-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dk4IjtrI6vMkN1/rHImxYg/auamdPTspAX10zM5ld9VZn+UQb7h3O2sD5dyqvdD2 Vwky9o+ZLQocZ9niUv85Ww== 0000950162-02-000867.txt : 20020709 0000950162-02-000867.hdr.sgml : 20020708 20020708154318 ACCESSION NUMBER: 0000950162-02-000867 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020702 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020708 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TECHNOLOGY GROUP INC CENTRAL INDEX KEY: 0000920424 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133757717 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-78309 FILM NUMBER: 02697871 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125884000 MAIL ADDRESS: STREET 1: 11100 SANTA MONICA BLVD STREET 2: 12TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90025 8-K 1 itg8k070802.txt FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 July 2, 2002 Date of Report (Date of earliest event reported) INVESTMENT TECHNOLOGY GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 0-23644 95-2848406 (State or other jurisdiction of (Commission file number) (I.R.S. Employer incorporation or organization) Identification No.) 380 Madison Avenue New York, New York 10017 (Address of principal executive offices) (212) 588-4000 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) ================================================================================ Item 5. Other events. On July 2, 2002, Investment Technology Group, Inc. ("ITG"), its subsidiary Indigo Acquisition Corp. and Hoenig Group Inc. (Nasdaq: HOEN) ("Hoenig") entered into an amendment to the agreement and plan of merger previously announced by them on February 28, 2002. The amended merger agreement provides for ITG's acquisition of Hoenig for approximately $105 million in cash, or $11.58 per Hoenig share. Of these amounts, $11.35 per share will be paid in cash at the closing and $0.23 per Hoenig share, or approximately $2.4 million, will be placed in escrow. Hoenig and ITG previously had announced a purchase price of $115 million, or $12.55 per share, for the transaction. The purpose of the escrow, which will be administered by Hoenig representatives, is to fund the continued pursuit of certain insurance claims relating to the trading loss incurred at Hoenig's U.K. subsidiary announced on May 9, 2002 and other related claims. Each holder of a Hoenig share or stock option at the closing will have the non-transferable right to receive in cash a proportional amount of any future recovery on the claims, net of expenses and taxes, plus any unused portion of the $2.4 million initial escrow funding. Hoenig is expected to have approximately $40 million of excess cash and cash equivalents at the closing date and has no long-term debt. Hoenig provides trade execution, independent research and client service to professional money managers and alternative investment funds throughout the world and maintains offices in the New York area, London and Hong Kong. It is expected that the transaction, if approved by Hoenig stockholders and certain regulatory authorities, will be consummated by the end of the third quarter of 2002. Hoenig stockholders owning 3,069,970 shares of Hoenig common stock have agreed to vote in favor of the merger. These shares represent approximately 38% of the outstanding shares of Hoenig common stock, excluding shares subject to employee stock options. Steven J. Sorice will assume the role of Chief Executive Officer of Hoenig following completion of the acquisition. The description contained in this Form 8-K of the amendment to the merger agreement and the escrow agreement is qualified in its entirety by reference to the full text of such agreements, copies of which are attached to this From 8-K as Exhibits 2.1 and 2.2, respectively. -2- Item 7. Financial Statements and Exhibits. (a) No financial statements are required to be filed with this report. (b) No pro-forma financial information is required to be filed with this report. (c) Exhibits. See Exhibit index. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: July 8, 2002 INVESTMENT TECHNOLOGY GROUP, INC By: /s/ Howard C. Naphtali ------------------------------------------------ Name: Howard C. Naphtali Title: Chief Financial Officer EXHIBIT INDEX Exhibit No. Description 2.1 Amendment No. 1 dated July 2, 2002 to Agreement and Plan of Merger, dated as of February 28, 2002, by and among Investment Technology Group, Inc., Hoenig Group Inc. and Indigo Acquisition Corp. 2.2 Escrow Agreement dated July 2, 2002 among Hoenig Group Inc., Hoenig & Company Limited, Investment Technology Group, Inc. and Fredric P. Sapirstein and Alan B. Herzog 2.3 Custodian and Paying Agent Agreement dated July 2, 2002 among Hoenig Group Inc., Hoenig & Company Limited, Investment Technology Group, Inc., The Bank of New York and Fredric P. Sapirstein and Alan B. Herzog 99.1 Press Release dated July 2, 2002 EX-2.1 3 itgex21.txt AMENDMENT NO. 1 TO AGREE. AND PLAN OF MERGER AMENDMENT NO. 1 AMENDMENT NO. 1 dated July 2, 2002 ("Amendment") to Agreement and Plan of Merger dated as of February 28, 2002 (the "Agreement") by and among Investment Technology Group, Inc., a Delaware corporation ("Parent"), Hoenig Group Inc., a Delaware corporation ("Company"), and Indigo Acquisition Corp. ("Merger Subsidiary"), a Delaware corporation and a direct wholly owned subsidiary of Parent. Capitalized terms used herein without definition have the meanings given to them in the Agreement. WHEREAS, on May 9, 2002, Company announced certain unauthorized trading and resulting trading losses at its wholly owned subsidiary Hoenig & Company Limited, a U.K. limited company; WHEREAS, in light of such losses, Parent, Merger Subsidiary and Company have agreed to amend the Agreement in order to adjust the Merger Consideration and make certain other changes; WHEREAS, the boards of directors of Parent, Merger Subsidiary and Company have approved this Amendment; WHEREAS, each person listed on Annex A hereto is, concurrently with the execution and delivery of this Amendment, delivering a letter in the form of Annex B hereto; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: ARTICLE ONE AMENDMENTS SECTION 1.1. The first paragraph of the Agreement is amended to replace "(this "Agreement") with "(as amended by Amendment No. 1, this "Agreement")". SECTION 1.2. Section 1.1 of the Agreement is amended as follows: (a) The following definitions are added: "Amendment No. 1" means Amendment No. 1 dated July 2, 2002 to this Agreement. "Cash Merger Consideration" means (i) $11.35 plus (ii) (A) the Escrow Reduction Amount, if any, divided by (B) the Number of Shares and Options Outstanding. "Cash Option Consideration" has the meaning given in Section 2.8(a). -2- "Contingent Payment" means the amount, if any, required to be paid in cash by ITG to the Agent pursuant to Section 7.03 of the Escrow Agreement for payment to Holders pursuant to the terms of the Paying Agent Agreement. "Contingent Payment Right" means the right to receive an amount equal to (i) the Contingent Payment divided by (ii) (x) the Number of Shares and Options Outstanding less (y) the number of Specified Rollover Options, which right shall not be assignable or otherwise transferable except by operation of law (including the laws of descent and distribution) or by intestacy and shall otherwise be subject to the terms of the Escrow Agreement. "Escrow Agreement" means the Escrow Agreement dated as of the date of Amendment No. 1 among Company, Hoenig UK, Parent and the Committee Members named therein, in the form of Annex C to the Amendment. "Escrow Reduction Amount" has the meaning given to such term in the Escrow Agreement. "FSA Notices" means (i) the Notification of a Regulatory Event filed by Hoenig UK with the Financial Services Authority in the United Kingdom dated May 21, 2002, and (ii) the Notification of a Regulatory Event filed by Hoenig UK, with the Financial Services Authority in the United Kingdom, dated June 11, 2002. "Hoenig UK" means Hoenig & Company Limited, a U.K. limited company and a wholly owned subsidiary of Company. "Specified Losses" means the trading losses totaling $7.1 million on a pre-tax basis incurred by Hoenig UK, described in the FSA Notices, plus (i) all fees and expenses incurred on or before the date of Amendment No. 1 in connection with the matters referred to in the FSA Notices, (ii) all Escrow Expenses (as defined in the Escrow Agreement), (iii) all penalties and fines levied by any Governmental Entity in connection with the matters referred to in the FSA Notices and (iv) all fees and expenses incurred after the date of Amendment No. 1 in connection with any inquiry, investigation or proceeding by any Governmental Entity relating to the matters referred to in the FSA Notices. "Specified Rollover Options" means the Rollover Options identified as such on the schedule to be delivered by Parent pursuant to Section 2.8(b). (b) The following definitions are deleted in their entirety: "Net Cash Proceeds" and "Option Consideration". (c) The definition of "Cash-out Option Schedule" is amended to replace "within 30 days after the date hereof" with "within 14 days after the date of Amendment No. 1". -3- (d) The definition of "Exchange Ratio" is amended to replace "Merger Consideration" with "Cash Merger Consideration". (e) The definition of "Transaction Agreements" is amended to add the following before the period: ", the Escrow Agreement and the Paying Agent Agreement (as defined in the Escrow Agreement)". SECTION 1.3. Section 2.6(b) of the Agreement is amended and restated as follows: "Conversion of Company Common Stock. Subject to Section 2.6(d), each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (including (i) all vested and unvested Company RSUs and (ii) any shares of Company Common Stock held by participants in the Company Stock Purchase Plans and issued prior to the date hereof, but excluding (x) shares to be canceled in accordance with Section 2.6(a) and (y) Dissenting Shares) shall be converted at the Effective Time into (i) the right to receive, without interest, the Cash Merger Consideration and (ii) one Contingent Payment Right (together, the "Merger Consideration"). Upon such conversion, all such shares of Company Common Stock shall no longer be deemed to be outstanding and shall automatically be canceled and retired and shall cease to exist, and each certificate previously representing any such shares shall thereafter represent only the right to receive the Merger Consideration upon the surrender of the certificate representing such shares of Company Common Stock in accordance with Section 2.7." SECTION 1.4. All instances of "Merger Consideration" in Section 2.7 of the Agreement are changed to "Cash Merger Consideration". The last sentence of Section 2.7(c) is amended to replace the words "amount of cash" with "Cash Merger Consideration". SECTION 1.5. The first sentence of Section 2.7(d) shall be amended to add ", except with respect to the Contingent Payment Rights" before the period. SECTION 1.6. Section 2.8(a) of the Agreement is amended and restated as follows: "At the Effective Time, all Cash-out Options shall be canceled, and holders of Cash-out Options with an exercise price below the Cash Merger Consideration shall receive from Surviving Corporation (subject to any applicable withholding taxes), with respect to each Cash-out Option, (i) an amount in cash, without interest, equal to the product of (x) the excess of the Cash Merger Consideration over the exercise price per share of such Cash-out Option times (y) the number of shares of Company Common Stock subject to such Cash-out Option (the "Cash Option Consideration") and (ii) the number of Contingent Payment Rights as is equal to the number of shares of Company Common Stock subject to such Cash-out Option. The Cash Option Consideration shall be due and paid at (or as soon as practicable following) the Effective Time." SECTION 1.7. Section 2.8(b) of the Agreement is amended as follows: -4- (a) In the first sentence, "shall be converted into and become an option" is replaced with "shall be converted into and become (x) except for the Specified Rollover Options, the number of Contingent Payment Rights as is equal to the number of shares of Company Common Stock subject to such Rollover Option and (y) an option". (b) In the second sentence, "within 30 days after the date hereof" is replaced with "within 14 days after the date of Amendment No. 1". (c) The following sentence shall be added after the second sentence: "Such schedule shall identify which Company Options constitute Specified Rollover Options." SECTION 1.8. The lead-in to Section 3.1 of the Agreement is amended and restated as follows: "SECTION 3.1 Representations and Warranties. Except for the Pursuit of Claims (each as defined in the Escrow Agreement) in compliance with the Escrow Agreement, the Specified Losses and the activity giving rise to the Specified Losses and matters in respect of any Governmental Entity arising from the delivery of the FSA Notices to any such Governmental Entity, the Company represents and warrants to Parent as follows:" SECTION 1.9. Section 3.1(s) of the Agreement is amended to replace "opinion of Company's Financial Advisor, dated the date of this Agreement" with "opinions of Company's Financial Advisor, dated the date of this Agreement and the date of Amendment No. 1". SECTION 1.10. Section 3.1(t) of the Agreement is amended to replace the second sentence with the following: "The Specified Asset Sales have been consummated in accordance with the Specified Asset Sale Agreements. Neither Company nor any of its Subsidiaries has any liability with respect to the business, operations, assets or liabilities of AHA or any of its Subsidiaries, other than those specified liabilities that are expressly disclosed in the Specified Asset Sale Agreements. Prior to the consummation of the Specified Asset Sale under the AHA Stock Purchase Agreement, Company caused AHA to make such dividends or distributions to Company so that AHA's Tangible Net Worth (as defined in the AHA Stock Purchase Agreement) was equal to zero (0) at the closing of such Specified Asset Sale." SECTION 1.11. Section 3.2(f) of the Agreement is amended and restated as follows: "Financing. Parent has and will have at the Effective Time sufficient funds to pay the Cash Merger Consideration and the Cash Option Consideration." SECTION 1.12. Section 4.1 of the Agreement is amended to add the following before the colon: -5- "(provided further that none of the clauses of this Section 4.1 shall be deemed to have been violated by reason of the Pursuit of Claims (each as defined in the Escrow Agreement) in compliance with the Escrow Agreement, the Specified Losses and the activity giving rise to the Specified Losses and matters in respect of any Governmental Entity arising from the delivery of the FSA Notices to any such Governmental Entity)" SECTION 1.13. Section 4.1(m) is amended to add the following to the beginning of the first sentence: "Except for any settlement or compromise of Claims,". SECTION 1.14. Section 4.1(p) of the Agreement is amended to delete the second sentence. SECTION 1.15. Section 5.1(c) of the Agreement is amended to replace the first sentence thereof with the following: "If required by the SEC, as promptly as practicable following the date of Amendment No. 1, Company shall prepare a revised preliminary Proxy Statement and file it with the SEC. After the SEC review of the revised preliminary Proxy Statement is complete and the Proxy Statement becomes definitive (the "Final Proxy Statement"), Company shall mail the Final Proxy Statement to the Company's stockholders. If the SEC does not require Company to refile the Proxy Statement in preliminary form, Company shall file the Final Proxy Statement with the SEC and mail it to Company's stockholders as promptly as practicable following the date of Amendment No. 1.". SECTION 1.16. Each of Section 6.2(c) and Section 6.3(c) of the Agreement is replaced with "[Intentionally Omitted]". SECTION 1.17. Section 7.1(c) of the Agreement is amended by replacing "August 15, 2002" with "October 15, 2002". SECTION 1.18. Section 8.3 of the Agreement is amended by deleting ", unless the context otherwise requires," from the fifth sentence thereof. ARTICLE TWO MISCELLANEOUS SECTION 2.1. Due Authorization, Etc. Each party represents and warrants that this Amendment, the Escrow Agreement and the Paying Agent Agreement (as defined in the Escrow Agreement) has been duly authorized, executed and delivered by it and constitutes a valid and binding obligation of such party, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the rights and remedies of creditors generally, and subject to general principles of equity, whether applied by a court of law or equity. -6- SECTION 2.2. Board Approval. Hoenig represents and warrants that the Board of Directors has reaffirmed the resolutions described in Section 3.1(l) of the Agreement. SECTION 2.3. Agreement Otherwise Unchanged. Except as expressly set forth herein, the terms, provisions and conditions of the Agreement shall remain in full force and effect and are in all respects hereby ratified and confirmed. Other than as specifically provided herein, this Amendment shall not operate as a waiver or amendment of any right, power or privilege of any party under the Agreement or of any other term or condition of the Agreement. SECTION 2.4. Headings. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment. SECTION 2.5. Counterparts. This Amendment may be executed in counterparts, each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. SECTION 2.6. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed by their respective officers thereunto duly authorized, all as of the first written above. INVESTMENT TECHNOLOGY GROUP, INC. By: /s/ Raymond L. Killian, Jr. ----------------------------------------------- Name: Raymond L. Killian, Jr. Title: Chairman INDIGO ACQUISITION CORP. By: /s/ Howard C. Naphtali ----------------------------------------------- Name: Howard C. Naphtali Title: Managing Director and Chief Executive Officer HOENIG GROUP INC. By: /s/ Fredric P. Sapirstein ----------------------------------------------- Name: Fredric P. Sapirstein Title: Chairman and Chief Executive Officer [Annex A] List of Stockholders Delivering Waiver Martin F.C. Emmett Robin A. Green Alan B. Herzog Kathryn Hoenig Laura H. Hoenig Family Trust Laura H. Hoenig Grantor Retained Annuity Trust Max H. Levine Michael J. Levine Fredric P. Sapirstein Robert Spiegel Benjamin J.B. Wood [Annex B] Form of Waiver Letter This Waiver (the "Waiver") is delivered by the stockholder of Hoenig Group Inc., a Delaware corporation ("Company"), identified on the signature page hereof ("Stockholder"). Reference is made to the Agreement and Plan of Merger dated as of February 28, 2002 by and among Investment Technology Group, Inc., a Delaware corporation ("Parent"), Company and Indigo Acquisition Corp. ("Merger Subsidiary"), a Delaware corporation and a direct wholly owned subsidiary of Parent, as amended by Amendment No. 1 thereto dated July 2, 2002 (the "Amendment," and the Agreement and Plan of Merger as so amended, the "Merger Agreement"). Capitalized terms used herein without definition have the meanings given to them in the Merger Agreement. On May 9, 2002, Company announced certain unauthorized trading and resulting losses at its wholly owned subsidiary Hoenig & Company Limited, a U.K. limited company. In light of such losses, Parent, Merger Subsidiary and Company have agreed to amend the Merger Agreement in order to adjust the Merger Consideration and make certain other changes. As a condition to its execution and delivery of the Amendment, Parent is requiring the receipt of letters in the form of this Waiver executed by each person listed on Annex A to the Amendment, including Stockholder. In consideration of (i) the execution and delivery of the Amendment by Parent and Merger Subsidiary, (ii) the Merger Consideration to be received in exchange for shares of Company Common Stock held by Stockholder and/or the consideration to be received in the Merger in exchange for Company Options held by Stockholder and (iii) for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by Stockholder, Stockholder hereby agrees and acknowledges as follows: 1. Waiver. Stockholder hereby irrevocably and unconditionally waives any and all actions, causes of action, claims, allegations, rights, obligations, liabilities or charges that Stockholder has or may have, now or in the future, whether known or unknown, against ITG, Hoenig, Hoenig UK, their respective affiliates, any officer, director, employee or stockholder of any of the foregoing, the Committee, any Member or the Agent (each as defined in the Escrow Agreement) or any attorney, agent, successor or assign of any of the foregoing (collectively, the "Beneficiaries") relating to or arising out of the Contingent Payment Rights, the Contingent Payment, the Escrow, the Escrow Assets or any decision, action or failure to act by any person in respect of any of the foregoing or under the Escrow Agreement or the Paying Agent Agreement; provided that the foregoing waiver shall not apply if Stockholder is a Member of the Committee acting in his or her capacity as a Member under the Escrow Agreement. 2. Representation by Counsel. By executing this Waiver, Stockholder acknowledges that Stockholder has been advised to consult with an attorney before executing this Waiver. -2- 3. Further Assurances. Stockholder shall promptly execute, acknowledge and deliver any and all documents and take any and all actions, as any of the Beneficiaries shall reasonably request in order to carry out the intent and meaning of, and to give full effect to, this Waiver. 4. Governing Law. This Waiver shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. Each Beneficiary shall entitled to enforce this Waiver in any court of the United States or of the State of New York sitting in the Borough of Manhattan, City of New York. IN WITNESS WHEREOF, the undersigned has duly executed this Waiver on the date set forth below. Date: , 2002 ------------------------------ Name of Stockholder (please print): By: ----------------------------------------- Name: Title: EX-2.2 4 itgex22.txt ESCROW AGREEMENT [Annex C to Amendment No. 1 to Merger Agreement] ESCROW AGREEMENT This Escrow Agreement (the "Agreement") is entered into as of July 2, 2002 by and among Hoenig Group Inc., a Delaware corporation ("Hoenig"), Hoenig & Company Limited, a U.K. limited company ("Hoenig UK"), Investment Technology Group, Inc., a Delaware corporation ("ITG"), and Fredric P. Sapirstein and Alan B. Herzog, as members of the Contingent Payment Rights Committee referred to below. Reference is made to the Agreement and Plan of Merger dated as of February 28, 2002 by and among Hoenig, ITG and Indigo Acquisition Corp., as amended by Amendment No. 1 thereto dated as of even date herewith (the "Merger Agreement"). This is the Escrow Agreement referred to therein. The parties hereto are simultaneously entering into the Custodian and Paying Agent Agreement attached hereto as Exhibit A (the "Paying Agent Agreement"), with The Bank of New York, a New York banking corporation, as custodian and paying agent (the "Agent"), in order to implement certain provisions of this Agreement. In consideration of the foregoing premises (which constitute an integral part of this Agreement) and mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Except with respect to the following terms, which shall have the respective meanings specified below, all capitalized terms contained herein shall have the meanings ascribed to them in the Merger Agreement: "Advisors" has the meaning set forth in Section 3.03 hereof. "Claims" means each and every claim asserted, or that may be asserted, against any third party identified in the FSA Notices or any insurer or reinsurer of Hoenig or any of its subsidiaries (collectively, the "Specified Persons") by or on behalf of Hoenig or Hoenig UK in respect of any matter referred to in the FSA Notices. "Code" means the Internal Revenue Code of 1986, as amended. -2- "Committee" has the meaning set forth in Section 3.01 hereof. "Escrow" means the escrow created by this Agreement for the purposes of holding and dispersing the Escrow Assets to be administered by the Agent pursuant to the Paying Agent Agreement. "Escrow Account" has the meaning set forth in Section 2.01 hereof. "Escrow Assets" means (i) the Initial Funding, (ii) any assets hereafter acquired by the Escrow, (iii) the Recoveries, (iv) any investments purchased with Escrow Assets or otherwise acquired by the Escrow and (v) all proceeds of each of the foregoing (including, without limitation, any earning and gains thereon), excluding assets paid, distributed, expended or otherwise disposed of from time to time by the Committee, including for the payment of Escrow Expenses. "Escrow Expenses" means all fees, costs, expenses, obligations and liabilities of every nature or description incurred on or after the date hereof, directly or indirectly, by the Committee or any Member in connection with establishing, maintaining and administering the Escrow and the Escrow Assets or in carrying out the Committee's express or implied powers and duties under this Agreement or applicable law, including without limitation (i) all costs and expenses of prosecuting, appealing, negotiating, resolving, settling, compromising or otherwise pursuing the Claims, including the fees and expenses of Advisors, witnesses and court costs, whether incurred on a contingent, time and materials or other basis, (ii) all compensation and reimbursements of the Agent and of the Members for serving as Members, if any, (iii) all costs and expenses of indemnifying the Agent pursuant to the Paying Agent Agreement or the Members pursuant to this Agreement or otherwise prosecuting or defending any other litigation involving the Escrow or the Committee, (iv) all reimbursements of Hoenig and Hoenig UK pursuant to Sections 5.01 and 5.05 hereof, (v) all amounts payable to ITG and its affiliates pursuant to Section 6.02 hereof and (vi) all costs and expenses of distributing the Contingent Payment to the Holders pursuant to Section 7.03 hereof. "Escrow Reduction Amount" has the meaning set forth in Section 7.04 hereof. "Holder" means, at any time, the holder at such time of a Contingent Payment Right listed on the Register (as defined in the Paying Agent Agreement). "Initial Funding" has the meaning set forth in Section 2.02 hereof. "Members" has the meaning set forth in Section 3.01 hereof. "Pursuit" has the meaning set forth in Section 3.03 hereof. "Recoveries" means all amounts recovered or received in respect of Claims by Hoenig UK, Hoenig, ITG or their respective subsidiaries less any amounts that may be deducted therefrom pursuant to Section 6.02 hereof. -3- ARTICLE II ESCROW ACCOUNT SECTION 2.01. Establishment of Escrow Account. Simultaneously with the execution and delivery hereof, the Committee shall direct the Agent to establish an account (the "Escrow Account") at its office located in New York, New York. All funds accepted or held by the Agent pursuant to this Agreement and the Paying Agent Agreement shall be held in the Escrow Account (and shall be deemed part thereof) in accordance with this Agreement and the Paying Agent Agreement, until released in accordance with the terms hereof and thereof. SECTION 2.02. Initial Funding. Simultaneously with the execution and delivery hereof, Hoenig UK shall deliver $2,365,000 in cash (the "Initial Funding") to the Agent for deposit into the Escrow Account in accordance with the Paying Agent Agreement. SECTION 2.03. Investment. The Committee shall direct the Agent to invest the Escrow Assets solely in the following: (i) obligations issued or guaranteed by the United States of America or any agency or instrumentality thereof with a maturity of not more than 365 days and (ii) money market funds substantially all of whose funds are invested in the foregoing. Pursuant to the Paying Agent Agreement, all earnings and gains on Escrow Assets, including interest and dividends, shall be paid into the Escrow Account and shall constitute Escrow Assets. If at any time the Committee deems it necessary that some or all of the investments constituting Escrow Assets be redeemed or sold in order to raise money necessary to comply with the provisions of this Agreement, the Committee shall direct the Agent to effect such redemption or sale, in such manner and at such time as the Committee directs in accordance with the Paying Agent Agreement. SECTION 2.04. Disbursements. From time to time at the written direction of the Committee and in accordance with this Agreement and the Paying Agent Agreement, the Committee shall direct the Agent to disburse such portion of the Escrow Assets as the Committee so directs to pay Escrow Expenses. Pursuant to the Paying Agent Agreement, the Agent shall keep a record of such disbursements. From and after the date hereof, all Escrow Expenses shall be paid by the Committee from the Escrow Account. SECTION 2.05. Quarterly Statements. The Committee shall direct the Agent, in accordance with the Paying Agent Agreement, as soon as practicable following each March 31, June 30, September 30 and December 31, until the termination of this Agreement, to deliver to the Committee a statement (a "Quarterly Statement") setting forth: (a) the amount of the Escrow Assets; (b) the amount of income or interest earned or accrued with respect to the Escrow Assets, if any, during the period covered by such Quarterly Statement; and (c) the amount of Escrow Expenses paid during such period. -4- ARTICLE III POWERS, RIGHTS AND OBLIGATIONS OF THE CONTINGENT PAYMENT RIGHTS COMMITTEE SECTION 3.01. Establishment of the Contingent Payment Rights Committee. There is hereby established a Contingent Payment Rights Committee (the "Committee"). The Committee shall consist of not less than two and not more than five members ("Members"). The initial Members shall be Fredric P. Sapirstein and Alan B. Herzog. SECTION 3.02. Action of the Committee. The Committee may act only with the concurrence of a majority of the Members; provided, however, that the Committee may, by resolution adopted by a majority of the Members, designate a Chairman to act as the administrative Member and delegate to the Chairman such authority as the Committee may determine. SECTION 3.03. Authority of Committee. The Committee shall have full power and authority from and after the date hereof (i) to prosecute, appeal, negotiate, resolve, settle, compromise or otherwise pursue the Claims, in whole or in part, in accordance with the provisions of this Agreement, including by litigation in trial or appellate courts, arbitration, alternative dispute resolution, negotiation, settlement or compromise (collectively, the "Pursuit" of Claims), (ii) to withdraw all or part of the Claims, terminate the Pursuit thereof and terminate the Escrow, (iii) to retain advisors, including, without limitation, counsel, accountants, financial advisors, arbitrators, mediators, experts, consultants, investigators and other assistants (collectively, "Advisors"), in connection with the foregoing, and to advise the Members with respect to the rights and obligations of the parties under this Agreement and the Paying Agent Agreement, and to determine the amount and method of compensation to be paid to such Advisors, including on a contingent, time and materials or other basis; provided that the Committee shall obtain the acknowledgment of each such Advisor that the sole recourse for such Advisor's fees and expenses shall be to the Escrow Assets, (iv) to direct the payment of Escrow Expenses by the Agent, (v) to direct the investment of the Escrow Assets by the Agent and (vi) to take such action as the Committee deems necessary or appropriate to enforce the obligations of the parties under this Agreement; provided, however, that without prior consultation with, and approval by (which approval shall not be unreasonably withheld or delayed in the case of clause (b) and may be withheld in its sole judgment in the case of clause (a) or (c)), ITG, the Committee shall not (a) enter into or amend any contracts or agreements binding on, or on behalf of, ITG or any of its affiliates, (b) replace Committee members or (c) commence litigation against any person other than the Specified Persons; provided, further, that the Committee shall (x) consult with ITG prior to filing a lawsuit or an appeal with respect to, or agreeing to settle, any Claims and (y) notify ITG (in advance to the extent practicable) of any material change in the Pursuit of Claims. The Members shall have no other duties, rights or obligations except as specifically set forth herein and no implied covenants or obligations shall be read in to this Agreement against the Members. SECTION 3.04. Replacement of Committee Members. If, prior to the Effective Time, any Member shall resign, die or become incapacitated or shall otherwise become unable or unwilling to act as a Member hereunder, Hoenig shall, subject to ITG's approval (which approval -5- shall not be unreasonably withheld or delayed), appoint a successor. If these events occur after the Effective Time, subject to Section 3.03 hereof, a majority of the remaining Members shall appoint a successor, or, if there is only one remaining Member, such remaining Member shall appoint a successor or successors. ITG acknowledges that a person who is a member of the board of directors of Hoenig immediately prior to the Effective Time and who is not an employee of ITG or any of its affiliates at the time of appointment is approved by ITG. SECTION 3.05. Committee Member May Be Holder. Any Member may also be a Holder or an officer, director, employee or affiliate of a Holder and will have all the rights of such a Holder to the same extent as if he or she were not a Member. SECTION 3.06. Cooperation with ITG. The Committee shall provide ITG such information and cooperation as ITG reasonably requests in connection with reports, forms, notifications, applications, tax returns and other documents to be filed with the Internal Revenue Service or the U.K. Inland Revenue and other applicable foreign, federal and state governmental agencies and such other actions necessary to comply with the Code or other tax laws. SECTION 3.07. Compliance with Applicable Laws, Etc. All actions required to be taken by the Committee pursuant to this Agreement shall be taken in compliance with all applicable statutes, rules, regulations, orders, writs, decrees and injunctions of courts or other governmental agencies. None of the parties shall take or cause to be taken, or omit to take or cause to omit to be taken, any action such that (a) the Escrow shall be or become required to register as an investment company under the Investment Company Act of 1940, as amended, or any similar law; or (b) the Contingent Payment Rights shall be or become required to be registered under the Securities Act 1993, as amended, the Securities Exchange Act of 1934, as amended, the Trust Indenture Act of 1939, as amended, or any similar law. SECTION 3.08. Reliance. In taking any action hereunder, or in refraining therefrom, the Committee, and the Members, shall be protected in relying upon any notice, paper or other document believed by it or them to be genuine and signed by the proper parties, or upon any evidence deemed by it or them to be sufficient. In no event shall the Committee or any Member be liable to the Holders for any action, failure to act, omission, decision, determination or undertaking by the Committee or any Member. In no event shall the Committee or any Member be liable to ITG or any of its affiliates for any action, failure to act, omission, decision, determination or undertaking by the Committee or any Member, other than in connection with a material breach of the rights of ITG or any of its affiliates under this Agreement, which breach causes injury to ITG or any of its affiliates; provided that ITG shall give written notice to the Committee describing the particulars of such breach and provide at least 30 days' opportunity to cure the breach. In the event that the Committee, or the Members, consult with Advisors in connection with its or their duties hereunder, it and they shall be fully protected by any action, omission, decision, determination or undertaking taken, suffered or permitted by it or them in good faith and in accordance with the advice of such Advisors. SECTION 3.09. Indemnification. -6- (a) Hoenig (if prior to the Effective Time) or ITG (if after the Effective Time) shall indemnify and hold harmless each Member against all claims, demands, obligations, liabilities, costs and expenses, including amounts paid in satisfaction of judgments, in compromise (so long as Hoenig or ITG, as applicable, has approved such compromise, with such approval not to be unreasonably withheld or delayed), or as fines or penalties, and fees of Advisors (collectively, "Losses"), reasonably incurred by him or her in connection with the defense or disposition of any action, suit or other proceeding by one or more Holders or by any other person, whether civil or criminal, in which he or she may be involved as a party or witness or with which he or she may be threatened, while a Member or thereafter by reason of having been a Member or resulting from administration of the Claims or the Escrow or any decision, action or failure to act, (i) except to the extent that any such Loss resulted from or arose out of a Member's decision, action or failure to act made or taken with deliberate intent to cause substantial injury to the Holders or with reckless disregard for the best interests of the Holders and (ii) except that ITG and its affiliates shall have no obligation under this Section 3.09 in respect of Losses in connection with a material breach of the rights of ITG or any of its affiliates under this Agreement, which breach causes injury to ITG or any of its affiliates; provided that ITG shall give written notice to the Committee describing the particulars of such breach and provide at least 30 days' opportunity to cure the breach. Hoenig or ITG, as the case may be, shall advance payments in connection with indemnification under this Section 3.09(a) upon request of any Member; provided that such Member shall have given a written undertaking to repay any amount advanced in the event it is subsequently determined in a final non-appealable decision rendered by a court of competent jurisdiction or other tribunal that such Member is not entitled to such indemnification. The rights accruing to any Member under these provisions shall not exclude any other right to which he or she may be lawfully entitled. The obligations of Hoenig and ITG set forth in this Section 3.09 shall survive the termination of this Agreement and the removal or resignation of any Member. (b) Notwithstanding the foregoing, all Losses indemnified pursuant to Section 3.09(a) hereof (including amounts advanced pursuant to the second sentence thereof) shall be paid out of the Escrow Assets until such time as the Escrow Assets are exhausted or the Escrow is terminated pursuant to Section 7.02 hereof before ITG shall be obligated to make any payments pursuant to Section 3.09(a) hereof. (c) Until such time as the Escrow Assets are exhausted or the Escrow is terminated pursuant to Section 7.02 hereof, the Committee shall cause ITG, Hoenig and its affiliates to be reimbursed out of the Escrow Assets for any and all losses, claims, costs, expenses and liabilities imposed on any of them in connection with, arising out of or related to any action, claim, suit or other proceeding arising from the establishment or administration of the Escrow, including, without limitation, the operation or administration of the Claims or the Escrow and the exercise (or the failure to exercise) by the Committee of any power or authority under this Agreement or under applicable law; provided, however, that the obligation for such reimbursement, as aforesaid, shall be payable solely out of Escrow Assets; provided, further, that ITG shall not have any such reimbursement or indemnification rights with respect to any action, claim, suit or other proceeding against ITG alleging a breach of, or seeking enforcement of, ITG's obligation under Section 7.03 hereof. -7- (d) The Committee may purchase such insurance as it determines adequately insures that each Member shall be indemnified against any such loss, liability or damage pursuant to this Section 3.09, the cost of which insurance shall constitute an Escrow Expense. ARTICLE IV CONTINGENT PAYMENT RIGHTS SECTION 4.01. Allocation of Contingent Payment Rights. The Contingent Payment Rights shall be allocated in accordance with Sections 2.6(b), 2.8(a) and 2.8(b) of the Merger Agreement. Holders of Contingent Payment Rights will not be entitled to receive certificates evidencing the Contingent Payment Rights but the Holders of the Contingent Payment Rights shall be as set forth in the Register. SECTION 4.02. Transfer of Contingent Payment Rights. Contingent Payment Rights will not be assignable or otherwise transferable except by operation of law (including the laws of descent and distribution) or by intestacy. No other purported transfer of any Contingent Payment Right will be valid or will be registered on the Register. SECTION 4.03. Rights of Holders. (a) No Holder shall have any title to, right to, possession of, management of, or control of, the Escrow Assets. (b) The Holders will have no rights to dividends or other distributions other than their pro rata share of the distribution of the Contingent Payment, if any, in accordance with Section 7.03 hereof, and will have no voting rights and no liquidation preference. SECTION 4.04. No Action by Holders. No Holder will have the right to institute or maintain any suit, action or proceeding against Hoenig, Hoenig UK, ITG, any of their affiliates, the Escrow, the Escrow Assets, the Committee, any Member or the Agent to enforce, or otherwise act in respect of, the Contingent Payment Rights or the provisions of this Agreement or the Paying Agent Agreement or for any decision regarding the conduct or disposition of the Claims, including, without limitation, any decision to dismiss, settle or cease prosecuting any litigation at any time without obtaining any cash or other recovery. ARTICLE V CERTAIN COVENANTS SECTION 5.01. Cooperation. Hoenig and Hoenig UK shall use commercially reasonable efforts to provide the Committee and its Advisors with such access, at normal business hours -8- and upon reasonable notice, to their books and records relating to the Claims and to their employees, agents, attorneys and independent accountants, including in connection with testimony in litigation and factual investigation, all to the extent reasonably requested by the Committee for the purpose of performing their duties and exercising their powers hereunder. Hoenig and Hoenig UK shall be entitled to reimbursement by the Escrow for reasonable out-of-pocket expenses incurred in connection therewith. SECTION 5.02. Powers-of-Attorney. Hoenig and Hoenig UK shall execute and deliver to the Committee powers-of-attorney in form reasonably satisfactory to the Committee to enable the Committee to file pleadings and execute any documents on behalf of Hoenig and Hoenig UK necessary or appropriate to enable the Committee to prosecute the Claims or otherwise necessary or useful in the Pursuit of Claims in compliance with this Agreement, in the name of Hoenig and Hoenig UK and without further consent or action by Hoenig, Hoenig UK, ITG or their respective affiliates. To the extent permitted by applicable law, and to the extent that the Pursuit of the Claims is not jeopardized, the Committee shall prosecute all Claims on behalf of and in the name of Hoenig UK, and, if the Committee deems it necessary or appropriate, ITG and its affiliates shall cause Hoenig to assign its Claims to Hoenig UK. SECTION 5.03. Pursuit of Claims. ITG and its affiliates will use commercially reasonable efforts not to take any action or fail to take any action that is reasonably expected to materially adversely affect the Claims or the Pursuit of the Claims in compliance with this Agreement; provided that the foregoing shall in no way affect ITG's rights under Section 3.03 hereof. ITG and its affiliates agree not to disclose any non-public information with respect to the Claims to any third parties except (i) to Advisors of ITG and its affiliates who are advised of the confidential nature of such information and agree to abide by this provision in respect of such non-public information, (ii) insofar as such disclosure is compelled by any Governmental Entity or applicable law or (iii) such information which is or becomes part of the public domain without breach by ITG and its affiliates of this Section 5.03. SECTION 5.04. Settlements. In the event of any settlement or compromise of any Claim agreed to by the Committee, ITG agrees that it will not unreasonably withhold such release by ITG and its affiliates as may be required by the other party to such settlement or compromise in connection with such settlement or compromise. SECTION 5.05. Reimbursement. The Committee shall cause Hoenig and Hoenig UK to be reimbursed for any fees and expenses of the type that would constitute Escrow Expenses incurred by them after the date hereof and prior to the Effective Time in respect of investigation or Pursuit of Claims and any investment banking fees payable in respect of the Contingent Payment. -9- ARTICLE VI RECOVERIES ON CLAIMS SECTION 6.01. Recoveries To Be Deposited. All Recoveries in respect of the Claims, promptly upon receipt thereof, shall be deposited into the Escrow Account, net of the taxes referred to in Section 6.02 hereof, and any such net Recoveries, whether or not deposited, shall constitute Escrow Assets. SECTION 6.02. Taxes. ITG, Hoenig, Hoenig UK and their affiliates shall be indemnified and held harmless, on an after-tax basis, for any and all foreign, federal, state and local taxes (including value added and withholding taxes) which are paid or payable in connection with, or in any way relating to, or arising out of the Contingent Payment Rights, the Escrow Assets, the Contingent Payment or the distribution thereof or the Escrow Reduction Amount or the distribution thereof, determined without regard to any refunds, credits, carryforwards or other tax attributes which could or do reduce or otherwise off-set taxes paid or payable, other than deductions for the Specified Losses, which ITG, Hoenig, Hoenig UK and their affiliates shall use commercially reasonable efforts to apply against any Recovery or income on the investment of Escrow Assets. In accordance with the Paying Agent Agreement, the Agent shall report to Hoenig UK and, prior to the Effective Time, ITG, as of the end of each fiscal quarter, all income earned from the investment of the Escrow Assets. The Committee shall direct the Agent to pay from the Escrow Assets any taxes payable by ITG, Hoenig, Hoenig UK or any of their affiliates on income earned from the investment of Escrow Assets and any indemnification payments pursuant to this Section 6.02. ITG and its affiliates shall be entitled to, and prior to the Effective Time Hoenig and Hoenig UK shall, deduct from any Recoveries the indemnification payments pursuant to this Section 6.02 prior to deposit into the Escrow Account. ARTICLE VII TERMINATION, DELIVERY AND DISTRIBUTION SECTION 7.01. Termination of Merger Agreement. In the event that the Merger Agreement is terminated under Section 7.1 thereof prior to the Effective Time, the Committee shall in accordance with the Paying Agent Agreement direct the Agent to immediately pay all Escrow Expenses, if any, that have been incurred and have not been paid, and deliver the remaining Escrow Assets, to Hoenig UK, and this Agreement and the Escrow shall terminate. SECTION 7.02. Delivery of Escrow Assets to Hoenig UK; Termination of the Escrow. Following the earliest of (i) the final settlement or other final resolution of the Claims, (ii) a final determination by the Committee to cease Pursuit of all Claims and (iii) the fourth anniversary of the Effective Time (which date shall be extended in the event of any outstanding claims of indemnification or reimbursement under Section 3.09, 5.01, 5.05 or 6.02 hereof), the Committee shall discharge all of the Escrow's obligations, including by directing the Agent to pay the Escrow Expenses and re- -10- serve for the payment of such costs and expenses of distributing the Contingent Payments pursuant to the Paying Agent Agreement. Following such discharge, the Committee shall direct the Agent to liquidate all remaining Escrow Assets, if any, and deliver the proceeds in cash to Hoenig UK. Following such delivery to Hoenig UK, the Escrow shall terminate. At no time shall there be any distribution of Escrow Assets to the Holders. SECTION 7.03. Delivery of Contingent Payment to Agent; Distribution to Holders. Promptly following the termination of the Escrow pursuant to Section 7.02 hereof, ITG shall deliver to the Agent cash in an amount equal to the lesser of (i) the amount of cash, if any, delivered to Hoenig UK by the Agent pursuant to Section 7.02 hereof plus the amount of any Recoveries which were not deposited in the Escrow Account net of any amounts deducted therefrom pursuant to Section 6.02 hereof, and (ii) $12,465,000 minus the Escrow Reduction Amount, if any. Pursuant to the Paying Agent Agreement, the Agent shall distribute the amount so received by it from ITG to the Holders, without interest, pro rata based on the number of Contingent Payment Rights allocated to each such Holder on the Register. At no time shall there be any distribution of the Contingent Payment except pursuant to the preceding sentence and in compliance with the Paying Agent Agreement. Following such distribution by the Agent, this Agreement and the Paying Agent Agreement shall terminate. The distribution of any Contingent Payment shall be in compliance with applicable laws. SECTION 7.04. Pre-Closing Recoveries. Notwithstanding anything to the contrary in the third sentence of Section 7.03 hereof, if any Recoveries are received prior to the Effective Time, the Committee shall be entitled to direct the Agent to withdraw from the Escrow Account (i) the amount of such Recoveries less Escrow Expenses incurred prior to the Effective Time plus (ii) such portion of the Initial Funding as the Committee determines (provided that in no event shall such amount be in excess of the amount that would leave $500,000 in the Escrow Account prior to the Effective Time) (the sum of clauses (i) and (ii), the "Escrow Reduction Amount"), and deliver the Escrow Reduction Amount in cash to Hoenig UK prior to the Effective Time. An amount equal to the Escrow Reduction Amount, if any, shall be delivered by ITG as part of the Cash Merger Consideration. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by telecopy upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a nationally recognized next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice. -11- (a) if to ITG or to Hoenig or Hoenig UK after the Effective Time, to: Investment Technology Group, Inc. 380 Madison Avenue, 4th Floor New York, NY 10017 Attention: General Counsel Telephone No.: (212) 444-6327 Telecopy No.: (212) 444-6494 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: Daniel J. Zubkoff, Esq. Telephone No.: (212) 701-3000 Telecopy No.: (212) 269-5420 (b) if to Hoenig or Hoenig UK prior to the Effective Time, to: Hoenig Group Inc. 4 International Drive Rye Brook, NY 10573 Attention: General Counsel Telephone No.: (914) 935-9000 Telecopy No.: (914) 935-9178 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attention: Blaine V. Fogg, Esq. Telephone No.: (212) 735-3000 Telecopy No.: (917) 777-3900 (c) if to the Committee or any Member, to it, him or her: c/o Hoenig Group Inc. 4 International Drive Rye Brook, NY 10573 Telephone No.: (914) 935-9000 Telecopy No.: (914) 935-9118 -12- (d) if to the Holders, then to them at their respective addresses set forth in the Register. SECTION 8.02. Counterparts. This Agreement may be executed in counterparts, each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. SECTION 8.03. Entire Agreement; No Third Party Beneficiaries. This Agreement and the Paying Agent Agreement (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (b) are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. SECTION 8.04. Creditors of Hoenig UK. The Escrow Assets shall be subject to the claims of the creditors of Hoenig UK. SECTION 8.05. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.06. Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the transactions contemplated hereby. SECTION 8.07. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, and any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 8.08. Headings. Sections, subheadings and other headings used in this Agreement are for convenience only and shall not affect the construction of this Agreement. SECTION 8.09. Amendment and Modification. This Agreement may be amended or modified only by a subsequent writing signed by each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duty authorized as of the day and year first above written. HOENIG GROUP INC. By: /s/ Fredric P. Sapirstein --------------------------------------------- Name: Fredric Sapirstein Title: Chairman and Chief Executive Officer HOENIG & COMPANY LIMITED By: /s/ Alan B. Herzog --------------------------------------------- Name: Alan B. Herzog Title: Director INVESTMENT TECHNOLOGY GROUP, INC. By: /s/ Raymond L. Killian, Jr. --------------------------------------------- Name: Raymond L. Killian, Jr. Title: Chairman MEMBERS OF THE CONTINGENT PAYMENT RIGHTS COMMITTEE: /s/ Fredric P. Sapirstein ---------------------------------------------------- Name: Fredric P. Sapirstein /s/ Alan B. Herzog ---------------------------------------------------- Name: Alan B. Herzog EX-2.3 5 itgex23.txt CUSTODIAN AND PAYING AGENT AGREEMENT [Exhibit A to Escrow Agreement] CUSTODIAN AND PAYING AGENT AGREEMENT This Custodian and Paying Agent Agreement (the "Agreement") is entered into as of July 2, 2002 by and among Hoenig Group Inc., a Delaware corporation ("Hoenig"), Hoenig & Company Limited, a U.K. limited company ("Hoenig UK"), Investment Technology Group, Inc., a Delaware corporation ("ITG"), The Bank of New York, a New York banking corporation, as custodian and paying agent (the "Agent"), and Fredric P. Sapirstein and Alan B. Herzog, as members of the Contingent Payment Rights Committee (the "Committee"). Reference is made to the Escrow Agreement dated as of even date herewith (the "Escrow Agreement") by and among Hoenig, Hoenig UK, ITG and the Committee. This is the Agreement referred to therein. Capitalized terms used without definition herein have the meanings given to them in the Escrow Agreement. This Agreement sets forth the basis on which the Agent will hold, and make disbursements from, the Escrow and distribute the Contingent Payment, if any, to Holders and the duties for which the Agent will be responsible. In consideration of the foregoing premises (which constitute an integral part of this Agreement) and mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I ESCROW ACCOUNT Section 1.01. Appointment and Agreement of Agent. Hoenig, Hoenig UK, ITG, and the Committee hereby appoint and designate The Bank of New York as the Agent, and The Bank of New York hereby accepts such appointment and agrees to perform the duties of the Agent under the terms and conditions set forth herein. Section 1.02. Establishment of Escrow Account. Simultaneously with the execution and delivery hereof, the Agent shall establish an account (the "Escrow Account") at its office located in New York, New York. The Agent shall maintain the Escrow Account in accordance with this Agreement. All funds delivered to, accepted or held by the Agent shall be held in the Escrow Account (and shall be deemed part thereof) in accordance with this Agreement, until released in accordance with the terms hereof. Section 1.03. Initial Funding. Simultaneously with the execution and delivery hereof, Hoenig UK shall deliver $2,365,000 in cash (the "Initial Funding") to the Agent for deposit into the Escrow Account in accordance with this Agreement. Section 1.04. Investment. The Committee will direct the Agent, in writing, to invest the Escrow Assets solely in the following: (i) obligations issued or guaranteed by the United States of America or any agency or instrumentality thereof with a maturity of not more than 365 days and (ii) money market funds substantially all of whose funds are invested in the foregoing. All earnings and gains on Escrow Assets, including interest and dividends, shall be paid into the Escrow Account and shall constitute Escrow Assets. If at any time the Committee deems it necessary that some or all of the investments constituting Escrow Assets be redeemed or sold in order to raise money necessary to comply with the provisions of the Escrow Agreement, the Committee shall direct the Agent, in writing, to effect such redemption or sale, in such manner and at such time as the Committee directs. Section 1.05. Disbursements. From time to time as the Committee shall direct the Agent in writing, the Agent shall disburse such portion of the Escrow Assets as the Committee so directs to pay Escrow Expenses. The Agent shall keep a record of such disbursements. Section 1.06. Quarterly Statements. As soon as practicable following each March 31, June 30, September 30 and December 31, until the termination of this Agreement, the Agent shall deliver to the Committee a statement (a "Quarterly Statement") setting forth: (a) the amount of the Escrow Assets; (b) the amount of income or interest earned or accrued with respect to the Escrow Assets, if any, during the period covered by such Quarterly Statement; and (c) the amount of Escrow Expenses paid during such period. Section 1.07. Maintenance of Register of Holders. The Agent shall maintain a register of the Holders (the "Register") at its office in New York, New York. The initial Register shall be provided to the Agent by Hoenig immediately prior to the Effective Time. The Agent shall record any transfers of Contingent Payment Rights in the Register to the extent transfers of Contingent Payment Rights are permissible under the terms of the Merger Agreement and the Escrow Agreement; provided that the Agent shall be entitled to rely solely on the Committee in determining whether or not any transfer is permitted. The Committee and the Agent may treat the person or entity in whose name any Contingent Payment Right is listed on the Register as the Holder thereof for the purposes of receiving the distribution of the Contingent Payment and for all other purposes. ARTICLE II TERMINATION AND DISTRIBUTION Section 2.01. Termination of Merger Agreement. In the event that the Merger Agreement is terminated under Section 7.1 thereof prior to the Effective Time, the Committee shall direct the Agent to immediately pay all Escrow Expenses, if any, that have been incurred and have not been paid, and to deliver the remaining Escrow Assets to Hoenig UK, and this Agreement and the Escrow shall terminate. Section 2.02. Delivery of Escrow Assets to Hoenig UK; Termination of the Escrow. Pursuant to the Escrow Agreement, following the earliest of (i) the final settlement or other final resolution of the Claims, (ii) a final determination by the Committee to cease Pursuit of all Claims and (iii) the fourth anniversary of the Effective Time (which date shall be extended in the event of any outstanding claims of indemnification or reimbursement under Section 3.09, 5.01, 5.05 or 6.02 of the Escrow Agreement), the Committee shall discharge all of the Escrow's obligations, including by directing the Agent to pay the Escrow Expenses and reserve for the payment of such costs and expenses of distributing the Contingent Payments pursuant to Section 2.03 hereof. Following such discharge, the Committee shall direct the Agent to liquidate all remaining Escrow Assets, if any, and to deliver the proceeds in cash to Hoenig UK. Following such delivery to Hoenig UK, the Escrow shall terminate. At no time shall there be any distribution of Escrow Assets to the Holders. Section 2.03. Delivery of Contingent Payment to Agent; Distribution to Holders. Promptly following the termination of the Escrow pursuant to Section 2.02 hereof, ITG shall deliver to the Agent cash in an amount equal to the lesser of (i) the amount of cash, if any, delivered to Hoenig UK by the Agent pursuant to Section 2.02 hereof, plus the amount of any Recoveries that were not deposited in the Escrow Account net of any amounts deducted therefrom pursuant to Section 6.02 of the Escrow Agreement, and (ii) $12,465,000 minus the Escrow Reduction Amount, if any. The Agent shall distribute the amount so received by it from ITG to the Holders, without interest, pro rata based on the number of Contingent Payment Rights allocated to each such Holder on the Register. At no time shall there be any distribution of the Contingent Payment except pursuant to the preceding sentence. Following such distribution by the Agent, this Agreement shall terminate. The distribution of any Contingent Payment shall be in compliance with applicable laws. SECTION 2.04. Pre-Closing Recoveries. Notwithstanding anything to the contrary in the third sentence of Section 2.03 hereof, if any Recoveries are received prior to the Effective Time, the Committee shall be entitled to direct the Agent to withdraw from the Escrow Account (i) the amount of such Recoveries less Escrow Expenses incurred prior to the Effective Time plus (ii) such portion of the Initial Funding as the Committee determines (provided that in no event shall such amount be in excess of the amount that would leave $500,000 in the Escrow Account prior to the Effective Time) (the sum of clauses (i) and (ii), the "Escrow Reduction Amount"), and deliver the Escrow Reduction Amount in cash to Hoenig UK prior to the Effective Time. ARTICLE III MATTERS CONCERNING AGENT Section 3.01. Indemnification of Agent. Hoenig (if prior to the Effective Time) or ITG (if after the Effective Time) shall indemnify the Agent and hold the Agent harmless from and against, and shall promptly advance to the Agent or its Advisors all funds necessary with respect to, any and all claims, demands, obligations, liabilities, costs and expenses, including amounts paid in satisfaction of judgments, in compromise (so long as Hoenig or ITG, as applicable, has approved such compromise, with such approval not to be unreasonably withheld or delayed), or fines or penalties, and counsel or other Advisor fees (collectively, "Losses") incurred in connection with the performance of the Agent's duties under this Agreement, except to the extent caused by the Agent's willful misconduct or gross negligence. Notwithstanding the foregoing, all Losses indemnified pursuant to the foregoing shall be paid out of the Escrow Assets until such time as the Escrow Assets are exhausted or the Escrow is terminated pursuant to Section 2.02 before ITG shall be obligated to make any payments pursuant to the foregoing. The obligations of Hoenig and ITG set forth in this Section 3.01 shall survive the termination of this Agreement and the removal or resignation of the Agent. Section 3.02. Agent Not Liable. The Agent, in the performance of its duties hereunder, shall not be liable or responsible for anything done or omitted to be done hereunder in good faith as herein provided, except for its own willful misconduct or gross negligence. The Agent shall be fully protected in relying upon any notice, certificate or other written communication, including, without limitation, any written notice delivered by the Committee to the Agent instructing the Agent to take any action or refrain from taking any action, believed by the Agent to be genuine and purported to be signed or given by any person or persons purporting to have authority to act on behalf of any party hereto. The Agent shall have the right, but not the obligation, to consult with counsel of its choice and shall not be liable for action taken or omitted to be taken by the Agent in accordance with the advice of such counsel. The Agent shall have no responsibility or liability for any diminution in value of any assets held hereunder which may result from any investments or reinvestment made in accordance with this Agreement. Section 3.03. Resignation; Successor Agent. The Agent or any successor Agent, as the case may be, may resign its duties and be discharged from all further duties or obligations hereunder at any time upon giving twenty (20) Business Days' prior written notice to the parties hereto. Hoenig (if such resignation occurs prior to the Effective Time) or the Committee (if such resignation occurs after the Effective Time) will designate a successor Agent hereunder within said twenty (20) Business Day period. Section 3.04. Compensation. The Agent shall be entitled to compensation for its services hereunder as set forth in Schedule A hereto, which is made a part hereof, and for reimbursement of its reasonable and documented out-of-pocket expenses, including the fees and expenses of attorneys or agents which it may find necessary to engage in the performance of its duties hereunder, all to be paid out of the Escrow Assets, and the Agent shall have, and is hereby granted, a prior lien upon any property, cash, or assets of the Escrow Account with respect to its unpaid fees and non-reimbursed expenses superior to the interests of any other persons or entities. The provisions of this Section 3.04 shall survive any termination, satisfaction or discharge of this Agreement, as well as the resignation or removal of the Agent. Section 3.05. Limited Duties of Agent. The Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Agreement. The Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith, including, without limitation, the Merger Agreement and the Escrow Agreement. This Agreement sets forth all matters pertinent to the Escrow contemplated hereunder, and no additional obligations of the Agent shall be inferred from the terms of this Agreement, the Escrow Agreement or any other agreement. Section 3.06. Merger of Agent. Any entity into which the Agent may be merged or converted or with which the Agent may be consolidated, or any entity resulting from any merger, conversion or consolidation to which the Agent shall be a party, or any entity to which all or substantially all of the business of the Agent shall be transferred, shall succeed to all the Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 3.07. Judgments, Etc. In the event that any Escrow property shall be attached, garnished or levied upon by any court order (including by bankruptcy), or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or entity by reason of such compliance, notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Section 3.08. Tax Filings. The Agent shall report to Hoenig UK, as of the end of each fiscal quarter, all income earned from the investment of the Escrow Assets. ARTICLE IV MISCELLANEOUS Section 4.01. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by telecopy upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a nationally recognized next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice. (a) if to ITG or to Hoenig or Hoenig UK after the Effective Time, to: Investment Technology Group, Inc. 380 Madison Avenue, 4th Floor New York, NY 10017 Attention: General Counsel Telephone No.: (212) 444-6327 Telecopy No.: (212) 444-6494 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: Daniel J. Zubkoff, Esq. Telephone No.: (212) 701-3000 Telecopy No.: (212) 269-5420 (b) if to Hoenig or Hoenig UK prior to the Effective Time, to: Hoenig Group Inc. 4 International Drive Rye Brook, NY 10573 Attention: General Counsel Telephone No.: (914) 935-9000 Telecopy No.: (914) 935-9178 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attention: Blaine V. Fogg, Esq. Telephone No.: (212) 735-3000 Telecopy No.: (917) 777-3900 (c) if to the Agent, to: Prior to July 6, 2002: The Bank of New York Insurance Trust and Escrow Unit 5 Penn Plaza -13th Floor New York, NY 10286 Attention: Aldrin Bayne Telephone No.: (212) 896-7182 Telecopy No.: (212) 896-7293 On or after July 8, 2002: The Bank of New York Insurance Trust and Escrow Unit 101 Barclay Street, 8th Floor New York, NY 10286 Attention: Aldrin Bayne Telephone No.: (212) 815-5384 Telecopy No.: (212) 815-5875 (d) if to the Committee or any Member, to it, him or her: c/o Hoenig Group Inc. 4 International Drive Rye Brook, NY 10573 Telephone No.: (914) 935-9000 Telecopy No.: (914) 935-9118 (e) if to the Holders, then to them at their respective addresses set forth in the Register. Section 4.02. Counterparts. This Agreement may be executed in counterparts, each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. Section 4.03. Entire Agreement; No Third Party Beneficiaries. This Agreement (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (b) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 4.04. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Section 4.05. Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the transactions contemplated hereby. Section 4.06. Assignment. Except as set forth in Section 3.06 hereof, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, and any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 4.07. Headings. Sections, subheadings and other headings used in this Agreement are for convenience only and shall not affect the construction of this Agreement. Section 4.08. Amendment and Modification. This Agreement may be amended or modified only by a subsequent writing signed by each of the Members, ITG, Hoenig and Hoenig UK; provided, that if any amendment or modification shall effect the rights or obligations of the Agent hereunder, any such amendment or modification must be signed by the Agent. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duty authorized as of the day and year first above written. HOENIG GROUP INC. By: /s/ Fredric P. Sapirstein ------------------------------------------- Name: Fredric P. Sapirstein Title: Chairman and Chief Executive Officer HOENIG & COMPANY LIMITED By: /s/ Alan B. Herzog ------------------------------------------- Name: Alan B. Herzog Title: Director INVESTMENT TECHNOLOGY GROUP, INC. By: /s/ Raymond L. Killian, Jr. ------------------------------------------- Name: Raymond L. Killian, Jr. Title: Chairman THE BANK OF NEW YORK, as Custodian and Paying Agent By: /s/ Aldrin M.F. Bayne ------------------------------------------- Name: Aldrin M.F. Bayne Title: Assistant Treasurer MEMBERS OF THE CONTINGENT PAYMENT RIGHTS COMMITTEE: /s/ Fredric P. Sapirstein ------------------------------------------------ Name: Fredric P. Sapirstein /s/ Alan B. Herzog ------------------------------------------------ Name: Alan B. Herzog EX-99.1 6 itgex991.txt PRESS RELEASE ITG HOENIG FOR IMMEDIATE RELEASE Contacts Howard C. Naphtali Frederic P. Sapirstein Investment Technology Group, Inc. Hoenig Group Inc. Chief Financial Officer Chief Executive Officer (212) 444-6160 (914) 935-9000 ITG's Acquisition of Hoenig To Proceed on Revised Terms NEW YORK, NY, and RYE BROOK, NY July 2, 2002. Investment Technology Group ("ITG") (NYSE: ITG) and Hoenig Group Inc. ("Hoenig") (Nasdaq: HOEN) announced today that they have revised the terms of their previously announced merger to provide for ITG's acquisition of Hoenig for approximately $105 million in cash, or $11.58 per Hoenig share. Of these amounts, $11.35 per share will be paid in cash at the closing and $0.23 per Hoenig share or approximately $2.4 million will be placed in escrow to fund the continued pursuit, on behalf of the Hoenig shareholders and option holders, of certain insurance claims relating to the $7.1 million loss that Hoenig announced on May 9, 2002 and other related claims. Hoenig and ITG previously had announced a purchase price of $115 million or $12.55 per share for the transaction. Hoenig has conducted an investigation and believes that the full extent of the loss resulting from the unauthorized trading activities of its former employee in the United Kingdom was $7.1 million. Hoenig believes that no other Hoenig employees were involved in the unauthorized trading activities and has reported the matter to the authorities. - more - ITG reported that the acquisition is expected to be immediately accretive to ITG's earnings per share in 2002. As planned synergies are achieved in 2003, the purchase should become increasingly profitable. ITG further reported that, had the acquisition taken place on January 1, 2002, Hoenig's continuing equity brokerage operations would have added approximately $11 million in net revenues, $0.7 million in net income and $0.01 in earnings per share to ITG's first quarter 2002 results. Hoenig is expected to have approximately $40 million of excess cash and cash equivalents at the closing date and has no long-term debt. Hoenig's global brokerage business maintains offices in the New York area, London and Hong Kong. ITG's Acquisition of Hoenig to Proceed on Revised Terms Page 2 "Hoenig's established, high-quality client base provides an excellent opportunity for ITG to penetrate the hedge fund brokerage business," said Robert J. Russel, ITG's Chief Executive Officer. "The combination of ITG's trading technology coupled with Hoenig's expertise in hedge fund client service and trade execution should position ITG to take advantage of the significant hedge fund market." The purpose of the escrow, which will be administered by Hoenig representatives, is to fund the pursuit of Hoenig's claims against insurers and others relating to the unauthorized trading activities of the former employee of Hoenig's UK subsidiary. Each holder of a Hoenig share or stock option at the closing will have the non-transferable right to receive in cash a proportional amount of any future recovery on the claims, net of expenses and taxes, plus any unused portion of the $2.4 million initial escrow funding. While Hoenig believes that it and its UK subsidiary have meritorious claims, there can be no assurance that these claims will result in any recovery for Hoenig shareholders and option holders or that any distribution will be made. Hoenig has established the close of business on July 17, 2002 as the record date for the special meeting of shareholders to vote on the acquisition by ITG, and the date of the special meeting of shareholders is August 26, 2002. It is expected that the transaction, if approved by the Hoenig shareholders and certain regulatory authorities, will be consummated by the end of the third quarter 2002. Steven J. Sorice will assume the role of Chief Executive Officer of Hoenig following completion of the acquisition. Mr. Sorice joined ITG in 1994 as a Vice President and became Managing Director and Co-Head of Sales and Trading in 1999. Prior to joining ITG, he had been a partner with ESI Securities Company and Head of its International Trading Desk. About Hoenig Group Inc. For thirty years, Hoenig Group Inc. has provided high quality trade execution, independent research and premier client service to professional money managers and alternative investment funds throughout the world. Hoenig Group Inc. operates through its brokerage subsidiaries in the United States, United Kingdom and Hong Kong. For additional information about Hoenig Group, visit www.hoeniggroup.com. - more - ITG's Acquisition of Hoenig to Proceed on Revised Terms Page 3 About ITG ITG is headquartered in New York with offices in Boston, Los Angeles, Dublin, Hong Kong, London, Melbourne, Sydney, Tel Aviv and Toronto. As a leading provider of technology-based equity-trading services and transaction research to institutional investors and brokers, ITG services help clients to access liquidity, execute trades more efficiently, and make better trading decisions. ITG generates superior trading results for its clients through three lines of business. POSIT(R), the world's largest equity matching system, allows clients to trade confidentially. The Electronic Trading Desk is recognized as one of the leading program trading operations in the U.S. ITG's leading-edge Client Site products allow users to implement their own trading strategies by providing direct electronic access to most sources of market liquidity. For additional information, visit http://www.itginc.com. In addition to historical information, this press release may contain "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that reflect the expectations of ITG and Hoenig Group management for the future. A variety of important factors could cause results to differ materially from such statements. These factors include the risk that conditions to the closing of the merger transaction described herein will not be satisfied and the sale will not be completed, the risk that Hoenig Group will not recover on any of its claims, as well ITG's and Hoenig Group's ability to achieve expected future levels of sales; the actions of both current and potential new competitors; rapid changes in technology; financial market volatility; general economic conditions, internationally or nationally; evolving industry regulation; cash flows into or redemption from equity funds; effects of inflation; customer trading patterns; and new products and services. These and other risks are described in greater detail in the ITG and Hoenig Group filings with the Securities and Exchange Commission, including those on Forms 10-K and 10-Q. Please note that Hoenig Group will be filing a definitive proxy statement with the Securities and Exchange Commission (SEC). The definitive proxy statement will be sent to Hoenig Group's stockholders seeking their approval of the proposed ITG transaction. STOCKHOLDERS OF HOENIG GROUP ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Once filed, the proxy statement and other information filed by Hoenig Group may be obtained free of charge on the Internet at the SEC web site at www.sec.gov. In addition, documents filed with the SEC by Hoenig Group will be available free of charge from the Company's Investor Relations Department, obtainable by addressing a request to: Hoenig Group Inc., 4 International Drive, Rye Brook, New York 10573, Attention: Investor Relations. Requests may also be made by telephone at (914) 935-9000. Hoenig Group and its directors may be deemed to be participants in the solicitation of proxies from Hoenig Group stockholders in favor of the ITG transaction. These directors include Fredric P. Sapirstein, Alan B. Herzog, Max H. Levine, Robert Spiegel, Kathryn L. Hoenig, Martin F.C. Emmett and Robert L. Cooney. Collectively, as of June 30, 2002, the directors of Hoenig Group may be deemed to beneficially own approximately 46.6% of the outstanding shares of the Company's common stock. Stockholders of Hoenig Group may obtain additional information regarding the interests of participants by reading the definitive proxy statement when it becomes available. ### -----END PRIVACY-ENHANCED MESSAGE-----