine Mr. McNierney’s 2009 annual incentive award, the Executive Compensation Committee considered the following factors:

 

 

The Committee did not establish a specific weighting for each factor, but rather considered all of the factors together. Based on these considerations, the Executive Compensation Committee awarded Mr. McNierney a 2009 annual incentive award valued at $2.48 million, consisting of a $850,000 cash bonus and $1.63 million of RSUs granted in 2010 (with a grant date fair market value of $1.53 million). The Committee determined that approximately 66% of Mr. McNierney’s 2009 annual incentive award should be granted in the form of RSUs.

 

Performance of NEOs — Ms. Arciero-Craig.  As described under the heading “Annual Incentive Awards in Respect of 2009 Performance — Background” above, other than with respect to the threshold goal that was required to be met in order for the NEOs to be eligible for 2009 annual incentive awards, the Executive Compensation Committee did not establish a specific formula to determine the level of 2009 annual incentive awards for Ms. Arciero-Craig. To determine Ms. Arciero-Craig’s 2009 annual incentive award, the Executive Compensation Committee considered the following factors:

 

 

As with our other NEOs, the Committee did not establish a specific weighting for each factor, but rather considered all of the factors together. Based on these considerations, the Executive Compensation Committee awarded Ms. Arciero-Craig a 2009 annual incentive award valued at $575,000, consisting of a $350,000 cash bonus and $225,000 of RSUs granted in 2010 (with a grant date fair market value of $211,235). The Committee determined that approximately 39% of Ms. Arciero-Craig’s 2009 annual incentive award should be granted in the form of RSUs.

 

Performance of NEOs — Mr. Turner.  As described under the heading “Annual Incentive Awards in Respect of 2009 Performance — Background” above, other than with respect to the threshold goal that was required to be met in order for the NEOs to be eligible for 2009 annual incentive awards, the Executive Compensation Committee did not establish a specific formula to determine the level of 2009 annual incentive

awards for Mr. Turner. To determine Mr. Turner’s 2009 annual incentive award, the Executive Compensation Committee considered the following factors:

 

 

The Committee did not establish a specific weighting for each factor, but rather considered all factors together. Based on these considerations, the Executive Compensation Committee awarded Mr. Turner a 2009 annual incentive award valued at $1.6 million, consisting of a $600,000 cash bonus and $1,000,000 of RSUs granted in 2010 (with a grant date fair market value of $938,823). The Executive Compensation Committee determined that approximately 62% of Mr. Turner’s 2009 annual incentive award should be granted in the form of RSUs.

 

Performance of NEOs — Mr. Gleacher.  The Executive Compensation Committee considered Mr. Gleacher’s overall contributions to the Company and the performance of our Investment Banking Division in considering his eligibility for a 2009 annual incentive award. During the period following the closing of the Gleacher acquisition, Mr. Gleacher’s contributions to the Company were substantial and his overall individual performance warranted awarding him a bonus. However, due to the performance of the Investment Banking Division during the period in 2009 following the Gleacher acquisition, prior to the Executive Compensation Committee making a final determination on the matter, Mr. Gleacher advised the Executive Compensation Committee that he had decided to forego a 2009 annual incentive award.

 

Section 162(m)

 

Section 162(m) of the Internal Revenue Code generally permits a tax deduction to public corporations for compensation over $1 million awarded in any fiscal year to a corporation’s chief executive officer and certain other highly compensated executive officers only if the compensation qualifies as being performance-based under Section 162(m). We endeavor to structure our compensation policies to qualify as performance-based under Section 162(m) whenever it is reasonably possible to do so while meeting our compensation objectives. For 2009, the annual bonus awards (but not the 2009 mid-year cash bonus) generally were designed to meet the requirements for deductible compensation. Nonetheless, from time to time certain nondeductible compensation may be paid and the Board of Directors and the Executive Compensation Committee reserve the authority to award nondeductible compensation to executive officers in appropriate circumstances. In addition, it is possible that some compensation paid pursuant to certain equity awards that have already been granted may be nondeductible as a result of Section 162(m).

 

The following table sets forth certain information regarding compensation of (i) each person who served as Chief Executive Officer during fiscal year 2009, (ii) each person who served as Chief Financial Officer during fiscal year 2009, and (iii) the Company’s three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer who were serving as executive officers as of December 31, 2009 (collectively referred to as the “Named Executive Officers” or the “NEOs”).

 

 

 

 

 

Jeffrey Kugler was appointed our Acting Chief Financial Officer in March 2010. Mr. Kugler does not have an employment contract with the Company. Mr. Kugler is currently paid a salary of $225,000 per year and is eligible to receive discretionary cash bonuses and equity compensation awards pursuant to the Company’s equity incentive plans.

 

The following table sets forth information regarding grants of compensation awards made to the Company’s Named Executive Officers during the fiscal year ended December 31, 2009.

 

 

 

 

 

The Company has employment agreements with Messrs. Gleacher and McNierney, each of which is discussed below. Ms. Arciero-Craig, our General Counsel, does not have an employment agreement with us. The Company terminated its employment agreements with Mr. Fensterstock as of February 21, 2010 and with Mr. Turner as of March 31, 2010.

 

Gleacher Employment Agreement.  In connection with the Gleacher transaction, the Company, Broadpoint Capital Inc., Gleacher Partners LLC (“Gleacher Partners”) and Mr. Gleacher entered into an employment agreement that became effective on June 5, 2009 (the “Gleacher Employment Agreement”).

 

The Gleacher Employment Agreement provides that Mr. Gleacher will be employed for a three-year term commencing on June 5, 2009, automatically extended for one additional year upon the third anniversary of the effective date without any affirmative action, unless either party to the agreement provides at least six (6) months’ advance written notice to the other party that the employment period will not be extended. In addition, during the three-year term, when he is up for election, the Board shall nominate him for election as a member of the Board and he shall serve as Chairman of the Board. Mr. Gleacher is entitled to receive an annual base salary of $350,000 and to participate in the Company’s Investment Banking Division’s annual investment banking bonus pool. Mr. Gleacher is also entitled to receive employee benefits on such basis as is comparable to those provided to other senior employees of the Company, automobile transportation related benefits for business purposes that are no less favorable than those provided to him prior to the Gleacher transaction and reimbursement for all reasonable expenses incurred by him on the same basis as applied to him prior to the Gleacher transaction. Mr. Gleacher is also entitled to tax gross-up payments for any excise taxes he might incur as a result of payments made to him in connection with a change in control.

 

Mr. Gleacher was appointed Chief Executive Officer on February 21, 2010, upon the resignation of Mr. Fensterstock. For further information regarding the Gleacher Employment Agreement see “Potential Payments Upon Termination or Change in Control” below.

 

In connection with the Gleacher Employment Agreement, the Company and Mr. Gleacher entered into a non-competition and non-solicitation agreement containing provisions regarding confidentiality, non-solicitation and other restrictive covenants.

 

McNierney Employment Agreement.  Mr. McNierney is employed by the Company pursuant to an employment agreement, effective as of September 21, 2007 (the “McNierney Employment Agreement”), between the Company and Mr. McNierney. Mr. McNierney is entitled to receive an annual base salary of $300,000 and to participate in the Company’s annual bonus pool. Mr. McNierney is also entitled to receive employee benefits on such basis as is comparable to those provided to other senior executives of the Company and to be reimbursed for all reasonable expenses incurred by him. The McNierney Employment Agreement also provides Mr. McNierney with a grant of restricted stock units in respect of 600,000 shares of the Company’s common stock (10% of which vested on the effective date of the McNierney Employment Agreement and 30% of which vests on each of the first, second and third anniversaries of such effective date, subject to Mr. McNierney’s continued employment with the Company on such dates) as well as subsequent grants of restricted stock units in respect of up to 500,000 shares of common stock, to be made over a period

commencing on June 30, 2008 and ending January 1, 2010 (with one-third of each grant vesting on each of the first, second and third anniversaries of the grant date, subject to Mr. McNierney’s continued employment with the Company on such dates). Mr. McNierney is also entitled to tax gross-up payments for any excise taxes he might incur as a result of payments made to him in connection with a change in control under the McNierney Employment Agreement. For further information regarding the McNierney Employment Agreement see “Potential Payments Upon Termination or Change in Control” below.

 

Turner Employment Agreement.  On March 14, 2008, the Board of Directors appointed Robert I. Turner as Chief Financial Officer of the Company, effective March 31, 2008. In connection with Mr. Turner’s appointment, the Company entered into a letter agreement (the “Turner Employment Agreement”) and a
non-compete and non-solicit agreement with him. The Turner Employment Agreement provides that Mr. Turner was entitled to receive a base salary of $250,000 per year and, to the extent he remained employed by the Company, subject to annual reviews for possible increases. Mr. Turner was eligible for annual discretionary bonuses and was entitled to participate in the Company’s standard employee benefit, perquisite and fringe benefit plans, programs and arrangements available to senior officers of the Company. Mr. Turner received 450,000 restricted stock units upon his appointment (20% of which vests on each of the first five anniversaries of such effective date, subject to Mr. Turner’s continued employment with the Company on such dates). The Turner Employment Agreement also provided for the Company’s payment of Mr. Turner’s legal fees in connection with the negotiation and drafting of the Turner Employment Agreement, the non-compete and non-solicit agreement and the restricted stock unit agreement, up to a maximum amount of $25,000.

 

Mr. Turner resigned from the position of Chief Financial Officer on March 31, 2010. In connection with Mr. Turner’s departure, the Company and Mr. Turner entered into a letter agreement (the “Turner Letter Agreement”) regarding the terms of Mr. Turner’s departure. The Turner Letter Agreement provides that for purposes of the award agreements governing his outstanding restricted stock units, Mr. Turner’s termination of employment will be treated as a termination not for cause. For further information regarding Mr. Turner’s employment agreement and the Turner Letter Agreement, see “Potential Payments Upon Termination or Change in Control” below.

 

Arciero-Craig Non-Compete and Non-Solicit Agreement.  On September 21, 2007, Ms. Arciero-Craig entered into a non-compete and non-solicit agreement. For further information regarding this agreement see “Potential Payments Upon Termination or Change in Control.” Ms. Arciero-Craig received a base salary of $250,000 in 2009.

 

Fensterstock Employment Agreement.  The Company entered into an employment agreement with Mr. Fensterstock, effective September 21, 2007 (the “Fensterstock Employment Agreement”), as amended on August 21, 2009. Under the agreement, as amended, Mr. Fensterstock was entitled to receive an annual base salary of $350,000 and to participate in the Company’s annual bonus pool, pursuant to a specific bonus formula for 2009. Based on the 2009 amendment to Mr. Fensterstock’s employment agreement, the Executive Compensation Committee determined that Mr. Fensterstock’s 2009 annual incentive formula should be based on a percentage of the Company’s pre-tax income before bonuses for the Company’s NEOs. The formula, which was based on various levels of pre-tax return on equity (“ROE”), provided for no bonus if ROE was below 8% and a bonus of up to 12% of pre-tax income before bonuses for the Company’s NEOs if ROE exceeded 20%. The Executive Compensation Committee had the right to adjust the dollar amount finally determined pursuant to the foregoing formula up or down by as much as 20%, with any upward adjustment to be subject to certain limits. Any 2009 bonus was to be payable in equal amounts of cash and RSUs, provided that, subject to the applicable annual share limit in the Incentive Compensation Plan, once cash payments in respect of the 2009 bonus reached $3.5 million (including Mr. Fensterstock’s 2009 Base Salary and mid-year bonus), the balance of Mr. Fensterstock’s 2009 bonus would be paid solely in RSUs.

 

The Fensterstock Employment Agreement, as amended, also provided Mr. Fensterstock with a grant of restricted stock units in respect of 1,000,000 shares of the Company’s common stock (10% of which vested on the effective date of the Fensterstock Employment Agreement and 30% of which vests on each of the first, second and third anniversaries of such effective date, subject to Mr. Fensterstock’s continued employment with the Company on such dates), as well as subsequent grants of restricted stock units in respect of up to

1,000,000 shares of the Company’s common stock, to be made over a period commencing on June 30, 2008 and ending January 1, 2010 (with one-third of each such grant vesting on each of the first, second and third anniversaries of the grant date, subject to Mr. Fensterstock’s continued employment with the Company on such dates). The Fensterstock Employment Agreement, as amended, provided Mr. Fensterstock with an additional grant of restricted stock units in respect of 832,147 shares of the Company’s common stock on August 21, 2009 (with one-third vesting on each of the first, second and third anniversaries of the grant date, subject to Mr. Fensterstock’s continued employment with the Company on such dates). Mr. Fensterstock was also entitled to tax gross-up payments for any excise taxes he incurred as a result of payments made to him in connection with a change in control.

 

Mr. Fensterstock resigned from the position of Chief Executive Officer on February 21, 2010. Pursuant to a letter agreement (the “Letter Agreement”), Mr. Fensterstock’s resignation was treated by the Company as a termination without cause. For further information regarding the Fensterstock Employment Agreement, as amended, and the Letter Agreement, see “Potential Payments Upon Termination or Change in Control” below.

 

The following table sets forth information regarding outstanding equity awards held by the Named Executive Officers as of December 31, 2009.

 

 

 

 

The following table sets forth information regarding equity awards held by the Company’s Named Executive Officers exercised or vested during fiscal year 2009.

 

 

 

 

The following tables set forth the estimated value of benefits that the Company’s Named Executive Officers would have been entitled to receive assuming certain terminations of employment and/or assuming a change in control of the Company, in each case occurring on December 31, 2009, except for Mr. Fensterstock and Mr. Turner, whose employment terminated on February 21, 2010 and March 31, 2010, respectively. The following tables also use the closing price of the Company’s common stock on December 31, 2009 ($4.46). For restricted stock, the cash-out value reflects the number of shares vesting as a result of the triggering event multiplied by such stock price. For options, the cash-out value reflects the excess of such stock price over the exercise price of any option vesting as a result of the triggering event and, if there is no excess, it reflects a zero value with respect to such option.

 

 

 

 

 

Gleacher Agreement.  Pursuant to the Gleacher Employment Agreement, “Cause” is defined as (i) the executive’s conviction of, or plea of guilty or “no contest” to, a felony, (ii) the executive’s conviction of, or plea of guilty or “no contest” to, a violation of criminal law involving our business, (iii) the executive’s commission of an act of fraud or theft, or material dishonesty in connection with his performance of duties; (iv) the executive’s willful refusal or gross neglect to perform the duties reasonably assigned to him and consistent with his position or otherwise to comply with the material terms of his employment agreement, which refusal or gross neglect continues for more than fifteen days after the executive receives written notice thereof providing reasonable detail of the asserted refusal or gross neglect (and which is not due to a physical or mental impairment); or (v) the executive’s breach of any material term of the non-competition agreement or any other material agreement between the executive and us which breach continues for more than five days after the executive receives written notice thereof providing reasonable detail of the asserted breach.

 

“Good Reason” is defined in the Gleacher Employment Agreement as (i) failure by the Company to perform fully the terms of the employment, or any plan or agreement referenced in the employment agreement, other than an immaterial and inadvertent failure not occurring in bad faith and remedied by the

Company promptly (but not later than five days) after receiving notice thereof from the executive; (ii) any reduction in the executive’s base salary or failure to pay any bonuses or other material amounts due under the employment agreement in accordance therewith; (iii) the assignment to the executive of any duties inconsistent in any material respect with his position or with his authority, duties or responsibilities during the period required by the employment agreement, or any other action by us which results in a diminution in such positions, authority, duties or responsibilities, excluding for this purpose any immaterial and inadvertent action not taken in bad faith and remedied by the Company promptly (but not later than ten days after receiving notice from the executive); (iv) any change in the place of the executive’s principal place of employment to a location outside New York City; and (v) any failure by the Company to obtain an assumption and agreement to perform the employment agreement by a successor to the Company; or (vi) a Change of Control of the Company or Broadpoint Capital Inc. (“Capital”) occurs and the executive does not continue thereafter as Chairman of the Company.

 

Under Mr. Gleacher’s Employment Agreement, a “Change in Control” of the Company, as applicable, shall be deemed to have occurred if after the effective date of the agreement: (i) any person, shall become the “beneficial owner” (as defined under the Exchange Act), directly or indirectly, of securities of the Company or Capital, as applicable, representing 35% or more of either (1) the combined voting power of the then-outstanding voting securities or (2) the then-outstanding shares of all classes of equity securities of such entity; (ii) the members of the Board of Directors of the Company, at the beginning of any consecutive 24-calendar-month period commencing on or after the date of the agreement, cease to constitute at least a majority of the members of such Board (with certain exceptions); (iii) (1) the consummation, directly or indirectly, of any consolidation or merger of, or other business combination transaction or reorganization involving the Company or any of its significant subsidiaries, unless following such transaction the shareholders of the Company as of immediately before such transaction continue to own, immediately after consummation of such transaction, equity securities representing more than 65% of the then-outstanding voting securities and other equity interests of the surviving or resulting entity in substantially the same proportions as their ownership immediately prior to such transaction and such shareholders continue to have the power to elect at least a majority of the board of directors of such surviving or resulting entity, (2) the consummation, directly or indirectly, of any sale, lease, exchange or other transfer of all or substantially all of the assets or equity interests of the Company or any of its significant subsidiaries unless the shareholders of the Company as of immediately before such transaction continue to own, immediately after consummation of such transaction, equity securities of the acquiring corporation representing more than 65% of the voting securities and other equity interests of the acquiring company in substantially the same proportions as their ownership immediately prior to such transaction and such shareholders have the power to elect at least a majority of the board of directors of such acquiring entity, or (3) the consummation or approval by shareholders of any plan or proposal for the liquidation or dissolution of the Company or Capital, as applicable; or (iv) the consummation of any consolidation, merger, sale or other business combination transaction as a result of which the business conducted previously by Gleacher Partners, Inc. is sold, transferred or otherwise conveyed to any person other than the Company and its subsidiaries.

 

The Gleacher Employment Agreement provides that upon termination of employment, Mr. Gleacher will be entitled to certain payments or benefits, the amount of which depends upon the circumstances of termination: If Mr. Gleacher terminates his employment without Good Reason, Mr. Gleacher will be entitled to any unpaid base salary and unpaid benefits and any earned but unpaid bonus and continued vesting or forfeiture, in accordance with the schedules provided in the award agreements, of any equity compensation awards granted to him prior to termination. In the event of the termination of his employment by the Company without Cause, he will receive his base salary for twelve months following termination; a prorated bonus for the fiscal year in which the twelve-month base salary continuation period ends; continuation of health insurance coverage paid by the Company for twelve months following termination; any earned but unpaid bonus; and, if he executes a settlement and release agreement, continued vesting, in accordance with the schedules provided in the award agreements, of any equity compensation awards granted to him prior to termination. If Mr. Gleacher terminates his employment for Good Reason or if his employment is terminated following (and due to) the expiration of the Gleacher Employment Agreement, he will be entitled to any

unpaid base salary and unpaid benefits; any earned but unpaid bonus; a pro-rated bonus for the year in which termination occurs; and continued vesting or forfeiture in accordance with the schedules provided in the award agreements of any equity compensation awards granted to him prior to termination. If Mr. Gleacher is terminated by the Company for Cause, he will be entitled to any unpaid base salary and unpaid benefits and any earned but unpaid bonus. Following the termination of Mr. Gleacher’s employment for any reason, he must resign any and all officerships and directorships he then holds with the Company, Broadpoint Capital and any of their affiliates. In the event of Mr. Gleacher’s death or disability, he will be entitled to receive any unpaid base salary and unpaid benefits, a pro rated bonus for the fiscal year in which termination occurs and any other earned but unpaid bonus and continued vesting or forfeiture, in accordance with the schedules provided in the award agreements, of any equity compensation awards granted to him prior to termination. The Gleacher Employment Agreement provides that, in the event that Mr. Gleacher becomes subject to the excise tax under Section 4999 of the Internal Revenue Code, he will be entitled to an additional payment such that he will be placed in the same after-tax position as if no such excise tax had been imposed. The Company believed it necessary to provide Mr. Gleacher with these protections in order to secure his employment as a senior member of the Investment Banking Division of the Company, and in light of his anticipated contributions to the future success of the Company.

 

 

 

 

 

 

McNierney Agreements.  Pursuant to the McNierney Employment Agreement, “Cause” is defined as: (i) the executive’s conviction of, or plea of guilty or “no contest” to, a felony, (ii) the executive’s conviction of, or plea of guilty or “no contest” to, a violation of criminal law involving the Company and its business, (iii) the executive’s commission of an act of fraud or theft, or material dishonesty in connection with his performance of duties to Company; or (iv) the executive’s willful refusal or gross neglect to perform the duties reasonably assigned to him and consistent with his position with the Company or otherwise to comply with the material terms of his employment agreement, which refusal or gross neglect continues for more than fifteen (15) days after the executive receives written notice thereof from Company providing reasonable detail of the asserted refusal or gross neglect (and which is not due to a physical or mental impairment).

 

“Good Reason” is defined in the McNierney Employment Agreement as: (i) the failure by the Company to perform fully the terms of the employment agreement, or any plan or agreement referenced in the employment agreement, other than an immaterial and inadvertent failure not occurring in bad faith and remedied by the Company promptly (but not later than five days) after receiving notice thereof from the executive; (ii) any reduction in the executive’s base salary or failure to pay any bonuses or other material amounts due under the employment agreement in accordance therewith; (iii) the assignment to the executive of any duties inconsistent in any material respect with his position or with his authority, duties or responsibilities as President and Chief Operating Officer, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, or reporting relationship, excluding for this purpose any immaterial and inadvertent action not taken in bad faith and remedied by the Company promptly (but not later than ten (10) days after receiving notice from the executive); (iv) any change in the place of the executive’s principal place of employment to a location outside New York City; and (v) any failure by the Company to obtain an assumption and agreement to perform the employment agreement by a successor to the Company.

 

There is no definition for a change in control in the McNierney Employment Agreement because Mr. McNierney’s potential payments upon termination are not tied to change in control.

 

Upon expiration of the McNierney Employment Agreement term or termination of employment, whether voluntary or involuntary, Mr. McNierney will be entitled to a cash severance payment equal to $1.8 million less the market value, as of the date of termination of his employment, of the common stock underlying any restricted stock units granted to him that have vested as of the date of termination of his employment with the Company or upon the expiration of the McNierney Employment Agreement. Mr. McNierney will also be entitled to other additional payments upon termination of employment, the amount of which depends upon the circumstances of termination. In particular, in the event of his termination from the Company without Cause, Mr. McNierney will also receive his base salary for twelve months following termination, a pro-rated discretionary bonus for the fiscal year in which the twelve month base salary continuation period ends, continuation of health insurance coverage paid by the Company for twelve months following termination, any earned but unpaid bonus and, if he executes a release agreement (which will include an 18-month restrictive covenant), continued vesting in accordance with the schedule provided in the McNierney Employment Agreement or any other award agreements of any restricted stock units granted to him prior to termination. If Mr. McNierney terminates his employment without Good Reason, he will be entitled to any unpaid base salary and unpaid benefits and any earned but unpaid bonus. If Mr. McNierney terminates his employment for Good Reason, he will be entitled to any unpaid base salary and unpaid benefits, any earned but unpaid bonus, a

pro-rated bonus for the year in which termination occurs and, if he executes a settlement and release agreement (which will include an 18-month restrictive covenant), continued vesting in accordance with the schedule provided in the McNierney Employment Agreement of any restricted stock units granted to him prior to termination. If Mr. McNierney is terminated by the Company for Cause, he will be entitled to any unpaid base salary and unpaid benefits and any earned but unpaid bonus. The McNierney Employment Agreement also contains standard post-termination confidentiality and non-solicitation provisions (for twelve months). In the event of Mr. McNierney’s death or disability, he will be entitled to receive any unpaid base salary and unpaid benefits and equity incentives that have vested prior to the termination, a pro rated bonus for the fiscal year in which termination occurs and a severance payment. In addition, RSUs granted prior to termination will vest upon such termination. The McNierney Employment Agreement provides that, in the event that Mr. McNierney becomes subject to the excise tax under Section 4999 of the Internal Revenue Code, he will be entitled to an additional payment such that he will be placed in the same after-tax position as if no such excise tax had been imposed. These terms were arrived at in arms-length negotiations with Mr. McNierney and the Company believed at such time that they were necessary to provide this protection to Mr. McNierney in return for taking on responsibility for implementing the Company’s strategic plan and to ensure a smooth transition through the Company’s recapitalization transaction with MatlinPatterson in 2007.

 

The stock option agreements entered into between the Company and Mr. McNierney on December 18, 2008 (“McNierney Stock Option Agreements”) provide that upon termination of employment, Mr. McNierney’s stock options will be subject to certain vesting and forfeiture provisions depending upon the circumstances of termination. In particular, in the event of his termination from the Company without Cause, or if Mr. McNierney terminates his employment for Good Reason, Mr. McNierney will receive continued vesting in accordance with the schedule provided in the applicable McNierney Stock Option Agreement of stock options granted to him prior to termination.