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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (AMENDMENT NO.(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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 Commission Only (as permitted
by Rule 14a-6(e)(2))
[X]/X/ Definitive Proxy Statement
[ ]/ / Definitive Additional Materials
[ ]/ / Soliciting Material Pursuant to Section 240.14a-11(c)Section240.14a-11(c) or
Section 240.14a-2.Section240.14a-12
LEHMAN__________________________LEHMAN BROTHERS HOLDINGS INC.
- --------------------------------------------------------------------------------INC._________________________
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------________________________________________________________________________________
(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 0-12.
(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
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/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
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/ / Fee paid previously with preliminary materials.
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the offsetting fee was paid previously. Identify the previous
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- -------------------------------------------------------------------- LEHMAN BROTHERS HOLDINGS INC.
----------------------------------------------------------------------
RICHARD S. FULD, JR. BROTHERS
Chairman and Chief Executive Officer
HOLDINGS
INC.
February 14, 199724, 2000
Dear Stockholder:
The 2000 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
(the
"Company") will be held on Wednesday, March 26, 1997,Tuesday, April 4, 2000, at 10:30 a.m. (New York Time), attime) in the
26th Floor Auditorium of 3 World Financial Center, 200 Vesey Street, New York,
New York 10285. A notice of the meeting, a proxy card and a proxy statement
containing information about the matters to be acted upon are enclosed. You are
cordially invited to attend.
Please note that this year we have introduced online voting via the internet
as an alternative to telephonic voting and the traditional proxy card method.
All holders of record of the Company's outstanding shares of Common Stock,
Cumulative Convertible Voting Preferred Stock, Series A and Series B, and
Redeemable Voting Preferred Stock asat the close of business on February 5, 199715, 2000
will be entitled to vote at the Annual Meeting. It is important that your shares
be represented at the meeting. You will be asked to (i) elect three Class III
Directors andDirectors; (ii) ratify the Board
of Directors' selection of Ernst & Young LLP as the Company's
independent auditors for the 19972000 fiscal year.year; and (iii) approve an amendment to
the 1996 Management Ownership Plan to increase the number of shares of Common
Stock with respect to which awards may be granted under the Plan from
15.5 million to 21 million shares. Accordingly, we request that you promptly
sign, date and return the enclosed proxy card, or register your vote online or
by telephone according to the instructions on the proxy card, regardless of the
number of shares you hold.
Very truly yours,
/s/ Richard S. Fuld, Jr.
------------------------------
RICHARD S. FULD, JR.[LOGO]
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LEHMAN BROTHERS HOLDINGS INC.
------------------------------------------
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Lehman Brothers Holdings Inc.:
The 2000 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
(the "Annual Meeting""Company") of the Company will be held on Wednesday, March 26, 1997,Tuesday, April 4, 2000, at 10:30 a.m. (New York
Time), attime) in the 26th Floor Auditorium of 3 World Financial Center, 200 Vesey
Street, New York, New York 10285, to:
(1)1. Elect three Class III Directors for terms of three years each;
(2)2. Ratify the Board of Directors' selection of Ernst & Young LLP as the Company's independent
auditors for the 19972000 fiscal year;
3. Approve an amendment to the 1996 Management Ownership Plan to increase
the number of shares of Common Stock with respect to which awards may be
granted under the Plan from 15.5 million to 21 million shares; and
(3)4. Act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business on February 15, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
THE COMPANY WILL ADMIT TO THE ANNUAL MEETING ALL STOCKHOLDERS OF RECORD AT
THE CLOSE OF BUSINESS ON FEBRUARY 15, 2000, ANY PERSONS HOLDING PROOF OF
BENEFICIAL OWNERSHIP OR WHO HAVE BEEN GRANTED PROXIES AND ANY OTHER PERSON THAT
THE COMPANY, IN ITS SOLE DISCRETION, MAY ELECT TO ADMIT. IF YOU PLAN TO ATTEND
THE ANNUAL MEETING, PLEASE CHECK THE APPROPRIATE BOX ON YOUR PROXY CARD OR
REGISTER YOUR INTENTION WHEN VOTING ONLINE OR BY TELEPHONE ACCORDING TO THE
INSTRUCTIONS ON THE PROXY CARD.
Stockholders of record at the close of business on February 5, 1997 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. A list of such Stockholders will be available at the Annual Meeting
and, during the ten days prior thereto, at the office of the Company's Corporate
Secretary, 3 World Financial Center, 24th Floor, New York, New York 10285.
A copy of the Company's Annual Report to Stockholders is enclosed herewith
unless the Stockholder is afor all Stockholders other than Lehman Brothers employee. The Company'semployees, to whom the Annual
Report to Stockholders is being separately distributed to Lehman Brothers
employees.distributed.
By Order of the Board of Directors
/s/ Karen C. Manson
----------------------------------
KAREN C. MANSON[LOGO]
Jennifer Marre
Secretary
New York, New York
February 14, 199724, 2000
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID
ENVELOPE.ENVELOPE, OR REGISTER YOUR VOTE ONLINE OR BY TELEPHONE ACCORDING TO THE
INSTRUCTIONS ON THE PROXY CARD.
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LEHMAN BROTHERS HOLDINGS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
February 14, 199724, 2000
PROXY STATEMENT
------------------------
INTRODUCTION
VOTE BY PROXY. This proxy statement ("Proxy(the "Proxy Statement") is furnished in
connection with the solicitation of the accompanying proxyproxies by the Board of Directors of the CompanyLehman
Brothers Holdings Inc. (the Company,"Company" and, together with its subsidiaries, the
"Firm") for use at the Company's2000 Annual Meeting of Stockholders of the Company to be
held on Wednesday, March 26, 1997Tuesday, April 4, 2000 at 10:30 a.m. (New York Time)time), or any adjournment
thereof ("Annual(the "Annual Meeting"). ThisThe Company expects to mail this Proxy Statement
and the accompanying proxy ("proxy card" or
"proxy") are expectedcard to be mailed tothe Company's stockholders of record at the
Company
("Stockholders"close of business on February 15, 2000 (the "Stockholders") on or about
February 14, 1997.24, 2000.
You are cordially invited to attend the Annual Meeting, but whether or not
you expect to attend in person, you are urged to complete, sign and date the
enclosed proxy card and return it as promptly as possible in the enclosed,
prepaid envelope.envelope, or vote your shares online or by telephone according to the
instructions on the proxy card. Stockholders have the right to revoke their
proxies at any time prior to the time their shares are actually voted by
(i) giving written notice to the Corporate Secretary of the Company, (ii) by
subsequently filing a later dated proxy or (iii) by attending the Annual Meeting
and voting in person. Please note that attendance at the meeting will not by
itself revoke a proxy.
The enclosed proxy indicates on its face the number of shares of common and/or
voting preferred stock registered in the name of each Stockholder at the close
of recordbusiness on February 5, 1997.15, 2000 (the "Record Date"). Proxies furnished to
Company employees also indicate the number of shares, if any, (i) held by the
employee under the Lehman Brothers Holdings Inc. Employee Stock Purchase Plan
("ESPP"(the "ESPP"), (ii) allocatedthat relate to the employee'stotal number of restricted stock unit
awards granted to the employee pursuant to various of the Company's Plans (as
defined below), which shares are held, in part, in the 1997 Trust Under Lehman
Brothers Holdings Inc. Employee Stock Ownership Plan ("ESOP"Incentive Plans (the "1997 Trust") account, and (iii) held by the
employee in a brokerage accountsaccount at the Company's wholly owned subsidiary, Lehman
Brothers Inc. ("LBI") and/or a brokerage account at Fidelity Brokerage
Services, Inc. ("Fidelity Brokerage"). Proxies returned by employees who participate in the ESOP will be
considered to be voting instructions returned to the ESOP trustee ("ESOP1997 Trust Trustee (the
"1997 Trust Trustee") with respect to the number of shares allocated to such participant's account. Pursuantdetermined pursuant
to the terms of the ESOP trust agreement governing the ESOP1997 Trust. The 1997 Trust Trustee
shall vote unallocated shares and
allocated shares for which noimplement such voting instructions are received in a manner that
the Trustee judges to be in the best interest of participants in the ESOP.as described below under "The Voting
Stock." Proxies returned by employees with LBI brokerageor Fidelity Brokerage accounts
will be considered to be voting instructions returned to LBI or Fidelity
Brokerage, as applicable, with respect to the shares held in each such accounts.account.
Under the Lehman Brothers Holdings Inc. Tax Deferred Savings Plan ("TDSP"(the "TDSP"),
the trustees of the TDSP shall vote all the shares held in participating
employees' accounts in a manner which they believethat such trustees judge to be in the best
interest of the TDSP participants.
CONFIDENTIAL VOTING. The proxies, ballots and voting tabulations relating
to individual Stockholders are kept private by the Company. Such documents are
available for examination only by Inspectors of Election and certain employees
of the Company's tabulating agents engaged in processing proxy cards and
tabulating votes. The vote of any Stockholder is not disclosed to management
except as may be necessary to meet legal requirements. However, all comments
directed to management from Stockholders, whether written on the proxy card or
elsewhere, will be forwarded to management.
GENERAL. Unless contrary instructions are indicated on the proxy or in a
vote registered online or by telephone, all shares represented by valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted as follows:
FOR the election of the three nominees for Class III Directors named below;
and
FOR the ratification of the Board of Directors' selection of Ernst & Young
LLP as the Company's independent auditors for the 19972000 fiscal year.year; and
FOR the approval of an amendment (the "1996 Plan Amendment") to the
Company's 1996 Management Ownership Plan (the "1996 Plan") to increase the
number of shares of Common Stock
with respect to which awards may be granted under the 1996 Plan from
15.5 million to 21 million shares.
In the event a Stockholder specifies a different choice on the proxy or by
online or telephone vote, his or her shares will be voted in accordance with the
specification so made. 5Confidential voting is not provided for in the Company's
Certificate of Incorporation or By-Laws.
The Company's 19961999 Annual Report has been distributed to Stockholders in
connection with this solicitation. A COPY OF THE COMPANY'S ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION (THEcopy (exclusive of exhibits) of the
Company's 1999 Form 10-K as filed with the Securities and Exchange Commission
(the "SEC") ON FORM 10-K, EXCLUSIVE OF
EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO: LEHMAN BROTHERS HOLDINGS
INC.may be obtained without charge by writing to: Lehman Brothers
Holdings Inc., 3 WORLD FINANCIAL CENTER, 24TH FLOOR, NEW YORK, NEW YORKWorld Financial Center, 24th Floor, New York, New York 10285
ATTN.Attn.: CORPORATE SECRETARY.Corporate Secretary. The Company's 19961999 Annual Report and 1996 Annual Report on1999 Form 10-K
also will be available through the Lehman Brothers Web Site:web site at
http://www.lehman.com.
COST OF SOLICITATION. The cost of soliciting these proxies will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
directors, officers or employees of the Company in person or by telephone or
telegram, or other means of communication, for which no additional compensation
will be paid. The Company has engaged the firm of Georgeson & CompanyShareholder
Communications Inc. to assist the Company in the distribution and solicitation
of proxies. The Company has agreed to pay Georgeson a fee of $15,000$11,000 plus
expenses for its services.
The Company also will reimburse brokerage houses, including the Company's
wholly-owned subsidiary, LBI, and other
custodians, nominees and fiduciaries for their reasonable expenses, in
accordance with the rules and regulations of the SEC, the New York Stock
Exchange, Inc. ("NYSE") and other exchanges, in sending proxies and proxy
materials to the beneficial owners of shares of the Company's voting securities.
THE VOTING STOCK. The Company has three classesfour series of voting stock: Common
Stock, par value $.10 per share (the "Common Stock"), Cumulative Convertible
Voting Preferred Stock, Series A, par value $1.00 per share (the "Series A
Preferred Stock"), Cumulative Convertible Voting Preferred Stock, par value
$1.00 per share (the "Series B Preferred Stock"), and Redeemable Voting
Preferred Stock, par value $1.00 per share ("Redeemable Preferred Stock") (the
Series A Preferred Stock, Series B Preferred Stock and Redeemable Preferred
Stock are collectively referred to herein as the "Preferred
Stock""Voting Preferred Stock," and
the Common Stock and the Voting Preferred Stock are collectively referred to
herein as the "Voting Stock").
As of February 5, 1997, therethe Record Date, the following shares of Voting Stock were
100,808,526outstanding:
- 120,798,286 shares of Common Stock outstanding (exclusive of 6,345,3661,841,927 shares held in
the treasury), each of which
is entitled to one vote per share with respect to each matter to
be voted on at the Annual Meeting,
and there were outstanding 13,000,000- 2,300 shares of Series A Preferred Stock, entitled to .3178313 votes per
share,
- 3,834,017 shares of Series B Preferred Stock, entitled to .3178313 votes
per share, and
- 1,000 shares of Redeemable Preferred Stock, each of which is entitled to .3178313 and 1,059 votes per
share, respectively.share.
There is no cumulative voting provision for Common Stock or Voting Preferred
Stock. The Common Stock and the Voting Preferred Stock will vote together as a
single class on each matter to be voted on at the meeting.
The four classes of Voting Stock will represent the following aggregate
votes at the Annual Meeting:
- The Common Stock will represent an aggregate of 120,798,286 votes, or
98.1488% of the total number of votes entitled to be cast,
- The Series A Preferred Stock will represent an aggregate of 731.01 votes,
or 0.0006% of the total number of votes entitled to be cast,
2
- The Series B Preferred Stock will represent an aggregate of 1,218,570.61
votes, or 0.9901% of the total number of votes entitled to be cast, and
- The Redeemable Preferred Stock will represent an aggregate of 1,059,000
votes, or 0.8605% of the total number of votes entitled to be cast.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of the shares of Common Stock and Voting Preferred Stock outstanding
and entitled to vote on the Record Date shall constitute a quorum.
The 1997 Trust holds shares of Common Stock ("Trust Shares") issuable to
future, current and former employees of the Company in connection with the
granting to such employees of restricted stock unit awards ("RSU Awards") under
the Company's Employee Incentive Plan (the "Employee Incentive Plan"), the
Company's 1994 Management Ownership Plan (the "1994 Plan") and the Company's
1996 Management Ownership Plan (together with the Employee Incentive Plan and
the 1994 Plan, the "Plans").
The 1997 Trust provides that the 1997 Trust Trustee will vote all Trust
Shares in accordance with instructions received from persons who have received
RSU Awards under the Plans ("Current Participants"). For each Current
Participant, the 1997 Trust Trustee shall vote or abstain from voting, according
to instructions received from such Current Participant, with respect to that
number of Trust Shares that results from multiplying (x) the number of Trust
Shares existing on the Record Date by (y) a fraction, the numerator of which is
the number of RSU Awards held by such Current Participant and as to which the
1997 Trust Trustee has received voting instructions from such Current
Participant, and the denominator of which is the total number of RSU Awards held
by all Current Participants and as to which the 1997 Trust Trustee has received
voting instructions. As is the case for all Voting Stock of the Company, voting
instructions given with respect to RSU Awards will not be confidential.
As of February 5,the Record Date, 25,557,589 Trust Shares (representing 20.7656% of the
votes entitled to be cast at the Annual Meeting) were held by the 1997 Trust.
As of the Record Date, American Express Company ("American Express") owned
no sharesor one
or more of Common Stock andits subsidiaries owned 92.8% of the outstanding shares of Redeemable
Preferred Stock, representing less than 1% of the Voting Stock.votes entitled to be cast at
the Annual Meeting. American Express has agreed that so long as it or any of its
subsidiaries holds any shares of the
Redeemable Preferred Stock, it will vote such
shares or cause such shares to be voted in the same proportion as the votes cast
by the holders of shares of Common Stock on matters to be voted on by
Stockholders.
As of February 5, 1997, Nippon Life Insurance Company ("Nippon Life") owned
70.5% and 7.2% of the outstanding shares of the Series A Preferred Stock and
Redeemable Preferred Stock, respectively, and approximately 5.4% of the
outstanding Common Stock, representing in the aggregate approximately 8.0% of
the outstanding Voting Stock.
STOCKHOLDERS ENTITLED TO VOTE. Only Stockholders of record aton the close of
business on February 5, 1997 will beRecord
Date are entitled to notice of and to vote at the Annual Meeting.
2Meeting or any
adjournment thereof.
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INFORMATION AS TO CERTAINSECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
To the knowledge of management, except for the 1997 Trust (described above)
and as described below, no person beneficially owned more than five percent of
any class of Voting Stock as of December 31, 1996.the Record Date.
NUMBER OF PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER SHARES CLASS
- ------------------------------------------- ------------------------- ------------------------ ---------------------------------- --------- ----------
Common Stock...............................Stock.............................. FMR Corp.(a) 13,109,621(b) 13.0%
Common Stock............................... Nippon Life(c) 8,400,307(d) 8.4%
Common Stock...............................6,328,483 (b) 5.2
The Prudential Insurance 7,153,636(f) 7.1%
Company
of America(e)
Cumulative Convertible Voting
Preferred Stock, Series A................ Nippon Life(c) 9,163,683 70.5%America (c) 6,311,386 (d) 5.2
Redeemable Voting Preferred Stock..........Stock......... American Express(g) 928(h) 92.8%
Redeemable Voting Preferred Stock..........Express (e) 928 (f) 92.8
Nippon Life(c)Life Insurance Company (g) 72 7.2%(h) 7.2
- ---------------------------------------
(a) TheAccording to Schedule 13G, filed February 14, 2000 (the "Fidelity
Schedule 13G"), filed by FMR Corp. ("Fidelity"), Edward C. Johnson 3d and
Abigail P. Johnson, the address of FMR Corp. is 82 Devonshire Street,
Boston, MAMassachusetts 02109.
(b) Based on Amendment No. 3 toThe information in this footnote has been extracted from the Fidelity
Schedule 13G, dated February 14, 1997, filed by
FMR Corp. and Edward C. Johnson 3rd. Includes 12,650,301the number of shares beneficially
owned byshown is as of December 31, 1999. On
such date, Fidelity Management & Research Company ("Fidelity Management &
Research"), a registered investment
adviser,wholly-owned subsidiary of Fidelity, was the beneficial owner
of 5,527,531 shares of Common Stock as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 19401940. On such date, (1) Edward C. Johnson 3d,
chairman of Fidelity, (2) Fidelity, through its control of Fidelity
Management & Research, and serving as investment adviser(3) certain unspecified funds (the "Funds"), each
had sole power to certain other fundsdispose of the 5,527,531 shares owned by the Funds.
Neither Fidelity nor Edward C. Johnson 3d had the sole power to vote or
direct the voting of the shares owned directly by the Funds, which are generally
offered to limited groupspower
resides with the Funds' Boards of investors; 355,620Trustees. Fidelity Management & Research
carries out the voting of the shares beneficially ownedunder written guidelines established by
the Funds' Boards of Trustees. Also on such date, Fidelity Management Trust
Company ("Fidelity Management Trust"), a bank andwholly-owned subsidiary of
FMR Corp., as a
resultFidelity, was the beneficial owner of its serving as trustee or managing agent for various private
investment accounts, primarily employee benefit plans and serving as
investment adviser to certain other funds which are generally offered to
limited groups789,722 shares of investors; and 103,700 shares beneficially owned by
Fidelity International Limited, an entity independent of FMR Corp.,Common Stock as a
result of its serving as investment adviser to various non-U.S. investment
companies. FMR Corp. hasmanager of certain unspecified
institutional account(s) (the "Accounts"). Edward C. Johnson 3d and
Fidelity, through its control of Fidelity Management Trust, each had sole
votingdispositive power over 327,340789,722 shares and sole dispositive power with respect to 13,009,621 shares.vote or to direct
the voting of 684,482 shares, and no power to vote or to direct the voting
of 105,240 shares of Common Stock owned by the Accounts. An additional
11,230 shares were owned by Fidelity International Limited ("FIL") has, which
had sole voting and dispositive power with respect to all
the shares it beneficially owns. Edward C. Johnson 3rd, Chairman of FMR
Corp., Abigail Johnson, an FMR Director, and members of the Johnson family
may be deemed to be a controlling group of FMR Corp. FMR Corp. and FIL each
disclaim beneficial ownership of shares held by the others.
(c) The address of Nippon Life is 2-2, Yurakucho, 1-Chome, Chiyoda-ku, Tokyo,
100, Japan.
(d) Includes 2,912,505 shares of Common Stock issuable upon conversion of the
Series A Preferred Stock. Based upon information furnished by Nippon Life,
Nippon Life has sole investmentvote and sole voting power over allto dispose of such shares. (e) The addressFIL
provides investment advisory services to various investment companies and
certain institutional investors. Prior to June 30, 1980, FIL was a
majority-owned subsidiary of Fidelity Management & Research. FIL currently
operates as an entity independent of Fidelity and Fidelity Management &
Research.
(c) According to Amendment No. 4 to Schedule 13G, filed January 31, 2000 (the
"Prudential Schedule 13G"), filed by The Prudential Insurance Company of
America ("Prudential"), the address of Prudential is 751 Broad Street,
Newark, NJNew Jersey 07102.
(f) Based on Amendment No. 1 to4
(d) The information in this footnote has been extracted from the Prudential
Schedule 13G, dated January 27, 1997, filed by
Prudential.and the number of shares shown is as of December 31, 1999. On
such date, Prudential has soleheld 13,400 shares of Common Stock for the benefit of
its general account. In addition, Prudential disclosed that it may have had
direct or indirect voting and/or investment and sole voting powerdiscretion over 13,8876,297,986 shares
and shared voting and shared dispositive power over 7,139,749 shares.
These shares areof Common Stock which were held for the benefit of Prudentialits clients by its
separate accounts, externally managed accounts, registered investment
companies, subsidiaries and/or other affiliates. (g)Prudential also had sole
power to vote or to direct the vote and sole power to dispose or direct the
disposition of 241,087 shares, shared power to vote 5,981,816 shares and
shared power to dispose or direct the disposition of 6,070,299 shares.
(e) The address of American Express is 3 World Financial Center, New York, New
York 10285.
(h)(f) Based on information furnished by American Express, American Express has
sole investment and sole voting power over all shares.
3(g) The address of Nippon Life Insurance Company ("Nippon Life") is 2-2,
Yurakucho, 1-Chome, Chiyoda-ku, Tokyo, 100-8444, Japan.
(h) Based upon information furnished by Nippon Life, Nippon Life also
beneficially owns 4,239,292 shares of Common Stock, representing 3.5% of
that class as of the Record Date, and has sole investment and sole voting
power over all shares.
5
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PROPOSAL 1
ELECTION OF CLASS III DIRECTORS
At the Annual Meeting three Class III Directors are to be elected, each to
serve until the Annual Meeting in 20002003 and until his or her successor is elected
and qualifies.qualified. The Restated Certificate of Incorporation of the Company
establishes a classified Board of Directors with three classes, designated
Class I, Class II and Class III. The terms of the Class III and Class III Directors
continue until the Annual Meetings in 19992001 and 1998, respectively.2002, respectively, and until
their respective successors are elected and qualified.
The three nominees for Director are:are Thomas H. Cruikshank, Henry Kaufman and
John D. Macomber. Messrs. Cruikshank, Kaufman and Macomber, who were first elected
Class III Directors in 1996, 1995 and 1994,
respectively.
TheProvided that a majority of the outstanding Voting Stock votes on the
proposal, the three nominees receiving the greatest number of votes cast by the
holders of the Voting Stock will be elected as Class III Directors of the
Company. Unless authority toAbstentions and broker non-votes will be disregarded and will have no
effect on the vote is withheld,for directors. Except as stated in the following sentence,
the persons specified inon the enclosed proxy card intend to vote for the aforementioned nominees
listed below, all of whom have consented to being named in this Proxy Statement
and to serving if elected. Although management knows of no reason why any
nominee would be unable to serve, the persons designated as proxies reserve full
discretion to vote for another person in the event any such nominee is unable to
serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
The following information is provided with respect to the nominees for
Director and the incumbent Directors. Italicized wording indicates principal
occupation.occupation(s).
NOMINEES FOR ELECTION AS CLASS III DIRECTORS TO SERVE
UNTIL THE 20002003 ANNUAL MEETING OF STOCKHOLDERS
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 65
Retired
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 68
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF HALLIBURTON
COMPANY. Mr. Cruikshank was the Chairman and Chief Executive Officer of
Halliburton Company. Mr.
Cruikshank was the Chairman of Halliburton Company, a major petroleum industry service company, from 1989 to
1995. He joined the company in 1969, and served as a Director from 1977 to 1996.
Mr. Cruikshank is a member of the Board of Directors of The Goodyear Tire &
Rubber Company and The Williams Companies, Inc., Central and
South West Corporation, and Seagull Energy Corporation. He is Mr. Cruikshank serves as a
member of the Company's Audit Committee.
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 72
PRESIDENT OF HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 69
President of Henry Kaufman & Company, Inc.COMPANY, INC. Dr. Kaufman has been President of
Henry Kaufman & Company, Inc., an investment management and economic and
financial consulting firm, since 1988. For the previous 26 years, he was with
Salomon Brothers Inc, where he was a Managing Director, Member of the Executive
Committee, and in charge of Salomon's four research departments. He was also a
Vice Chairman of the parent company, Salomon Inc. Before joining Salomon
Brothers, Dr. Kaufman was in commercial banking and served as an economist at
the Federal Reserve Bank of New York. Dr. Kaufman is a Director of Federal Home
Loan Mortgage Corporation and W. R. Berkley Corporation. He is the Chairman of
the Board of Trustees of the Institute of International Education, a member of
the Board of Trustees of New York University, the Chairman of the Board of
Overseers of the Stern School of Business of New York University and the Presidenta Member of
the Board of Trustees of the Animal Medical Center. Dr. Kaufman is a Member of
the Board of Trustees of the Whitney Museum of American Art, a Member of the
International Capital Markets Advisory Committee of the Federal Reserve Bank of
New York, a Member of the Advisory Committee to the Investment Committee of the
6
International Monetary Fund Staff Retirement Plan and a Member of the Board of
Governors of Tel-Aviv University. Dr. Kaufman has
been a Director ofserves as the Company since 1995. He is Chairman of the
Company's
Finance Committee and as a member of the Nominating Committee.
4
8
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 69
Principal of
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 72
PRINCIPAL OF JDM Investment Group.INVESTMENT GROUP. Mr. Macomber has been a Principal of JDM
Investment Group, a private investment firm, since 1992. He was Chairman and
President of the Export-Import Bank of the United States from 1989 to 1992,
Chairman and Chief Executive Officer of Celanese Corporation from 1973 to 1986
and a Senior Partner at McKinsey & Co. from 1954 to 1973. Mr. Macomber is a
Director of Bristol-Myers Squibb Company, The Brown Group, Inc., Pilkington
Ltd.,IRI International, Mettler-Toledo International, and Textron Inc. and Xerox Corporation. He is also a Director of the Atlantic
Council of the United States, the French-American Foundation and the National
Executive Services Corps. Mr. Macomber
is Chairman of the Council for Excellence in Government. Mr. Macomber is on the Advisory BoardGovernment, Rand McNally & Company
and Vice Chairman of the Center for Strategic
& International StudiesAtlantic Council. He is a Director of the National
Campaign to Prevent Teen Pregnancy and the Yale School of Management. He isSmithsonian Institute and a Trustee
of the Carnegie Institution of Washington and the Folger Library. He is also a
member of the Council on Foreign Relations and the Bretton Woods Committee. Mr. Macomber
has been a Director ofserves as the Company since 1994. He is Chairman of the
Company's Compensation and Benefits Committee and as a
member of the Company's
Executive Committee and the Nominating Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
CLASS II DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
19982001 ANNUAL MEETING OF STOCKHOLDERS
MICHAEL L. AINSLIE DIRECTOR SINCE 1996 AGE: 53
Private Investor and former President and Chief Executive Officer of
Sotheby's Holdings. Mr. Ainslie, a private investor, is the former President,
Chief Executive Officer and a director of Sotheby's Holdings. He was Chief
Executive Officer of Sotheby's from 1984 to 1994. From 1980 to 1984 he was
President of the National Trust for Historic Preservation. From 1975 to 1980 he
was Chief Operating Officer of N-Ren Corp., a Cincinnati based chemical
manufacturer. From 1971 to 1975, he was President of Palmas Del Mar, a real
estate development company. He began his career as an associate with McKinsey
and Company. He is Vice Chairman of the Board of Directors of the New York
Landmarks Conservancy, as well as a Trustee of Vanderbilt University. Mr.
Ainslie serves as a Director of the United States Tennis Association and is also
Chairman of the Posse Foundation. He is a member of the Company's Audit
Committee.
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 66
Theatrical Producer.
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 69
THEATRICAL PRODUCER. Roger S. Berlind, who is also a private investor, has been
a theatrical producer and principal of Berlind Productions since 1981.
Mr. Berlind is also a Director of LBI, a Governor of the League of American
Theaters and Producers and has served as a Trustee of Princeton University, the
Eugene O
NeillO'Neill Theater Center and the American Academy of Dramatic Arts.
Mr. Berlind has
been a Director ofserves as the Company since 1985. He is Chairman of the Company's Audit Committee and as a member of the
Finance Committee.
DINA MERRILL
HIDEICHIRO KOBAYASHI DIRECTOR SINCE 1997 AGE: 55
DIRECTOR SINCE 1988 AGE: 68
Vice ChairmanAND GENERAL MANAGER FOR THE AMERICAS OF NIPPON LIFE. Mr. Kobayashi has
been affiliated with Nippon Life, Japan's largest insurance company, since 1967,
has been General Manager for the Americas since April 1997 and has been a
Director since July 1997. Mr. Kobayashi was General Manager for the
International Finance Department from 1995 to 1997 and was General Manager of
RKO Pictures,the International Finance and Planning Department from 1994 to 1995. He was
General Manager of the International Finance Department from 1993 to 1994.
Mr. Kobayashi was General Manager of the International Investment Department of
Nippon Life from 1992 to 1993 and President of NLI International Inc. and Actress.Chief
Representative of New York from 1989 to 1992. Mr. Kobayashi has been a Director
since May 1997 of PanAgora Asset Management, Inc. Mr. Kobayashi serves as a
member of the Audit Committee and the Finance Committee.
DINA MERRILL DIRECTOR SINCE 1988 AGE: 71
DIRECTOR AND VICE CHAIRMAN OF RKO PICTURES, INC. AND ACTRESS. Dina Merrill, a
Director and Vice Chairman of RKO Pictures, Inc., is an actress and also a
private investor. Ms. Merrill was a Presidential Appointee to the Kennedy Center
Board of Trustees and is a Vice President of the New York City Mission Society,
a Trustee of the Eugene O'Neill Theater Foundation and a member of the boardBoard of
Project Orbis, the Juvenile Diabetes Foundation and the Museum of Television and
Radio. Ms. Merrill has been a Director of the Company since 1988. She isserves as a member of the Company's Compensation and Benefits Committee
and the Nominating Committee.
57
9
MASATAKA SHIMASAKI DIRECTOR SINCE 1994 AGE: 53
Director and General Manager for the Americas of Nippon Life. Mr.
Shimasaki has been affiliated with Nippon Life, Japan's largest insurance
company, since 1967, has been General Manager for the Americas since March 1994,
and has been a Director since July 1994. He was General Manager, International
Planning Department of Nippon Life from 1993 until March 1994. Mr. Shimasaki was
General Manager of Nippon Life's International Finance Department from 1990
until 1993, and Chief Representative of Nippon Life's London Representative
Office from 1988 through 1990. Mr. Shimasaki is also a Director of PanAgora
Asset Management, Inc. Mr. Shimasaki has been a Director of the Company since
1994. He is a member of the Company's Audit Committee and the Company's Finance
Committee.
CLASS I DIRECTORS WHOSE TERMS CONTINUE
UNTIL THE 19992002 ANNUAL MEETING OF STOCKHOLDERS
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 62
Retired
MICHAEL L. AINSLIE DIRECTOR SINCE 1996 AGE: 56
PRIVATE INVESTOR AND FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF SOTHEBY'S
HOLDINGS. Mr. Ainslie, a private investor, is the former President, Chief
Executive Officer and a Director of Sotheby's Holdings. He was Chief Executive
Officer of Sotheby's from 1984 to 1994. From 1980 to 1984 he was President and
Chief Executive Officer of the National Trust for Historic Preservation. From
1975 to 1980 he was Chief Operating Officer of N-Ren Corp., a Cincinnati-based
chemical manufacturer. From 1971 to 1975, he was President of Palmas Del Mar, a
real estate development company. He began his career as an associate with
McKinsey & Company. Mr. Ainslie is a Director of the St. Joe Company and Artesia
Technologies, an internet software provider. He is a Trustee of Vanderbilt
University. Mr. Ainslie serves as a Director of the United States Tennis
Association and is also Chairman of International Business Machines Corporation.the Posse Foundation. Mr. Ainslie serves as
a member of the Audit Committee.
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 65
RETIRED CHAIRMAN OF INTERNATIONAL BUSINESS MACHINES CORPORATION. Mr. Akers, a
private investor, is the retired Chairman of the Board of Directors of
International Business Machines Corporation. Mr. Akers served as Chairman of the
Board of Directors and Chief Executive Officer of IBM from 1985 until his
retirement on May 1, 1993, completing a 33-year career with IBM. Mr. Akers is a
Director of W. R. Grace & Co., theThe New York Times Company, PepsiCo, Inc.,
Hallmark Cards, Inc. and Springs Industries and a member of the U.S. Advisory
Board of Zurich Insurance Company and the Advisory Board of Directorship.Industries. He is a former member of the Board
of Trustees of the California Institute of Technology and The Metropolitan
Museum of Art, as well as the former Chairman of the Board of Governors of
United Way of America. Mr. Akers is also a former member of President George
Bush's Education Policy Advisory Committee. He isMr. Akers serves as a member of the
Company's Finance Committee and the Compensation and Benefits Committee.
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 50
Chairman and Chief Executive Officer.
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 53
CHAIRMAN AND CHIEF EXECUTIVE OFFICER. Mr. Fuld has been Chairman of the Board
of Directors of the Company and LBI since April 1994 and Chief Executive Officer
of the Company and LBI since November 1993. He is alsoMr. Fuld serves as the Chairman of
the Executive Committee and as Chairman and a nonvoting member of the Corporate ManagementNominating
Committee. Mr. Fuld was President and Chief Operating Officer of the Company and
LBI from March 1993 to April 1994 and was Co-President and Co-Chief Operating
Officer of both corporations from January 1993 to March 1993. He was President
and Co-Chief Executive Officer of the Lehman Brothers Division of Shearson
Lehman Brothers Inc. from August 1990 to March 1993. Mr. Fuld was a Vice
Chairman of LBIShearson Lehman Brothers from August 1984 until 1990. He also serves as a Director and
executive officer of several of the Company's subsidiaries. Mr. Fuld has
been a Director of LBI since 1984 and1984. Mr. Fuld joined Lehman Brothers in 1969.
Mr. Fuld is a Directormember of the Company since 1990.Board of Governors of the New York Stock Exchange
and is Chairman of the U.S. Thailand Business Council (USTBC). He is also a
former member of the President's Advisory Committee on Trade Policy
Negotiations. Mr. Fuld is a trustee of the Mount Sinai Medical Center, and
former Chairman of the Mount Sinai Children's Center Foundation. He currently
serves on the foundation's Executive Committee. In addition, he is a member of
the University of Colorado Business Advisory Council, is a member of the
Executive Committee of Mount Sinai Children's Center Foundation, a trusteethe New York City Partnership and serves on the Board of
Wilbraham & Monson
Academy and a DirectorDirectors of Ronald McDonald House and the New York Stock Exchange.
He is Chairman of the Company's Executive Committee and Chairman and a
non-voting member of the Company's Nominating Committee.
KATSUMI FUNAKI DIRECTOR SINCE 1991 AGE: 55
Senior General Manager of International Business of the Finance and
Investment Planning Office of Nippon Life. Mr. Funaki has been affiliated with
Nippon Life, Japan's largest insurance company, since 1964 and has been Senior
General Manager for International Business of the Finance and Investment
Planning Office since March 1994. Mr. Funaki was Chief General Manager for the
Americas from 1993 through March 1994, and General Manager for North America
from March 1991 until 1993. He was Deputy Chief of International Investment
Headquarters of Nippon Life from 1990 to 1991. Mr. Funaki was General Manager of
the International Investment Department of Nippon Life from 1988 to 1990 and
Deputy General Manager of the International Investment Department of Nippon Life
from 1986 to 1988. Mr. Funaki has been a Director of the Company since 1991.
6House.
8
10
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive, Audit, Compensation and Benefits, Finance and Nominating
Committees of the Board of Directors are described below.
EXECUTIVE COMMITTEE. The Executive Committee consists of Mr. Fuld, who
chairs the Executive Committee, and Mr. Macomber. The Executive Committee has
the authority, in the intervals between meetings of the Board of Directors, to
exercise all of the authority of the Board of Directors, except for those matters
that the Delaware General Corporation Law or the Restated Certificate of
Incorporation reserves to the full Board of Directors. The Executive Committee
acted by unanimous written consent thirteen10 times during the 1996 fiscal year.year ended
November 30, 1999 ("Fiscal 1999").
AUDIT COMMITTEE. The Audit Committee consists of RogerMr. Berlind, who chairs
the Audit Committee, and Messrs. Ainslie, Cruikshank and Shimasaki,Kobayashi, all of whom
are Non-employee Directors. The Audit Committee represents the Board in
discharging its responsibilities relating to the accounting, reporting and
financial control practices of the Company. The Audit Committee has general
responsibility for surveillance of financial controls, as well as for the
Company's accounting and audit activities. The Audit Committee annually reviews
the qualifications of the independent auditors, makes recommendations to the
Board of Directors as to their selection, reviews the audit plan, fees and audit
results, of their audit, and approves their non-audit services to be performed by the auditors and
related fees. The Audit Committee held three meetings during the 1996 fiscal year.Fiscal 1999.
COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits
Committee (the "Compensation Committee") consists of Mr. Macomber, who chairs
the Compensation Committee, and Mr. Akers and Ms. Merrill, all of whom are
Non-employee Directors. The Compensation Committee establishes corporate policy
and programs with respect to the compensation of officers and employees of the
Firm, including establishing compensation policies and practices, such as
salary, cash incentive, restricted stock, long-term incentive compensation and
stock purchase plans and other programs, and making grants under such plans. The
Compensation Committee also establishes and administers all of the Company's
employee benefit and compensation plans and has the authority, where
appropriate, to delegate its duties. The Compensation Committee held fivetwo
meetings during the 1996 fiscal year and acted by telephone or unanimous written consent five times.nine times during
Fiscal 1999.
FINANCE COMMITTEE. The Finance Committee consists of Mr.Dr. Kaufman, who
chairs the Finance Committee, and Messrs. Akers, Berlind and Shimasaki.Kobayashi. The
Finance Committee reviews and advises the Board of Directors on the financial
policies and practices of the Company, and periodically reviews, among other
things, major capital expenditure programs and significant capital transactions
and recommends a dividend policy to the Board of Directors. The Finance
Committee held two meetings during the 1996 fiscal year.Fiscal 1999.
NOMINATING COMMITTEE. The Nominating Committee consists of Mr. Fuld, who
chairs the Nominating Committee but is a non-votingnonvoting member, and three
Non-employee Directors, Messrs. Kaufman and Macomber and Ms. Merrill. The
Nominating Committee considers and makes recommendations to the Company's Board
of Directors with respect to the size and composition of the Board of Directors
and Board Committees and with respect to potential candidates for membership on
the Board of Directors. The Nominating Committee held two meetingsone meeting during the
1996 fiscal year.Fiscal
1999. The Nominating Committee will consider nominees for Director recommended
by Stockholders. Stockholders wishing to submit recommendations for the 19982001
Annual Meeting of Stockholders should write to the Corporate Secretary, Lehman
Brothers Holdings Inc., 3 World Financial Center, 24th Floor, New York, New York
10285. The Company's bylawsBy-Laws contain time limitation,limitations, procedures and
requirements relating to Stockholder nominations.
9
ATTENDANCE AT MEETINGS BY DIRECTORS
The Board of Directors held seven meetings during the 1996 fiscal year and
acted once by unanimous written consent.Fiscal 1999. All Directors other than Mr. Funaki,
who resides in Japan,
attended 75 percent or more of the aggregate of (a) the total number of meetings
of the Board held during the period when he or she was a Director and (b) the
total number of meetings held by all Committees of the Board on which he or she
served during the period when he or she was a Director. The number of meetings
held by each Committee during the 1996 fiscal yearFiscal 1999 is set forth above.
7
11
COMPENSATION OF CURRENT DIRECTORS
Non-employee Directors receive an annual cash retainer of $45,000 and are
reimbursed for reasonable travel and related expenses. No additional fees are
paid for attendance at Board of Directors or Committee meetings. Each DirectorThe annual retainer is expected to attend all Board meetings. Compensation for attending meetings is
deemed to be included within the annual retainers which are
paid quarterly; however, the fourth quarter payment will be withheld for failure
to attend 75% of the requiredtotal number of meetings. EachIn addition, each Non-employee
Director who served as a chairman of a Committee of the Board of Directors
receivesreceived an additional annual retainer of $7,500$15,000 per Committee, and each
Non-employee Director who servesserved as a Committee member ofreceived $1,500 per
Committee meeting.
RESTRICTED STOCK UNIT AND OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS. An
annual equity retainer in the Executive Committee receives an additional annual retainerform of
$15,000.
Restricted Stock Unit Grants for Non-Employee Directors. Under the terms
of the Company's 1994 Management Ownership Plan, a grant of Restricted Stock Units ("RSUs")
representing $30,000$80,000 fair market value of Common Stock (as of the date of the
Annual Meeting) will beis made to each Non-employee Director on the first business day
following the Company's Annual Meeting of Stockholders for
each year thatStockholders. The number of RSUs
granted is based on the closing price of the Common Stock on the NYSE on the day
such plan is in effect.units are awarded. As of each date that a dividend is paid on Common Stock,
each Non-employee Director holding RSUs shall beis credited with a number of additional
RSUs equal to the product of (A) the dividend paid on one share of Common Stock,
multiplied by (B) the number of RSUs held by the Non-employee Director, divided
by (C) the closing price of the Common Stock on the NYSE on such date. One-third of theThe RSUs
granted to Non-employee Directors will
vest on each of the first three anniversaries of the date of grant, or, if
earlier, immediately and are payable in Common Stock upon death, disability or
termination of service asservice.
Alternatively, a Non-employee Director after serving ten years. One-third of a Non-employee
Director's vested RSUs is payable in Common Stock on each ofmay elect to receive options, for
three times the first three
anniversaries following death, disability or termination of service. The number of RSUs granted will be based onhe or she would have received, with an exercise
price equal to the closing price of the Common Stock on the NYSE on the day such unitsdate the
award is made. The options have a ten-year term, are awarded.
The Company's Deferred Compensation Plan for Non-employee Directors.not forfeitable, and become
exercisable in one-third increments on each of the first three anniversaries of
the award date or, if sooner, upon termination of service.
THE COMPANY'S DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS. The
Company's Deferred Compensation Plan for Non-employee Directors is a
non-qualifiednonqualified deferred compensation plan, which provides each Non-employee
Director an opportunity to elect to defer receipt of cash compensation to be
earned for services on the Board of Directors. Each Non-employee Director may
elect to defer all or a specified percentageportion of his or her future cash compensation (or such
election may be limited to such Non-employee Director's annual retainer fees) with
respect to one or more terms as Director. Such an election can be revoked only by a
showing of financial hardship and with the consent of the Compensation
Committee. Amounts deferred are credited quarterly with interest, based upon the
average 30-day U.S. Treasury Bill rate, and compounded annually. Deferred
amounts will be paid in either a lump sum or in annual installments over a
period not to exceed ten years as elected by the Non-employee Director. Payments
will commence pursuant to an election byas the Non-employee Director elects, at a specified date in the future
or upon termination of service as a Non-employee Director.
The Company's Frozen Retirement Plan for Non-employee Directors.THE COMPANY'S FROZEN RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS. Prior to
May 1994, the Company maintained the Company's Retirement Plan for Non-employee
Directors which was a non-qualifiednonqualified retirement plan which provided a limited
annual retirement benefit for Non-employee Directors who had earned five or more
years of service as defined in the plan. Participation in this plan was frozen
on May 31, 1994. Any Non-employee Director who had, on such date, completed at
least five years of service as a Director (determined in accordance with thisthe
plan) has vested benefits under
this10
the plan. Any individual who was a Non-employee Director on such date, but had
not completed five years of service as of such date, will acquireacquired vested benefits
under this plan at the time such individual completescompleted such five years of service
as a Director. Any individual who becomesbecame a Non-employee Director after such date
iswas ineligible to participate in this plan. Vested benefits under this plan will
be paid after the individuala participant ceases to be a Director.
8
12
EXECUTIVE OFFICERS OF THE COMPANY
TheBiographies of the current Executive Officers of the Company (the "Executive
Officers"), who comprise the Firm's Executive Committee, are set forth below,
excluding Mr. Fuld whose biography is included above. TheEach Executive Officers
compriseOfficer
serves at the Company's Corporate Management Committee, which performs broad,
policy making functions for the Company.
JEREMIAH M. CALLAGHAN AGE: 53
Chief of Operations and Technology. Mr. Callaghan has been the Firm's
Chief of Operations and Technology, a Managing Director of LBI and headdiscretion of the Firm's Trading Services Division since 1993. He is also a memberBoard of the Lehman
Brothers Operating Committee and Corporate Management Committee. Prior to
joining Lehman Brothers, Mr. Callaghan held various senior positions in the
securities processing and operations groups of the American Express Information
Services Corporation (now First Data Corp.) and Shearson Lehman Brothers. At
Shearson Lehman Brothers, he was head of the Securities Processing Group. Mr.
Callaghan previously was a Senior Managing Director at Bear Stearns as well as a
member of its management and operations committees. He worked at Bear Stearns
from 1975 to 1988, when he left the firm to work full time at Covenant House, a
non-profit organization for troubled young people. Before joining Bear Stearns,
Mr. Callaghan had held positions at Industrial Bank of Japan, Lynch Jones & Ryan
and Coopers & Lybrand.
JOHN L. CECIL AGE: 42
Chief Administrative Officer.Directors.
CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER. Mr. Cecil has been Chief
Administrative Officer of the Company and LBI as well as a Managing Director of LBI since January 1994.1994 and has been Chief
Financial and Administrative Officer of the Company since July 1998. He is
responsible for Finance, Technology, Operations, Human Resources, Expense
Management and Strategic Planning. Mr. Cecil is also a member of the OperatingFirm's
Executive Committee and Corporate ManagementOperating Committee. Mr. Cecil joined McKinsey & Company
Inc. in 1980, where he was elected a partner in 1986, and was a Director from 1991 through
December 1993. Mr. Cecil is a member of the Advisory Council of the Bendheim
Center for Finance at Princeton University. Mr. Cecil is a Vice Chairman of the
Board of Directors of Graham-Windham Agency and is the Chairman of its Executive Committee.
CHARLES B. HINTZAgency.
JOSEPH M. GREGORY AGE: 47
Chief Financial Officer.
HEAD OF GLOBAL EQUITIES. Mr. Hintz has been Chief Financial OfficerGregory is Head of the Company and LBIFirm's Global Equities
Division, in charge of the overall equities business, a position he has held
since March 1996, as well as1996. Mr. Gregory is also a member of the OperatingFirm's Executive Committee and
Corporate ManagementOperating Committee. He also has been a Managing DirectorFrom 1994 to 1996 he was Head of LBI
since March 1996. He is responsible for the Firm's Financial Management and
Control, Treasury and Tax and Capital Planning, Asset/Liability Management, and
Creditor and Rating Agency Relations.Fixed Income
Division. He was named Co-Head of the Fixed Income Division in 1991. From 1980
to 1989, he held various management positions in the Fixed Income Division,
including Head of the Firm's Mortgage Business. Mr. Hintz served 10 years with Morgan
Stanley Group, most recentlyGregory joined the Firm in
1974 as Managing Director and Treasurer.a commercial paper trader. Mr. HintzGregory is ona member of the Board of
Directors of the Treasury Managers Association (CCM), and a memberDorothy Rodbell Cohen Foundation.
HEAD OF INVESTMENT BANKING. Mr. Jack is Head of the Financial Executives Institute and the National Investor Relations
Institute. He is a Lieutenant Commander in the U.S. Naval Reserve.
THOMAS A. RUSSO AGE: 53
Chief Legal Officer. Mr. Russo has been Chief Legal Officer and a member
of the Corporate Management Committee of the Company since 1994. He has been a
Managing Director of LBI since 1993. He is head of the Company's Corporate
Advisory Division with responsibility for Legal, Compliance, Corporate
Communications, Internal Audit, Investor Relations, Government Relations, the
Diversified Asset Group and the Documentation Group, as well as the Firm's Investment Banking
business, responsible for the Division's global industry, product and Commitments Committees.geographic
groups, a position he has held since 1996. Mr. RussoJack is also a member of the
Lehman
Brothers Operating Committee and serves as Chairman of the Company's New
ProductsFirm's Executive Committee and Operating Exposures Committee. From 1977 until1993 to 1996 he joined
LBI in 1993, Mr. Russo was a
partnerSector Head in Investment Banking, responsible for Lehman Brothers' businesses
involving Debt Capital Markets, Financial Services, Leveraged Finance and Real
Estate. Mr. Jack has been with Lehman Brothers for 15 years, joining the Firm in
1984 as an associate in the Fixed Income Division. Previously, he was Head of
the Firm's Fixed-Income Global Syndicate activities. In addition to his
responsibilities at Lehman Brothers, Mr. Jack is a member of the law firmBoard of
Cadwalader, Wickersham &
Taft whereDirectors of the Dorothy Rodbell Cohen Foundation and a member of the Board of
Regents of the American Architectural Foundation.
STEPHEN M. LESSING AGE: 45
HEAD OF GLOBAL SALES AND RESEARCH. Mr. Lessing is Head of Global Sales and
Research, responsible for the Firm's Fixed Income and Equity Sales and Research
organizations, as well as the Private Client Services business, which focuses on
high-net-worth individuals and middle market institutions. He has held this
position since 1996. Mr. Lessing is also a member of the Firm's Executive
Committee and Operating Committee. From 1992 to 1996 he hadwas Head of Global Fixed
Income Sales. From 1982 to 1992 Mr. Lessing held various management positions in
the Fixed Income Division, including Head of the Mortgage Business and National
Sales Manager for Money Markets, Governments and Central
11
Funding. Mr. Lessing joined the Firm in 1980 as an associate in the Fixed Income
Division. Mr. Lessing is a financial marketsmember of the Board of Directors of the Dorothy
Rodbell Cohen Foundation, a member of the Board of Directors of the
International Tennis Hall of Fame and general corporate practice.
9a member of the Board of Directors of
Lessing's Inc.
MICHAEL F. MCKEEVER AGE: 48
HEAD OF PRIVATE EQUITY. Mr. McKeever is Head of the Firm's Private Equity
Division, which encompasses the Firm's Merchant Banking, Venture Capital and
other private investment activities, a position he has held since 1999. From
1996 to 1999 Mr. McKeever was Co-Head of Investment Banking responsible for the
Division's global industry, product and geographic groups. Mr. McKeever is also
a member of the Firm's Executive Committee and Operating Committee. From 1991 to
1996 he was a Sector Head in Investment Banking, responsible for the Firm's
businesses involving Telecommunications, Media, Technology, Merchandising, and
Consumer Products, as well as all investment banking activities in the Midwest
region. From 1986 to 1990 he was Co-Head of the Firm's equity, debt and
derivatives origination business. Mr. McKeever is a member of the Board of
Directors of the Dorothy Rodbell Cohen Foundation.
JEFFREY VANDERBEEK AGE: 42
HEAD OF FIXED INCOME. Mr. Vanderbeek is Head of the Fixed Income Division, in
charge of the overall fixed income business, a position he has held since 1996.
Mr. Vanderbeek is also a member of the Firm's Executive Committee and Operating
Committee. He became Chief Operating Officer of the Fixed Income Government
Securities Department in May 1993 and Chief Operating Officer of the Fixed
Income Derivatives Department in June 1993. Mr. Vanderbeek joined Lehman
Brothers in February 1984 as Managing Director and Chief Operating Officer in
the Fixed Income Central Funding Department. Mr. Vanderbeek is a member of the
Board of Directors of the Dorothy Rodbell Cohen Foundation.
12
13
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership information as of
January 25, 2000 with respect to the Common Stock as
of December 31, 1996 for each current Director each nomineeof
the Company (which include all nominees for Director,Director), each Executive Officer
named in the Summary Compensation Table and all current Directors and Executive Officers of the Company as a group. Except as described
below, each of the persons listed below has sole voting and investment power
with respect to the shares shown. None of the individuals beneficially ownsowned any
of the Company's outstanding Preferred Stock or as much as 1.0% of the outstanding Common Stock.January 25, 2000.
NUMBER OF SHARES OF
COMMON STOCK WHICH MAY PERCENT OF
NUMBER OF SHARES BE ACQUIRED WITHIN 60 DAYS OUTSTANDING
BENEFICIAL OWNERSOWNER OF COMMON STOCK(a) DAYS
-------------------------------------------- ------------------ ----------------------STOCK (A) OF JANUARY 25, 2000 COMMON STOCK (B)
- ---------------- ------------------- -------------------------- ----------------
Michael L. Ainslie.......................... 1,000 0Ainslie................... 11,968 401 *
John F. Akers............................... 1,000 0Akers........................ 3,209 401 *
Roger S. Berlind............................ 107,148(b) 0
Jeremiah M. Callaghan....................... 6,187 129,173Berlind (c)................. 125,677 401 *
John L. Cecil............................... 8,190 119,999Cecil........................ 906,015 1,007,000 1.6
Thomas H. Cruikshank........................ 4,000Cruikshank................. 9,718 0 *
Richard S. Fuld, Jr. ....................... 190,343(c) 359,230
Katsumi Funaki..............................(d)............. 1,831,327 1,898,320 3.0
Joseph M. Gregory.................... 982,947 1,138,000 1.7
Bradley H. Jack...................... 587,662 876,835 1.2
Henry Kaufman (e).................... 39,336 0 *
Hideichiro Kobayashi................. 1,750 0 Charles B. Hintz............................ 510 0
Henry Kaufman............................... 35,000(d) 0*
Stephen M. Lessing................... 880,624 1,266,000 1.8
John D. Macomber............................ 22,000 0Macomber..................... 29,677 401 *
Michael McKeever..................... 657,761 858,000 1.2
Dina Merrill................................ 5,240 0
Thomas A. Russo............................. 26,199 83,412
Masataka Shimasaki.......................... 0 0Merrill......................... 10,917 401 *
Jeffrey Vanderbeek................... 652,836 895,000 1.3
All Currentcurrent Directors and Executive
Officers as a group (14(15
individuals)............... 406,817 691,814....................... 6,731,424 7,941,160 11.4
- ---------------------------------------
* Less than one percent.
(a) This chart doesAmounts include vested and unvested RSUs. RSUs are convertible on a
one-for-one basis into shares of Common Stock, but cannot be sold or
transferred until converted to Common Stock and, with respect to each person
identified in the table, are not include 4,627 RSUs held by eachconvertible within 60 days following
January 25, 2000. A portion of Messrs. Berlind,
Funaki, Macomber, Shimasaki and Ms. Merrill; 2,911 RSUs held by Mr. Kaufman
or 1,220 RSUs held by Mr. Akers. Messrs. Ainslie and Cruikshank each will
receive their first payment of RSUs on March 27, 1997.the vested RSUs held by the Executive
Officers are set forth in footnote (a) ofsubject to forfeiture for detrimental or competitive activity.
Nonetheless, an Executive Officer who holds RSUs will be entitled to direct
the Summary Compensation
Table on page 13. Vested RSUs are payable in an equivalent1997 Trust Trustee to vote a number of sharesTrust Shares that is
proportionate to the number of Common StockRSUs held irrespective of vesting; such
number of Trust Shares will be calculated prior to the Annual Meeting and
will be determined by the number of Trust Shares held by the 1997 Trust on
the Record Date and the extent to which Current Participants under the Plans
return voting instructions to the 1997 Trust Trustee. See "Introduction--The
Voting Stock."
(b) Percentages are calculated in accordance with the terms of the applicable plan and
grant.
(b) ExcludesSEC rules.
(c) Includes 40,000 shares of Common Stock held by Mr. Berlind's wife, as to
which Mr. Berlind disclaims beneficial ownership.
(c)(d) Includes 3,593 shares of Common Stock held by Mr. Fuld's children, as to
which Mr. Fuld acts as custodian.
(d)(e) Held by Mr.Dr. Kaufman's various family trusts, foundations and partnerships.
Mr.Dr. Kaufman has sole voting and sole investment power over 10,000 of such shares
and shared voting and shared investment power over 25,000 of such shares.
1013
14
COMPENSATION COMMITTEE REPORT OFON EXECUTIVE OFFICER COMPENSATION
The Company's Compensation and Benefits Committee (the "Committee") makes
decisionsoversees the Compensation Programs of the
Company, with respectparticular attention to the compensation of the Company's Chief
Executive Officer and the other Executive Officers. The Compensation Committee
is composedcomprised of John D.Mr. Macomber, who chairs the Compensation Committee, John F.Mr. Akers
and DinaMs. Merrill.
In making its decisions with respect to the compensation of Executive
Officers, the Compensation Committee has adopted several practicalthe following philosophical
positions and philosophical
positions:policies:
- Deliver a significant portion of total compensation in equity-based
awards, thereby aligning the financial interest of Executive Officers with
Stockholdersstockholders and encouraging prudent long-term strategic decisions. Where
feasible, based on market conditions and other factors, shares will be
repurchased in the market to avoid Stockholderstockholder dilution.
- Tie compensation for Executive Officers to annual and long-term
performance goals, which further harmonizesaligns the interests of Executive
Officers with those of Stockholdersstockholders and rewards Executive Officers for
achievements.
- Ensure that compensation opportunities are comparable with those at major
competitors, so that the Firm may recruit and retain talented Executive
Officers who are key to the Company's long-term success.
The elements and weightings of the compensation program at the Company are
comparable to those used in the investment banking industry, but are
considerably different from those of other major corporations operating in
different industries. The securities industry typically pays higher levels of
compensation than other industries, such as manufacturing, transportation,
utilities or retail. The nature of the securities industry requires that the
workforce consist of a large percentage of highly skilled professionals, who are
in great demand due to the revenue they can generate. Competitive pressure to
hire these professionals results in high levels of compensation in order to
attract and retain the talent needed to compete effectively.
Total compensation is comprised of base salary and both cash and non-cashnoncash
incentive compensation. Base salaries are intended to make up a small portion of
total compensation. The greater part of total compensation is based on the
Company's financial performance and other factors and is delivered through a
combination of cash and equity-based awards. This approach results in overall
compensation levels which will vary significantly withfollow the financial performance of the Company.
As in 19941996, 1997 and 1995,1998, a key element of Executive Officer compensation
for 1996Fiscal 1999 was preestablishedpre-established compensation formulas for each Executive
Officer, which in 1996Fiscal 1999 were based on the Company's return on equity. The
formulas were intended to provide a specific amount of cash and restricted stock unitsRestricted Stock
Units ("RSUs"), which haveare subject to significant vesting and sales restrictions. The percentage of total
compensation consisting of RSUs for Executive Officers increases with the level
of executive responsibility. (The Committee has taken a similar approach in the
RSU award program for employees, by paying a percentage of employee compensation
in RSUs, with the percentage increasing commensurate with employee compensation
levels.)forfeiture
restrictions, and cannot be sold or transferred until converted to Common Stock.
As in 1995, the 1996, 1997 and 1998, Fiscal 1999 Executive Officer Compensation
included a long-term incentive plan ("LTIP") as a component of total
compensation. Whereas the cash and RSU components of total compensation are
based upon annual performance goals, the LTIP awards performance stock unitsPerformance Stock Units
("PSUs") over a longer period. Under the LTIP, the Company's return on equity,
for 1996its relative performance with a competitor group and shareholder return through the endshare price of 1997the
Company, together determine an award of RSUs which does not vest until the end of 2002.in one-third increments
in 2002 through 2004. The shareholder returnperformance component of the LTIP seeks to further
align executive performance with Stockholder interests. The vesting component
seeks to encourage the retention of talented executives, particularly if the
Company's return on equity and stock price for 1996 and 1997 result in a meaningful award.
In determining overall Executive Officer compensation for 1996, the
Committee also considered a number of business factors and conditions. 1996 was
a record year for the Company which posted the highest level of revenues, pretax
income and net income in its history. Productivity improved dramatically,
expenses were further reduced and the balance sheet was strengthened. In
addition, the Committee reviewed compensation provided in the prior year, along
with estimates of compensation for the current year, for the companies
comprising the peer group (the "Peer Group") utilized for the Performance Graph
on page 17. In making their determinations, the Committee had available to it
third-party advisors knowledgeable of industry practices.
The Compensation Committee also utilized stock option awards in Fiscal 1999
to further encourage Executive Officers to strive for long-term Stockholder
value. The options were awarded with
14
exercise prices equal to fair market value on the date of the grant, and 11
15
vestingwill
vest in four and one-half years. Vesting accelerates ratably in thirds as the
market price of the Common Stock increases to levels well above the issuance
price. The Compensation Committee believes that options assist the Firm in
maintaining a competitive compensation program.
In determining overall Executive Officer compensation for Fiscal 1999, the
Compensation Committee also considered a number of business factors and
conditions. Fiscal 1999 was a record year for the Company which posted the
highest level of revenues, pretax income, net income and return on equity in its
history. Productivity improved, expenses were controlled and the balance sheet
and liquidity were substantially strengthened. Share price was up significantly
at fiscal year end 1999 from fiscal year end 1998. In addition, the Compensation
Committee reviewed compensation provided in the prior year, along with estimates
of compensation for the current year, for competitor firms. In making its
determinations, the Compensation Committee had available to it third-party
advisors knowledgeable of industry practices.
In establishing 1996Fiscal 1999 compensation for Richard S. Fuld, Jr., the
Company's Chairman and Chief Executive Officer, the Compensation Committee
considered the following performance factors (to which it did not assign any
specific relative weights):
- Overseeing the improvingrecord financial performanceresults of the Company.
- Building and growingFurther diversifying the sources of revenues by strengthening the Firm's
higher margin businesses.
- Developing further the Company's global franchise, particularly in
Europe.
- Implementing a plan to exit businesses which are not part of the Firm's
strategic focus.
In addition to these specific criteria, the Committee evaluated Mr. Fuld on
his contributions in building and maintaining an effective management team, and
in general, on initiatives taken to build long-term Stockholder value for Lehman
Brothers.Maintaining discipline around expense reduction.
On the general criteria of leadership, management and governance, it is the
Compensation Committee's judgment that Mr. Fuld's 1996Fiscal 1999 performance was
above expectations. In
addition,Notably, the actual financial results of the Company for
1996Fiscal 1999 were significantly higher than for 1995.1998. Since the major portion of
Mr. Fuld's compensation is based on financial results, his 1996Fiscal 1999
compensation reflects an increase from 1995.1998.
Section 162(m) of the Internal Revenue Code (the "Code") limits the tax
deductibility of compensation in excess of $1 million unless the payments are
made under qualifying performance-based plans. For the compensation year ending December
31, 1996,ended
November 30, 1999, these procedures were adhered to. While the Compensation
Committee currently seeks to maximize the deductibility of compensation paid to named
Executive Officers, it will maintain flexibility to take other actions which may
be based on considerations other than tax deductibility.
COMPENSATION AND BENEFITS COMMITTEE:Compensation and Benefits Committee:
John D. Macomber, Chairman
John F. Akers
Dina Merrill
February 14, 199724, 2000
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, John D. Macomber, John F. Akers and
Dina Merrill served on the Compensation Committee. NeitherNone of these individuals nor John F. Akers (who
was elected to the Committee in January 1997), havehas
ever served as an officer or employee of the Firm.
1215
16COMPENSATION OF EXECUTIVE COMPENSATIONOFFICERS
The following table shows, for the calendar years ending December 31, 1996,
1995ended November 30, 1999, 1998 and
1994,1997, as applicable, the cash and other compensation paid or accrued and certain
long-term awards made to the Named ExecutivesExecutive Officers for services in all capacities.
Mr. Hintz was hiredMessrs. Gregory, Jack, Lessing, McKeever and Vanderbeek became Executive
Officers in March of 1996. Mr. Callaghan was not an1998. All Executive OfficerOfficers, other than the Chairman, received the
same total compensation, based on the same broad financial and other performance
goals. The Compensation Committee believes this compensation structure will
build a team/partnership approach at the most senior level of the Company prior to 1996.Firm.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS
PAYOUTS
---------------------------------- --------------------------- ---------
OTHER RESTRICTED LONG-TERM------------------------------------- -----------------------
NAME AND PRINCIPAL RESTRICTED SECURITIES
POSITION AT FISCAL OTHER ANNUAL STOCK OPTIONS/ INCENTIVEUNIT UNDERLYING ALL OTHER
POSITION ATNOVEMBER 30, 1999 YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS(A) OPTIONS COMPENSATION DECEMBER 31, 1996 YEAR ($) ($) ($) ($) (# SHARES) ($) ($)(B)
- ------------------------ ---- ------- --------- ---------------------------------------------- -------- -------- ---------- ------------- ---------- ---------- --------- ----------------------------
R. S. Fuld, Jr.......... 1996 750,000 2,000,000Jr.................... 1999 $750,000 $4,500,000 $ 0 3,927,994(a) 375,000 0 7,528(b)$7,500,350 400,000 $8,778
Chairman and 1995 750,000 1,450,000 0 2,750,010 400,000 0 7,556
Chief Executive 1998 750,000 2,350,000 0 6,643,437 350,000 7,908
Officer 19941997 750,000 675,000 85,093 2,375,000 317,004 858,529 8,5623,125,000 0 5,536,325 325,000 7,570
J. L. Cecil............. 1996 450,000 1,950,000Cecil....................... 1999 $450,000 $3,550,000 $ 0 2,285,379(a) 250,000 0$4,285,914 350,000 $ 0
Chief Financial and 1998 450,000 2,300,000 0 3,928,915 300,000 0
Administrative 1995Officer 1997 450,000 1,787,5003,300,000 0 1,203,131 200,000 0 0
Officer 1994 432,692 1,167,308 80,000 820,000 80,000 03,214,640 225,000 0
J. M. Callaghan......... 1996Gregory..................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $4,810
Head of Global Equities 1998 450,000 950,0002,300,000 0 857,018(a) 100,0003,928,915 300,000 4,333
B. H. Jack........................ 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $ 0
ChiefHead of OperationsInvestment Banking 1998 450,000 2,300,000 0 3,928,915 300,000 0
S. M. Lessing..................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $2,114
Head of Global Sales and Technology
C. B. Hintz............. 1996 349,615 747,7491998 450,000 2,300,000 0 1,023,356(c) 100,0003,928,915 350,000 1,905
Research
M. F. McKeever.................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $ 0
Chief Financial
Officer
T. A. Russo............. 1996Head of Private Equity 1998 450,000 550,0002,300,000 0 714,182(a) 100,0003,928,915 300,000 0
J. Vanderbeek..................... 1999 $450,000 $3,550,000 $ 0 Chief Legal Officer 1995$4,285,914 350,000 $ 709
Head of Fixed Income 1998 450,000 552,5002,300,000 0 371,873 100,000 0 0
1994 450,000 825,000 8,438 325,000 75,120 107,529 03,928,915 300,000 610
- ---------------------------------------
(a) 1996Fiscal 1999 amounts represent RSUs awarded under the Company's 1996
Management Ownership PlanPlan. The values indicated are based on December 31, 1996. These RSUs vest and convert tothe closing
trading price of the Common Stock on the NYSE for November 30, 2001.1999,
$76.375, which is also the undiscounted award price for the Fiscal 1999
awards. However, RSUs actually are issued at a discount because they are
subject to significant vesting and forfeiture restrictions and cannot be
sold or transferred until they convert to Common Stock. The value indicated above reflectsStock on November 30, 2004.
Dividends are payable by the average
closing trading priceCompany on all such holdings from their date of
the Company's Common Stock foraward, and are reinvested in additional RSUs.
At November 30, 1999, the last three days
of fiscal 1996, $29.21, which is also the undiscounted payment price for the
1996 RSUs. The total number of RSUs held by Messrs. Fuld, Cecil,
CallaghanGregory, Jack, Lessing, McKeever and Russo, is: 438,681.66, 187,982.79, 124,708.37,Vanderbeek is 1,258,489.01, 785,915.77,
832,338.36, 514,653.99, 653,396.63, 537,640.55 and 65,851.03,
respectively, and the total535,012.48, respectively.
The value of such RSUs based onthese holdings at the December 31,
1996November 30, 1999 closing price per share
of Common Stock of $76.375 is $31.375 of $13,763,637, $5,897,960, $3,912,725$96,117,098, $60,024,317, $63,569,842,
$39,306,698, $49,903,168, $41,062,297 and $2,066,076.$40,861,578, respectively.
(b) Amounts reported under "All Other Compensation" for 1996Fiscal 1999 consist of
the dollar value of above-market earnings on deferred compensation. Included
are credits to compensation deferred pursuant to the Executive and Select
Employees Plan, which was established in 1985, and Lehman Brothers Kuhn Loeb
Deferred Compensation Plans, which were established in 1977 and 1980.
(c) These RSUs were granted in accordance with Mr. Hintz's compensation
arrangement. See "Employment Contracts and Other Arrangements with Executive
Officers." The 20,802.44 RSUs vest twenty percent per year, beginning
January 1, 1997. The value indicated above for the 20,802.44 RSUs reflects
the closing price of the Company's Common Stock, $25.00, on March 21, 1996
and generally is the undiscounted purchase price for the award. Eighty
percent of the remaining 20,648 RSUs vest on July 1, 1997, and twenty
percent vest on July 1, 2001. Each such vested RSU converts to one share of
Common Stock on July 1, 2001. The value indicated above for the 20,648 RSUs
reflects the mid-year price of the Company's Common Stock, $24.375, the
undiscounted payment price for the award. The total value of the 41,450.44
RSUs based on the December 31, 1996 closing price of $31.375 is $1,300,508.
1316
17
The following table contains information concerning the grant of
nonqualified stock options in 1996Fiscal 1999 to the named executives:
OPTION/SARExecutive Officers. These
hypothetical present values are presented pursuant to SEC rules even though
there is no assurance that such values will ever be realized. The actual amount,
if any, realized upon the exercise of stock options would depend upon the market
price of Common Stock relative to the exercise price per share of the stock
option at the time the stock option is exercised.
OPTION GRANTS IN 1996LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/SARS
NUMBER OFOPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARSOPTIONS EMPLOYEES OR BASE PRICE ($/PER EXPIRATION PRESENT
NAME GRANTED(a)GRANTED (A) IN 1996 SHARE)FISCAL YEAR PER SHARE DATE VALUES($)(b)
--------------------------- ------------ ------------ ------------VALUE (B)
---- ----------- -------------- ------------- ---------- ----------------------
R. S. Fuld, Jr............. 375,000 14.29% $ 24.000 03/17/01 $1,653,750Jr.................... 350,000 3.2% $40.875 12/13/2003 $3,087,000
50,000 0.5% 76.875 11/30/2004 995,500
J. L. Cecil................ 250,000 9.52% $ 24.000 03/17/01 $1,102,500
J.M. Callaghan............. 100,000 3.81% $ 24.000 03/17/01 $ 441,000
C.Cecil....................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
J. M. Gregory..................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
B. Hintz................ 100,000 3.81% $ 24.500 05/27/01 $ 455,000
T. A. Russo................ 100,000 3.81% $ 24.000 03/17/01 $ 441,000H. Jack........................ 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
S. M. Lessing..................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
M. F. McKeever.................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
J. Vanderbeek..................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
- ---------------------------------------
(a) GrantedFive-year nonqualified stock options were granted on March 18, 1996, except for Mr. Hintz, whose grant date was May
28, 1996.December 14, 1998 and
December 1, 1999. These options have a five-year term. The options becomeare exercisable in one-third increments when
the closing price of the Common Stock on the NYSE reaches $28, $30,$55, $65 and $32$75,
respectively for 30the December 14, 1998 grant and $90, $100 and $110,
respectively for the December 1, 1999 grant, for 15 out of 20 consecutive
trading days (the "Closing Price Conditions"). The Closing Price Conditions of $28 and
$30 were satisfied in January 1997 and therefore two/thirds of the options,
are currently exercisable. The remaining one/third becomesor, if sooner, become exercisable entirely in four and one-half
years or upon satisfactionafter the date of the $32 Closing Price
Condition.grant.
(b) These values were calculated using the Black-Scholes option pricing model as
of the grant date. The Black-Scholes model is a mathematical formula whichthat is
widely used and accepted for valuing traded stock options. The model is
premised on immediate exercisability and transferability of the options.
Thisoptions
which is not true for the Company's options granted to Executive Officers.
Therefore, certain discounting assumptions about the time of exercise and
risk of forfeiture were applied, as indicated below.
Any estimated value
will depend onThe following assumptions were used in employing the market value of the Common Stock at a future date. The
values shown were calculated using the following assumptions: theBlack-Scholes option
pricing model: an exercise price is equal to 100% of the closing price of the Common
Stock on March 18,
1996 and May 28, 1996; the date of grant; an expected option life of approximately three
years; a dividend rate is $0.20of $0.30 per share for 1996 based
on the Company's actual regular quarterly dividends;December 14, 1998 grant
and $0.36 per share for the December 1, 1999 grant; a risk-free rate of
return equal to the yield for the U.S. Treasury stripStrip security with a
maturity date closest to the expiration dateexpected option life of the option grant; andan expected
stockCommon Stock price volatility used is the historic volatility of the Peer
Group. In addition, the assumed option term of the awards reflects the
likelihood of exercise before the expiration of the maximum term. Stock
options such as these withrate based on historical volatility; and a five year term are assumed to be exercised in
three years. The10%
per annum adjustment for non-transferabilitynontransferability or risk of forfeiture during the
vesting period is 10% per annum.
14period.
17
18
The following table sets forth information concerning LTIP awards made in
1996 to the Executive Officers.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1996
MINIMUM TARGET PERFORMANCE OR
NUMBER OF NUMBER OF OTHER PERIOD UNTIL
NAME UNITS(#) UNITS (#)(a) MATURATION OR PAYOUT
- ------------------------------------------------ --------- ------------ --------------------
R. S. Fuld, Jr. ................................ 0 124,324 November 30, 2002
J. L. Cecil..................................... 0 93,243 November 30, 2002
J. M. Callaghan................................. 0 31,081 November 30, 2002
C. B. Hintz..................................... 0 31,081 November 30, 2002
T. A. Russo..................................... 0 31,081 November 30, 2002
- ---------------
(a) Performance Stock Units ("PSUs") will be awarded based on the Company's 1996
return on equity and the total return to Stockholders (which includes
dividends and stock price appreciation) from January 1, 1996 through January
31, 1998, except for Mr. Hintz, who joined Lehman Brothers in March 1996 and
has a performance period covering April 1, 1996 through January 31, 1998.
Stockholder return must be at least 7% per year before any units are earned,
and must be 22% for the performance period for 100%exercise of the above units to be
earned. Total awards may exceed 100% if higher Stockholder return levels are
achieved. PSUs earned, if any, will convert to RSUs on January 31, 1998 and
vest on November 30, 2002.
The following table shows the number of shares of the Common Stock
represented by outstanding stock
options heldduring Fiscal 1999 by each of the Executive Officers asand the fiscal
year-end value of December 31, 1996. The exercise price of a portion of the options
represented by these shares was lower than the closing price of the Common Stock
at year-end, and thus some of these options were "in-the-money" as of such date.
During 1996, other than Mr. Fuld, none of the Executive Officers exercised any
of the Company's stockunexercised options.
AGGREGATED OPTION/SAROPTION EXERCISES IN 1996LAST FISCAL YEAR
AND FISCAL YEAR-END 1996
OPTION/SAROPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1996FISCAL YEAR END AT DECEMBER 31, 1996(a)
SHARES ACQUIREDFISCAL YEAR END (B)
ON VALUE --------------------------- --------------------------------------------------------
NAME ON EXERCISE (A) REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- --------------------------------------- ------------ ------------ ----------- ------------- ------------------------ -------------
R. S. Fuld, Jr. ..... 15,000 $ 106,875 359,230 717,774 $4,421,368.88 $6,583,559.63Jr................ 189,269 $6,553,756 1,781,653 166,667 $80,507,127 $4,141,679
J. L. Cecil..........Cecil................... 0 0 119,999 410,001 $1,413,321.88 $3,600,428.13
J.M. Callaghan.......907,000 150,000 35,297,875 3,550,000
J. M. Gregory................. 0 0 129,173 258,588 $1,536,024.13 $2,475,279.25
C.1,038,000 150,000 42,355,875 3,550,000
B. Hintz..........H. Jack.................... 0 0 0 100,000 $ 0.00 $ 687,500.00
T. A. Russo..........776,835 150,000 28,604,566 3,550,000
S. M. Lessing................. 85,835 3,787,469 1,166,000 150,000 49,746,500 3,550,000
M. F. McKeever................ 0 0 83,412 191,708 $1,019,803.13 $1,772,426.88758,000 150,000 27,627,500 3,550,000
J. Vanderbeek................. 0 0 795,000 150,000 29,546,875 3,550,000
- ---------------------------------------
(a) The value representsOnly those options scheduled to expire during Fiscal 1999 were exercised by
executive officers. No discretionary exercises occurred during the year.
(b) Aggregate values shown above represent the excess of $31.375,$76.375 per share, the
closing price of the Lehman
Brothers Common Stock on December 31, 1996November 30, 1999 on the NYSE, over the
respective exercise prices of thesethe options. 15
19The actual amount, if any,
realized upon exercise of stock options will depend upon the market price of
the Common Stock relative to the exercise price per share of the stock
option at the time the stock option is exercised. There is no assurance that
the values of unexercised in-the-money options reflected above will be
realized.
PENSION BENEFITS
Lehman Brothers Holdings Inc. Retirement Plan (the "Holdings Retirement
Plan") is a funded, qualified, noncontributory, integrated, defined benefit
pension plan covering eligible employees.
All employees of the Company or a designated subsidiary who have attained
the age of 21 and completed one year of service are generally eligible to
participate in the Holdings Retirement Plan. The Holdings Retirement Plan
formula provides for an annual retirement benefit payable at age 65, calculated
as a straight life annuity. Pensionable earnings are total Form W-2 earnings
(plus elective deferrals under the Lehman Brothers Holdings Inc. Tax Deferred
Savings Plan and certain other health plan deferral amounts) up to the Internal
Revenue Service maximum of $150,000 in 1995 and 1996. For each year of plan
participation prior to 1989, the annual accrual was based on percentages of
pensionable earnings up to and in excess of the social security taxable wage
base. After 1988 the annual accrual is equal to one percent of pensionable
earnings up to the average Social Security taxable wage base plus 1.65% of
pensionable earnings in excess of the average taxable wage base. Generally,
participants have a non-forfeitablenonforfeitable right to their accrued benefits upon
completing five years of vesting service. As of December 31, 1996,November 30, 1999, the estimated
annual projected benefits payable upon retirement at a normal retirement age of
65 for Messrs. Fuld, Cecil, RussoGregory, Jack, Lessing, McKeever and CallaghanVanderbeek are
$98,825.18, $50,079.84,
$32,083.30approximately $96,480, $54,840, $104,856, $89,127, $102,882, $94,607 and
$32,267.92,$97,344, respectively.
18
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has adopted a nonqualified, noncontributory Supplemental
Retirement Plan ("SRP") covering members of the Executive Committee of the
Company who are at least age 60 and who have completed at least five years of
service or whose age plus service equals or exceeds 85. The SRP is a defined
benefit plan and provides for the payment of reduced benefits payable at age 60
if the participant is above age 45 and has completed five years of service.
Benefits are not payable in cases of termination or employment by a competitor.
In addition, eligibility for SRP benefits is subject to continued employment
through July 1, 2001. As of November 30, 1999, the estimated annual projected
benefits payable upon retirement at age 60 for Mr. HintzFuld are $1.25 million, and
for each of Messrs. Cecil, Gregory, Jack, Lessing, McKeever and Vanderbeek are
$700,000. In the event of a change in control, vesting is not yet a participant in
the Holdings Retirement Plan.accelerated.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND OTHERCHANGE OF CONTROL ARRANGEMENTS
WITH EXECUTIVE OFFICERS
Pursuant to its authority to accelerate the vesting and waive the transfer
restrictions for grants of RSUs, in 1994 the Compensation Committee determined
to accelerate the vesting and waive the transfer restrictions of the RSUs
received by the Executive Officers (and made comparable provisions for all other
employees) in the event of a Hostile Change of Control, which generally means a
tender offer, acquisition of 20% of the Company's voting securities or a change
of a majority of the incumbent Board of Directors, in each case without the
prior approval of a majority of the independent members of the incumbent Board
of Directors. To the extent there is a Change of Control which is not Hostile,
then the RSUs would be paid out but the difference between the acquisition price
and the RSU value at grant would be deferred for the shorter of two years or the
term of any remaining restrictions and the conditions of the original RSU grant
would govern the deferred amounts. Comparable arrangements were implemented for
options and restricted stock held by the Executive Officers and all other
employees. Prior
to conversion toIn the case of PSU award grants made in 1996 the number of RSUs
PSUs have pro rata cash payouts inpayable upon a Change of Control would be approximately twice, and in Control.the case
of PSU award grants made in 1997 would be approximately 2.5 times, the number of
RSUs otherwise payable (which aggregate payouts, upon a Change of Control, would
represent the full awards earned pursuant to the performance formula). In
addition, under a Cash Awards Plan, if a Change of Control occurs within six
months after a grant of RSUs, then the Chief Executive Officer receives a
payment equal to 350% of his previous annual cash compensation, the Chief
Administrative Officer shall receive 300% and the other Corporate Management
Committee membersparticipants shall
receive from 200% to 300%.
In connection with his joining the Firm as Chief Financial Officer, LBI
entered into an agreement with Mr. Hintz guaranteeing him an annual compensation
of at least $1.5 million in 1996 and $1.3 million in 1997. This agreement
expires December 31, 1997.
1619
20
PERFORMANCE GRAPH
The performance graph below illustrating cumulative stockholder return
compares the performance of the Company's
Common Stock, formeasured at each of the Company's
last five fiscal quarter following the May 31, 1994 spin-off from
American Express,year-ends, with that of (1) an index comprised of the S&P 500 Index and the Company's Peer Group
(Morgan Stanley Group Inc.,common
stocks of The Bear Stearns Companies Inc., Donaldson, Lufkin & Jenrette, Inc.,
J.P. Morgan & Co. Incorporated and Salomon Inc).Paine Webber Group, Inc. (the "Peer Group"),
and (2) the S&P 500 Index. Because Donaldson, Lufkin & Jenrette, Inc. has been a
publicly traded company only since October 1995, its common stock is not
included in the Peer Group index results for fiscal 1995.
The graph assumes $100 iswas invested in the Company's Common Stock and each index on
May 31,November 30, 1994, using the closing price of $18, and that all dividends were reinvested.reinvested in full. The
investment in the stocks comprising the peer group index has been weighted at
the beginning of each measurement period according to the issuing companies'
market capitalizations, in accordance with SEC rules.
CUMULATIVE TOTAL RETURN
PERFORMANCEFOR LEHMAN BROTHERS HOLDINGS INC. COMMON STOCK,
A PEER GROUP INDEX AND THE S&P 500 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MEASUREMENT PERIOD LEHMAN BROTHERS
(FISCAL YEAR COVERED) HOLDINGS INC. S&P 500 PEER GROUP11/94 11/95 11/96 11/97 11/98 11/99
5/31/94
LEHMAN BROTHERS HOLDINGS INC. 100.00 153.61 199.32 348.17 346.20 532.14
PEER GROUP 100.00 143.24 178.46 255.20 261.05 312.43
S & P 500 100.00 8/31/94 90.97 104.91 97.38136.98 175.15 225.09 278.35 336.52
CUMULATIVE TOTAL RETURN (IN DOLLARS)
---------------------------------------------------------------
11/30/94 83.61 100.85 83.04
2/28/95 101.94 108.97 93.10
5/31/95 111.25 119.73 105.80
8/31/95 133.06 126.76 112.92
11/30/95 127.78 137.05 113.75
2/29/96 139.86 145.51 123.91
5/31/96 138.75 152.55 131.70
8/30/96 120.28 149.63 133.18
11/29/96 165.00 173.49 155.4111/28/97 11/30/98 11/30/99
-------- -------- -------- -------- -------- --------
Lehman Brothers Holdings Inc............... 100.00 153.61 199.32 348.17 346.20 532.14
Peer Group................................. 100.00 143.24 178.46 255.20 261.05 312.43
S & P 500.................................. 100.00 136.98 175.15 225.09 278.35 336.52
1720
21
CERTAIN TRANSACTIONS AND AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
In the ordinary course of business, the Firm from time to time engages in
transactions with other corporations or financial institutions whose officers or
directors are also Executive Officers or Directors of the Company. Transactions
with such corporations and financial institutions are conducted on an
arm's-length basis and may not come to the attention of the Directors or
Executive Officers of the Company or those of the other corporations or
financial institutions involved.
From time to time, Executive Officers and Directors of the Company and their
associates may be indebted to the Company or its subsidiaries under lending
arrangements offered by those companies to the public. For example, such persons
may be indebted to LBI, as customers, in connection with margin account loans,
revolving lines of credit and other extensions of credit. Such indebtedness is
in the ordinary course of business, is substantially on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and does not involve a more than
normal risk of collectibility or present other unfavorable features. In
addition, such Executive Officers, Directors and associates may engage in
transactions in the ordinary course of business involving other goods and
services provided by the Firm, such as investment services, limited partnership
investments and financial counseling, on terms similar to those extended to
employees of the Company generally. From time to time since the beginning of
the
1996 fiscal year,Fiscal 1999, the Company, through certain of its subsidiaries, in the ordinary
course of business has provided investment, financial advisory and other
services to certain corporations and entities with which its Directors and prior
Directors are affiliated.
In March 1996, the Company advanced approximately $3.1 million to T.
Christopher Pettit, the former President and a former Director of the Company.
Of the advance, $2.9 million was repaid in early 1997 and the balance is
expected to be repaid by mid-year 1997.
In April 1996,1999, the Company entered into a one-year consulting agreement with
Henry Kaufman & Company, Inc. ("HK Company") pursuant to which HK Company
will provide,provides, upon request, advice to the Firm on global initiatives, economic
forecasts and other matters. HK Company receives a consulting fee of $12,500 per
month. Henry Kaufman, a Director of the Company, is a principal of HK Company.
In June 1996, LBI advanced $1 million to Jeremiah Callaghan, the Company's
Chief of Operations and Technology. The advance, which bore interest at the
margin loan rate, was repaid in full in early 1997.
Lehman Brothers Capital Partners II, L.P. ("Capital Partners II") is a
limited partnership established in 1988 to provide senior officers and other
employees of the Firm with an opportunity to invest in a portfolio of various
investment opportunities on a leveraged basis. Directors of the Company were
also given an opportunity to invest in Capital Partners II. During 1996, Mr.
Fuld and Mr. Berlind received $277,204 and $415,806, respectively, in income
distributions from Capital Partners II.
Lehman Brothers Capital Partners III, L.P. ("Capital Partners III") is a
limited partnership established in 1995 to provide senior officers and other
employees, consultants and directors of the Firm with the opportunity to invest
in a portfolio of investment opportunities. The partnershipCapital Partners III may enter into
high
riskhigh-risk investment opportunities of all kinds in all markets globally. Each of
the Executive Officers and Messrs. Berlind and Kaufman are limited partners in
the
partnership.Capital Partners III. The Company as general partner is making a capital
contribution to the partnershipCapital Partners III of up to $200 million and the limited
partners are contributing an aggregate of $25 million. The amount of the general
partner's capital contribution, together with a preferred rate offixed return thereon, will
generally be distributed to the general partner before any distributions are
made to the limited partners. As a result, the limited partners may not receive a return of
any of their capital. After the general partner has received back its
capital contribution and preferredfixed return, any subsequent profits are dividedallocated 90%
to the limited partners and 10% to the general partner. There were noDuring Fiscal 1999,
Messrs. Berlind, Kaufman, Cecil, Fuld, Gregory, Jack, Lessing, McKeever and
Vanderbeek received $66,000 and 12,424 shares of common stock of L-3
Communications Holdings, Inc. (such stock, the "L-3 Common Shares"), $66,000 and
12,424 L-3 Common Shares, $132,000 and 24,848 L-3 Common Shares, $231,000 and
43,484 L-3 Common Shares, $165,000 and 31,060 L-3 Common Shares, $66,000 and
12,424 L-3 Common Shares, $132,000 and 24,848 L-3 Common Shares, $82,500 and
15,530 L-3 Common Shares, and $82,500 and 15,530 L-3 Common Shares,
respectively, in distributions on
investments infrom Capital Partners III during fiscal 1996.
18III.
Lehman Brothers Venture Capital Partners I L.P. ("Venture") is a limited
partnership established in 1999 to provide senior officers and other employees,
directors and consultants of the Firm with the opportunity to invest in a
private equity fund. Venture will co-invest with a Lehman Brothers subsidiary,
LB I Group Inc., and with Lehman Brothers Venture Partners L.P., a private
equity fund organized for third party investors, generally in proportions based
upon the respective outstanding capital commitments of the three investing
entities. A subsidiary of the Company acts as general partner for Venture. The
investment objective of Venture is to seek substantial capital appreciation
through venture capital investments. Venture has capital commitments of
$60.8 million from the limited partners and $0.6 million from the general
partner, respectively. The Executive Officers and Messrs. Berlind and Cruikshank
are limited partners in Venture. Distributions of investment proceeds in respect
of a venture capital investment will be made to the limited partners and the
general partner pro rata in proportion to each of their capital contributions.
21
22
CERTAIN TRANSACTIONS AND AGREEMENTS WITH
AMERICAN EXPRESS AND SUBSIDIARIES
American Express has invested $29.4 million in two merchant banking
partnerships in which subsidiaries of the Company act as general partner, and
American Express received partnership distributions in an aggregate amount of
$6.9 million$196,703 in respect of these investments in 1996.Fiscal 1999.
Lehman Brothers Financial Resource Accounts include, as one of the features
of the integrated financial services accounts, the Gold Card issued by American
Express Travel Related Services Company, Inc. ("TRS"), for which LBI pays TRS a
portion of the fees received from the holders. LBI and TRS agreed in May 1994 to
extend such arrangements for a three-year period on an exclusive basis. TRS also provides the Corporate
Card to employees of the Firm, for which TRS receiveshas waived all annual fees. In
January 1994, the Company agreed to consolidate all of the Firm's domestically
initiated business travel reservations through TRS Travel Center in Omaha. LBI
and TRS agreed in May 1994March 1997 to extend such arrangements with respect to the
Corporate Card and travel services for 5 years,until June 30, 2000, with TRS as the sole
provider of such services.
In August 1990, American Express agreed to guarantee certain payments to
employees who were then active employees of the Company under certain deferred
compensation programs. As of December 31, 1996,1999, deferred compensation with an
aggregate balance of approximately $138$137 million was covered by this guarantee.
The Company pays American Express an annual fee equal to 0.625% on approximately
two-thirds of the outstanding balance under such deferred compensation plans, in
consideration of American Express maintaining the guarantee, which is scheduled
to expire in August 2000.
On June 28, 1991, Lehmanthe Company sold its subsidiary, The Balcor Company, to a
wholly owned subsidiary of American Express. In connection therewith, there
remains an interest bearing note with an unpaid principal amount of
$150approximately $88.4 million as of December 31, 1996,1999, with a maturity of
December 31, 2000, payable by American Express to the Company.
Portions of this note will be prepaid by
American Express prior to such date in proportion to the Company's payments and
prepayments on any indebtedness related to the World Financial Center.
In February 1996,During Fiscal 1999, the Company repurchased at the request offrom American Express
$200$220 million (aggregate liquidation preference) of 8.44% Cumulativethe Series B Preferred Stock
held by an American
Express subsidiary for an aggregate repurchase price of $202 million. The
repurchased preferred stock was then retired by the Company.at par.
The Firm, from time to time, provides investment banking, commercial paper
placement, brokerage and various other financial services such as repurchase
transactions, investment advisory, strategic advisory and derivative products to
American Express and its subsidiaries, including acting as placement agent for
medium-term notes, dealer for commercial paper and advisor regarding certain
dispositions. The Firm, American Express and its subsidiaries also engage in the
ordinary course of business in various trading and short-term funding
transactions, including foreign exchange and precious metals transactions. In
addition to the services referred to above, American Express and its
subsidiaries provide banking and other financial services to the Firm. All of
these transactions are done on an arms-lengtharm's-length basis with customary fees.
The Company and American Express entered into an Agreement dated May 26,
1994 (the "Tax Allocation Agreement"), which provided for the allocation,
settlement and payment of the Company's federal, state and local income tax
liabilities for the years during which the Company and any of its subsidiaries
were included in the American Express consolidated Federal income tax return or
any combined or unitary state and local tax returns. Under the terms of the Tax
Allocation Agreement, American Express retained significant control and
discretion over issues relating to the allocation, settlement and payment of the
covered tax liabilities, including the resolution of proposed audit adjustments.
For income tax filings relating to periods commencing on or after June 1, 1994
(the spin-off date), the Company files its own consolidated Federal income tax
return and applicable state and city filings.
The Company, LBI and Lehman Commercial Paper Inc. (collectively, the "LB
Co-tenants") are co-tenants together with American Express and certain of its
subsidiaries (the "AXP Co-tenants" and,
22
together with the LB Co-tenants, the "Co-tenants") of the leasehold interest in
3 World Financial Center in New York City (the "Property"). The Co-tenants'
relationship with respect to the Property is governed by an Agreement
19
23 of
Tenants-In-Common. The agreement provides, among other things, that each
Co-tenant is obligated to pay its proportionate share of all Property
obligations and limits the actions that may be taken by individual Co-tenants.
The AXP Co-tenants and LB Co-tenants are liable, on a limited recourse basis,
for their proportionate share of the debt (with maturities through the year(zero-coupon notes which mature in
December 2000) issued by the Co-tenants to finance the Property. The LB
Co-tenants' share of such debt as of December 31, 19961999 amounts to approximately
$219$191.7 million and has been guaranteed by American Express. Certain of suchSuch debt is secured
by a first and/or second mortgage granted on the interest of the Co-tenants as
tenants-in-common in the Property.
CERTAIN TRANSACTIONS AND AGREEMENTS WITH NIPPON LIFE
The Company, American Express and Nippon Life entered into a Business
Association Agreement in 1987. The Company and Nippon Life have conducted
certain personnel exchanges pursuant to such agreement.
On October 3, 1988, the Company entered into a loan agreement with Nippon
Life and borrowed Yen 5 billion maturing October 5, 1998. The Company prepaid
this borrowing on April 5, 1996. This borrowing was used to meet the Company's
general funding requirements. Interest on any advance outstanding under the loan
was paid at a rate of 5.5% per annum.
Nippon Life invested $137 million in a merchant banking partnership in
which a subsidiary of the Company acts as general partner. Nippon Life has
received partnership distributions in an aggregate amount of $46.7 million in
respect of this investment for fiscal 1996.
The Company's relationship with Nippon Life also provides the Company with
access to numerous Asian institutions for private placements and underwritings.
The Firm from time to time engages in certain investment banking, brokerage
and other trading activities, including securities lending arrangements, with
Nippon Life in return for commissions and fees which are negotiated on an
arm's-length basis.
Each of the Company and Nippon Life owns 50% of the outstanding capital
stock of PanAgora Asset Management Inc. ("PanAgora") and PanAgora Asset
Management Limited ("PanAgora Ltd."). Nippon Life and the Company also are
parties to an agreement regarding the cooperation and management of PanAgora and
PanAgora Ltd. The PanAgora entities may act as advisor or subadvisor to funds
sponsored by or sold or distributed to clients of the Firm and the Firm may
provide research, brokerage, distribution and other financial and administrative
services to the PanAgora entities or the funds which they advise.
AGREEMENT AMONG THE COMPANY, AMERICAN EXPRESS AND NIPPON LIFE
Pursuant to a 1987 Investment Agreement, as amended in 1990 ("Investment
Agreement"), Nippon Life has the right to nominate, and American Express will
vote its shares of Voting Stock for, two Directors to the Company's Board of
Directors, one of whom will serve on the Finance Committee of the Board of
Directors, (provided, however, that American Express must vote its shares of
Preferred Stock in the same manner as other Common Stockholders). These rights
continue so long as Nippon Life owns shares of Voting Stock, with a value (as
determined in accordance with the Investment Agreement) equal to not less than
two-thirds of the aggregate purchase price of the Series A Preferred Stock
($508.3 million), as adjusted (the "Investor's Minimum Investment"). Except to
the extent Nippon Life may participate in the management of the Company through
its nominees, Nippon Life has agreed that it will not, alone or in concert with
any other person, seek to affect or influence the control of the management or
business operations of the Company. Voting Stock means all securities issued by
the Company having the ordinary power to vote in the election of Directors of
the Company, other than securities having such power only upon the occurrence of
a default or any other extraordinary contingency. Nippon Life has, so long as it
owns the Investor's Minimum Investment, the right to purchase a pro rata share
(based on its then current percentage equity interest in the Company) of any
voting equity security or any securities convertible into or exchangeable for
shares of voting equity
20
24
securities issued by the Company (excluding shares of any such security offered
pursuant to the Company's employee benefit plans, dividend reinvestment plans
and other offerings other than for cash).
In addition, under the Investment Agreement, as modified by a new
investment agreement entered into in connection with the Company's spin-off from
American Express in 1994, Nippon Life has a non-transferable right to exchange
the Series A Preferred Stock held by it for common stock of American Express at
an exchange price of $81 per share of American Express common stock, subject to
certain anti-dilution adjustments (the "Exchange Price") until December 31,
1999. The Company also may redeem the Series A Preferred Stock held by Nippon
Life or its affiliates if the average market price of American Express common
stock exceeds the Exchange Price on the date notice of such redemption is given.
CERTAIN TRANSACTIONS WITH OTHER INSTITUTIONAL INVESTORS
AND THEIR SUBSIDIARIES
In December 1995,June 1999 Fidelity and the Firm sold, pursuantCompany announced an alliance across a broad
spectrum of investment products, research, and distribution channels. Under the
alliance, certain of Fidelity's brokerage clients will gain greater access to an asset purchase agreement,a
wide range of equity and fixed income products, including Lehman Brothers
research and the possibility of participating in Lehman Brothers lead-managed
initial and secondary public offerings, and Fidelity will be the principal
channel for Lehman Brothers to distribute underwritten securities to eligible
retail businessesbrokerage customers outside its own network of six European branch offices of LBI to Prudential
Securities Group Inc. and its affiliates. The sales price was comprised of
certain specified payments at closing plus semi-annual earn-out payments over a
three year post-closing period. The Firm received approximately $8 million from
Prudential Securities and its affiliates in respect of such transaction through
January 31, 1997. The sale was part of a series of moves that aligned the Firm's
high net-worth sales force with its institutional businesses. Prudential
Securities is a subsidiary of Prudential.net worth retail
brokers.
In the ordinary course of business and at customary and usual fees therefor,
the Firm may provide to PrudentialFidelity and its subsidiaries, FMR Corp.Prudential and its
subsidiaries, and other institutional stockholders, brokerage and other
financial services, andservices; on the same basis, such companies may provide mutual fund,
insurance and other financial services to the Firm.
23
PROPOSAL 2
RATIFICATION OF THE COMPANY'S SELECTION OF ITS AUDITORS
The Board of Directors recommends to the Stockholders that they ratify the
selection of Ernst & Young LLP, independent auditors, to audit the accounts of
the Firm for fiscal year 1997.Fiscal 2000.
The affirmative vote of the majority of Voting Stock present in person or by
proxy at the meeting is required to ratify the selection of auditors. In
determining whether the proposal has received the requisite number of
affirmative votes, abstentions will be counted and will have the same effect as
a vote against the proposal. Broker non-votes will have no impact on such matter
since they are not considered "shares present" for voting purposes.
In the event that the Stockholders fail to ratify the appointment, the Board
of Directors will consider it a direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Board of Directors, in
its discretion, may direct the appointment of a new independent accounting firm
at any time during the year if the Board feels that such a change would be in
the best interests of the Company and its Stockholders.
For Fiscal 1999, fees related to the annual examination of the Firm's
financial statements amounted to approximately $5.3 million.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will have the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
PROPOSAL 3
AMENDMENT TO THE 1996 MANAGEMENT OWNERSHIP PLAN RELATING
TO THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE TO BE GRANTED
The Board of Directors recommends to the Stockholders that they approve the
1996 Plan Amendment. Such approval would amend Section 3 of the 1996 Plan to
increase the number of shares of Common Stock with respect to which awards may
be granted under the 1996 Plan from 15.5 million to 21 million shares.
The 1996 Plan is administered by the Compensation Committee, which is
currently comprised exclusively of Non-employee Directors. The 1996 Plan
provides for the granting of incentive and non-qualified stock options, stock
appreciation rights and other stock-based awards, including restricted stock,
RSUs and PSUs ("Awards"), to officers holding the title of Senior Vice President
or above. The Compensation Committee has discretion to select the individuals to
whom Awards will be granted and to determine the type, size and terms of each
Award and the authority to administer, construe and interpret the 1996 Plan. As
of the Record Date, approximately 1,240 individuals were eligible to participate
in the 1996 Plan.
As of the Record Date, the Company had granted awards under the 1996 Plan
with respect to 13.065 million shares of Common Stock. The Board of Directors
believes approval of an additional 5.5 million shares is advisable in order to
permit the Company to continue to compensate senior officers in part with RSUs,
options and other stock-based awards instead of cash. Stock-based awards provide
an incentive to management to continue to work for the financial success of the
Company and encourage management to remain with the Company.
The relevant section of the 1996 Plan, as it would be amended by the 1996
Plan Amendment, is attached hereto as Appendix A. The change that would result
from the 1996 Plan Amendment is marked on such Appendix.
24
The affirmative vote of the majority of Voting Stock present in person or by
proxy at the meeting is required to ratify the 1996 Plan Amendment. In
determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as votes against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
MATERIAL PROVISIONS OF THE 1996 PLAN
The Board of Directors (the "Board") adopted the 1996 Plan on January 30,
1996, subject to approval by the Company's Stockholders, which was obtained on
April 10, 1996. Stockholder approval will permit the Company to maintain the
tax-deductible status of any RSUs and other stock-based awards to the Company's
Chief Executive Officer and any other executive officers. The 1996 Plan is
designed to permit it to be administered to grant "performance-based" awards to
executive officers which are intended to qualify for tax deductibility under
Section 162(m) of the Code. The 1996 Plan is administered by the Compensation
Committee, which is currently comprised exclusively of Non-employee Directors.
The shares of Common Stock issuable under the 1996 Plan may be authorized
but unissued shares, treasury shares or any combination thereof. If any shares
of Common Stock subject to repurchase or forfeiture rights are reacquired by
Holdings or if any Award is canceled, terminates or expires unexercised, the
shares of Common Stock which were issued or would have been issuable pursuant
thereto will become available for new Awards. No individual may receive options,
stock appreciation rights ("SARs") or other stock-based Awards during a calendar
year attributable to more than one million shares of Common Stock, subject to
adjustment in accordance with the terms of the 1996 Plan.
An individual to whom an Award is made has no rights as a stockholder with
respect to any Common Stock issuable pursuant to the Award until the date of
issuance of the stock certificate for such shares upon payment of the Award.
Notwithstanding the foregoing, such individual may be able to provide voting
instructions to the 1997 Trust Trustee with respect to Trust Shares relating to
such Award. See "Introduction--Vote By Proxy" and "--The Voting Stock."
Set forth below are the types of Awards which may be granted under the 1996
Plan.
STOCK OPTIONS. A stock option, which may be a non-qualified or an incentive
stock option (each, an "Option"), is the right to purchase a specified number of
shares of Common Stock at a price (the "Option Price") fixed by the Compensation
Committee. The Option Price of an Option may be no less than the fair market
value of the underlying Common Stock on the date of grant.
Unless otherwise provided in the Optionee's award agreement, options are not
transferable during the Optionee's lifetime and generally will expire not later
than ten years after the date on which they are granted. Options become
exercisable at such times and in such installments as the Compensation Committee
shall determine. The Compensation Committee may also accelerate the period for
exercise of any or all Options held by an Optionee. Payment of the Option price
must be made in full at the time of exercise in cash, by tendering to the
Company Common Stock having a fair market value equal to the Option price, or,
if authorized by the Compensation Committee, by certain withholding methods
which constitute a cashless exercise or by pledging shares of Common Stock as
security for a loan to pay the exercise price or by other means that the
Compensation Committee deems appropriate. The Compensation Committee may, at the
time of the grant of an Option or thereafter, grant a Limited Right, defined as
a right to surrender to Holdings all or a portion of the related Option in
connection with a Change in Control. In exchange for such surrender, the
Optionee would receive a payment in an amount equal to the number of shares
subject to the Option multiplied by the excess of the higher of (i) the highest
price per share of Common Stock paid in certain Change in Control transactions
or (ii) the highest fair market value per share of Common Stock at any time
during the 90-day period preceding such a Change in Control over the Option
price of the Option to which the Limited Right
25
relates. A Limited Right can be exercised within the 30-day period following a
Change in Control. A Limited Right will only be exercisable during the term of
the related Option. A "Change in Control" is deemed to occur when: (i) 20% or
more of the combined voting power of Holdings' voting securities is acquired in
certain instances; (ii) individuals who are members of Holdings' Board prior to
the Change in Control cease, subject to certain exceptions, to constitute at
least a majority of such Board; or (iii) Stockholders approve certain mergers,
consolidations, reorganizations, a liquidation of Holdings or an agreement for
the sale or other disposition of all or substantially all the assets of
Holdings.
STOCK APPRECIATION RIGHTS. A SAR may be granted alone or in tandem with
Options. Upon exercise, a stock appreciation right shall entitle the Participant
to receive from the Company an amount equal to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over the per share grant or option price, as applicable (or
some lesser amount as the Compensation Committee may determine at the time of
grant), multiplied by the number of shares of Common Stock with respect to which
the stock appreciation right is exercised. Upon the exercise of a stock
appreciation right granted in connection with a stock option, the stock option
shall be canceled to the extent of the number of shares as to which the stock
appreciation right is exercised, and upon the exercise of a stock option granted
in connection with a stock appreciation right or the surrender of such stock
option, the stock appreciation right shall be canceled to the extent of the
number of shares as to which the stock option is exercised or surrendered. The
Compensation Committee shall determine whether the stock appreciation right
shall be settled in cash, Common Stock or a combination of cash and Common
Stock. The Compensation Committee may, at the time of the grant of a SAR
unrelated to an Option or thereafter, grant a Limited Right in tandem with the
SAR which will operate in a manner comparable to the Limited Right described
above under the caption "Stock Options."
OTHER STOCK-BASED AWARDS. Other Awards of Common Stock and Awards that are
valued in whole or in part by reference to, or otherwise based on, the Fair
Market Value of Common Stock (all such Awards being referred to herein as "Other
Stock-based Awards"), may be granted under the 1996 Plan in the discretion of
the Compensation Committee. Other Stock-based Awards shall be in such form as
the Compensation Committee shall determine, including without limitation,
(i) the right to purchase shares of Common Stock, (ii) shares of Common Stock
subject to restrictions on transfer until the completion of a specified period
of service, the occurrence of an event or the attainment of performance
objectives, each as specified by the Compensation Committee; and (iii) shares of
Common Stock issuable upon the completion of a specified period of service, the
occurrence of an event or the attainment of performance objectives, each as
specified by the Compensation Committee. Other Stock-based Awards may be granted
alone or in addition to any other Awards made under the Plan. Subject to the
provisions of the Plan, the Compensation Committee shall have sole and absolute
discretion to determine to whom and when such Other Stock-based Awards will be
made, the number of shares of Common Stock to be awarded under (or otherwise
related to) such Other Stock-based Awards and all other terms and conditions of
such Awards. The Compensation Committee shall determine whether Other
Stock-based Awards shall be settled in cash, Common Stock or a combination of
cash and Common Stock.
With respect to any RSUs granted under the Plan, the obligations of the
Company or any Subsidiary are limited solely to the delivery of shares of Common
Stock on the date when such shares of Common Stock are due to be delivered under
each Agreement, and in no event shall the Company of any Subsidiary become
obligated to pay cash in respect of such obligation (except that the Company or
any Subsidiary may pay to Participants amounts in cash in respect of a
restricted stock unit equal to cash dividends paid to a holder of shares of
Common Stock).
The Compensation Committee shall establish the performance objectives that
must be attained in order for the Company to grant other Other Stock-based
Awards. Accordingly, unless the Compensation Committee determines at the time of
grant not to qualify the award as performance-
26
based compensation under Section 162(m), the performance objectives for awards
made under the 1996 Plan will be based upon one or more of the following
criteria: (i) before or after tax net income; (ii) earnings per share;
(iii) book value per share; (iv) stock price; (v) return on Stockholders'
equity; (vi) the relative performance of peer group companies; (vii) expense
management; (viii) return on investment; (ix) improvements on capital structure;
(x) profitability of an identifiable business unit or product; (xi) profit
margins; (xii) budget comparisons; and (xiii) total return to Stockholders.
Participants who have primary responsibility for a business unit of the Company
may be measured on business unit operating profit, business unit operating
profit as a percent of revenue, and/or measures related to business unit
profitability above its cost of capital, in place of some or all of the
corporate performance measures. The Compensation Committee must certify as to
the attainment of the applicable performance goals prior to payment of any Other
Stock-based Award, and may reduce the amount of any Other Stock-based Award.
ADDITIONAL INFORMATION. Under the 1996 Plan, if there is any change in the
outstanding shares of Common Stock by reason of any stock split, stock dividend,
combination, subdivision or exchange of shares, recapitalization, merger,
consolidation, reorganization or other extraordinary or unusual event, the
Compensation Committee shall direct that appropriate changes be made in the
number or kind of securities that may be issued under the 1996 Plan and in the
terms of the outstanding Awards. The Compensation Committee may accelerate or
waive vesting or exercise periods or the lapse of restrictions on all or any
portion of any Award or extend the exercisability of Options or SARs.
Unless otherwise provided in an individual's award agreement, an
individual's rights under the 1996 Plan may not be assigned or transferred
(except in the event of death). The Company shall have the right to deduct from
all amounts paid to any Participant in cash (whether under the Plan or
otherwise) any taxes required by law to be withheld therefrom. In the case of
payments of Awards in the form of Common Stock, at the Compensation Committee's
discretion, the participant may be required to pay to the Company the amount of
any taxes required to be withheld with respect to such Common Stock, or, in lieu
thereof, the Company shall have the right to retain the number of shares of
Common Stock the fair market value of which equals the amount required to be
withheld. Without limiting the foregoing, the Compensation Committee may, in its
discretion and subject to such conditions as it shall impose, permit share
withholding to be done at the Participant's election.
No Awards may be granted on or after the tenth anniversary of the date of
the adoption of the 1996 Plan by Holdings. The Compensation Committee or the
Board may amend, suspend or terminate the 1996 Plan or any portion hereof at any
time, provided that no amendment shall be made without approval of the
Stockholders which shall (i) increase (except as provided in the 1996 Plan) the
total number of shares or the percentage of shares reserved for issuance
pursuant to the Plan; (ii) change the class of employees eligible to be
participants; or (iii) extend the date after which Awards cannot be granted
under the 1996 Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. Certain of the federal
income tax consequences to Optionees and their employers of Options granted
under the 1996 Plan should generally be as set forth in the following summary:
An employee to whom an incentive stock option ("ISO") which qualifies under
Section 422 of the Code is granted will not recognize income at the time of
grant or exercise of such Option. No federal income tax deduction will be
allowable to the employee's employer upon the grant or exercise of such ISO.
However, upon the exercise of an ISO, the excess of the fair market value over
the Option exercise price will be a tax preference item in the year of the
exercise of the ISO, pursuant to special alternative minimum tax rules which
apply for the employee. When the employee sells such shares more than one year
after the date of transfer of such shares and more than two years after the date
of grant of such ISO, the employee will normally recognize a mid-term or
long-term capital gain or loss, as the case may be, depending on the holding
period, equal to the difference, if any, between the sale
27
prices of such shares and the Option exercise price. If the employee does not
hold such shares for this period, when the employee sells such shares, the
employee will recognize ordinary compensation income in such amounts as are
prescribed by the Code and regulations thereunder, and the employee's employer
will generally be entitled to a federal income tax deduction in the amount of
such ordinary compensation income.
An individual to whom a non-qualified Option is granted will not recognize
income at the time of the grant of such Option. When such Optionee exercises
such non-qualified Option, the Optionee will recognize ordinary compensation
income equal to the difference, if any, between the Option Price paid and the
fair market value, as of the date of option exercise, of the share the Optionee
receives. The tax basis of such shares to such Optionee will be equal to the
Option Price paid plus the amount includible in the Optionee's gross income, and
the Optionee's holding period for such shares will commence on the day after
which the Optionee recognized taxable income in respect of non-qualified in
respect of such shares. Subject to applicable provisions of the Code and
regulations thereunder, the employer of such Optionee will generally be entitled
to a federal income tax deduction in respect of non-qualified Options in an
amount equal to the ordinary compensation income recognized by the Optionee. Any
compensation includible in the gross income of an employee in respect of a
non-qualified Option will be subject to appropriate federal, state, local and
foreign income and employment taxes.
The discussion set forth above does not purport to be a complete analysis of
all potential tax consequences relevant to recipients of Options or their
employers or to describe tax consequences based on particular circumstances and
does not address Awards other than options. It is based on federal income tax
law and interpretational authorities as of the date of this Proxy Statement,
which are subject to change at any time. Employees who receive Options/other
Awards under the 1996 Plan should therefore consult their own tax advisors
regarding the federal, state and local income tax consequences of the 1996 Plan
and of the Options/other Awards granted pursuant thereto.
28
OTHER MATTERS
Management does not know of any business to be transacted at the meeting
other than as indicated herein. Should any such matter properly come before the
meeting for a vote, the persons designated as proxies will vote thereon in
accordance with their best judgment.
You are urged to sign, date and return the enclosed proxy incard as promptly
as possible, using the prepaid envelope provided for such purpose.purpose, or vote
online or by telephone according to the instructions on the proxy. It is hoped
that registered Stockholders will give us advance notice of their plans to
attend the Annual Meeting by marking the box provided on the proxy card.card or by
registering their intention when voting online or by telephone.
If you will need special assistance at the Annual Meeting because of a
disability, please contact the Corporate Secretary of the Company, Ms. Jennifer
Marre, at (212) 526-1911526-1936 or at Karen Manson@usccmail.1ehman.com.jmarre@lehman.com. Directions to the meeting are
on the backlast page of this Proxy Statement.
DEADLINE FOR SUBMITTING PROPOSALS FOR NEXT YEAR'S MEETING. Stockholders who
intend to present proposals for inclusion in the proxy material to be
distributed by the Company in connection with the Company's 19982001 Annual Meeting
of Stockholders must submit their proposals to the Corporate Secretary of the
Company on or before October 20, 1997.
KAREN C. MANSON27, 2000.
In addition, in accordance with Article II, Section 9 of the Company's
By-Laws, in order to be properly brought before the 2001 Annual Meeting, a
matter must have been (a) specified in a notice of meeting given 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), (b) otherwise properly brought before the meeting
by or at the direction of the Board of Directors or (c) otherwise properly
brought before the meeting by a stockholder. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 90 nor more than 120 days prior to the
first anniversary of the date of this year's Annual Meeting. Accordingly, any
notice given by or on behalf of a stockholder pursuant to the foregoing
clause (c) in connection with the 2001 Annual Meeting must be received no later
than January 4, 2001.
Jennifer Marre
Secretary
New York, New York
February 24, 2000
29
APPENDIX A
EXCERPT FROM THE
LEHMAN BROTHERS HOLDINGS INC.
1996 MANAGEMENT OWNERSHIP PLAN
If the 1996 Plan Amendment is approved, Section 3 of the 1996 Plan would be
amended to read as follows:
SECTION 3--SHARES SUBJECT TO THE PLAN
(a) Shares of Common Stock which may be issued under the Plan may be either
authorized and unissued shares of Common Stock or authorized and issued shares
of Common Stock held in the Company's treasury, or any combination thereof.
Subject to adjustment as provided in Section 14, 1997
22the number of shares of Common
Stock with respect to which Awards (whether distributable in shares of Common
Stock or in cash) may be granted under the Plan shall be 15.5 million(1)
21 MILLION(2) shares. The maximum number of shares of Common Stock available for
stock options, stock appreciation rights or other Stock-based Awards that may be
granted to a Participant during a calendar year shall not exceed one million.
(b) Notwithstanding the last sentence of Section 3(a), to the extent that
the number of shares of Common Stock with respect to which Awards may be granted
under the Plan in any calendar year exceeds the number of shares of Common Stock
with respect to which Awards were granted under the Plan during that calendar
year, such excess shall be available for grant under the Plan in succeeding
calendar years.
(c) In the event that any other Award subject to repurchase or forfeiture
rights is reacquired by the Company or if any Award is canceled, terminates or
expires unexercised (except with respect to a stock option which terminates on
the exercise of a stock appreciation right) for any reason under the Plan, any
Common Stock allocated in connection with such Award, shall thereafter again be
available for grant pursuant to the Plan.
- ------------------------
(1) Underscored language appears in the 1996 Plan as currently in effect and
will be deleted if the 1996 Plan Amendment is approved at the 2000 Annual
Meeting.
(2) Language in bold type will be included in the 1996 Plan if the 1996 Plan
Amendment is approved at the 2000 Annual Meeting.
26
DIRECTIONS TO THE LEHMAN BROTHERS HOLDINGS INC.
19972000 ANNUAL MEETING OF STOCKHOLDERS
The Firm's World Headquarters, site of the 19972000 Annual Meeting of
Stockholders, is located at 200 Vesey Street, 3 World Financial Center, on the
west side of lower Manhattan in the office complex known as the World Financial
Center. The World Financial Center is a part of Battery Park City, a 10-acre development
of office buildings, residences and parks amongst formeralongside the Hudson River piers on the
southwestern tip of Manhattan. It is connected to the World Trade Center by two
pedestrian overpasses and is also accessible at street level by automobile.
BY SUBWAY
Take any of the several subway lines (A, C, E, N, R or the 1, 2, 3, 4, 5 or
9 trains) that stop at or near the World Trade Center. Walk from the World Trade
Center across West Street (formerly known as the Westside Highway (also known as West Street)Highway) via one of
the two pedestrian overpasses. The Company's offices are in 3 World Financial
Center, which is the building on the north side of the Winter Garden in the
World Financial Center.
BY AUTOMOBILE OR TAXICAB
Proceed to West Street (formerly known as the Westside HighwayHighway) in lower
Manhattan, orienting toward the twin towers of the World Trade Center. Enter the
World Financial Center, which is directly across the Westside HighwayWest Street from the towers, by
turning west on either Murray Street or Vesey Street. Proceed to the main
entrance of 3 World Financial Center, which is the building located at the
southwest corner of Vesey Street and the Westside Highway.West Streets. There is only very limited
underground parking in the building. Such parking requires the payment of a fee.
Building security may inspect your car before permitting you to park.
23
27
LEHMAN BROTHERS
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
COMPANY HIGHLIGHTS
1996 WAS A RECORD YEAR FOR
LEHMAN BROTHERS HOLDINGS INC.
* The Firm earned, after a special item, a record $415 million in 1996.
* Net Income increased 84% from 1995.
* 1996 Earnings Per Share were $3.24, compared with $1.76Proxy for 1995.
* TheAnnual Meeting of Stockholders
This proxy is solicited by the Board of Directors
changedJennifer Marre, Joseph Polizzotto and Thomas A. Russo, or each of them
(with full power to act without the others and with full power of substitution)
are hereby appointed attorneys and proxies to attend the Annual Common Stock Dividend Policy from
$0.20Meeting of
Stockholders to $0.24 per share - a 20% increasebe held on April 4, 2000, and any adjournment thereof, and to
vote and act for the undersigned on the matters listed on the reverse side
hereof, which are set forth in detail in the dividend rate.
DETACH HERE
/X/ Please mark votes in this example
---------------------------------------------------------------
The Board of Directors recommends aaccompanying Proxy Statement.
This proxy revokes all previous proxies. Unless specified to the contrary,
it will be voted FOR all proposals. In their discretion, the proxies are
authorized to vote FOR proposals 1 and 2.
---------------------------------------------------------------
1. Election of Class of Directors 2. Ratification of Ernst & Young LLP
as independent auditors for
Nominees: Thomas H. Cruikshank, Henry fiscal year 1997.
Kaufman and John D. Macomber
FOR AGAINST OBSTAIN
FOR WITHHELD / / / / / /
/ / / /
3. To act onupon any other business which may properly come before the
Annual Meeting or any adjournment thereof.
/ /________________________________________
For all nominees as noted(Continued, and to be signed and dated, on the line above.
MARK HEREreverse side.)
LEHMAN BROTHERS HOLDINGS INC.
P.O. BOX 11034
NEW YORK, N.Y. 10203-0034
LEHMAN BROTHERS VOTE BY TELEPHONE OR INTERNET
LEHMAN BROTHERS HOLDINGS INC. 24 HOURS A DAY, 7 DAYS A WEEK
THREE WORLD FINANCIAL CENTER
NEW YORK, NY 10285
TELEPHONE
800-574-7049
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below; then just follow the simple directions.
INTERNET
http://proxy.shareholder.com/leh
Use the internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your control number, located
in the box below; then just follow the simple directions.
MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
Your telephone or internet vote authorizes the named proxies to vote
your shares in the same manner as if you marked, signed and returned
the proxy card.
-------------------------------------
If you have submitted your proxy by
telephone or the internet there is no
need for you to mail back your proxy.
-------------------------------------
----------------------------
CONTROL NUMBER FOR
ADDRESS CHANGE AND / /
NOTE AT LEFT
MARKTELEPHONE OR INTERNET VOTING
----------------------------
DETACH PROXY CARD HERE IF YOU PLAN TO ATTENDARE NOT
VOTING BY TELEPHONE OR INTERNET
- -------------------------------------------------------------------------------
If Mailing Your Proxy, Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
/ /
THE MEETING
PLEASE SIGN, DATE AND MAIL YOUR,
PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.The Board of Directors recommends a vote FOR all nominees and
FOR proposals 2 and 3.
1. Election of Class Ill Director Nominees: 01-Thomas H. Cruikshank 02-Henry
Kaufman 03-John D. Macomber
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
for all nominees x
*Exceptions_____________________________________________________________________
2. Ratification of Ernst & Young LLP as independent auditors for the fiscal
year 2000. FOR AGAINST ABSTAIN
3. Approval of amendment to the 1996 Management Ownership Plan to increase
shares available for grants by 5.5 million. FOR AGAINST ABSTAIN
4. To act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
Mark here if you plan Address Change and/or
to attend the meeting. Comments Mark Here x
IMPORTANT: Please sign exactly as
your name or names appear hereon and
when signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
the signature is by a corporation, sign the full
corporate name by a
duly authorized officer.
Signature__________________________________ Date___________________
Signature__________________________________ Date___________________
28
DETACH HERE
LEHMAN BROTHERS HOLDINGS INC.officer should sign
in full corporate name. Dated:
______________________________, 2000
SIGNATURE(S)
PLEASE SIGN, DATE AND MAIL YOUR PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
P
THIS PROXY IS SOLICITEDVOTES MUST BE INDICATED
CARD PROMPTLY IN THE ENCLOSED ENVELOPE (X) IN BLACK OR BLUE INK. X
UNLESS YOU HAVE VOTED BY THE BOARD OF DIRECTORS
R
O Karen C. Manson, Karen M. Muller and Thomas A. Russo, or each of them
(with full power to act without the other and with full power of
X substitution) are hereby appointed attorneys and proxies to attend the
Annual Meeting of Stockholders to be held on March 26, 1997, and at any
Y adjournment thereof, and to vote and act for the undersigned on the matters
listed on the reverse side which are set forth on the accompanying Proxy
Statement.
This proxy revokes all previous proxies. Unless specified to the
contrary, it will be voted FOR all proposals. In their discretion, the
proxies are authorized to vote upon any matters which may properly come
before the meeting or any adjournment.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDETELEPHONE OR
INTERNET.