UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, For Use of the 2 Commission Only (as permitted by Rule
14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Under rule 14a-12
THE BEAR STEARNS COMPANIES INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
THE BEAR STEARNS COMPANIES INC.
PROXY STATEMENT
NOTICE OF THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MARCH 29, 2001
[LOGO]
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
To Our Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders, which will be held on Thursday, March 29, 2001, at 5:00 P.M., New
York City time, in the Bear Stearns Auditorium, 245 Park Avenue, 5th Floor, New
York, New York.
At the meeting we will be reporting to you on your Company's current
operations and outlook. Stockholders will elect directors of the Company and
transact such other items of business as are listed in the Notice of Annual
Meeting and more fully described in the Proxy Statement which follows. The
Company's Board of Directors and management hope that many of you will be able
to attend the meeting in person.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. ACCORDINGLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT
YOUR SHARES WILL BE REPRESENTED. IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY
WITHDRAW YOUR PROXY SHOULD YOU WISH TO VOTE IN PERSON.
Sincerely yours,
Alan C. Greenberg
Chairman of the Board
March 2, 2001
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 29, 2001
----------
To the Stockholders of
THE BEAR STEARNS COMPANIES INC.:
The Annual Meeting of Stockholders of The Bear Stearns Companies Inc., a
Delaware corporation (the "Company"), will be held on Thursday, March 29, 2001,
at 5:00 P.M., New York City time, in the Bear Stearns Auditorium, 245 Park
Avenue, 5th Floor, New York, New York, for the following purposes:
1. To elect eleven directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified.
2. To approve an amendment to the Company's Restated Certificate of
Incorporation, to increase the number of shares of authorized Common
Stock from 200,000,000 shares to 500,000,000 shares.
3. To approve The Bear Stearns Companies Inc. Non-Employee Directors'
Stock Option Plan.
4. To approve an amendment to The Bear Stearns Companies Inc. Stock Award
Plan, to increase the number of shares subject to awards granted under
the Stock Award Plan.
5. To transact such other business as may properly be brought before the
meeting and any adjournments or postponements thereof.
Holders of record of Common Stock of the Company, par value $1.00 per
share, at the close of business on February 16, 2001, will be entitled to notice
of, and to vote on, all matters presented at the meeting and at any adjournments
or postponements thereof.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
March 2, 2001
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MARCH 29, 2001
----------
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being furnished to the holders of Common
Stock of The Bear Stearns Companies Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the 2001 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held in the Bear Stearns Auditorium, 245 Park
Avenue, 5th Floor, New York, New York, on Thursday, March 29, 2001, at 5:00
p.m., New York City time, and at any adjournments or postponements thereof.
These proxy materials are being mailed on or about March 2, 2001, to holders of
record on February 16, 2001, of the Company's Common Stock, par value $1.00 per
share ("Common Stock").
A proxy may be revoked by a stockholder prior to its exercise in any of
three ways: by written notice to the Secretary of the Company; by submission of
another proxy bearing a later date; or by voting in person at the Annual
Meeting. Revocation by notice to the Secretary of the Company, or by submission
of a later proxy, will not affect a vote on any matter which is taken by the
Company prior to the receipt of the notice or later proxy. The mere presence at
the Annual Meeting of the stockholder appointing the proxy will not revoke the
appointment. If not revoked, the proxy will be voted at the Annual Meeting in
accordance with the instructions indicated on the proxy by the stockholder. If
no instructions are indicated, the proxy will be voted FOR the slate of
directors described herein; FOR the approval of an amendment to the Company's
Restated Certificate of Incorporation, to increase the number of shares of
authorized Common Stock from 200,000,000 shares to 500,000,000 shares as
described herein; FOR the approval of The Bear Stearns Companies Inc.
Non-Employee Directors' Stock Option Plan as described herein; FOR the approval
of an amendment to The Bear Stearns Companies Inc. Stock Award Plan to increase
the number of shares subject to awards granted under the Stock Award Plan as
described herein and, as to any other matter of business that may be brought
before the Annual Meeting, in accordance with the judgment of the person or
persons voting on the matter.
The Company has adopted a policy of encouraging stockholder participation
in corporate governance by ensuring the confidentiality of stockholder votes.
The Company has designated an independent third party, Mellon Investor Services
LLC, the Company's transfer agent, to receive and to tabulate stockholder proxy
votes. The manner in which any stockholder votes on any particular issue will be
kept confidential and will not be disclosed to the Company or any of its
officers or employees except (i) where disclosure is required by applicable law,
(ii) where disclosure of a vote of a stockholder is expressly requested by such
stockholder, or (iii) where the Company concludes in good faith that a bona fide
dispute exists as to the authenticity of one or more proxies, ballots or votes,
or as to the accuracy of any tabulation of such proxies, ballots or votes.
However, aggregate vote totals may be disclosed to the Company from time to time
and publicly announced at the Annual Meeting. The policy of ensuring
confidentiality of stockholder votes will also apply to shares of Common Stock
held in customer accounts at the Company's subsidiary, Bear, Stearns Securities
Corp. Holders of Common Stock whose shares are held in such accounts will be
requested to give instructions with respect to the manner in which their shares
are to be voted to Automatic Data Processing, Inc., which has been directed not
to disclose such instructions to the Company.
This mail solicitation is being made by the Company. All expenses of the
Company in connection with this solicitation will be borne by the Company.
Directors, officers and other employees of the Company also may solicit proxies,
without additional compensation, by telephone, in person or otherwise. The
Company also will request that brokerage firms, nominees, custodians, and
fiduciaries forward proxy materials to the beneficial owners of shares held of
record by such persons and will reimburse such persons and the Company's
transfer agent for reasonable out-of-pocket expenses incurred by them in
forwarding such materials.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 21, 1985. The Company succeeded to the business of Bear, Stearns & Co., a
New York limited partnership (the "Partnership"), on October 29, 1985. As used
in this Proxy Statement, all references to "Bear Stearns", "BSB", "BSSC" and
"BSIL" are to Bear, Stearns & Co. Inc., Bear
Stearns Bank plc, Bear, Stearns Securities Corp., and Bear, Stearns
International Limited, respectively, the principal subsidiaries of the Company.
On January 18, 2000, the Company's Board of Directors elected to change its
fiscal year-end to November 30 from June 30, effective with the year beginning
November 27, 1999, as announced in its Form 8-K filed on January 21, 2000. The
five-month period ended November 26, 1999 is the Company's "Transition Period".
References to fiscal years prior to fiscal 2000 in this proxy statement refer to
the fiscal years ended June 30 while references to fiscal 2000 refers to the
fiscal year ended November 30, 2000.
VOTING SECURITIES
Holders of record of Common Stock at the close of business on February 16,
2001, are entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. Each outstanding share of Common Stock
entitles the holder thereof to one vote. Shares of Common Stock represented by
CAP Units (as hereinafter defined) credited pursuant to the Capital Accumulation
Plan are not outstanding and are not entitled to vote at the Annual Meeting.
On February 16, 2001, 106,915,091 shares of Common Stock were outstanding.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of such shares shall constitute a quorum.
Assuming the presence of a quorum at the Annual Meeting, the affirmative
vote of a plurality of the votes cast by holders of shares of Common Stock is
required for the election of directors. The affirmative vote of a majority of
the outstanding shares of Common Stock is required for the approval of an
amendment to the Company's Restated Certificate of Incorporation. The
affirmative vote of a majority of the shares of Common Stock represented at the
meeting and entitled to vote is required for (i) the approval of the approval of
The Bear Stearns Companies Inc. Non-Employee Directors' Stock Option Plan and
(ii) the approval of an amendment to The Bear Stearns Companies Inc. Stock Award
Plan. An abstention with respect to any proposal will be counted as present for
purposes of determining the existence of a quorum, but will have the practical
effect of a negative vote as to that proposal. Brokers (other than Bear Stearns
and BSSC) who do not receive a stockholder's instructions are entitled to vote
on the election of directors. The New York Stock Exchange (the "NYSE")
determines whether brokers who do not receive instructions will be entitled to
vote on the other proposals contained in this Proxy Statement. Under the rules
of the NYSE, if Bear Stearns and BSSC do not receive a stockholder's
instructions, and other brokers are entitled to vote on a proposal, Bear Stearns
and BSSC are also entitled to vote such shares of Common Stock, but only in the
same proportion as the shares represented by votes cast by all other record
holders with respect to such proposal. In the event of a broker non-vote with
respect to any proposal coming before the meeting caused by the beneficial
owner's failure to authorize a vote on such proposal, the proxy will be counted
as present for the purpose of determining the existence of a quorum, but will
not be deemed present and entitled to vote on that proposal for the purpose of
determining the total number of shares of which a majority is required for
adoption, having the practical effect of reducing the number of affirmative
votes required to achieve a majority vote for such matter by reducing the total
number of shares from which a majority is calculated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 16, 2001, the following is the only entity (other than the
Company's employees as a group) known to the Company to be the beneficial owner
of more than 5% of the Company's outstanding Common Stock.
NAME AND ADDRESS OF TOTAL NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
----------- ------------- -----
Legg Mason, Inc.(1) 5,447,357 5.10%
100 Light Street
Baltimore, MD 21202
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(1) According to the Schedule 13G, filed with the Commission on February 9,
2001, by Legg Mason, Inc., a parent holding company incorporated in
Maryland ("Legg Mason"), Legg Mason beneficially owned 5,447,357 shares of
Common Stock with sole voting power over 3,646,768 shares, sole dispositive
power over 0 shares, shared voting power over 1,800,589 shares and shared
dispositive power over 5,447,357 shares. The Legg Mason subsidiaries that
acquired Common Stock were identified and classified as follows: Brandywine
Asset Management, Inc., as investment adviser with discretion; Bingham Legg
Advisers, LLC, as investment adviser with discretion; Legg Mason Funds
Management, Inc., as investment adviser with discretion; Bartlett & Co., as
investment adviser with discretion; Legg Mason Capital Management, Inc., as
investment adviser with discretion; Legg Mason Trust, fsb, as investment
adviser with discretion and Legg Mason Wood Walker, Inc., as investment
adviser and broker/dealer with discretion.
The determination that there were no other persons, entities or groups
known to the Company to beneficially own more than 5% of the Common Stock was
based on a review of all statements filed with respect to the Company since the
beginning of the past fiscal year with the Commission pursuant to Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, as amended.
-2-
SECURITY OWNERSHIP OF MANAGEMENT
The following information with respect to the outstanding shares of Common
Stock beneficially owned by each director of the Company, each nominee for
director of the Company, each executive officer named in the Summary
Compensation Table under "Executive Compensation" and all directors, nominees
and executive officers of the Company as a group, is furnished as of January 22,
2001. Also set forth below as of such date is certain information with respect
to the number of shares of Common Stock represented by CAP Units credited to the
accounts of such persons pursuant to the Capital Accumulation Plan
(notwithstanding that shares underlying CAP Units generally are not deemed to be
beneficially owned for this purpose because the named persons have neither the
present ability to direct the vote nor the ability to dispose of such shares and
will not have such rights within the next 60 days) and Common Stock represented
by Restricted Stock Units granted under the Stock Award Plan.
PERCENTAGE OF
AMOUNT COMMON STOCK OUTSTANDING
AND NATURE OF PERCENT OF REPRESENTED BY COMMON STOCK,
COMMON STOCK COMMON STOCK CAP UNITS AND CAP UNITS AND
BENEFICIALLY BENEFICIALLY RESTRICTED STOCK RESTRICTED STOCK
NAME AND ADDRESS (1) OWNED (2)(3) OWNED UNITS UNITS COMBINED
------------------ ------------- ------------- -------------- --------------
James E. Cayne (5) 4,598,413 4.28% 3,110,110 4.95%
Carl D. Glickman (6) 369,745 (4) -- (4)
Alan C. Greenberg 152,550 (4) 1,352,368 (4)
Donald J. Harrington, C.M. 266 (4) -- (4)
Mark E. Lehman (7) 138,170 (4) 375,886 (4)
Marshall J Levinson (8) 5,023 (4) 23,676 (4)
William L. Mack 22,050 (4) -- (4)
Michael Minikes (9) 394,728 (4) 498,691 (4)
Samuel L. Molinaro Jr. 14,457 (4) 115,119 (4)
Frank T. Nickell 33,501 (4) -- (4)
Frederic V. Salerno 413 (4) -- (4)
Alan D. Schwartz 971,567 (4) 2,266,408 2.08%
Warren J. Spector (10) 173,087 (4) 4,035,683 2.70%
Vincent Tese 1,102 (4) -- (4)
Fred Wilpon 1,337 (4) -- (4)
All directors, nominees and
executive officers as a
group (15 individuals) 6,876,409 6.41% 11,777,941 11.98%
----------
(1) The address in each case is 245 Park Avenue, New York, New York 10167.
(2) Nature of Common Stock beneficially owned is sole voting and investment
power, except as indicated in subsequent notes. Includes an aggregate of
3,360 shares of Common Stock owned by directors, nominees and executive
officers through The Bear Stearns Companies Inc. Employee Stock Ownership
Plans (the "ESOPs"). Shares owned by the ESOPs that are allocated to
employees' accounts are voted on a "pass through" basis by the employees to
whose accounts such shares are allocated. Shares not allocated to
employees' accounts, and allocated shares for which voting directions have
not been received, are voted by the trustee of the ESOPs in proportion to
the manner in which allocated shares are directed to be voted by the
employees.
(3) Does not include shares underlying CAP Units credited under the Capital
Accumulation Plan, except for the following number of shares expected to be
distributed during March 2001 to the following persons: Mr. Cayne--41,817,
Mr. Greenberg--32,550, Mr. Lehman--4,638, Mr. Levinson--725, Mr.
Minikes--17,624, Mr. Molinaro--1,042, Mr. Schwartz--21,361, and Mr.
Spector--38,941.
(4) Less than one percent.
(5) Does not include 45,669 shares of Common Stock owned by Mr. Cayne's wife,
as to which shares Mr. Cayne disclaims beneficial ownership. Does not
include 235,754 shares of Common Stock held by trusts established for Mr.
Cayne's children, as to which shares Mr. Cayne disclaims beneficial
ownership. Does not include 8,048 shares of Common Stock owned by a child
of Mr. Cayne, as to which shares Mr. Cayne disclaims beneficial ownership.
(6) Does not include 3,427 shares of Common Stock owned by Mr. Glickman's wife,
as to which shares Mr. Glickman disclaims beneficial ownership.
(7) Does not include 29,763 shares of Common Stock held in a trust established
for Mr. Lehman's wife, as to which shares Mr. Lehman disclaims beneficial
ownership.
(8) Does not include 77 shares of Common Stock held in a trust established for
Mr. Levinson's daughter, as to which shares Mr. Levinson disclaims
beneficial ownership.
(9) Does not include 1,780 shares of Common Stock owned by Mr. Minikes' wife,
as to which shares Mr. Minikes disclaims beneficial ownership.
(10) Does not include 636 shares of Common Stock owned by Mr. Spector's wife, as
to which shares Mr. Spector disclaims beneficial ownership.
-3-
I. ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends the election of each of
the nominees set forth below as a director of the Company to serve until the
next Annual Meeting of Stockholders or until his successor is duly elected and
qualified. Each nominee is currently a director of the Company. Each nominee who
is elected or re-elected to the Board of Directors will hold office until the
next Annual Meeting of Stockholders, in accordance with the By-laws of the
Company. Should any nominee become unable or unwilling to accept nomination or
election, it is intended that the persons named in the enclosed proxy will vote
the shares that they represent for the election of a substitute nominee
designated by the Board of Directors, unless the Board of Directors reduces the
number of directors. At present, it is anticipated that each nominee will be a
candidate.
The affirmative vote of a plurality of the votes cast by holders of shares
of Common Stock is required for the election of directors. Officers serve at the
discretion of the Board of Directors.
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
JANUARY 22, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 2001 AND DIRECTORSHIPS HELD THE COMPANY
---- ---------- ---------------------- -----------
James E. Cayne ................... 66 President and Chief Executive Officer of 1985
the Company and Bear Stearns, member of
the Executive Committee (as hereinafter
defined)
Carl D. Glickman ................. 74 Private Investor; Trustee, Lexington Corporate 1985
Property Trust; Director, Office Max Inc.
Alan C. Greenberg ................ 73 Chairman of the Board of the Company and 1985
Bear Stearns and Chairman of the
Executive Committee
Donald J. Harrington, C.M. ....... 55 President, St. John's University; Director, 1993
The Reserve Fund, Reserve Institutional
Trust, Reserve Tax-Exempt Trust, Reserve
New York Tax-Exempt Trust and Reserve
Special Portfolios Trust
William L. Mack .................. 60 Founder and Managing Partner, The Apollo 1997
Real Estate Investment Funds; President
and Senior Managing Partner, The Mack
Organization; Chairman of the Board of
Mack-Cali Realty Corporation and
Metropolis Realty Trust, Inc.; Director,
Koger Equity, Inc., Vail Resorts, Inc. and
Wyndham International, Inc.
Frank T. Nickell ................. 53 President and Chief Executive Officer of Kelso 1993
& Company; Director, Blackrock Inc., Earle
M. Jorgensen Company and Peebles Inc.
Frederic V. Salerno .............. 57 Vice Chairman and CFO of Verizon 1992
Communications; Director, Avnet, Inc.,
Orion Power Holdings and Viacom, Inc.
-4-
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
JANUARY 22, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 2001 AND DIRECTORSHIPS HELD THE COMPANY
---- ---------- ---------------------- -----------
Alan D. Schwartz 50 Executive Vice President and Head of the 1987 (1)
Investment Banking Group of Bear
Stearns; Director, Unique Casual
Restaurants, Inc.
Warren J. Spector 43 Executive Vice President and Head of the 1990 (1)
Fixed Income Group of Bear Stearns
Vincent Tese 57 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Allied Waste
Industries Inc., Angram, Inc., Bowne & Co.
Inc., Xanboo Inc., Cablevision Inc., Mack-
Cali Realty Corp., Orion Power Holdings,
Inc., National Wireless Holdings Inc. and
Lynch Interactive Corp.
Fred Wilpon 64 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Director,
Loews Corporation; President and Chief
Executive Officer of the New York Mets
----------
(1) Did not serve as director during 1997 and 1998.
Mr. Cayne has been Chief Executive Officer and President of the Company and
Bear Stearns for more than the past five years.
Mr. Glickman has been a private investor for more than the past five years.
Mr. Glickman is also currently Chairman of the Compensation Committee of the
Board of Directors of the Company.
Mr. Greenberg has been Chairman of the Board of the Company for more than
the past five years.
Father Harrington has been the President of St. John's University for more
than the past five years.
Mr. Mack has been Managing Partner of the Apollo Real Estate Investment
Funds for more than the past five years. He has been President and Senior
Managing Partner of The Mack Organization (a national owner, developer and
investor in office and industrial buildings and other real estate) for more than
the past five years. Mr. Mack is Chairman of the Board of Mack-Cali Realty
Corporation (a publicly traded real estate investment trust). He is also
Chairman of the Board of Metropolis Realty Trust, Inc. (the owner of high rise
office buildings).
Mr. Nickell has been President of Kelso & Company, a privately held
merchant banking firm, for more than the past five years. Mr. Nickell was
appointed Chief Executive Officer of Kelso & Company in 1998.
Mr. Salerno is the Vice Chairman and CFO of Verizon Communications
(formerly Bell Atlantic Corporation). Prior to June 2000, Mr. Salerno was the
Senior Executive Vice President and CFO/Strategy and Business Development of
Bell Atlantic Corporation. Prior to the merger of NYNEX Corp. ("NYNEX") and Bell
Atlantic Corporation, Mr. Salerno was the Vice Chairman of the Board of NYNEX
for more than five years. Mr. Salerno served as Chairman of the Board of the
State University of New York from 1990 to 1996.
Mr. Schwartz has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Schwartz was an Executive
Vice President of the Company and a member of the Executive Committee for more
than the past five years. Mr. Schwartz is responsible for all of the investment
banking activities of Bear Stearns.
Mr. Spector has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Spector was an Executive
Vice President of the Company and a member of the Executive Committee for more
than the past five years. Mr. Spector is responsible for all of the fixed income
activities of Bear Stearns.
-5-
Mr. Tese has been Chairman of Wireless Cable International Inc. since April
1995. Mr. Tese was Chairman of Cross Country Wireless Inc. from October 1994 to
July 1995 and was a corporate officer and a general partner of Cross Country
Wireless Inc.'s predecessors, Cross Country Wireless Cable-I, L.P. and Cross
Country Wireless Cable West, L.P., from 1990 until October 1994. Mr. Tese was
the Director of Economic Development for the State of New York from June 1987 to
December 1994. Mr. Tese is currently Chairman of the Audit Committee of the
Board of Directors of the Company.
Mr. Wilpon has been Chairman of the Board of Directors of Sterling
Equities, Inc., a privately held entity, and certain affiliates thereof, which
are primarily real estate development/owner management companies, for more than
the past five years. Mr. Wilpon has also been President and Chief Executive
Officer of the New York Mets baseball team for more than the past five years.
There is no family relationship among any of the directors or executive
officers of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings (exclusive of committee meetings)
during the preceding fiscal year. In addition, the Board of Directors has
established three committees whose functions and current members are noted
below. The Audit Committee and Compensation Committee (collectively, the "Board
Committees") are committees of the Board of Directors and consist solely of
members of the Board of Directors. The Executive Committee includes individuals
who are not members of the Board of Directors, but may function in a manner
comparable to that of the Board Committees under certain circumstances as
described below. Each current director, except Mr. Schwartz, attended 75% or
more of the aggregate number of meetings of the Board of Directors and Board
Committees (including for this purpose, the Executive Committee) on which he
served that were held during such period.
EXECUTIVE COMMITTEE. During the last fiscal year, the Executive Committee
of the Company (the "Executive Committee") consisted of Messrs. Cayne, Greenberg
(Chairman), Lehman, Minikes and Molinaro. It met once each week and more
frequently, as required, having held 62 meetings during the preceding fiscal
year. The Executive Committee has the authority between meetings of the Board of
Directors to take action with respect to a variety of matters delegated by the
Board of Directors that are considered to be in the ordinary course of the
Company's business and, to take all actions with respect to the management of
the Company's business that require action of the Board of Directors, so long as
the action is also approved by a majority of the members who are also directors
of the Company, except with respect to certain matters that by law and the
provisions of the Certificate of Incorporation must be approved by the Board of
Directors.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors (the "Audit
Committee") consists of Messrs. Glickman, Mack, Salerno and Tese (Chairman).
Each of the foregoing is a director who is not employed by the Company or
affiliated with management. This Committee is responsible for reviewing and
helping to ensure the integrity of the Company's financial statements. Among
other matters, the Audit Committee with management and independent and internal
auditors reviews the adequacy of the Company's internal accounting controls that
could significantly affect the Company's financial statements, reviews with the
Company's independent accountants the scope of their audit, their report and
their recommendations, and recommends the selection of the Company's independent
accountants. The Audit Committee held six meetings during the preceding fiscal
year.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors (the "Compensation Committee") consists of Messrs. Glickman
(Chairman), Harrington, Nickell and Tese. Each of the foregoing is a director
who is not employed by the Company or affiliated with management. The
Compensation Committee establishes the compensation policies used in determining
the compensation of all executive officers and other Senior Managing Directors,
including members of the Board of Directors who are employees of the Company
("employee directors"). The Compensation Committee administers the Performance
Compensation Plan pursuant to which the salary and bonus compensation of certain
Senior Managing Directors (including certain executive officers) of the Company
is determined. The Compensation Committee also approves the salary and bonus
compensation of other executive officers and other Senior Managing Directors
based upon recommendations made by the Executive Committee and the Bear Stearns
and Co. Inc. Management and Compensation Committee (the "Management and
Compensation Committee") applying criteria established by the Compensation
Committee. The Compensation Committee also administers certain aspects of the
Capital Accumulation Plan, the Stock Award Plan and the Restricted Stock Plan.
The Compensation Committee held eleven meetings during the preceding fiscal
year.
The Executive Committee has recommended to the Board of Directors that they
establish an independent nominating committee to consider and make
recommendations to the Board of Directors with respect to the size and
composition of the Board of Directors and the identification of potential
candidates to serve as directors. The Executive Committee believes that the
establishment of a nominating committee will assist in ensuring that qualified
candidates are presented to the Board of Directors for election as directors and
members of committees of the Board of Directors, thereby benefiting the Company
and its stockholders.
-6-
AUDIT COMMITTEE REPORT
The members of the Audit Committee (the "Committee") have been appointed by
the Board of Directors (the "Board"). The Committee is governed by a charter
(attached as Exhibit A) which has been approved and adopted by the Board and is
reviewed and reassessed annually by the Committee. The Committee is comprised of
four directors who meet the independence and experience requirements of the New
York Stock Exchange.
The following Audit Committee Report does not constitute soliciting
material and shall not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Audit Committee Report by reference therein.
The Committee assists the Board in monitoring (1) the integrity of the
financial statements of the Company, (2) the compliance by the Company with
legal and regulatory requirements and (3) the independence and performance of
the Company's internal and external auditors.
Management is responsible for the preparation and integrity of the
Company's financial statements. The Committee reviewed the Company's audited
financial statements for the year ended November 30, 2000 and met with both
management and the Company's external auditors to discuss those financial
statements. Management and the external auditors have represented to the
Committee that the financial statements were prepared in accordance with
generally accepted accounting principles.
The Committee has received from and discussed with the external auditors
their written disclosure and letter regarding their independence from the
Company as required by Independence Standards Board Standard No. 1. The
Committee also discussed with the external auditors any matters required to be
discussed by Statement on Auditing Standards No. 61.
Based upon these reviews and discussions, the Committee has recommended to
the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended November 30, 2000.
AUDIT COMMITTEE
Carl D. Glickman
William L. Mack
Frederic V. Salerno
Vincent Tese, Chairman
. . .
-7-
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee establishes the compensation policies applicable
to all executive officers. From the time of the Company's initial public
offering after succession on October 29, 1985, to the business of the
Partnership, compensation of the Company has been strongly influenced by the
principle that the compensation of senior executives should be structured to
directly link the executives' financial reward to Company performance. Thus,
senior executives would both share in the success of the Company as a whole and
be adversely affected by poor Company performance, thereby aligning their
interests with the interests of the Company's stockholders.
During fiscal 2000, the Compensation Committee made several changes to the
Company's compensation structure. These changes included amending the Capital
Accumulation Plan to make participation by Senior Managing Directors mandatory
and to also make the benefits thereunder subject to vesting beginning in fiscal
2000. Senior Managing Directors will also receive stock options under the Stock
Award Plan. In addition, the Compensation Committee also established the
Restricted Stock Unit Plan which allowed the Company to compensate certain key
employees other than Senior Managing Directors in a combination of cash,
restricted stock units and stock options, in conjunction with the Stock Award
Plan. The restricted stock units and stock options were also subject to vesting
over periods up to four years. The Compensation Committee believes that these
changes were necessary to the long-term interests of both the employees and the
stockholders as they would further strengthen the alignment of such interests by
expanding the number of employees receiving stock-based compensation.
PERFORMANCE COMPENSATION PLAN
The salary and bonus compensation of executive officers is determined
principally by the operation of the Performance Compensation Plan (the
"Performance Compensation Plan"), which is designed to implement the foregoing
philosophy. Under the Performance Compensation Plan, the executive officers
receive a base salary of $200,000 per annum and a share of a performance-based
bonus pool. The Compensation Committee determines the formula for calculating
one or more bonus pools within 90 days after the beginning of each fiscal year
based upon one or more of the following criteria, individually or in
combination, adjusted in such manner as the Compensation Committee shall
determine: (a) pre-tax or after-tax return on equity; (b) earnings per share;
(c) pre-tax or after-tax net income; (d) business unit or departmental pre-tax
or after-tax income; (e) book value per share; (f) market price per share; (g)
relative performance versus peer group companies; (h) expense management; and
(i) total return to stockholders.
The share of one or more of the bonus pools to be allocated to each
executive officer in any fiscal year is determined by the Compensation
Committee, in its sole discretion. However, under no circumstance may the
aggregate amount of the bonuses paid under the Performance Compensation Plan
exceed 100% of the bonus pools computed under the formula designated by the
Compensation Committee.
For fiscal 2000, the Compensation Committee created two separate
performance-based pools. One pool consisted of five participants, which included
the Company's Chief Executive Officer, Chairman of the Board and General Counsel
(the "Executive Committee Pool"), while the other pool consisted of five
members, including two members of the Executive Committee. The Compensation
Committee established a formula for calculating the Executive Committee Pool
based on the Company's adjusted after-tax return on common equity. The maximum
amount allocable to the Executive Committee Pool was $150,000,000, of which the
maximum percentage of any individual participant was 30% of such pool. During
fiscal 2000, the Executive Committee Pool totaled $81,379,000 which was
delivered to the participants in a combination of cash, CAP Units (as defined
below under "Equity Ownership and Capital Accumulation Plan") and stock options
(see "Stock Award Plan"). The allocation of these amounts to the participants
was 56.0% in cash, 37.3% in CAP Units and 6.7% in stock options. Beginning in
fiscal 2001, the Compensation Committee intends to change the mix of
compensation payable to participants in the Executive Committee Pool such that a
greater percentage (up to 25%) will be delivered in the form of stock options.
The Compensation Committee believes that requiring the participants in the
Executive Committee Pool to receive a higher percentage of their compensation in
stock options will benefit the Company's stockholders as the participants would
ultimately be compensated based on the performance of the Company's Common
Stock.
The Compensation Committee also established the formulas for calculating
the other bonus pool for fiscal 2000 and the share for each participant based
upon a combination of factors including departmental pre-tax profits and
adjusted pre-tax return on equity of the Company. The maximum bonus that may be
allocated to a participant in this pool in any fiscal year is $15,000,000. The
total bonus pool resulting from the application of these formulas for fiscal
2000 was $63,370,544, of which the Compensation Committee, based on the
recommendation of the Management and Compensation Committee,
-8-
and with the concurrence of the Executive Committee, determined that
compensation aggregating $33,643,071 would be paid to executive officers
participating in this bonus pool. This amount was delivered to participants in
this pool $14,403,632 in cash, 147,700 in stock options, $10,495,727 in CAP
Units and $6,649,481 in restricted stock units. The restricted stock units will
cliff vest over a 55-month period.
EQUITY OWNERSHIP AND CAPITAL ACCUMULATION PLAN
A focus on performance and growth and the direct alignment of employee and
stockholder interests flows from the substantial ownership of Common Stock and
CAP Units by senior executives of the Company. The five current members of the
Executive Committee beneficially own 6.91% of the outstanding Common Stock, CAP
Units and Restricted Stock Units combined, while all directors and executive
officers as a group beneficially own 11.98% of the outstanding Common Stock, CAP
Units and Restricted Stock Units combined as of January 22, 2001.
All executive officers are required to participate in the Capital
Accumulation Plan. The executive officers receive a portion of their annual
compensation in the form of stock units ("CAP Units") which will vest over three
years. After a five-year period, each officer will be entitled to receive from
the Company a number of freely transferable shares of Common Stock equal to the
number of CAP Units then credited to such officer's Capital Accumulation Account
plus cash in the amount, if any, of such officer's cash balance account at the
end of such period.
For fiscal 2000 executive officers received compensation of approximately
$17,213,114 in the form of CAP Units. Furthermore, for fiscal 2000, 39.60% of
the compensation (including amounts deferred pursuant to the Capital
Accumulation Plan) of the current members of the Executive Committee was
received in the Capital Accumulation Plan while 41.78% of such compensation was
received by all executive officers and employee directors.
Pursuant to the terms of the Capital Accumulation Plan, participants only
receive CAP Units to the extent shares were purchased from existing
stockholders. Accordingly, executive stock ownership is increased without
substantial dilution to earnings per common share or book value per common
share. Such shares were purchased in the open market or from participants who
received shares of Common Stock pursuant to the Capital Accumulation Plan.
STOCK AWARD PLAN
The Stock Award Plan provides the Company with greater flexibility in the
composition of incentive awards. The determination of recipients of stock
options, the terms and conditions of such options within the parameters of the
Stock Award Plan and the number of shares covered by each option is determined
and administered by the Compensation Committee.
During fiscal 2000, 244,575 ten-year options were granted to executive
officers. These options were granted with exercise prices equal to the fair
market value of the Common Stock on the date of grant and become exercisable
after three years.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The total compensation of Mr. Cayne, the Company's Chief Executive Officer,
along with other members of the Executive Committee, is determined in all
respects by the Performance Compensation Plan. Pursuant to the terms of the
Performance Compensation Plan, for fiscal 2000 Mr. Cayne received a base salary
of $200,000 and shared in a bonus fund based on the Company's fiscal 2000
after-tax return on equity. Mr. Cayne's proportionate share of the fiscal 2000
bonus fund (as well as that of the other members of the Executive Committee) was
determined by the Compensation Committee in February 2000, based on the
recommendation of the Executive Committee as to how the bonus fund should be
allocated among the members of the Executive Committee. The Executive
Committee's recommendations were based on the same criteria established by the
Compensation Committee for determining the total compensation of Senior Managing
Directors who were not members of the Executive Committee for fiscal 2000.
Mr. Cayne received $11,865,172 in salary and cash bonus, $9,577,402 in
restricted stock awards in the form of CAP Units and 108,856 in stock options.
These amounts were based on the Company's financial performance and allocation
of the bonus fund. Due to the substantial portion of Mr. Cayne's compensation
being delivered in the form of stock units and stock options the ultimate
realization of benefits from his current bonus will depend on the future
performance of the Company and its Common Stock.
Section 162(m) of the Internal Revenue Code limits deductibility for
federal income tax purposes of compensation in excess of $1,000,000 annually
paid to individual executive officers named in the Summary Compensation Table
unless certain exceptions, including compensation based on performance goals,
are satisfied. The Performance Compensation Plan and the Stock Award Plan have
been established and maintained in an effort to comply with the
performance-based excep-
-9-
tion to limits on deductibility of executive officer compensation. However,
while the Compensation Committee currently seeks to maximize the deductibility
of compensation paid to executive officers, it will maintain the flexibility to
take actions which may be based upon other considerations.
The Compensation Committee believes that the Performance Compensation Plan,
the Stock Award Plan and the Capital Accumulation Plan provide appropriate
incentives to senior management of the Company and are fair and reasonable
methods for determining the compensation of executive officers, including the
Chief Executive Officer, and also serve to align the interests of executives and
stockholders.
COMPENSATION COMMITTEE
Carl D. Glickman, Chairman
Donald J. Harrington
Frank T. Nickell
Vincent Tese
. . .
-10-
COMPENSATION TABLES AND OTHER INFORMATION
The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company (other than the Chief Executive Officer) for the two fiscal years ended
June 30, 1998 and 1999, the Transition Period ("Transition") and the fiscal year
ended November 30, 2000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------- -----------------------------
NAME AND FISCAL RESTRICTED STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) AWARDS (2)(3)(4) STOCK OPTIONS COMPENSATION (5)
------------------ ---- ------ --------- ---------------- ------------- ----------------
James E. Cayne 2000 $200,000 $11,665,172 $9,577,402 108,856 $10,060,813
Chief Executive Transition 84,615 4,216,771 3,181,359 72,427 4,192,005
Officer and 1999 200,000 10,871,700 10,311,700 8,639,708
President 1998 200,000 10,171,830 9,611,830 7,192,766
Alan C. Greenberg 2000 $200,000 $10,373,868 $2,517,611 66,475 $ 4,957,838
Chairman of the Transition 84,615 3,735,562 753,638 44,240 2,065,766
Board 1999 200,000 9,648,512 3,212,838 4,434,095
1998 200,000 13,698,880 4,562,960 3,716,754
Mark E. Lehman 2000 $200,000 $2,989,193 $1,599,430 20,762 $ 1,168,832
Executive Vice Transition 84,615 1,034,750 544,531 16,052 487,013
President and General Counsel 1999 200,000 2,544,650 1,994,650 869,158
1998 200,000 2,177,275 1,627,275 674,445
Michael Minikes 2000 $200,000 $1,828,197 $2,938,124 22,085 $ 1,790,522
Treasurer Transition 84,615 1,105,938 829,064 14,903 746,051
1999 200,000 1,880,000 2,320,000 1,678,984
1998 200,000 1,880,000 2,320,000 1,999,114
Samuel L. Molinaro Jr. 2000 $200,000 $2,068,914 $2,332,629 21,878 $ 203,609
Chief Financial Transition 84,615 431,887 231,434 5,571 84,837
Officer and Senior 1999 200,000 671,000 779,000 129,892
Vice President--Finance 1998 200,000 789,800 360,200 92,314
For each of the above-named officers, compensation information is provided
for the full fiscal years during which he served as an executive officer of the
Company. Transition represents the five month period July 1, 1999 to November
26, 1999.
----------
(1) Represents amounts payable under the Performance Compensation Plan. See
"Executive Compensation--Compensation Committee Report--Performance
Compensation Plan".
(2) Represents the portion of the named executive officer's bonus deferred
pursuant to the Capital Accumulation Plan. See "Executive
Compensation--Compensation Committee Report--Equity Ownership and Capital
Accumulation Plan".
(3) As of November 30, 2000, the value and the aggregate number of CAP Units
credited to the accounts of each named person (based on the closing price
of the Common Stock on the Consolidated Transaction Reporting System on
such date) was: Mr. Cayne--$144,791,628 (3,151,927 units); Mr.
Greenberg--$63,619,678 (1,384,918 units); Mr. Lehman--$17,480,357 (380,525
units); Mr. Minikes--$22,710,111 (494,370 units); and Mr.
Molinaro--$4,606,710 (100,282 units).
(4) On December 11, 2000, Mr. Minikes and Mr. Molinaro received restricted
stock units as part of their compensation pursuant to the Performance
Compensation Plan. Mr. Minikes' grant was $1,089,063, which represents
21,945 restricted stock units and Mr. Molinaro's grant was $788,021, which
represents 15,879 restricted stock units. Dividend equivalents of
additional restricted stock units are payable by the Company on all such
holdings from the date of grant. These restricted stock units will vest 33
1/3% per annum commencing June 30, 2003.
(5) Represents preferential earnings paid in the form of CAP Units pursuant to
the Capital Accumulation Plan that exceed cash dividends paid on the
equivalent shares of Common Stock. Preferential earnings were not
determinable at the time of the filing of the Form 8-K for the Transition
Period. These amounts were calculated at the end of fiscal 2000 and are now
reflected under "All Other Compensation".
-11-
STOCK OPTION GRANTS RELATING TO THE LAST FISCAL YEAR(1)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE (2) PRESENT VALUE (3)
---- --------------- ----------- --------- -------- -----------------
James E. Cayne 108,856 2.85% $49.625 12/11/10 $1,543,426
Alan C. Greenberg 66,475 1.74% 49.625 12/11/10 942,521
Mark E. Lehman 20,762 0.54% 49.625 12/11/10 294,377
Michael Minikes 22,085 0.58% 49.625 12/11/10 313,127
Samuel L. Molinaro Jr. 21,878 0.57% 49.625 12/11/10 310,196
----------
(1) Represents awards made in December 2000 for performance in fiscal year
2000.
(2) All stock options become exercisable three years after grant date.
(3) Valued using a modified Black-Scholes option pricing model. The exercise
price of each stock option ($49.625) is equal to the closing price on the
Consolidated Transaction Reporting System of a share of Common Stock on
December 8, 2000, the date of the grant. The assumptions used for the
variables in the model were: 37% volatility (a projection of the volatility
of the Common Stock over the 120 month term of the options); a 6.40%
risk-free rate of return (based on the USD Interest Rate Swap Curve,
expressed as a zero-coupon rate over the 120 month term); a 1.45% dividend
yield (which was an estimated projected dividend yield on the date of
grant); and a ten year option term (which is the maximum term of the
options). The actual gain that executives will realize on their stock
options will depend on the future price of the Common Stock and can not be
accurately forecast by application of an option pricing model.
AGGREGATED STOCK OPTION EXERCISES MADE IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (1)
-------------------------- -------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
James E. Cayne -- -- -- 181,283 -- $520,569
Alan C. Greenberg -- -- -- 110,715 -- 317,975
Mark E. Lehman -- -- -- 36,814 -- 115,374
Michael Minikes -- -- -- 36,988 -- 107,115
Samuel L. Molinaro Jr. -- -- -- 27,449 -- 40,042
----------
(1) This valuation represents the difference between $45.9375, the closing
price of a share of Common Stock reported on the Consolidated Transaction
Reporting System on November 30, 2000 and the exercise prices of these
stock options.
-12-
PERFORMANCE GRAPH
The following performance graph compares the performance of an investment
in the Company's Common Stock over the last five fiscal years with the S&P 500
Index, the S&P Financial Diversified Index and its Peer Group. The entities
included in the Company's current peer group (the "Peer Group") consist of
Merrill Lynch & Co., Inc., Morgan Stanley, Dean Witter & Co., Goldman Sachs
Group Inc. and Lehman Brothers Holdings, Inc. The performance graph assumes the
value of the investment in the Company's Common Stock and each index was $100 on
November 30, 1995, and that all dividends have been reinvested. There can be no
assurance that the Company's future stock performance will correlate with past
stock performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[The table below represents a line chart in the printed piece.]
The Bear Stearns New Peer Old Peer S&P Financial
Companies Inc. Group (1) Group (2) Diversified Index S&P 500 Index
100 100 100 100 100
152.54 138.51 136.67 137.35 126.18
258.85 234.11 234.1 192.07 159.24
278.42 294.18 293.99 270.94 198.72
312.64 431.12 419.6 341.25 236.12
362.66 416.92 499.12 393.49 219.17
----------
Assumes $100 invested on November 30, 1995 in the Company's Common Stock; S&P
500 Index; S&P Financial Diversified Index; the New Peer Group and the Old Peer
Group and that all dividends have been reinvested.
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
The Bear Stearns
Companies Inc. $100.00 $152.54 $258.85 $278.42 $312.64 $362.66
New Peer Group (1) 100.00 138.51 234.11 294.18 431.12 416.92
Old Peer Group (2) 100.00 136.67 234.10 293.99 419.60 499.12
S&P Financial
Diversified Index 100.00 137.35 192.07 270.94 341.25 393.49
S&P 500 Index 100.00 126.18 159.24 198.72 236.12 219.17
----------
(1) Peer Group calculation assumes conversion of Morgan Stanley Group Inc.
shares into newly formed company, Morgan Stanley, Dean Witter & Co., in
June 1997. In fiscal year 2000, Goldman Sachs Group Inc. was added to the
peer group. Goldman Sachs Group Inc. is not included in results for 1995,
1996, 1997, 1998 and 1999. The peer group no longer includes Donaldson,
Lufkin & Jenrette Inc. and Paine Webber Group Inc. due to their mergers
with Credit Suisse Group and UBS AG, respectively, and the resulting
unavailability of financial information on a comparative basis.
(2) Peer Group calculation assumes conversion of Morgan Stanley Group Inc.
shares into newly formed company, Morgan Stanley, Dean Witter & Co., in
June 1997. Donaldson, Lufkin & Jenrette Inc.'s performance is not included
in results for 1995. Donaldson Lufkin & Jenrette Inc. and Paine Webber
Group Inc are not included in results for 2000 due to their mergers with
Credit Suisse Group and UBS AG, respectively, and the resulting
unavailability of financial information on a comparative basis.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives an annual
retainer of $35,000, plus $800 for each meeting of the Board of Directors
attended, and reasonable expenses relating to attendance at such meetings.
Directors who are members of the Audit Committee and directors who are members
of the Compensation Committee receive additional compensation at the rate of
$1,500 for each meeting of the Audit Committee or Compensation Committee
attended, with the exception of telephone conference committee meetings (where a
quorum consists of directors attending via telephone conference call) as to
which the compensation paid for participation is $200.
On March 15, 2000, the Board of Directors adopted the Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), subject to approval by the
stockholders at the Annual Meeting. On this date, each of the seven directors of
the Company who was not an officer or employee of the Company or any of its
subsidiaries (the "Non-Employee Directors") was granted
-13-
an option to purchase 3,000 shares of Common Stock, which will not become
exercisable until the Directors' Plan is approved by stockholders at the Annual
Meeting. If the Directors' Plan is approved by stockholders, the Non-Employee
Directors will receive a further option to purchase shares of Common Stock
immediately following the Annual Meeting, in an amount determined pursuant to
the Directors' Plan. If stockholder approval of the Directors' Plan is not
obtained, all options granted to Non-Employee Directors will become null and
void.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CERTAIN TRANSACTIONS
The Company, in the ordinary course of business, has extended credit to
certain of its directors, officers and employees in connection with their
purchase of securities. Such extensions of credit have been made on
substantially the same terms (including as to interest rates and collateral
requirements) as those prevailing at the time for comparable transactions with
non-affiliated persons, except that for some credit products, the interest rates
charged were equivalent to the lowest of the interest rates charged to other
persons or were the same as those charged to Company employees and did not
involve more than the normal risk of collectability or have unusual terms or
conditions which are disadvantageous to the Company. To the extent officers and
employees of the Company and members of their immediate families wish to
purchase securities in brokerage transactions, they ordinarily are required to
do so through Bear Stearns, which offers them a discount from its standard
commission rates that could be substantial depending on various factors,
including the size of the transaction. Bear Stearns periodically in the ordinary
course of its business, enters into transactions, as principal, involving the
purchase or sale of securities and commercial paper (including different forms
of repurchase transactions) with directors, officers, employees of the Company
and members of their immediate families. Such purchases and sales of securities
or commercial paper on a principal basis are effected on substantially the same
terms as similar transactions with unaffiliated third parties.
The Company, from time to time, has made loans to its officers and other
employees against commissions and other compensation which would otherwise be
payable to them in the ordinary course of business. Interest is generally
charged by the Company on such loans at the same rate of interest charged by
BSSC on loans to purchase securities. The Company currently requires that any
such loan in excess of $7,500 made to officers and other employees against
commissions or other compensation be approved by the Management and Compensation
Committee. During the fiscal year ended November 30, 2000, the maximum aggregate
amount of month-end loans outstanding against commissions and other compensation
was approximately $20,750,326.
The Company has formed several limited partnerships, The BSC Employee Fund,
L.P., The BSC Employee Fund II, The BSC Employee Fund III and The BSC Employee
Fund IV, which provide investment opportunities for the Company's key employees.
The BSC Employee Fund, L.P (the "Fund") provides an investment opportunity
for the Company's Senior Managing Directors and Managing Directors that are
accredited investors. The Fund has committed to invest $62,000,000 in a
diversified group of closed-end acquisition and leveraged buyout funds that are
managed by highly regarded private equity firms. As of November 30, 2000, 336
participants in the Fund have purchased a total of 1,201 limited partnership
interests. Each limited partnership interest represents a commitment by the
participant to invest $50,000, of which $25,000 is funded by the participant and
$25,000 is in the form of a nonrecourse, interest-bearing loan from the Company
to the Fund participant. The loans bear interest at the London Interbank Offered
Rate ("LIBOR") plus 1.0%. Capital calls since June 12, 1997 have totaled 88.92%
of each participant's equity commitment. The total amount loaned to the
participants in the Fund at November 30, 2000 was $15,639,542. At such date,
loans in excess of $60,000 were outstanding to the following directors or
executive officers in the aggregate dollar amount set forth after each of their
respective names: James E. Cayne ($260,442), Alan D. Schwartz ($260,442), and
Warren J. Spector ($1,041,768). The aggregate amount of the loans outstanding to
all directors and executive officers as a group on such date was $1,640,785.
The BSC Employee Fund II, L.P. ("Fund II"), provides an investment
opportunity for certain key employees of the Company that are accredited
investors. Fund II has committed to invest $60,850,000 in a diversified group of
private equity funds, sponsored and managed by well-regarded private equity
firms. As of November 30, 2000, 206 participants in Fund II have purchased a
total of 602 limited partnership interests. Each limited partnership interest
represents a commitment by the participant to invest $100,000, of which $50,000
is funded by the participant and $50,000 is in the form of a nonrecourse,
interest-bearing loan from the Company to the participant. The loans bear
interest at LIBOR plus 1.0%. Capital calls since September 28, 2000 have totaled
15% of each participant's equity commitment. The total amount loaned to the
participants in Fund II at November 30, 2000 was $4,515,000. At such date, there
were no loans in excess of $60,000 outstanding to any directors or executive
officers.
-14-
The BSC Employee Fund III, L.P. ("Fund III"), provides an investment
opportunity for certain key employees of the Company. Fund III has committed to
invest $60,017,271 alongside Bear Stearns Merchant Banking Partners II, L.P.
(the "Merchant Banking Fund"), which will invest by making private equity and
equity-related investments in leveraged buyouts, recapitalizations and growth
capital opportunities and may make investments in preferred stock and debt
having equity components. Fund III is the first in a series of three employee
funds (the "MB Employee Funds") that will invest as side-by-side funds,
alongside the Merchant Banking Fund. As of November 30, 2000, 164 participants
in Fund III have purchased a total of 281 limited partnership interests. Each
limited partnership interest represents a commitment by the participant to
invest $80,000, of which $20,000 is funded by the participant and $60,000 is in
the form of an advance from the Company to the participant. The advances bear
interest at LIBOR plus 1.75%. Capital calls since October 20, 2000 have totaled
30% of each participant's equity commitment. The total amount loaned to the
participants in Fund III at November 30, 2000 was $5,148,000. At such date,
there were no loans in excess of $60,000 outstanding to any directors or
executive officers.
The BSC Employee Fund IV, L.P. ("Fund IV"), provides an investment
opportunity for Senior Managing Directors of the Company that are accredited
investors. Fund IV has committed to invest $106,649,395 alongside the Merchant
Banking Fund. The Merchant Banking Fund will invest in private equity and
equity-related investments in leveraged buyouts, recapitalizations and growth
capital opportunities and may make investments in preferred stock and debt
having equity components. In addition, Fund IV has committed to invest
$37,500,000 alongside Constellation Venture Partners II, L.P. (the
"Constellation Fund"), which will invest in equity and equity related securities
in early and mid-stage media, communications and technology based companies.
Fund IV is the first in a series of three employee funds (the "Combined Employee
Funds") that will co-invest alongside the Merchant Banking Fund and a Bear
Stearns-sponsored venture capital fund (in the case of Fund IV, the
Constellation Fund). As of November 30, 2000, 194 participants in Fund IV have
purchased a total of 499 limited partnership interests. Each limited partnership
interest represents a commitment by the participant to invest $80,000 in the
Merchant Banking Fund (of which $20,000 is funded by the participant and $60,000
is in the form of an advance from the Company to the participant) and $30,000 to
the Constellation Fund (of which $15,000 is funded by the participant and
$15,000 is in the form of an advance from the Company to the participant). The
advances bear interest at LIBOR plus 1.75%. Capital calls since October 20, 2000
have totaled 30% of each participant's equity commitment. The total amount
loaned to the participants in Fund IV at November 30, 2000 was $11,227,500. At
such date, loans in excess of $60,000 were outstanding to the following
directors or executive officers in the aggregate dollar amount set forth after
each of their respective names: James E. Cayne ($112,500), Alan D. Schwartz
($112,500), Warren J. Spector ($112,500), Mark E. Lehman ($112,500), Samuel L.
Molinaro Jr. ($90,000) and Michael Minikes ($90,000). The aggregate amount of
the loans outstanding to all directors and executive officers as a group on such
date was $675,000.
Other than as described in this Proxy Statement, no director or executive
officer of the Company was indebted to the Company during the last fiscal year
for any amount in excess of $60,000.
Sterling BSC Inc. ("Sterling BSC") and Hines Interests Limited Partnership
("Hines"), as a joint venture (the "Joint Venture"), are acting as a consultant
to the Company on certain real estate matters. The Company entered into an
agreement with Bradick 383 Associates LLC (the "Developer"), of which Sterling
BSC owns a 60% interest and Hines owns a 40% interest. Under the terms of this
agreement, relating to the development of the Company's new world headquarters
being developed at 383 Madison Avenue, the Company has agreed to pay a
development fee of $12 million and has also agreed to reimburse the Developer
for any direct administrative costs associated with the project. During fiscal
2000, the Company paid the Developer $4,437,797 related to this agreement. Fred
Wilpon, a director of the Company, is Chairman, Chief Executive Officer and a
33.75% stockholder of Sterling BSC. Mr. Wilpon and members of his family own
approximately 85% of the outstanding stock of Sterling BSC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Glickman, Harrington, Nickell and Tese, none of whom is or has been an officer
or an employee of the Company. There were no "Compensation Committee Interlocks"
during fiscal year 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and any persons who own more than ten
percent of the Company's Common Stock, to file reports of initial ownership of
the Company's Common Stock and subsequent changes in that ownership with the
Securities and Exchange Commission and furnish the Company with copies of all
forms they file pursuant to Section 16(a). Based solely upon a review of the
copies of the forms furnished to the Company, or written representations from
certain reporting persons that no Form 5's were required, the Company believes
that during the 2000 fiscal year all Section 16(a) filing requirements were
complied with.
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II. APPROVAL OF AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION
The Board of Directors proposes that the stockholders approve the proposed
amendment (the "Amendment") to the Company's Restated Certificate of
Incorporation described below. The Amendment was approved by the Board of
Directors of the Company on February 14, 2001 subject to approval by the
stockholders at the Annual Meeting. The Amendment requires the approval of the
Company's stockholders by the affirmative vote of a majority of the outstanding
shares of Common Stock.
Article IV of the Company's Restated Certificate of Incorporation currently
provides that the Company has the authority to issue 210,000,000 shares,
consisting of 10,000,000 shares of preferred stock, par value $1.00 per share,
and 200,000,000 shares of Common Stock. The Board of Directors has determined
that it would be appropriate and in the best interests of the Company to amend
the Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 200,000,000 shares to 500,000,000 shares
and to increase the total number of shares which the Company shall have
authority to issue from 210,000,000 shares to 510,000,000 shares.
The additional shares of Common Stock would become part of the existing
class of Common Stock, and the additional shares, when issued, would have the
same rights and privileges as the shares of Common Stock now issued. There are
no pre-emptive rights relating to the Common Stock. If the proposed amendment is
approved by the stockholders, it will become effective upon filing of a
Certificate of Amendment to the Company's Restated Certificate of Incorporation
as required by the Delaware General Corporation Law.
Although the Company has no present plans, agreements, or understandings
regarding the issuance of the proposed additional shares, the Board of Directors
believes that adoption of the amendment is advisable because it will provide the
Company with greater flexibility in connection with possible future financing
transactions, acquisitions of other companies or business properties, stock
dividends or splits, employee benefit plans and other proper corporate purposes.
Having such additional authorized shares available will give the Company the
ability to issue shares without the expense and delay of a special meeting of
stockholders. Such a delay might deprive the Company of the flexibility the
Board views as important in facilitating the effective use of the Company's
shares. Except as otherwise required by applicable law or stock exchange rules,
authorized but unissued shares of Common Stock may be issued at such time, for
such purposes, and for such consideration as the Board of Directors may
determine to be appropriate, without further authorization by stockholders.
Since the issuance of additional shares of Common Stock, other than on a
pro rata basis to all current stockholders, would dilute the ownership interest
of a person seeking to obtain control of the Company, such issuance could be
used as an anti-takeover device to discourage a change in control of the Company
by making it more difficult or costly. The Company is not aware of anyone
seeking to accumulate Common Stock or obtain control of the Company, and has no
present intention to use the additional authorized shares to deter a change in
control or otherwise as an anti-takeover device.
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
Set forth below is the text of revised Article IV of the Company's Restated
Certificate of Incorporation containing the amendment being proposed at the
Annual Meeting. The amendment is qualified in its entirety by reference to such
text.
The text of Article IV shall be amended to read as follows:
"CAPITALIZATION
The total number of shares which the Corporation shall have authority to
issue is Five Hundred Ten Million (510,000,000) shares, consisting of Ten
Million (10,000,000) shares of Preferred Stock, of the par value of One Dollar
($1.00 per share) (hereinafter called "Preferred Stock") and Five Hundred
Million (500,000,000) shares of Common Stock, of the par value of One Dollar
($1.00) per share (hereinafter called "Common Stock")."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
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III. APPROVAL OF THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Board of Directors proposes that the stockholders approve the
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), a copy of
which is attached to this Proxy Statement as Exhibit B. Stockholders are
encouraged to review the Directors' Plan carefully. Any description in this
Proxy Statement of the Directors' Plan is qualified in its entirety by reference
to Exhibit B.
On March 15, 2000, the Board of Directors adopted the Directors' Plan,
subject to approval by the stockholders at the Annual Meeting. On this date,
each of the seven directors of the Company who was not an officer or employee of
the Company or any of its subsidiaries (the "Non-Employee Directors") was
granted an option to purchase 3,000 shares of Common Stock, which will not
become exercisable until the Directors' Plan is approved by stockholders at the
Annual Meeting. If the Directors' Plan is approved by stockholders, the
Non-Employee Directors will receive a further option to purchase shares of
Common Stock immediately following the Annual Meeting, in an amount determined
as described below. If stockholder approval of the Directors' Plan is not
obtained, all options granted to Non-Employee Directors will become null and
void.
PURPOSE
The purpose of the Directors' Plan is to secure for the Company and its
stockholders the continued services of Non-Employee Directors who are important
to the decision-making process of the Company and its subsidiaries. The Company
believes that awards under the Directors' Plan will provide Non-Employee
Directors with a more direct stake in the future welfare of the Company and will
encourage additional qualified persons to become directors, which will benefit
the Company and its stockholders.
DESCRIPTION OF THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Directors' Plan is set forth as Exhibit B to this Proxy Statement and
the summary of the material terms of the Directors' Plan contained herein is
qualified in its entirety by reference to Exhibit B. All references to the
"Directors' Plan" in the remaining text of this subsection shall mean the
Non-Employee Directors' Stock Option Plan.
The Directors' Plan shall be administered by the Board of Directors.
Subject to the provisions of the Directors' Plan, the Board of Directors shall
have the power to construe the Directors' Plan, to determine all questions
arising thereunder, and to adopt and amend such rules and regulations as it may
deem desirable. Any decision of the Board of Directors in the administration of
the Directors' Plan shall be final and conclusive.
Each Non-Employee Director shall be eligible to receive grants of options
in accordance with the provisions of the Directors' Plan. All options granted
under the Directors' Plan shall be evidenced by an agreement in such form as the
Board of Directors shall prescribe from time to time in accordance with the
Directors' Plan. All options will be non-qualified options which are not
entitled to special tax treatment under Section 422 of the Internal Revenue
Code.
An aggregate of 300,000 shares of Common Stock (subject to adjustment as
provided below and provided in the Directors' Plan) will be subject to the
Directors' Plan. Shares subject to options which terminate, expire or are
cancelled without having been exercised will become available for future option
grants.
Each person who is or becomes a Non-Employee Director on the date of an
annual meeting of the Company's stockholders and whose service will continue
after such meeting shall be granted an option to purchase a number of shares of
Common Stock. The number of shares covered by the option will be equal to the
quotient of an amount determined by the Executive Committee divided by the
average closing price of the Common Stock for the five trading days immediately
preceding the date of such meeting, subject to adjustment upon changes in
capitalization as provided in the Directors' Plan.
The option price per share of options granted under the Directors' Plan
shall equal the fair market value of a share of Common Stock on the date of
grant. The "fair market value" of the Common Stock on any date means (i) if the
Common Stock is listed on a national securities exchange or quotation system,
the closing sales price reported for composite transactions in exchange or
quotation system listed securities on such date or, in the absence of reported
sales on such date, the closing sales price on the immediately preceding date on
which sales were reported, or (ii) if the Common Stock is not listed on a
national securities exchange or quotation system, by such other method as the
Board of Directors determines in good faith to be reasonable. At the close of
trading on February 26, 2001, the closing price of the Common Stock as reported
on the NYSE was $54.70.
Except in the event of a Change of Control of the Company (as defined
below), no option may be exercised prior to the expiration of six months from
the date of grant. The term of each option may not exceed ten years from the
date of grant. Payment of the option price upon exercise of an option may be
made (i) by check payable to the Company, (ii) with the consent of the Board of
Directors by delivery of Common Stock already owned by the optionee for at least
six months (which may include
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shares received as the result of a prior exercise of an option) having a fair
market value (determined as of the date such option is exercised) equal to all
or part of the aggregate purchase price, (iii) in accordance with a cashless
exercise program as specified in the Directors' Plan or (iv) by any combination
of the foregoing alternatives or by any other means that the Board of Directors
deems appropriate. No optionee shall have any rights to dividends or other
rights of a stockholder with respect to his or her shares subject to the option
until the optionee has given written notice of exercise and paid in full for
such shares.
Awards of options are not transferable except by will or the laws of
descent and distribution. However, options may be transferred, for no
consideration, to certain family members of the Non-Employee Director or to
trusts for such family members. Except as described below, if a Non-Employee
Director terminates service on the Board of Directors for any reason, any
unexercised option that has not expired may be exercised at any time until the
earlier of (i) the third anniversary of the date of termination and (ii) the
date of expiration of such option with respect to the number of shares of Common
Stock that were exercisable on the date the Non-Employee Director terminated his
or her service with the Company. Any such option will terminate immediately if
(i) such former Non-Employee Director participates in a business which is
directly in competition (as defined in the Directors' Plan) with the Company or
any of its subsidiaries or affiliates or (ii) if such individual ceases to be a
Non-Employee Director for Cause (as defined in the Directors' Plan).
In the event of a Change in Control of the Company, the Board of Directors
may, to assure fair and equitable treatment of the participants in the
Directors' Plan (i) accelerate the exercisability of any outstanding options
awarded pursuant to the Directors' Plan; (ii) offer to purchase any outstanding
option granted pursuant to the Directors' Plan from the holder for its
equivalent cash value, as determined by the Board of Directors, as of the date
of the Change in Control; and (iii) make adjustments or modifications to
outstanding options, as the Board deems appropriate to maintain and protect the
rights and interests of participants in the Directors' Plan following such
Change in Control. "Change in Control" means: (a) a majority of the Board of
Directors ceases to consist of Continuing Directors (as hereinafter defined);
(b) any person becomes the beneficial owner of 25% or more of the outstanding
voting power of the Company unless such acquisition is approved by a majority of
the Continuing Directors; (c) the stockholders of the Company approve an
agreement to merge or consolidate into any other entity, unless such merger or
consolidation is approved by a majority of the Continuing Directors; or (d) the
stockholders of the Company approve an agreement to dispose of all or
substantially all of the assets of the Company, unless such disposition is
approved by a majority of the Continuing Directors. "Continuing Directors" means
those members of the Board of Directors on the effective date of the Directors'
Plan or who are elected to the Board of Directors after such date upon the
recommendation or with the approval of a majority of the Continuing Directors at
the time of such recommendation or approval.
The Board of Directors may terminate, modify or amend the Directors' Plan
at any time on or prior to the expiration date, subject to any approval by
stockholders which is required under any law or regulation. No amendment may
materially impair the rights of an optionee under an outstanding option without
such optionee's consent.
In the event of certain changes to the outstanding Common Stock such as
stock splits, stock dividends, reclassifications or recapitalizations, the Board
of Directors shall appropriately adjust the character and number of shares
available under the Directors' Plan and the character, number and price of
shares subject to outstanding options to reflect such changes.
The Directors' Plan became effective on the date of its adoption by the
Board of Directors, subject to approval by the stockholders at the Annual
Meeting. The Directors' Plan will terminate upon the earlier of (i) the adoption
of a resolution of the Board of directors to terminate the Directors' Plan or
(ii) the date all shares of Common Stock subject to the Directors' Plan are
purchased according to the Directors' Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the Internal Revenue Code and
applicable regulations thereunder in effect on the date hereof. Any subsequent
changes in the Internal Revenue Code or such regulations may affect the accuracy
of this discussion. In addition, this discussion does not consider any state,
local or foreign tax consequences or any circumstances that are unique to a
particular Non-Employee Director that may affect the accuracy or applicability
of this discussion.
Options granted or to be granted under the Directors' Plan will be
"non-qualified" stock options and are not intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code. An optionee will realize
no income at the time he or she is granted a non-qualified stock option.
Ordinary income generally will be realized when a non-qualified stock option is
exercised. The amount of such income will be equal to the excess of the fair
market value on the exercise date of the shares of Common Stock issued to an
optionee over the option price. The Company is generally entitled to a
corresponding ordinary income tax deduction, at that time, equal to the amount
of such ordinary income.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN.
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IV. APPROVAL OF AMENDMENT TO THE STOCK AWARD PLAN
GENERAL
The Stock Award Plan was adopted by the Board of Directors on September 28,
1999 and was approved by the Company's stockholders at the 1999 Annual Meeting.
The purpose of the Stock Award Plan is to provide the Company with greater
flexibility in the composition of incentive awards and to secure for the Company
and its stockholders the continued services of key employees who are important
to the success and growth of the business of the Company and its subsidiaries.
The Company believes that awards under the Stock Award Plan may serve to broaden
the equity participation of such key employees and further link the long-term
interests of management and stockholders. The Company will consider awards
pursuant to the Stock Award Plan in light of its overall compensation philosophy
and competitive conditions in the marketplace. The Company intends to grant
future stock options pursuant to the Stock Award Plan in concert with employee
participation in the Capital Accumulation Plan.
The Company relies on the Capital Accumulation Plan to provide long-term
incentive compensation to the Company's key executives. The Company adopted the
Stock Award Plan in the belief that the flexibility to selectively use options
as part of an overall compensation package for key employees may enhance the
Company's ability to attract and retain such individuals in an intensely
competitive business environment. A number of the Company's competitors utilize
equity awards as a significant component of their incentive compensation
programs. The use of equity-based compensation as a larger percentage of total
compensation should more closely align executive incentives with the long-term
goals of the Company's stockholders, yet in a tax-efficient manner.
PROPOSED AMENDMENT TO STOCK AWARD PLAN
Currently, an aggregate of 16,000,000 shares of Common Stock are subject to
the Stock Award Plan. Shares subject to options which terminate or expire
unexercised will become available for future option grants. During fiscal 2000,
the Company granted approximately 12,000,000 options. On January 4, 2001, the
Board of Directors approved an amendment to the Company's Restated Certificate
of Incorporation, subject to stockholder approval at the Annual Meeting, to
increase the number of authorized shares of Common Stock. In light of this
proposed amendment, on February 14, 2001, the Board of Directors approved an
increase in the number of shares of Common Stock available for the grant of
options under the Stock Award Plan to 24,000,000 shares (subject to adjustment
as described below and provided in the Plan). The proposed increase in the
aggregate number of shares available for the grant of options is intended to
enhance the Company's flexibility in structuring incentive awards by
facilitating future stock option grants.
Set forth below is the text of revised section 3.1 of the Stock Award Plan
containing the amendment being proposed at the Annual Meeting. The amendment is
qualified in its entirely by reference to such text.
The text of section 3.1 shall be amended to read as follows:
"3.1 NUMBER OF SHARES. Subject to the provisions of Paragraph 17 (relating
to adjustments upon changes in capitalization), the number of shares of Common
Stock subject at any one time to options granted under the Plan, plus the number
of shares of Common Stock theretofore issued or delivered pursuant to the
exercise of options granted under the Plan, shall not exceed 24,000,000 shares.
If and to the extent that options granted under the Plan terminate, expire or
are cancelled without having been exercised, new options may be granted under
the Plan with respect to the shares of Common Stock covered by such terminated,
expired or cancelled options; provided, that the granting and terms of such new
options shall in all respects comply with the provisions of the Plan."
DESCRIPTION OF THE STOCK AWARD PLAN
All references to the "Plan" in the remaining text of this subsection shall
mean the Stock Award Plan. The summary of the material terms of the Stock Award
Plan is qualified in its entirety by reference to the full text of the Stock
Award Plan, a copy of which is attached to this Proxy Statement as Exhibit C.
The determination of employee recipients of options and awards, their terms
and conditions within the parameters of the Plan and the number of shares
covered by each option or award is determined and administered by the
Compensation Committee.
Key employees of the Company or any of its subsidiaries, including
executive officers and directors, to the extent that they are key employees of
the Company or any of its subsidiaries, are eligible to participate in the Plan
based upon its terms and conditions. Awards may be granted by the Compensation
Committee and may include: (i) options to purchase shares of Common Stock in the
form of incentive stock options, as defined in Section 422 of the Internal
Revenue Code ("ISOs"),
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or non-qualified stock options and (ii) stock appreciation rights granted in
tandem with such options ("SARs"). At the time of original grant of options, the
Compensation Committee may also authorize the grant of reload options, which
shall be non-qualified stock options for such number of shares of Common Stock
as were used by the participant to pay the purchase price upon the exercise of
previously granted options, but are still subject to the other terms set forth
in the Plan. For each calendar year, during any part of which the Plan is in
effect, no participant may be granted awards relating in the aggregate to more
than 1,000,000 shares of Common Stock, as adjusted to reflect certain changes to
the outstanding Common Stock pursuant to the Plan. Awards of options and SARs
are not transferable except by will or the laws of descent and distribution.
However, non-qualified stock options may be transferred, for no consideration,
to certain family members of the plan participant or to trusts for such family
members.
The option price per share of options granted under the Plan shall be
determined by the Compensation Committee. However, the per share option price of
any ISO shall not be less than the fair market value (as hereinafter defined) of
a share of Common Stock at the time the ISO is granted, and the per share option
price of any non-qualified stock option shall not be less than the fair market
value of a share of Common Stock at the time the non-qualified stock option is
granted. The "fair market value" of the Common Stock on any date means (i) if
the Common Stock is listed on a national securities exchange or quotation
system, the closing sales price on such exchange or quotation system on such
date or, in the absence of reported sales on such date, the closing sales price
on the immediately preceding date on which sales were reported, (ii) if the
Common Stock is not listed on a national securities exchange or quotation
system, the mean between the bid and offered prices as quoted by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
for such date or (iii) if the Common Stock is neither listed on a national
securities exchange or quotation system nor quoted by NASDAQ, the fair value as
determined by such other method as the Compensation Committee determines in good
faith to be reasonable. At the close of trading on February 26, 2001, the
closing sales price of the Common Stock as reported on the NYSE was $54.70 per
share. Each option shall be exercisable at such times, or upon the occurrence of
such events, and in such amount, as may be determined by the Compensation
Committee and stated in the option award agreement. The term of each option may
not exceed ten years from the date of grant. Payment of the option price upon
exercise of an option may be made (i) by check payable to the Company, (ii) with
the consent of the Compensation Committee by delivery of Common Stock already
owned by the optionee for at least six months (which may include shares received
as the result of a prior exercise of an option) having a fair market value
(determined as of the date such option is exercised) equal to all or part of the
aggregate purchase price, (iii) in accordance with a cashless exercise program
as specified in the Plan or (iv) by any combination of the foregoing
alternatives or by any other means that the Compensation Committee deems
appropriate. No optionee shall have any rights to dividends or other rights of a
stockholder with respect to his or her shares subject to the option until the
optionee has given written notice of exercise and paid in full for such shares.
The Compensation Committee may, in its sole discretion, with respect to
each option granted under the Plan, grant tandem stock appreciation rights, that
is, the right to relinquish such option in whole or in part and to receive a
cash payment equal to the excess of the fair market value of the stock covered
by the relinquished option (or part thereof) over the applicable option price.
In the event of a Change in Control of the Company, the Compensation
Committee may, to assure fair and equitable treatment of the participants in the
Plan, (i) accelerate the exercisability of any outstanding options, (ii) offer
to purchase any outstanding option granted pursuant to the Plan from the holder
for its equivalent cash value and (iii) make adjustments or modifications to
outstanding options as the Compensation Committee deems appropriate to maintain
and protect the rights and interests of participants in the Plan following such
Change in Control. In no event, however, may any option be exercised prior to
the expiration of six months from the date of grant (unless otherwise provided
in the option agreement pursuant to which such option was granted) or after ten
years from the date of grant. "Change in Control" means: (a) a majority of the
Board of Directors ceases to consist of Continuing Directors (as hereinafter
defined); (b) any person becomes the beneficial owner of 25% or more of the
outstanding voting power of the Company unless such acquisition is approved by a
majority of the Continuing Directors; (c) the stockholders of the Company
approve an agreement to merge or consolidate into any other entity, unless such
merger or consolidation is approved by a majority of the Continuing Directors;
or (d) the stockholders of the Company approve an agreement to dispose of all or
substantially all of the assets of the Company, unless such disposition is
approved by a majority of the Continuing Directors. "Continuing Directors" means
those members of the Board of Directors on the effective date of the Plan or who
are elected to the Board of Directors after such date upon the recommendation or
with the approval of a majority of the Continuing Directors at the time of such
recommendation or approval.
The Company's Board of Directors may terminate, modify or amend the Plan,
but no amendment may be made which would, without the approval of the
stockholders (i) change the class of employees eligible to receive options
payable in Common Stock, (ii) increase the total number of shares reserved for
issuance under the Plan or (iii) materially increase the benefits
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accruing to participants under the Plan, within the meaning of Rule 16b-3
promulgated under the Exchange Act. The Compensation Committee may amend the
terms of any award or option already granted, provided that any such retroactive
amendment is consistent with the provisions of the Plan and does not disqualify
an ISO under the provisions of Section 422 of the Internal Revenue Code.
In the event of certain changes to the outstanding Common Stock such as
stock splits, stock dividends, reclassifications or recapitalizations, the Board
of Directors shall appropriately adjust the character and number of shares
available under the Plan and the Compensation Committee shall appropriately
adjust the character, number and price of shares subject to outstanding options
to reflect such changes.
The Plan became effective on the date of its adoption by the Board of
Directors. The Plan will terminate upon the earlier of (i) the adoption of a
resolution of the Company's Board of Directors to terminate the Plan or (ii) ten
years from the effective date of the Plan.
Because the Plan is discretionary, benefits to be received by individual
optionees are not determinable. The following table shows the number of shares
of Common Stock issuable upon exercise of stock options granted to the named
individuals and groups under the Plan during the fiscal year ended November 30,
2000.
NUMBER OF
GROUP OR INDIVIDUAL OPTIONS
------------------- ----------
James E. Cayne
Chief Executive Officer and President .............................. 108,856
Alan C. Greenberg
Chairman of the Board .............................................. 66,475
Mark E. Lehman
Executive Vice President and General Counsel ....................... 20,762
Michael Minikes
Treasurer .......................................................... 22,085
Samuel L. Molinaro Jr ..............................................
Chief Financial Officer and Senior Vice President--Finance ......... 21,878
All current executive officers as a group
(6 persons) ........................................................ 244,575
All current directors who are not executive officers as a group .... 215,935
All employees (who are not executive officers) as a group .......... 8,252,810
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the Internal Revenue Code and
applicable regulations thereunder in effect on the date hereof. Any subsequent
changes in the Internal Revenue Code or such regulations may affect the accuracy
of this discussion. In addition, this discussion does not consider any state,
local or foreign tax consequences or any circumstances that are unique to a
particular Plan participant that may affect the accuracy or applicability of
this discussion.
INCENTIVE STOCK OPTIONS ("ISOs")
(a) Neither the grant nor the exercise of an ISO will be treated as
the receipt of taxable income by the employee or a deductible
item by the Company. The amount by which the fair market value of
the shares issued upon exercise exceeds the option strike price
will constitute an item of adjustment that must be taken into
account in determining the employee's alternative minimum tax.
(b) If the employee holds shares acquired by him or her upon the
exercise of an ISO until the later of two years from the date of
grant of the option and one year from such exercise and has been
an employee of the Company at all times from the date of grant of
the ISO to the day three months before such exercise, then any
gain realized by the employee on a later sale or exchange of such
shares will be a capital gain and any loss sustained will be a
capital loss. The Company will not be entitled to a tax deduction
with respect to any such sale or exchange of ISO shares.
(c) If the employee disposes of any shares acquired upon the exercise
of an ISO during the two-year period from the date of grant of
the option or the one-year period beginning on the day after such
exercise (i.e., a "dis-
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qualifying disposition"), the employee will generally be
obligated to report as ordinary income for the year in which the
disposition occurred the amount by which the fair market value of
such shares on the date of exercise of the option (or, as noted
in clause (d) below, in the case of certain sales or exchanges of
such shares for less than such fair market value, the amount
realized upon such sale or exchange) exceeds the option strike
price, and the Company will be entitled to an income tax
deduction equal to the amount of such ordinary income reported by
the employee on his or her federal income tax return.
(d) If an ISO holder who has acquired stock upon the exercise of an
ISO makes a disqualifying disposition of any such stock, and the
disposition is a sale or exchange with respect to which a loss
(if sustained) would be recognized by the ISO holder, then the
amount includable in the ISO holder's gross income, and the
amount deductible by the Company, will not exceed the excess (if
any) of the amount realized on the sale or exchange over the tax
basis of the stock.
NON-QUALIFIED STOCK OPTIONS ("NQSOs")
In the case of an NQSO, the grant of the option will not result in taxable
income to the option holder or an income tax deduction to the Company. The NQSO
holder generally recognizes ordinary income at the time the NQSO is exercised in
the amount by which the fair market value of the shares acquired exceeds the
option strike price. The Company is generally entitled to a corresponding
ordinary income tax deduction, at that time, equal to the amount of such
ordinary income.
STOCK APPRECIATION RIGHTS ("SARs")
The granting of SARs does not produce taxable income to participating
employees or an income tax deduction for the Company. The exercise of a SAR for
cash is immediately taxable as ordinary income to the grantee and deductible by
the Company.
LIMITATIONS ON COMPANY DEDUCTIONS; PARACHUTE PAYMENTS
Under Section 162(m) of the Internal Revenue Code, certain compensation
payments in excess of $1,000,000 are subject to a limitation on deductibility by
the Company. This limitation on deductibility applies with respect to that
portion of compensation in excess of $1,000,000 paid to individual executive
officers named in the Summary Compensation Table per taxable year. However,
certain "performance-based compensation" the material terms of which are
disclosed to and approved by stockholders is not subject to this limitation on
deductibility. The Company has structured the Plan with the intention that
compensation resulting therefrom would be such performance-based compensation
and would be deductible.
Under certain circumstances, accelerated vesting or exercise of options or
SARs in connection with a Change in Control of the Company might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provisions
of Sections 280G and 499 of the Internal Revenue Code. To the extent it is so
considered, the optionee or grantee may be subject to an excise tax equal to 20%
of the amount of the excess parachute payment and the Company may be denied a
tax deduction.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE STOCK AWARD PLAN.
-22-
INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as the Company's
independent auditors to conduct the audit of the Company's books and records for
the fiscal year ended November 30, 2001. Deloitte & Touche LLP also served as
the Company's independent auditors for the previous fiscal year. Representatives
of Deloitte & Touche LLP are expected to be present at the Annual Meeting to
respond to questions and to make a statement should they so desire.
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte") for professional services rendered for the audit of the Company's
annual financial statements for the fiscal year ended November 30, 2000 and for
the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for that fiscal year were $3.6 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Deloitte for professional services rendered
for information technology services relating to financial information systems
design and implementation for the fiscal year ended November 30, 2000.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", for the fiscal year ended
November 30, 2000 were $6.9 million.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.
OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of any
business other than that described above that will be presented at the Annual
Meeting. If any other business should properly come before the Annual Meeting in
connection therewith, it is intended that the persons named in the enclosed
proxy will have discretionary authority to vote the shares which they represent.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
In accordance with rules promulgated by the Securities and Exchange
Commission, any stockholder who wishes to submit a proposal for inclusion in the
proxy material to be distributed by the Company in connection with the 2002
Annual Meeting must do so no later than November 2, 2001.
In addition, in accordance with Article VI, Section 2 of the Certificate of
Incorporation, in order to be properly brought before the 2002 Annual Meeting, a
matter must have been (i) specified in a written notice of such meeting (or any
supplement thereto) given to the stockholders by or at the direction of the
Board of Directors (which would be accomplished if a stockholder proposal were
received by the Secretary of the Company as set forth in the preceding
paragraph), (ii) brought before such meeting at the direction of the Board of
Directors or the Chairman of the meeting, or (iii) specified in a written notice
given by or on behalf of a stockholder of record on the record date for such
meeting or a duly authorized proxy for such stockholder, which conforms to the
requirements of Article VI, Section 2 of the Certificate of Incorporation and is
delivered personally to, or mailed to and received by, the Secretary of the
Company at the address below not less than 10 days prior to the first
anniversary of the date of the notice accompanying this Proxy Statement;
provided, however, that such notice need not be given more than 75 days prior to
the 2002 Annual Meeting. Accordingly, any written notice given by or on behalf
of a stockholder pursuant to the foregoing clause (iii) in connection with the
2002 Annual Meeting must be received no later than February 20, 2002.
-23-
REPORTS
The Company will furnish without charge to each person whose proxy is being
solicited, upon the written request of any such person, a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended November 30, 2000, as filed
with the Securities and Exchange Commission, including the financial statements
and schedules thereto. Requests for copies of such Annual Report on Form 10-K
should be directed to the Corporate Communications Department of the Company at
the address below.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
The Bear Stearns Companies Inc.
245 Park Avenue
New York, New York 10167
March 2, 2001
-24-
EXHIBIT A
THE BEAR STEARNS COMPANIES INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
The members of the Audit Committee shall be appointed by the Board. The
Audit Committee shall be governed by a charter and shall be comprised of at
least three directors who shall meet the independence and experience
requirements of the New York Stock Exchange. The Audit Committee shall assist
the Board in monitoring (1) the integrity of the financial statements of the
Company, (2) the compliance by the Company with legal and regulatory
requirements and (3) the independence and performance of the Company's internal
and external auditors.
The Audit Committee shall meet at least four times annually and shall make
regular reports to the Board. It shall have the authority to retain special
legal, accounting or other consultants to advise the Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or
to meet with any members of, or consultants to, the Committee.
In fulfilling its responsibilities the Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually, recommend
any proposed changes to the Board for approval and ensure inclusion of
the Charter in the Company's annual proxy statement at least once
every three years.
2. Review the annual audited financial statements with management,
including major issues, if any, regarding accounting principles.
3. Review with management and the independent auditor:
a. significant financial reporting issues and judgements made in
connection with preparation of the Company's financial
statements.
b. the adequacy of internal controls that could significantly affect
the Company's financial statements.
4. Ensure review by the independent auditor of the Company's interim
financial information prior to the filing of its quarterly report on
Securities and Exchange Commission Form 10-Q.
5. Meet, as necessary, with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Company's accounting principles and
practices as brought to it's attention by the independent auditor,
internal auditors, management or as required by professional or
regulatory pronouncements and actions.
7. Recommend to the Board the selection and appointment of the
independent auditor, which firm shall be ultimately accountable to the
Audit Committee and the Board.
8. Receive periodic reports from the independent auditor regarding the
auditor's independence. Discuss such reports with the auditor, and if
so determined by the Audit Committee, recommend that the Board take
appropriate action regarding the auditor.
9. Evaluate after gathering information from management, internal audit
and other Board members, the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
10. Review the fees to be paid to the independent auditor as negotiated by
management.
11. Review the appointment and retention of the senior internal auditing
executive.
12. Review, as necessary, with the senior internal auditing executive the
Internal Audit Department's responsibility, budget and staffing.
13. Review significant reports to management prepared by the internal
auditing department and management's responses thereto, if any.
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14. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
15. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit. Such review should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to required information.
(b) Any changes required in the planned scope of the audit.
(c) Any matters communicated by the auditor to management which the
auditor views are material weaknesses and reportable conditions
of material inadequacies as those terms are defined by the
accounting profession or regulators.
16. Prepare the report required by the rules of the Securities and
Exchange Commission (Item 306 of Regulation S-K) to be included in the
Company's annual proxy statement
17. Discuss with management, the conformity of the Company's subsidiaries
and controlled affiliated entities with applicable significant legal
requirements and the Company's Code of Conduct and advise the Board of
such compliance.
18. Review with the Company's General Counsel legal matters that may have
a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
19. Meet, as deemed necessary, with the chief financial officer, the
senior internal auditing executive and the independent auditor in
separate executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are presented
fairly in accordance with generally accepted accounting principles. This is the
responsibility of management as to the Company's financial statements and the
independent auditor as to the plan, extent and execution of the audit. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor as to the
plan and extent of the audits or to assure compliance with laws and regulations
and the Company's Code of Conduct.
Approved by the Audit Committee on March 14, 2000
Approved by the Board of Directors of The Bear Stearns Companies Inc. on
March 15, 2000
A-2
EXHIBIT B
THE BEAR STEARNS COMPANIES INC.
NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
1. PURPOSE. The purpose of The Bear Stearns Companies Inc. Non-Employee
Directors' Stock Option Plan (the "Plan") is to secure for The Bear Stearns
Companies Inc. and its successors and assigns (the "Company") and its
stockholders the benefits of the incentive inherent in holding an equity
interest in the Company's Common Stock, par value $1.00 per share (the "Common
Stock"), by the members of the Board of Directors (the "Board") of the Company
who are not employees of the Company or any of its subsidiaries ("Non-Employee
Directors"). It is expected that such ownership will provide such Non-Employee
Directors with a more direct stake in the future welfare of the Company and
encourage them to remain directors of the Company. It is also expected that the
Plan will encourage qualified persons to become directors of the Company.
Pursuant to the Plan, such Non-Employee Directors will be offered the
opportunity to acquire Common Stock through the grant of options.
2. ADMINISTRATION. The Plan shall be administered by the Board. The
Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreement embodying grants of stock options made under
the Plan. Subject to the provisions of the Plan, the Board shall have the power
to construe the Plan, to determine all questions arising thereunder, and to
adopt and amend such rules and regulations for the administration of the Plan as
it may deem desirable. Any decision of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other officer
of the Corporation to execute and deliver documents on behalf of the Board and
to perform administrative functions under the Plan. No member of the Board shall
be liable for anything done or omitted to be done by such member or by any other
member of the Board in connection with the Plan, except for such member's own
willful misconduct or as expressly provided by statute.
3. SHARES SUBJECT TO GRANTS.
3.1 NUMBER OF SHARES. Subject to the provisions of Paragraph 13,
the number of shares of Common Stock subject at any one time to options granted
under the Plan, plus the number of shares of Common Stock theretofore issued or
delivered pursuant to the exercise of options granted under the Plan, shall not
exceed 300,000 shares. If and to the extent that options granted under the Plan
terminate, expire or are cancelled without having been exercised, new options
may be granted under the Plan with respect to the shares of Common Stock covered
by such terminated, expired or cancelled options; provided, that the granting
and terms of such new options shall in all respects comply with the provisions
of the Plan.
3.2 CHARACTER OF SHARES. Shares of Common Stock delivered under
the Plan may be authorized and unissued Common Stock, issued Common Stock held
in the Company's treasury, or both.
3.3 RESERVATION OF SHARES. There shall be reserved at all times
for sale or award under the Plan a number of shares of Common Stock (authorized
and unissued Common Stock, issued Common Stock held in the Company's treasury,
or both) equal to the maximum number of shares set forth in Paragraph 3.1 (less
any shares that have been issued pursuant to options granted hereunder).
4. ELIGIBILITY. Each Non-Employee Director shall be eligible to receive
grants of options in accordance with the further provisions of the Plan. All
options granted under the Plan shall be evidenced by an agreement in such form
as the Board shall prescribe from time to time in accordance with the Plan,
which agreement shall include the provisions contained in Paragraphs 6, 7.2,
7.3, 7.4, 8, 9 and 12, as well as such other provisions (not inconsistent with
the terms of the Plan) as the Board shall deem appropriate.
5. GRANT OF OPTIONS.
Options shall be granted in the following amounts and on the following
dates:
5.1 OPTION GRANTS TO NON-EMPLOYEE DIRECTORS AT EFFECTIVE DATE OF
PLAN. An option to purchase 3,000 shares of Common Stock, subject to adjustment
as provided in Paragraph 13, shall be granted automatically to each Non-Employee
Director who is then a member of the Board on the day following the adoption of
the Plan by the Board. These options will not become exercisable until the Plan
is approved by the Company's stockholders at the next Annual Meeting.
B-1
If the stockholders do not approve the Plan at the next annual meeting, any
option granted hereunder will become null and void.
5.2 ANNUAL OPTION GRANTS. Each person who is or becomes a
Non-Employee Director on the date of an annual meeting of the Company's
stockholders and whose service will continue after such meeting shall be granted
an option to purchase a number of shares of Common Stock. The number of shares
covered by the option will be equal to the quotient of an amount determined by
the Company's Executive Committee divided by the average closing price of the
Common Stock for the five trading days immediately preceding the date of such
meeting, subject to adjustment as provided in Paragraph 13, effective as of the
date of such meeting.
6. OPTION PRICE.
Subject to Paragraph 13, the option price of each share of Common Stock
purchasable under any option granted under the Plan shall equal the fair market
value of such share of Common Stock on the date of grant of the option.
For purposes of this Plan, the "fair market value" of the Common Stock on
any date means (i) if the Common Stock is listed on a national securities
exchange or quotation system, the closing sales price reported for composite
transactions in exchange or quotation system listed securities on such date or,
in the absence of reported sales on such date, the closing sales price on the
immediately preceding date on which sales were reported, or (ii) if the Common
Stock is not listed on a national securities exchange or quotation system, by
such other method as the Board determines in good faith to be reasonable.
7. EXERCISABILITY AND DURATION OF OPTIONS.
7.1 All options granted under the Plan shall:
(a) be nonqualified options not entitled to special tax
treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"),
(b) terminate and expire ten (10) years after the date
granted, subject to earlier termination as provided in
Paragraphs 7.2, 7.3 and 7.4,
(c) not be exercised for a period of six (6) months from the
date of grant subject to Paragraphs 5.1 and 12, and
(d) be exercisable in the manner provided in Paragraph 8.
7.2 TERMINATION OF SERVICE. Subject to Paragraphs 7.3 and 7.4, if
a person shall cease to be a Non-Employee Director for any reason while holding
an unexercised option that has not expired, such person, or in the case of his
or her death or adjudication of incompetency, his or her executors,
administrators, distributees, guardian or legal representative, as the case may
be, may, at any time until the earlier to occur of the (y) third anniversary of
the date of cessation and (z) the tenth anniversary of the date of grant,
exercise the option with respect to any shares of Common Stock as to which it is
exercisable on the date the person ceased to be a Non-Employee Director. To the
extent that options granted hereunder were not exercisable on the date the
person ceased to be a Non-Employee Director, such options shall terminate.
7.3 PARTICIPATION IN A COMPETING BUSINESS. If a person shall cease
to be a Non-Employee Director for any reason while holding an option that has
not expired and has not been fully exercised, such option will terminate
immediately if and at such time as such person, acting alone or with others,
directly or indirectly, shall engage, either as employee, employer, independent
contractor, consultant, advisor, or director, or as an owner, investor, partner,
or stockholder unless such person's interest is insubstantial, in any business
in an area or region in which the Company or any subsidiary or affiliate
conducts business at the date the event occurs, which is directly in competition
with a business then conducted by the Company or any subsidiary or affiliate.
The Board shall, in its discretion, determine which lines of business the
Company or any subsidiary or affiliate conducts on any particular date and which
third parties may reasonably be deemed to be in competition with the Company or
any subsidiary or affiliate. For purposes of this Paragraph 7.3, a person's
interest as a stockholder is insubstantial if it represents beneficial ownership
of less than three percent of the outstanding class of stock, and a person's
interest as an owner, investor or partner is insubstantial if it represents
ownership, as determined by the Board in its discretion, of less than three
percent of the outstanding equity of the entity.
B-2
7.4 TERMINATION OF SERVICE WITH CAUSE. In the event such person
shall cease to be a Non-Employee Director for Cause while holding an option that
has not expired and has not been fully exercised, such option shall terminate
immediately. Cause means (A) the Non-Employee Director is charged with a felony
or commission of any act, which would rise to the level of a felony, (B) the
Non-Employee Director is charged with the commission of a lesser crime or
offense that adversely impacts on the business or reputation of the Company, (C)
the Non-Employee Director is charged with the commission of a dishonest or
wrongful act involving fraud, misrepresentation or moral turpitude causing
damage or potential damage to the Company or (D) the Non-Employee Director
commits a breach of fiduciary duty.
8. EXERCISE OF OPTIONS.
Options granted under the Plan shall be exercised by the Non-Employee
Director (or by his or her executors, administrators, distributees, guardian or
legal representative as provided in Paragraph 7.2) as to all or part of the
shares covered thereby, by the giving of written notice of exercise to the
Company, specifying the number of shares to be purchased, accompanied by payment
of the full exercise price for the shares being purchased. Payment of such
exercise price shall be made (a) by check payable to the Company, (b) with the
consent of the Board, by delivery of shares of Common Stock already owned by the
Non-Employee Director for at least six months (which may include shares received
at least six months earlier as the result of a prior exercise of an option)
having a fair market value (determined as of the date such option is exercised)
equal to all or part of the aggregate exercise price, (c) in accordance with a
"cashless exercise" program established by the Board in its sole discretion
under which if so instructed by the Non-Employee Director, shares may be issued
directly to the Non-Employee Director's broker or dealer upon receipt of the
purchase price in cash from the broker or dealer, (d) by any combination of (a),
(b), or (c) above, or (e) by other means that the Board deems appropriate. Such
notice of exercise, accompanied by such payment, shall be delivered to the
Company at its principal business office or such other office as the Board may
from time to time direct, and shall be in such form, containing such further
provisions consistent with the provisions of the Plan, as the Board may from
time to time prescribe. The date of exercise shall be the date of the Company's
receipt of such notice and payment. The Company shall effect the transfer of the
shares so purchased to the Non-Employee Director (or such other person
exercising the option pursuant to Paragraph 7.2) as soon as practicable. No
Non-Employee Director or other person exercising an option shall have any of the
rights of a stockholder of the Company with respect to shares subject to an
option granted under the Plan until due exercise and full payment has been made
as provided above. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date of such due exercise and
full payment except as provided under Paragraph 13. In no event may any option
granted hereunder be exercised for a fraction of a share.
9. NON-TRANSFERABILITY OF OPTIONS. Except as provided herein, no option
granted under the Plan or any right evidenced thereby shall be transferable by
the Participant other than by will or by the laws of descent and distribution,
and an option may be exercised, during the lifetime of a Participant, only by
such Participant. Notwithstanding the preceding sentence, the Non-Employee
Directors with the approval of the Committee, may transfer his or her options
for no consideration to or for the benefit of the Participant's spouse, parents,
children (including stepchildren or adoptive children), grandchildren, or
siblings, or to a trust for the benefit of any of such persons.
10. DEFERRAL OF OPTIONS. Subject to rules prescribed by the Board, a
Non-Employee Director may elect to defer receipt of shares of Common Stock which
would otherwise be received upon exercise of an option. Such an election must be
made at least six month prior to the exercise of the option and must be
irrevocable.
11. RESTRICTIONS ON DELIVERY AND SALE OF SHARES. Each option granted
under the Plan is subject to the condition that if at any time the Board, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such option upon any securities exchange or under any
state or federal law or compliance with another legal obligation is necessary or
desirable as a condition of or in connection with the granting of such option or
the purchase or delivery of shares thereunder, the delivery of any or all shares
pursuant to exercise of the option may be withheld unless and until such
listing, registration, qualification or compliance, shall have been effected.
The Board may require, as a condition of exercise of any option that the
Non-Employee Director represent, in writing, that the shares received are being
acquired for investment and not with a view to distribution and agree that the
shares will not be disposed of except pursuant to an effective registration
statement, unless the Company shall have received an opinion of counsel
satisfactory to the Company that such disposition is exempt from such
requirement under the Securities Act of 1933. The Board may require that the
sale or other disposition of any shares acquired upon exercise of an option
hereunder shall be subject to a right of first refusal in favor of the Company,
which right shall permit the Company to repurchase such shares from the
Non-Employee Director or his or her representative prior to their sale or other
disposition at their then current fair market value in accordance with such
terms and conditions as shall be specified in the agreement evidencing the grant
of the option. The Company may endorse on cer-
B-3
tificates representing shares issued upon the exercise of an option such legends
referring to the foregoing representations or restrictions or any other
applicable restrictions on resale as the Company, in its discretion, shall deem
appropriate.
12. CHANGE IN CONTROL.
(a) In the event of a Change in Control of the Company, as defined
below, the Board may, in its sole discretion, provide that any of the following
applicable actions be taken as a result, or in anticipation, of any such event
to assure fair and equitable treatment of Non-Employee Directors:
(i) accelerate the exercisability of any outstanding options
awarded pursuant to this Plan;
(ii) offer to purchase any outstanding options made pursuant
to this Plan from the holder for its equivalent cash
value, as determined by the Board, as of the date of the
Change in Control; or
(iii) make adjustments or modifications to outstanding options
as the Board deems appropriate to maintain and protect
the rights and interests of the Non-Employee Directors
following such Change in Control.
Any such action approved by the Board shall be conclusive and binding on
the Company, its subsidiaries and all Non-Employee Directors.
(b) To the extent not otherwise defined in this Plan, the
following terms used in this Paragraph 12 shall have the following meanings:
"Associate" of a Person means (a) any corporation or organization of which
such Person is an officer or partner or is, directly or indirectly, the
Beneficial Owner of 10% or more of any class of equity securities, (b) any trust
or other estate in which such Person has a substantial beneficial interest or as
to which such Person serves as trustee or in a similar fiduciary capacity and
(c) any relative or spouse of such Person, or any relative of such spouse, who
has the same home as such Person or who is a director or officer of such Person
or any of its parents or subsidiaries.
"Beneficial Owner" has the meaning ascribed thereto in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") except
that, in any case, a Person shall be deemed the Beneficial Owner of any
securities owned, directly or indirectly, by the Associates of such Person.
"Change in Control" means (a) a majority of the Board of Directors ceases
to consist of Continuing Directors; (b) any Person becomes the Beneficial Owner
of 25% or more of the outstanding voting power of the Company unless such
acquisition is approved by a majority of the Continuing Directors; (c) the
stockholders of the Company approve an agreement to merge or consolidate into
any other entity, unless such merger or consolidation is approved by a majority
of the Continuing Directors; or (d) the stockholders of the Company approve an
agreement to dispose of all or substantially all of the assets of the Company,
unless such disposition is approved by a majority of the Continuing Directors.
"Continuing Director" means any member of the Board of Directors who is a
member on the effective date of the Plan as set forth in Paragraph 16 or who is
first elected to the Board of Directors after such date upon the recommendation
or with the approval of a majority of the Continuing Directors at the time of
such recommendation or approval.
"Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or a political subdivision thereof.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
In the event that any large, special and non-recurring dividend or other
distribution (whether in the form of cash or other property), Common Stock
dividend, forward or reverse split, recapitalization, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Common
Stock such that an adjustment is determined by the Board to be appropriate in
order to prevent dilution or enlargement of an optionee's rights under the Plan,
then the Board shall, in such manner as it may deem equitable, adjust any or all
of (i) the number and kind of shares reserved and available for delivery
pursuant to the exercise of options under Paragraph 3.1, (ii) the number of
shares subject to options automatically granted under Paragraph 5.1 and the kind
of shares granted under Paragraph 5, (iii) the number and kind of shares
deliverable upon exercise of outstanding options, and the exercise price per
share thereof (provided that no fractional shares will be delivered upon
exercise of any option), and (iv) the fair market value of shares determined
under Paragraph 6.
B-4
14. EXPIRATION AND TERMINATION OF THE PLAN.
14.1 GENERAL. The Plan shall expire at such time as no shares
remain available for option grants and no options remain outstanding (the
"Expiration Date"). Outstanding options shall remain in effect until they
have been exercised, terminated or have expired. The Plan may be
terminated, modified or amended by the Board of Directors at any time on
or prior to the Expiration Date; provided, however, that the approval of
the Company's stockholders will be required for any amendment to the
extent required under any law or regulation; and provided further, that
any amendments that materially impair the rights of an optionee under an
outstanding option shall be effective as to such option only if consented
to by such optionee.
14.2 MODIFICATIONS. No modification, extension, renewal or other
change in any option granted under the Plan shall be made after grant,
unless the same is consistent with the provisions of the Plan. In
addition, the option price of an option may not be changed after grant,
other than in the case of an adjustment described in Paragraph 13.
15. MISCELLANEOUS PROVISIONS OF THE PLAN. The following are
miscellaneous provisions of the Plan:
15.1 Except as expressly provided for in the Plan, no Non-Employee
Director or other person shall have any claim or right to be granted an
option under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
15.2 The expenses of the Plan shall be borne by the Company.
15.3 If an option is exercised by the executors, administrators,
legatees or distributees of the estate of a deceased optionee or by the
guardian or legal representative of an optionee, the Company shall be
under no obligation to issue stock thereunder unless and until the Company
is satisfied that the person or persons exercising the option are the duly
appointed legal representatives of the optionee or of the deceased
optionee's estate or the proper legatees or distributees of such estate.
16. EFFECTIVE DATE OF PLAN. The Plan shall become effective on March 15,
2000, the date of its adoption by the Board of Directors, subject, however, to
the approval of the Plan by the Company's stockholders.
17. GOVERNING LAW. The Plan shall be governed by the laws of the State
of New York, without reference to the principles of conflicts of law.
B-5
EXHIBIT C
THE BEAR STEARNS COMPANIES INC.
STOCK AWARD PLAN
(AMENDED AND RESTATED AS OF JANUARY 11, 2000)
1. PURPOSE. The purpose of The Bear Stearns Companies Inc. Stock Award
Plan (the "Plan") is to secure for The Bear Stearns Companies Inc. and its
successors and assigns (the "Company") and its stockholders the benefits of the
additional incentive, inherent in the ownership of the Company's common stock,
par value $1.00 per share (the "Common Stock"), by selected key employees of the
Company and its subsidiaries who are important to the success and growth of the
business of the Company and its subsidiaries and to help the Company and its
subsidiaries secure and retain the services of such persons. Compensation
awarded under the Plan is intended to qualify for tax deductibility pursuant to
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended from time to time or any successor statute or statutes (the "Code"), to
the extent deemed appropriate by the Committee (as defined in Paragraph 2.1).
Pursuant to the Plan, such employees will be offered the opportunity to
acquire Common Stock through the grant of options and stock appreciation rights
in tandem with such options. Options granted under the Plan will be either
"incentive stock options," intended to qualify as such under the provisions of
Section 422 of the Code, or "nonqualified stock options." For purposes of the
Plan, the terms "parent" and "subsidiary" shall mean "parent corporation" and
"subsidiary corporation," respectively, as such terms are defined in Sections
424(e) and (f) of the Code.
2. COMMITTEE.
2.1 ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). Any
vacancy on the Committee, whether due to action of the Board of Directors or due
to any other cause, may be filled, and shall be filled if required to maintain a
Committee of at least two disinterested persons, by resolution adopted by the
Board of Directors. For purposes of the Plan, a person shall be deemed to be a
"disinterested person" if, at the time of reference, such person is not, and has
not been at any time during the preceding one-year period, eligible to
participate in the Plan or any other plan of the Company or any of its
affiliates entitling participants therein to acquire stock, stock options or
stock appreciation rights of the Company or any of its affiliates.
Notwithstanding any of the foregoing, the Board of Directors may designate one
or more persons, who at the time of such designation are not disinterested
persons, to serve on the Committee effective upon the date such person or
persons qualify as disinterested persons.
2.2 PROCEDURES. The Committee shall select one of its members as
Chairman and shall adopt such rules and regulations as it shall deem appropriate
concerning the holding of its meetings and the administration of the Plan. A
majority of the whole Committee shall constitute a quorum, and the acts of a
majority of the members of the Committee present at a meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee,
shall be the acts of the Committee.
2.3 INTERPRETATION. The Committee shall have full power and authority to
interpret the provisions of the Plan and any agreement evidencing options
granted under the Plan, and to determine any and all questions arising under the
Plan, and its decisions shall be final and binding on all participants in the
Plan.
3. SHARES SUBJECT TO GRANTS.
3.1 NUMBER OF SHARES. Subject to the provisions of Paragraph 17
(relating to adjustments upon changes in capitalization), the number of shares
of Common Stock subject at any one time to options granted under the Plan, plus
the number of shares of Common Stock theretofore issued or delivered pursuant to
the exercise of options granted under the Plan, shall not exceed 16,000,000
shares. If and to the extent that options granted under the Plan terminate,
expire or are cancelled without having been exercised, new options may be
granted under the Plan with respect to the shares of Common Stock covered by
such terminated, expired or cancelled options; provided, that the granting and
terms of such new options shall in all respects comply with the provisions of
the Plan.
3.2 CHARACTER OF SHARES. Shares of Common Stock delivered under the Plan
may be authorized and unissued Common Stock, issued Common Stock held in the
Company's treasury, or both.
3.3 RESERVATION OF SHARES. There shall be reserved at all times for sale
or award under the Plan a number of shares of Common Stock (authorized and
unissued Common Stock, issued Common Stock held in the Company's treasury, or
both) equal to the maximum number of shares set forth in Paragraph 3.1.
C-1
4. EMPLOYEES ELIGIBLE. Options may be granted under the Plan to any key
employee of the Company or any of its subsidiaries, or to any prospective key
employee of the Company or any of its subsidiaries, conditioned upon, and
effective not earlier than, such person's becoming an employee. Directors and
executive officers shall be eligible to receive grants under the Plan only if
they are also key employees of the Company or any of its subsidiaries.
Notwithstanding the foregoing:
(a) No member of the Committee, while serving as such, shall be
eligible to receive any grants under the Plan and no person designated by
the Board of Directors pursuant to Paragraph 2.1 to serve on the Committee
effective at the time he or she qualifies as a disinterested person shall
be eligible to receive any grants under the Plan during the period from
the date such designation is made to the date such designation becomes
effective.
(b) No incentive stock options may be granted under the Plan to
any person who owns, directly or indirectly (within the meaning of
Sections 422(b)(6) and 424(d) of the Code), at the time the incentive
stock option is granted, stock possessing more than 10% of the total
combined voting power of all classes of stock of the employee's employer
corporation or of its parent, if any, or any of its subsidiaries, unless
the option price is at least 110% of the fair market value of the shares
subject to the option, determined on the date of the grant, and the option
by its terms is not exercisable after the expiration of five years from
the date such option is granted.
(c) In each calendar year during any part of which the Plan is in
effect, no Participant (as defined below) may be granted options relating
in the aggregate to more than 1,000,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 17.
An individual receiving any option under the Plan is hereinafter referred
to as a "Participant." Any reference herein to the employment of a Participant
by the Company shall include (i) his or her employment by the Company or any of
its subsidiaries, and (ii) with respect to a Participant who was not an employee
of the Company or any of its subsidiaries at the time of grant of his or her
option, his or her period of service in the capacity for which the option was
granted. For all purposes of this Plan, the time at which an option is granted,
in the case of the grant of an option to a key employee shall be deemed to be
the effective date of such grant.
5. GRANT OF OPTIONS.
The Committee shall determine, within the limitations of the Plan, the
persons to whom options are to be granted, the number of shares that may be
purchased under each option, the option price, and shall designate options at
the time of grant as either "incentive stock options" or "nonqualified stock
options"; provided, that the aggregate fair market value (determined as of the
time the option is granted) of the Common Stock with respect to which incentive
stock options become exercisable for the first time by any Participant (as
defined in Paragraph 4) in any calendar year (under all stock option plans of
the employee's employer corporation and its parent, if any, and its
subsidiaries) shall not exceed $100,000 (the provisions of Section 422(d) of the
Code are intended to govern). In determining the persons to whom options shall
be granted and the number of shares to be covered by each option, the Committee
shall take into consideration the person's present and potential contribution to
the success of the Company and its subsidiaries and such other factors as the
Committee may deem proper and relevant. Each option granted under the Plan shall
be evidenced by a written agreement between the Company and the Participant
containing such terms and conditions and in such form, not inconsistent with the
provisions of the Plan or, with respect to incentive stock options, Section 422
of the Code, as the Committee shall provide.
6. OPTION PRICE. Subject to Paragraph 17, the option price of each
share of Common Stock purchasable under any incentive stock option or
non-qualified stock option granted under the Plan shall not be less than the
fair market value of such share of Common Stock at the time the option is
granted. The option price of an option issued in a transaction described in
Section 424(a) of the Code shall be an amount which conforms to the requirements
of that Section and the regulations thereunder.
For purposes of this Plan, the "fair market value" of the Common Stock on
any date means (i) if the Common Stock is listed on a national securities
exchange or quotation system, the closing sales price on such exchange or
quotation system on such date or, in the absence of reported sales on such date,
the closing sales price on the immediately preceding date on which sales were
reported, (ii) if the Common Stock is not listed on a national securities
exchange or quotation system, the mean between the bid and offered prices as
quoted by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") for such date or (iii) if the Common Stock is
neither listed on a national securities exchange or quotation system nor quoted
by NASDAQ, the fair value as determined by such other method as the Committee
determines in good faith to be reasonable.
7. STOCK APPRECIATION RIGHT. The Committee, in its sole discretion, may
in connection with the grant of any option also grant to the Participant a stock
appreciation right. Such stock appreciation right shall be granted by the
Committee simultaneously with the grant of the related stock option. A stock
appreciation right shall be exercised in the manner provided
C-2
in Paragraph 9, and shall result in the cancellation of options on shares with
respect to which the Participant exercises a stock appreciation right, and, upon
such exercise, the Company shall pay to the Participant an amount equal to the
excess of the fair market value of such shares with respect to which options are
cancelled on the date of exercise over the option price of such shares. A stock
appreciation right shall be exercisable to the same extent and under the same
conditions as the underlying option, except that a stock appreciation right
granted in connection with an incentive stock option may be exercised only when
the fair market value of the shares subject to the option exceeds the option
price of such shares. Payments on the exercise of stock appreciation rights
shall be made by the Company in cash to the Participant as soon as practicable
following exercise.
8. EXERCISABILITY AND DURATION OF OPTIONS.
8.1 DETERMINATION OF COMMITTEE; ACCELERATION. Each option granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the agreement evidencing the option. Subsequent to the grant of an
option which is not immediately exercisable in full, the Committee, at any time
before complete termination of such option, may accelerate the time or times at
which such option may be exercised in whole or in part.
8.2 AUTOMATIC TERMINATION. The unexercised portion of any option
granted under the Plan shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the following:
(a) The expiration of ten years from the date on which such option
was granted;
(b) The expiration of 30 days from the date of termination of the
Participant's employment by the Company unless a longer period is provided
by the Committee (other than a termination described in subparagraph (c)
below or in the event of termination as a result of death, in which case
expiration will be at the end of the term set forth in the option
agreement or such other time specified therein);
(c) The termination of the Participant's employment by the Company
if such termination constitutes or is attributable to a breach by the
Participant of an employment or consulting agreement with the Company or
any of its subsidiaries, or if the Participant is discharged or his or her
services are terminated for cause; or
(d) The expiration of such period of time or the occurrence of
such event as the Committee in its discretion may provide upon the
granting thereof.
The Committee or the Board of Directors shall have the right to determine
what constitutes cause for discharge or termination of services, whether the
Participant has been discharged or his or her services terminated for cause and
the date of such discharge or termination of services, and such determination of
the Committee or the Board of Directors shall be final and conclusive.
9. EXERCISE OF OPTIONS, STOCK APPRECIATION RIGHTS. Options and stock
appreciation rights granted under the Plan shall be exercised by the Participant
(or by his or her executors or administrators, as provided in Paragraph 10) as
to all or part of the shares covered thereby, by the giving of written notice of
exercise to the Company, specifying the number of shares to be purchased or the
number of shares with respect to which stock appreciation rights are being
exercised, accompanied, in the case of an option, by payment of the full
purchase price for the shares being purchased. Payment of such purchase price
shall be made (a) by check payable to the Company, (b) with the consent of the
Committee, by delivery of shares of Common Stock already owned by the
Participant for at least six months (which may include shares received as the
result of a prior exercise of an option) having a fair market value (determined
as of the date such option is exercised) equal to all or part of the aggregate
purchase price, (c) in accordance with a "cashless exercise" program established
by the Committee in its sole discretion under which if so instructed by the
Participant, shares may be issued directly to the Participant's broker or dealer
upon receipt of the purchase price in cash from the broker or dealer, (d) by any
combination of (a), (b), or (c) above, or (e) by other means that the Committee
deems appropriate. Such notice of exercise, accompanied by such payment, shall
be delivered to the Company at its principal business office or such other
office as the Committee may from time to time direct, and shall be in such form,
containing such further provisions consistent with the provisions of the Plan,
as the Committee may from time to time prescribe. The date of exercise shall be
the date of the Company's receipt of such notice. The Company shall effect the
transfer of the shares so purchased to the Participant (or such other person
exercising the option pursuant to Paragraph 10 hereof) as soon as practicable.
No Participant or other person exercising an option shall have any of the rights
of a stockholder of the Company with respect to shares subject to an option
granted under the Plan until due exercise and full payment has been made as
provided above. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date of such due exercise and full
payment. In no event may any option granted hereunder be exercised for a
fraction of a share.
C-3
10. NON-TRANSFERABILITY OF OPTIONS. Except as provided herein, no option
granted under the Plan or any right evidenced thereby shall be transferable by
the Participant other than by will or by the laws of descent and distribution,
and an option may be exercised, during the lifetime of a Participant, only by
such Participant. Notwithstanding the preceding sentence: (a) in the event of a
Participant's death during his or her employment by the Company, its parent, if
any, or any of its subsidiaries, or during the 30 day period following the date
of termination of such employment, his or her options shall thereafter be
exercisable, during the period set forth in the option agreement, or, if no
period is specifically set forth, during the remaining term of the option, by
his or her executors or administrators; and (b) the Participant, with the
approval of the Committee, may transfer his or her options (other than incentive
stock options) for no consideration to or for the benefit of the Participant's
spouse, parents, children (including stepchildren or adoptive children),
grandchildren, or siblings, or to a trust for the benefit of any of such
persons.
11. RELOAD OPTIONS. At the time an option (the "original option") is
granted, the Committee may also authorize the grant of a "reload option," which
shall be subject to the following terms:
(a) The number of shares of Common Stock subject to the reload
option shall be the number of shares, if any, used by the Participant to pay the
purchase price upon exercise of the original option, plus the number of shares,
if any, delivered by the Participant to satisfy the tax withholding requirement
relating to such exercise.
(b) The reload option shall be a nonqualified stock option.
(c) The grant of the reload option shall be effective upon the
date of exercise of the original option, and the term of the reload option shall
be the period, if any, remaining from that date to the date upon which the
original option would have expired.
(d) The grant of the reload option shall not be effective if, on
the date of exercise of the original option, the Participant is not employed by
the Company.
(e) Except as specified in (a) through (d) above, the terms of the
reload option shall be as prescribed in the preceding Paragraphs of this Plan.
12. WITHHOLDING TAX. Whenever under the Plan shares of stock are to be
delivered upon exercise of a nonqualified stock option, the Company shall be
entitled to require as a condition of delivery that the Participant remit or, in
appropriate cases, agree to remit when due an amount sufficient to satisfy all
federal, state and local withholding tax requirements relating thereto. At the
option of the Company, such amount may be remitted by check payable to the
Company, in shares of Common Stock (which may include shares received as the
result of a prior exercise of an option), by the Company's withholding of shares
of Common Stock issuable upon the exercise of any option or stock appreciation
right pursuant to the Plan, or any combination thereof. Whenever an amount shall
become payable to a Participant in connection with the exercise of a stock
appreciation right, the Company shall be entitled to withhold therefrom an
amount sufficient to satisfy all federal, state and local withholding tax
requirements relating to such amount.
13. RESTRICTIONS ON DELIVERY AND SALE OF SHARES. Each option granted
under the Plan is subject to the condition that if at any time the Committee, in
its discretion, shall determine that the listing, registration or qualification
of the shares covered by such option upon any securities exchange or under any
state or federal law is necessary or desirable as a condition of or in
connection with the granting of such option or the purchase or delivery of
shares thereunder, the delivery of any or all shares pursuant to exercise of the
option may be withheld unless and until such listing, registration or
qualification shall have been effected. The Committee may require, as a
condition of exercise of any option that the Participant represent, in writing,
that the shares received are being acquired for investment and not with a view
to distribution and agree that the shares will not be disposed of except
pursuant to an effective registration statement, unless the Company shall have
received an opinion of counsel satisfactory to the Company that such disposition
is exempt from such requirement under the Securities Act of 1933. The Committee
may require that the sale or other disposition of any shares acquired upon
exercise of an option hereunder shall be subject to a right of first refusal in
favor of the Company, which right shall permit the Company to repurchase such
shares from the Participant or his or her representative prior to their sale or
other disposition at their then current fair market value in accordance with
such terms and conditions as shall be specified in the agreement evidencing the
grant of the option. The Company may endorse on certificates representing shares
issued upon the exercise of an option such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale
as the Company, in its discretion, shall deem appropriate.
C-4
14. CHANGE IN CONTROL.
(a) In the event of a Change in Control of the Company, as defined
below, the Committee may, in its sole discretion, provide that any of the
following applicable actions be taken as a result, or in anticipation, of any
such event to assure fair and equitable treatment of Participants:
(i) accelerate the exercisability of any outstanding options
awarded pursuant to this Plan;
(ii) offer to purchase any outstanding options made pursuant
to this Plan from the holder for its equivalent cash value, as determined
by the Committee, as of the date of the Change in Control; or
(iii) make adjustments or modifications to outstanding options
as the Committee deems appropriate to maintain and protect the rights and
interests of the Participants following such Change in Control.
Any such action approved by the Committee shall be conclusive and binding
on the Company, its subsidiaries and all Participants.
(b) In no event, however, may (i) any option be exercised prior to the
expiration of six (6) months from the date of grant (unless otherwise provided
in the agreement evidencing the option), or (ii) any option be exercised after
ten (10) years from the date it was granted.
(c) To the extent not otherwise defined in this Plan, the
following terms used in this Paragraph 14 shall have the following meanings:
"Affiliate" means (a) Bear Stearns (b) any other subsidiary of the Company
and (c) any other corporation or other entity which is controlled, directly or
indirectly, by, or under common control with, the Company and which the
Committee designates as an "Affiliate" for purposes of the Plan.
"Associate" of a Person means (a) any corporation or organization of which
such Person is an officer or partner or is, directly or indirectly, the
Beneficial Owner of 10% or more of any class of equity securities, (b) any trust
or other estate in which such Person has a substantial beneficial interest or as
to which such Person serves as trustee or in a similar fiduciary capacity and
(c) any relative or spouse of such Person, or any relative of such spouse, who
has the same home as such Person or who is a director or officer of such Person
or any of its parents or subsidiaries.
"Bear Stearns" means Bear, Stearns & Co. Inc., a Delaware corporation, and
its successors and assigns.
"Beneficial Owner" has the meaning ascribed thereto in Rule 13d-3 under
the Exchange Act, except that, in any case, a Person shall be deemed the
Beneficial Owner of any securities owned, directly or indirectly, by the
Affiliates and Associates of such Person.
"Change in Control" means (a) a majority of the Board of Directors ceases
to consist of Continuing Directors; (b) any Person becomes the Beneficial Owner
of 25% or more of the outstanding voting power of the Company unless such
acquisition is approved by a majority of the Continuing Directors; (c) the
stockholders of the Company approve an agreement to merge or consolidate into
any other entity, unless such merger or consolidation is approved by a majority
of the Continuing Directors; or (d) the stockholders of the Company approve an
agreement to dispose of all or substantially all of the assets of the Company,
unless such disposition is approved by a majority of the Continuing Directors.
"Continuing Director" means any member of the Board of Directors who is a
member on the effective date of the Plan as set forth in Paragraph 19 or who is
elected to the Board of Directors after such date upon the recommendation or
with the approval of a majority of the Continuing Directors at the time of such
recommendation or approval.
"Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or a political subdivision thereof.
15. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any option
granted under the Plan shall confer upon any Participant the right to continue
as an employee of the Company or affect the right of the Company or any of its
subsidiaries, to terminate the Participant's employment at any time, subject,
however, to the provisions of any agreement of employment between the
Participant and the Company, its parent, if any, or any of its subsidiaries.
16. TRANSFER, LEAVE OF ABSENCE. For purposes of this Plan, neither (i) a
transfer of an employee from the Company to a subsidiary or other affiliate of
the Company, or vice versa, or from one subsidiary or affiliate of the Company
to another, nor (ii) a duly authorized leave of absence, shall be deemed a
termination of employment.
17. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. In the event of any
stock split, stock dividend, reclassification or recapitalization which changes
the character or amount of the Company's outstanding Common Stock while any
portion of any option theretofore granted under the Plan is outstanding but
unexercised, the Committee shall make such
C-5
adjustments in the character and number of shares subject to such options and in
the option price, as shall be equitable and appropriate in order to make the
option, as nearly as may be practicable, equivalent to such option immediately
prior to such change; provided, however, that no such adjustment shall give any
Participant any additional benefits under his or her option; and provided
further, that, with respect to any outstanding incentive stock option, if any
such adjustment is made by reason of a transaction described in Section 424(a)
of the Code, it shall be made so as to conform to the requirements of that
Section and the regulations thereunder.
If any transaction (other than a change specified in the preceding
paragraph) described in Section 424(a) of the Code affects the Company's Common
Stock subject to any unexercised option theretofore granted under the Plan
(hereinafter for purposes of this Paragraph 17 referred to as the "old option"),
the Board of Directors or any surviving or acquiring corporation may take such
action as it deems appropriate, and in conformity with the requirements of that
Section and the regulations thereunder, to substitute a new option for the old
option, in order to make the new option, as nearly as may be practicable,
equivalent to the old option, or to assume the old option.
If any such change or transaction shall occur, the number and kind of
shares for which options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
18. EXPIRATION AND TERMINATION OF THE PLAN.
18.1 GENERAL. Options may be granted under the Plan at any time and
from time to time on or prior to the tenth anniversary of the effective date of
the Plan as set forth in Paragraph 19 (the "Expiration Date"), on which date the
Plan will expire except as to options then outstanding under the Plan. Such
outstanding options shall remain in effect until they have been exercised,
terminated or have expired. The Plan may be terminated, modified or amended by
the Board of Directors at any time on or prior to the Expiration Date, except
with respect to any options then outstanding under the Plan; provided, however,
that the approval of the Company's stockholders will be required for any
amendment which (i) changes the class of employees eligible for grants, as
specified in Paragraph 4, (ii) increases the maximum number of shares subject to
grants, as specified in Paragraph 3 (unless made pursuant to the provisions of
Paragraph 17) or (iii) materially increases the benefits accruing to
participants under the Plan, within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
18.2 MODIFICATIONS. No modification, extension, renewal or other
change in any option granted under the Plan shall be made after grant, unless
the same is consistent with the provisions of the Plan and does not disqualify
an incentive stock option under the provisions of Section 422 of the Code. In
addition, the option price of an option may not be changed after grant, other
than in the case of an adjustment described in Paragraph 14 or pursuant to
Paragraph 17.
19. EFFECTIVE DATE OF PLAN. The Plan shall become effective on September
28, 1999, the date of its adoption by the Board of Directors, subject, however,
to the approval of the Plan by the Company's stockholders within 12 months of
such adoption.
C-6
PROXY
THE BEAR STEARNS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS MARCH 29, 2001 AT 5:00 P.M.
The undersigned stockholder of The Bear Stearns Companies Inc. (the "Company")
hereby appoints Alan C. Greenberg and James E. Cayne, and each of them, as
attorneys and proxies, each with power of substitution and revocation, to
represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held on March 29, 2001, and at any adjournments or postponements thereof,
with authority to vote all shares of Common Stock of the Company held or owned
by the undersigned on February 16, 2001, in accordance with the directions
indicated herein.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2, 3, 4 AND PURSUANT TO ITEM 5.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED
HEREIN, "FOR" APPROVAL OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK FROM
200,000,000 SHARES TO 500,000,000 SHARES, "FOR" APPROVAL OF THE NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN AND "FOR" APPROVAL OF AN AMENDMENT TO THE STOCK
AWARD PLAN TO INCREASE THE NUMBER OF SHARES SUBJECT TO AWARDS GRANTED UNDER THE
STOCK AWARD PLAN.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
--------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
Please mark [X]
your votes as
indicated in
this example
Item 1. ELECTION OF DIRECTORS Nominees FOR ALL NOMINEES WITHHOLD AUTHORITY
for Directors: James E. Cayne, LISTED BELOW TO VOTE FOR
Carl D. Glickman, Alan C. (except as marked to ALL NOMINEES
Greenberg, Donald J. Harrington, the contrary below) LISTED BELOW
William L. Mack, Frank T. [_] [_]
Nickell, Frederic V. Salerno,
Alan D. Schwartz, Warren J.
Spector, Vincent Tese and Fred
Wilpon.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE NAMED ABOVE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME)
Item 2. APPROVAL OF AN AMENDMENT TO THE RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION: [_] [_] [_]
Item 3. APPROVAL OF THE NON-EMPLOYEE DIRECTORS' [_] [_] [_]
STOCK OPTION PLAN:
Item 4. APPROVAL OF AN AMENDMENT TO THE STOCK [_] [_] [_]
AWARD PLAN:
Item 5. In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any adjournments
or postponements thereof.
Signature(s)___________________________________________ Date _____________, 2001
(Please date and sign exactly as name appears hereon. When signing as attorney,
administrator, trustee, custodian or guardian, give full title as such. Where
more than one owner, all should sign. Proxies executed by a partnership or
corporation should be signed in the full partnership or corporate name by a
partner or authorized officer.)
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[LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT]
March 2, 2001
VIA EDGAR
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Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Definitive Proxy Statement on Schedule 14A -
The Bear Stearns Companies Inc.
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Ladies and Gentlemen:
We hereby file the Definitive Proxy Statement on Schedule 14A pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on behalf of
The Bear Stearns Companies Inc. (the "Company") in connection with the Company's
2001 Annual Meeting of Stockholders.
Pursuant to Exchange Act Rules 14a-3(c) and 14a-6(b), copies of the Company's
Proxy Statement and 2000 annual report in the form mailed to stockholders will
be furnished to the Securities and Exchange Commission under separate cover.
Please telephone the undersigned at (212) 504-5555 if you have any questions or
comments.
Very truly yours,
/s/ Dennis J. Block
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Dennis J. Block
Enclosures
cc: The Bear Stearns Companies Inc.