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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
LEHMAN BROTHERS HOLDINGS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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:
------------------------------------------------------------------------
(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 it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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LEHMAN BROTHERS HOLDINGS INC.
- -------------------------------------------------------------------- LEHMAN--------------------------------------------------------------------------------
RICHARD S. FULD, JR. BROTHERS
Chairman and Chief Executive Officer
HOLDINGS
INC.
February 14, 199719, 1998
Dear Stockholder:
The 1998 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
(the
"Company") will be held on Wednesday,Tuesday, March 26, 1997,31, 1998, at 10:30 a.m. (New York Time), at the
26th Floor Auditorium, 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.
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, 199710, 1998
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 threefour Class III Directors andII
Directors; (ii) ratify the Board
of Directors' selection of Ernst & Young LLP as the Company's
independent auditors for the 19971998 fiscal year.year; and (iii) approve amendments to
the 1996 Management Ownership Plan to (a) increase the number of shares of
Common Stock with respect to which awards may be granted under the Plan from ten
million to 15.5 million shares and (b) make an additional class of senior
officers of the Company eligible to participate in the Plan. Accordingly, we
request that you promptly sign, date and return the enclosed proxy card,
regardless of the number of shares you hold.
Very truly yours,
/s/ Richard S. Fuld, Jr.
------------------------------
RICHARDRichard S. FULD, JR.Fuld, Jr.
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February 19, 1998
Dear Stockholder:
Enclosed with this letter are the proxy materials for the upcoming Annual
Meeting. You are being asked to approve the addition of 5.5 million shares to
the 1996 Management Ownership Plan (the "1996 Plan"). Compensation paid under
the 1996 Plan consists of long-term equity, which has served as an effective
mechanism for the delivery of performance-driven compensation to senior officers
of the Firm. In fact, operating results and stock price have improved
dramatically since early 1996 when Stockholders approved the adoption of the
1996 Plan with an initial allocation of ten million shares. Net income has
increased over 167% from $242 million in fiscal 1995 to $647 million in fiscal
1997 and the stock price has increased over 100% from approximately $23 at
fiscal year-end 1995 to $51 at fiscal year-end 1997. Accordingly, the
Compensation and Benefits Committee of the Board of Directors unanimously
recommends approval of the proposed amendment to the 1996 Plan.
A fundamental principle of our approach to compensation is to align the
interests of every member of the Firm with those of the Stockholders. In brief,
we believe that this can be accomplished through the following:
- compensate all members of the firm with an "ownership" stake in the
Company and, thus, encourage actions which build long-term Stockholder
value; and
- tie compensation to the achievement of specified performance goals.
The 1996 Plan embodies this principle and will continue to meet the
above-stated Firm objectives. As a result of awards under the 1996 Plan to
senior officers and our Firm-wide programs, employees currently represent
approximately 26% of the ownership of the Firm, up from approximately 17% at the
time of adoption of the 1996 Plan. We believe this significant ownership stake
truly aligns the interests of our employees and public Stockholders.
The 1996 Plan allows the Company to grant restricted stock units ("RSUs")
and other equity-based awards, such as options and performance stock units, to
senior officers. In order to continue to make equity-based awards under the 1996
Plan for the foreseeable future, an additional 5.5 million shares of the
Company's Common Stock need to be added to the Plan. This is less than 4.7% of
the currently outstanding shares, and we believe the additional shares will
enable us to continue to appropriately align the interests of senior officers
and Stockholders. Stockholder approval of the increase is required to assure
that awards to senior officers under such plans are tax-deductible to the
Company, which itself is important to maximize Stockholder value.
In addition to awards to senior officers under the 1996 Plan, we intend to
continue our current practice of paying a significant percentage of all
employees' total compensation in RSUs under our Firm-wide programs. The
Firm-wide programs provide employees with a strong interest in the financial
performance and growth of the Company and a powerful incentive in working to
build long-term Stockholder value. As with the 1996 Plan, the RSUs paid under
our Firm-wide programs will have vesting and resale restrictions, which will
also assist the Firm in retaining key personnel. We are pleased to tell you that
the Company will continue to fund RSUs and any other equity-based awards paid
under our Firm-wide programs through secondary market purchases to avoid share
dilution. By the end of 1997, we had purchased more than 7.5 million shares to
fund awards under our Firm-wide programs. The Board of Directors announced last
month that up to an additional 4.5 million shares will be purchased in 1998. We
will keep you advised of our buy-back plans for later years.
Sincerely,
[MACOMBER SIG]
John D. Macomber
Chairman
Compensation and Benefits Committee
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LEHMAN BROTHERS HOLDINGS INC.
------------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Lehman Brothers Holdings Inc.:
The 1998 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
(the "Annual Meeting""Company") of the Company will be held on Wednesday,Tuesday, March 26, 1997,31, 1998, at 10:30 a.m. (New York
Time), at the 26th Floor Auditorium, 3 World Financial Center, 200 Vesey Street,
New York, New York 10285, to:
(1)(i) Elect threefour Class IIIII Directors for terms of three years each;
(2)(ii) Ratify the Board of Directors' selection of Ernst & Young LLP as the Company's
independent auditors for the 19971998
fiscal year;
(iii) Approve amendments to the 1996 Management Ownership Plan to (a)
increase the number of shares of Common Stock with respect to which awards
may be granted under the Plan from ten million to 15.5 million shares and
(3)(b) make an additional class of senior officers of the Company eligible to
participate in the Plan; and
(iv) 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 10, 1998 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 10, 1998, 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.
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 a Lehman Brothers employee. The Company's Annual
Report to Stockholders is being separately distributed to Lehman Brothers
employees.
By Order of the Board of Directors
/s/ Karen C. Manson
----------------------------------
KAREN C. MANSON[MANE SIG]
Jennifer Marre
Secretary
New York, New York
February 14, 199719, 1998
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.
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LEHMAN BROTHERS HOLDINGS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
February 14, 199719, 1998
PROXY STATEMENT
------------------------
INTRODUCTION
VOTE BY PROXY. This proxy statement ("Proxy(the "Proxy Statement") is furnished
in connection with the solicitation of the accompanying proxy by the Board of
Directors of the CompanyLehman Brothers Holdings Inc. (the Company,"Company" and, together with its
subsidiaries, the "Firm") for the Company's1998 Annual Meeting of Stockholders of the
Company to be held on Wednesday,Tuesday, March 26, 199731, 1998 at 10:30 a.m. (New York Time), or
any adjournment thereof ("Annual(the "Annual Meeting"). This Proxy Statement and the
proxy ("proxy(a "proxy card" or "proxy") are expected to be mailed to the Company's
stockholders of record at the Company
("Stockholders"close of business on February 10, 1998 (the
"Stockholders") on or about February 14, 1997.20, 1998.
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 and return it in the enclosed, prepaid envelope. 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 preferred stock registered in the name of each Stockholder at the close
of recordbusiness on February 5, 1997.10, 1998 (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) allocated to the employee'saccount of the employee under the Lehman
Brothers Holdings Inc. Employee Stock Ownership Plan ("ESOP"(the "ESOP"), (iii) that
relate to the total 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.
Incentive Plans (the "1997 Trust") account, and (iii)(iv) held by the employee in brokerage
accounts at the Company's wholly owned subsidiary, Lehman Brothers Inc. ("LBI"),
or at Fidelity Brokerage Services, Inc. ("Fidelity"). Proxies returned by
employees who participate inwith respect to shares allocated to the employee under the ESOP will
be considered to be voting instructions returned to the ESOP trustee ("ESOP(the "ESOP
Trustee") with respect to shares allocated to such participant's account.shares. Pursuant to the terms of the ESOP trust
agreement, the ESOP Trustee shall vote unallocated shares and allocated shares
for which no voting instructions are received in a manner that the ESOP Trustee
judges to be in the best interest of participants in the ESOP.ESOP participants. Proxies returned by
employees will be considered to be voting instructions returned to the 1997
Trust Trustee (the "1997 Trust Trustee") with respect to the number of shares
determined pursuant to the terms of the agreement governing the 1997 Trust. The
1997 Trust Trustee shall implement such voting instructions as described below
under "-- The Voting Stock." Proxies returned by employees with LBI or Fidelity
brokerage accounts will be considered to be voting instructions returned to LBI
or Fidelity, as applicable, with respect to 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. 6
GENERAL. Unless contrary instructions are indicated on the proxy, 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 threefour nominees for Class IIIII 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 19971998 fiscal year.year; and
FOR the approval of amendments (the "1996 Plan Amendments") to the
Company's 1996 Management Ownership Plan (the "1996 Plan") to (a) increase
the number of shares of Common Stock with respect to which awards may be
granted under the 1996 Plan from ten million to 15.5 million shares and (b)
make an additional class of senior officers of the Company eligible to
participate in the Plan, as more fully described below.
In the event a Stockholder specifies a different choice on the proxy, 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 19961997 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 of the Company's Annual Report to the
Securities and Exchange Commission (the "SEC") ON FORMon Form 10-K, EXCLUSIVE OF
EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO: LEHMAN BROTHERS HOLDINGS
INC.exclusive of
exhibits, 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 19961997 Annual Report and 19961997 Annual Report on
Form 10-K also will be available through the Lehman Brothers Web Site: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 & Company Inc. to
assist the Company in the distribution and solicitation of proxies. The Company
has agreed to pay Georgeson a fee of $15,000 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"Stock," and the
Common Stock and the Preferred Stock are collectively referred to herein as the
"Voting Stock").
As of February 5, 1997,the Record Date, there were 100,808,526119,097,077 shares of Common Stock
outstanding (exclusive of 6,345,366904,768 shares held in the treasury), each of which
is entitled to
one vote with respect to each matter to be voted on at the Annual Meeting, and
there were outstanding 13,000,00032,100 shares of Series A Preferred Stock, 12,967,900
shares of Series B Preferred Stock and 1,000 shares of Redeemable Preferred
Stock. Each of the Series A Preferred Stock each of whichand the Series B Preferred Stock is
entitled to .3178313 votes per share, and the Redeemable Preferred Stock is
entitled to 1,059 votes per share, respectively.share. There is no cumulative voting provision for
Common Stock or Preferred Stock. The Common Stock and the Preferred Stock will
vote together as a single class on each matter to be voted on at the meeting. As
of the Record Date, the Common Stock is entitled to an aggregate of 119,097,077
votes, or 95.82% of the total number of votes entitled to be cast at the Annual
Meeting; the Series A Preferred Stock is entitled to an aggregate of 10,202.38
votes, or 0.01% of the total number of votes entitled to be cast at the Annual
Meeting; the Series B Preferred Stock is entitled to an aggregate of
4,121,604.52 votes, or 3.32% of the total number of votes entitled to be cast at
the Annual Meeting; and the Redeemable
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Preferred Stock is entitled to an aggregate of 1,059,000 votes, or 0.85% of the
total number of votes entitled to be cast at the Annual Meeting. The presence in
person or by proxy at the Annual Meeting of the holders of a majority of the
shares of Common Stock and 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 1996 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 of February 5,the Record Date, 18,246,760 Trust Shares (representing approximately
14.7% 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") or one
or more of its subsidiaries owned no shares of Common Stock, 70.7% of the
outstanding shares of Series B Preferred Stock, representing approximately 2.34%
of the votes entitled to be cast at the Annual Meeting, and 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 CERTAIN8
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
To the knowledge of management, except as described below, no person
beneficially owned more than five percent of any class of Voting Stock as of
December 31, 1996.1997.
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...............................7,137,424(b) 6.0%
The Prudential Insurance
7,153,636(f) 7.1%
Company of America(e)America(c) 7,079,321(d) 5.9%
Cumulative Convertible Voting
Preferred Stock, Series A................ Nippon Life(c) 9,163,683 70.5%B..... American Express(e) 9,163,683(f) 70.7%
Redeemable Voting
Preferred Stock..........Stock............... American Express(g) 928(h)Express 928(f) 92.8%
Redeemable Voting Preferred Stock.......... Nippon Life(c) 72Life Insurance
Company(g) 72(h) 7.2%
- ---------------
(a) TheAccording to Amendment No. 5 to Schedule 13G, dated February 14, 1998 (the
"Fidelity Schedule 13G"), filed by FMR Corp., 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 12,650,301 shares beneficially
owned by13G. Fidelity Management & Research Company ("Fidelity"), a
registered investment
adviser,wholly-owned subsidiary of FMR Corp., is the beneficial owner of 6,161,171
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 1940, and serving as a result of acting as sub-adviser to Fidelity
American Special Situations Trust ("FASST"), a unit trust established under
the laws of England. The investment adviser of FASST is Fidelity Investment
Services Limited, a company established under the laws of England and a
subsidiary of Fidelity International Limited ("FIL"). Edward C. Johnson 3d,
FMR Corp., through its control of Fidelity and certain funds each have sole
power to certain other funds which are generally
offered to limited groupsdispose of investors; 355,620the 6,129,871 shares beneficially owned by certain Funds. Neither FMR
Corp. nor Edward C. Johnson 3d has the sole power to vote or direct the
voting of the shares owned directly by the Fidelity Funds, which power
resides with the Funds' Boards of Trustees. Fidelity carries out the voting
of the shares under written guidelines established by the Funds' Boards of
Trustees. FIL, FMR Corp., through its control of Fidelity, and FASST each
have sole power to vote and to dispose of the 31,300 shares held by FASST.
Fidelity Management Trust Company, a bank andwholly-owned subsidiary of FMR Corp.,
as a
resultis 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 groups779,453 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.manager of certain institutional account(s). Edward C.
Johnson 3d and FMR Corp. has, through its control of Fidelity Management Trust
Company, each have sole votingdispositive power over 327,340779,453 shares and sole dispositive power
with respect to 13,009,621 shares. Fidelity International
Limited ("FIL") has solevote or to direct the voting of 654,573 shares, and dispositiveno power with respect to allvote or
to direct the shares it beneficially owns. Edward C. Johnson 3rd, Chairmanvoting 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 2,912,505124,880 shares of Common Stock issuable upon conversionowned by the
institutional account(s) as reported above. FIL and various foreign-based
subsidiaries provide investment advisory and management services to a number
of non-U.S. investment companies and certain institutional investors. FIL is
the beneficial owner of 228,100 shares of Common Stock, which include 31,300
shares owned by FASST. Prior to June 30, 1980, FIL was a majority-owned
subsidiary of Fidelity. On that date, the shares of FIL held by Fidelity
were distributed, as a dividend, to the shareholders of FMR Corp. FIL
currently operates as an entity independent of FMR Corp. and Fidelity. FIL
has the sole power to vote and the sole power to dispose of 196,800 shares.
FIL, FMR Corp., through its control of Fidelity, and FASST each have sole
power to vote and to dispose of the Series A Preferred Stock. Based upon information furnished31,300 shares held by Nippon Life,
Nippon Life has sole investment and sole voting power over all shares.
(e) The address ofFASST.
(c) According to Amendment No. 2 to Schedule 13G, dated February 10, 1998 (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 to(d) The information in this footnote has been extracted from the Prudential
Schedule 13G, dated January 27, 1997, filed by
Prudential.13G. Prudential has solemay have direct or indirect voting and/or
investment and sole voting powerdiscretion over 13,8877,079,321 shares and shared voting and shared dispositive power over 7,139,749 shares.
These sharesof Common Stock
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which are held for the benefit of Prudentialits clients by its separate accounts,
externally managed accounts, registered investment companies, subsidiaries
and/or other affiliates. (g)Prudential has disclosed in the Prudential Schedule 13G
that it has sole power to vote or to direct the vote and sole power to
dispose or direct the disposition with respect to 16,187 shares and shared
power to vote or to direct the vote and shared power to dispose or direct
the disposition with respect to 7,063,134 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
7The Cumulative
Convertible Voting Preferred Stock, Series B, owned by American Express is
convertible into 2,912,505 shares of Common Stock, and if converted would
represent approximately 2.4% of that class.
(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 5,487,802 shares of Common Stock, representing
approximately 4.6% of that class, and has sole investment and sole voting
power over all shares.
PROPOSAL 1
ELECTION OF CLASS IIIII DIRECTORS
At the Annual Meeting threefour Class IIIII Directors are to be elected, each to
serve until the Annual Meeting in 20002001 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 Class I and Class IIIII Directors continue
until the Annual Meetings in 1999 and 1998, respectively.2000, respectively, and until their
respective successors are elected and qualified.
The threefour nominees for Director are: Thomas H. Cruikshank, Henry KaufmanMichael L. Ainslie, Roger S. Berlind,
Hideichiro Kobayashi and John D. Macomber.Dina Merrill. Messrs. Cruikshank, KaufmanAinslie, Berlind and MacomberKobayashi
and Ms. Merrill were elected Class IIIII Directors in 1996, 19951985, 1997 and 1994,1988,
respectively.
The threeProvided that a majority of the outstanding Voting Stock votes on the
proposal, the four nominees receiving the greatest number of votes cast by the
holders of the Voting Stock will be elected as Class IIIII Directors of the
Company. Unless authority to vote is withheld,Except as stated in the following sentence, the persons specified in
the enclosed proxy 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 IIIII DIRECTORS TO SERVE
UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 65
Retired Chairman and Chief Executive Officer of Halliburton Company. Mr.
Cruikshank was the Chairman of Halliburton Company, a major petroleum industry
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, The Williams Companies, Inc., Central and
South West Corporation, and Seagull Energy Corporation. He is a member of the
Company's Audit Committee.
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 69
President of Henry Kaufman & 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, the Chairman
of the Board of Overseers of the Stern School of Business of New York University
and the President 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 International Monetary Fund Staff Retirement Plan
and a Member of the Board of Governors of Tel-Aviv University. Dr. Kaufman has
been a Director of the Company since 1995. He is Chairman of the Company's
Finance Committee and a member of the Nominating Committee.
4
8
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 69
Principal of JDM 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., 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 Board of the Center for Strategic
& International Studies and the Yale School of Management. He is 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 of the Company since 1994. He is Chairman of the
Company's Compensation and Benefits Committee, and a member of the Company's
Executive Committee and 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: 5354
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 directorDirector 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
5
10
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 isMr. Ainslie serves as a member of the Company's Audit Committee.
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 6667
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
serves as the Chairman of the Audit Committee and as a member of the Finance
Committee.
HIDEICHIRO KOBAYASHI DIRECTOR SINCE 1997 AGE: 53
Director and 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
the Company since 1985.International Finance and Planning Department from 1994 to 1995. He is Chairmanwas
General Manager of the Company'sInternational 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 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 a member of the Finance Committee.
DINA MERRILL DIRECTOR SINCE 1988 AGE: 6869
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 board 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 Nominating
Committee.
5
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 FinanceNominating Committee.
CLASS I DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
1999 ANNUAL MEETING OF STOCKHOLDERS
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 6263
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., the 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. 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: 5051
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 also a member of the Corporate
Management Committee. Mr. Fuld was President and Chief
6
11
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 from August 1990 to March 1993. Mr. Fuld was a Vice
Chairman of LBI 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 and a Director of the Company since 1990. Mr. Fuld is
a trustee of Mount Sinai Medical Center, a member of the Executive Committee of
Mount Sinai Children's Center Foundation, a trustee of Wilbraham & Monson
Academy and a Director of Ronald McDonald
House, anda member of the Board of Governors of the New York Stock Exchange.
HeExchange and a
member of the President's Advisory Committee on Trade Policy Negotiations. Mr.
Fuld is a member of the University of Colorado Business Advisory Council. Mr.
Fuld serves as the Chairman of the Company's Executive Committee and as Chairman and a
non-voting member of the Company's Nominating Committee.
KATSUMI FUNAKIMASAHIRO YAMADA DIRECTOR SINCE 19911997 AGE: 55
Senior General Manager of International Business of the Finance and
Investment Planning Office52
Managing Director of Nippon Life. Mr. FunakiYamada has resigned as a Director, such
resignation to take effect March 31, 1998. Mr. Yamada has been affiliated with
Nippon Life, Japan's largest insurance company, since 19641968 and has been Senior
General Manager for International Business of the Finance and Investment
Planning OfficeManaging
Director since March 1994.1997. Mr. FunakiYamada was ChiefDirector and General Manager for the
AmericasCorporate Planning Department from 1993 through March 1994,1995 to 1997 and was Director and General
Manager for North Americaof the Actuarial Department from March 1991 until 1993.1994 to 1995. He was Deputy ChiefBranch Manager of
International Investment
Headquarters of Nippon Lifethe Hiroshima Branch Office from 19901992 to 1991.1994. Mr. FunakiYamada was General Manager of
the International Investment Department of Nippon Life from 19881990 to 19901992 and
Deputy General Manager of the International Planning Department from 1989 to
1990. He was Manager of the International Securities Investment Department of Nippon Life
from
19861984 to 1988.1989. Mr. FunakiYamada was sent to London as trainee in 1978 and was Chief
Representative in Nippon's London Office from 1981 to 1984. Mr. Yamada has been
a Director since May 1997 of PanAgora Asset Management, Inc., and a Director
since June 1997 of PanAgora Asset Management Limited.
CLASS III DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
2000 ANNUAL MEETING OF STOCKHOLDERS
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 66
Retired Chairman and Chief Executive Officer of Halliburton Company. Mr.
Cruikshank was the Chairman and Chief Executive Officer 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, The
Williams Companies, Inc. and Seagull Energy Corporation. Mr. Cruikshank serves
as a member of the Audit Committee.
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 70
President of Henry Kaufman & Company, Inc. Dr. Kaufman has been President of
Henry Kaufman & Company, Inc., an investment management and economic and
financial consulting firm, since 1991.
61988. 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, the Chairman
of the Board of Overseers of the Stern School of Business of New York University
and a 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 International Monetary Fund Staff Retirement Plan and a Member
of the Board of Governors of Tel-Aviv University. Dr. Kaufman serves as the
Chairman of the Finance Committee and as a member of the Nominating Committee.
7
1012
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 70
Principal of JDM 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., Mettler-Toledo
International, Pilkington, Ltd., Textron Inc. and Xerox Corporation. He is
Chairman of the Council for Excellence in Government and Vice Chairman of the
Atlantic Council. He is a Director of the French-American Foundation, the
National Executive Services Corps and a Trustee of the Carnegie Institution of
Washington and the Folger Library. Mr. Macomber serves as the Chairman of the
Compensation and Benefits Committee and as a member of the Executive Committee
and the Nominating Committee.
8
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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 reservesreserve to the full Board of Directors. The Executive Committee
acted by unanimous written consent thirteen13 times during the 1996 fiscal year.year ended
November 30, 1997 ("Fiscal 1997").
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 1997.
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 fiveseven
meetings during the 1996 fiscal year and acted by telephone or unanimous written consent five times.once during Fiscal
1997.
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 1997.
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 meetingsacted by unanimous written
consent once during the
1996 fiscal year.Fiscal 1997. The Nominating Committee will consider nominees
for Director recommended by Stockholders. Stockholders wishing to submit
recommendations for the 19981999 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.
ATTENDANCE AT MEETINGS BY DIRECTORS
The Board of Directors held seven meetings during the 1996 fiscal year and acted once by unanimous written
consent.consent once during Fiscal 1997. All Directors other than Mr. Funaki,Yamada, 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
9
14
during the period when he or she was a Director. The number of meetings held by
each Committee during the 1996 fiscal yearFiscal 1997 is set forth above.
7
11
COMPENSATION OF CURRENT DIRECTORS
Non-employee Directors receive an annual 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. EachDuring Fiscal 1997, 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 per Committee and
each Non-employee Director who servesserved as a member of the Executive Committee
receivesreceived an additional annual retainer of $15,000. In November 1997, the Board
of Directors changed the fee arrangements for Directors, acting upon the
recommendation of the Compensation Committee. Henceforth, each Non-employee
Director serving as a chairman of a Committee of the Board of Directors will
receive an additional annual retainer of $15,000 per Committee, and each
Non-employee Director serving as a Committee member will receive $1,500 per
Committee meeting, payable whether the Committee meets in person or
telephonically or acts by unanimous written consent.
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 fair market value of Common Stock (as of the date of the Annual Meeting)
will be made to each Non-employee Director on the first business day following
the Company's Annual Meeting of Stockholders for each year that such plan is in
effect. As of each date that a dividend is paid on Common Stock, each
Non-employee Director holding RSUs shall be 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 Common Stock on the NYSE on such date. One-third of
the RSUs granted to Non-employee Directors will vest on each of the first three
anniversaries of the date of grant, or, if earlier, immediately upon death,
disability or termination of service as 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 of the first three anniversaries following death,
disability or termination of service. The number of RSUs granted will be based
on the closing price of the Common Stock on the NYSE on the day such units are
awarded.
The Company's Deferred Compensation Plan for Non-employee Directors. The
Company's Deferred Compensation Plan for Non-employee Directors is a
non-qualified deferred compensation plan which provides each Non-employee
Director an opportunity to elect to defer receipt of compensation to be earned
for services on the Board of Directors. Each Non-employee Director may elect to
defer all or a specified percentage of his or her future 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 by the Non-employee Director 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. Prior to
May 1994, the Company maintained the Company's Retirement Plan for Non-employee
Directors which was a non-qualified 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 this
plan) has vested benefits under this 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 acquire vested benefits under this plan at the time such individual
completes such five years of service as a Director. Any individual who becomes a
Non-employee Director after such date is ineligible to participate in this plan.
Vested benefits under this plan will be paid after the individual ceases to be a
Director.
810
1215
EXECUTIVE OFFICERS OF THE COMPANY
TheBiographies of the current Executive Officers of the Company (the
"Executive Officers") are set forth below, excluding Mr. Fuld whose biography is
included above. The Executive Officers comprise the Company's Corporate
Management Committee, which performs broad, policy making functions for the
Company. Each Executive Officer was appointed by the Board of Directors and
serves at the discretion of the Board of Directors until a successor is
appointed or until resignation or removal in accordance with applicable law.
JEREMIAH M. CALLAGHAN AGE: 5354
Chief of Operations and Technology. Mr. Callaghan has beenis the Firm's Chief of
Operations and Technology,Technology. He has been a Managing Director of LBI and head of the
Firm's Trading Services Division since 1993.1991. He
is also a member of the Lehman Brothers Operating Committee and the 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 Directorgeneral partner 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: 4243
Chief 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.
Mr. CecilHe is also a member of the Operating Committee and the Corporate Management
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 Board of Directors of Graham-Windham Agency and is
the Chairman of its Executive Committee.
CHARLES B. HINTZ AGE: 4748
Chief Financial Officer. Mr. Hintz has been Chief Financial Officer of the
Company and LBI and a Managing Director of LBI since March 1996, as well as1996. He is also a
member of the Operating Committee and the Corporate Management Committee. He
also has been a Managing Director 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. Mr. Hintz served 10 yearsfrom 1985
to March 1996 with Morgan Stanley Group, most recently as Managing Director and
Treasurer. Mr. Hintz is on
the Board of Directorsa member of the Treasury Managers Association (CCM), and
a member 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: 5354
Chief Legal Officer. Mr. Russo has beenis the Firm's Chief Legal Officer and a member
of the Corporate Management Committee of the Company since 1994.Officer. He has been a
Managing Director of LBI since 1993. He is headalso a member of the Company'sLehman Brothers
Operating Committee and a member of the Corporate Advisory Division with responsibilityManagement Committee of the
Company. He is responsible for the Company's Legal, Compliance, Corporate
Communications, Internal Audit, Investor Relations, Government Relations,
the
Diversified Asset Group and the Transactions Management Documentation Group
Departments, as well as the Firm'sFirm Investment and CommitmentsInvestment Banking Commitment
Committees. Mr. Russo is also a member of the Lehman
Brothers Operating Committee and serves as Chairman of the Company's New Products
Committee and Operating Exposures Committee. From 1977 until he joined LBI in
1993, Mr. Russo was a partner at the law firm of Cadwalader, Wickersham & Taft
where he had a financial markets and general corporate practice.
911
1316
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of December 31, 1996the Record Date 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 owns any of the Company's
outstanding Preferred Stock or as much as 1.0% of the outstanding shares of
Common Stock, including shares that may be acquired within 60 days, except for
Mr. Fuld, who owns approximately 1.3%. All current Directors and Executive
Officers as a group own shares of Common Stock, including shares that may be
acquired within 60 days, that in the aggregate represent approximately 2.9% of
the outstanding Common Stock.
NUMBER OF SHARES OF
COMMON STOCK WHICH MAY
NUMBER OF SHARES BE ACQUIRED WITHIN 60
BENEFICIAL OWNERSOWNER OF COMMON STOCK(a)STOCK (A) DAYS
-------------------------------------------- ------------------- ---------------------------------------------------- ------------------- ----------------------
Michael L. Ainslie..........................Ainslie.................................. 1,000 0
John F. Akers...............................Akers....................................... 1,000 0
Roger S. Berlind............................ 107,148(b)Berlind.................................... 80,000(b) 0
Jeremiah M. Callaghan....................... 6,187 129,173Callaghan............................... 9,188 462,761
John L. Cecil............................... 8,190 119,999Cecil....................................... 7,616 755,000
Thomas H. Cruikshank........................Cruikshank................................ 4,000 0
Richard S. Fuld, Jr. ....................... 190,343(c) 359,230
Katsumi Funaki.............................. 0 0Jr................................. 203,463(c) 1,387,589
Charles B. Hintz............................ 510Hintz.................................... 24,039 175,000
Henry Kaufman....................................... 35,000(d) 0
Henry Kaufman............................... 35,000(d)Hideichiro Kobayashi................................ 0 0
John D. Macomber............................Macomber.................................... 22,000 0
Dina Merrill................................Merrill........................................ 5,240 0
Thomas A. Russo............................. 26,199 83,412
Masataka Shimasaki..........................Russo..................................... 26,217 350,120
Masahiro Yamada..................................... 0 0
All Current Directors and Executive Officers as a
group (14 individuals)............... 406,817 691,814............................ 418,763 3,130,470
- ---------------
(a) This charttable does not include 4,6275,609.89 RSUs held by each of Messrs. Berlind,
Funaki, Macomber Shimasaki and Ms. Merrill; 2,9113,884.60 RSUs held by Dr. Kaufman; 2,182.89 RSUs
held by Mr. Kaufman
or 1,220Akers; 956.22 RSUs held by Mr. Akers. Messrs. Ainslie and Cruikshank each will
receive their first payment of RSUs on March 27, 1997.Cruikshank; and
the RSUs held by the Executive Officers, which are set forth in footnote (a)
of the Summary Compensation Table on page 13. Vested15. RSUs are payable in an equivalent number ofconvertible on a
one-for-one basis into shares of Common Stock, but are subject to
significant vesting and forfeiture restrictions and cannot be sold or
transferred until converted to Common Stock and, with respect to each person
identified in accordance with the termstable, are not convertible within 60 days following the
Record Date. Nonetheless, a holder of RSUs will be entitled to direct the
applicable plan1997 Trust Trustee to vote a number of Trust Shares that is proportionate to
the number of RSUs held by such person; such number of Trust Shares will be
calculated prior to the Annual Meeting and grant.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) Excludes 40,000 shares of Common Stock held by Mr. Berlind's wife, as to
which Mr. Berlind disclaims beneficial ownership.
(c) Includes 3,593 shares of Common Stock held by Mr. Fuld's children, as to
which Mr. Fuld acts as custodian.
(d) 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.
1012
1417
COMPENSATION COMMITTEE REPORT OFON EXECUTIVE OFFICER COMPENSATION
The Company's Compensation and Benefits Committee (the "Committee") makes decisions with respect to the compensation
of the Company's Chief Executive Officer and the other Executive Officers. The
Compensation Committee is composed 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 practical and
philosophical positions:
- Deliver a significant portion of total compensation in equity-based
awards, thereby aligning the financial interest of Executive Officers
with Stockholders 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 Stockholder dilution.
- Tie compensation for Executive Officers to annual and long-term
performance goals, which further harmonizes the interests of Executive
Officers with those of Stockholders 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. Total compensation is comprised of base salary and both
cash and non-cash 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 with the financial
performance of the Company.
As in 19941995 and 1995,1996, a key element of Executive Officer compensation for
1996Fiscal 1997 was preestablishedpre-established compensation formulas for each Executive
Officer, which in 1996Fiscal 1997 were based on the Company's return on equity. The
formulas were intended to provide a specific amount of cash and restricted stock units ("RSUs"),Restricted Stock
Units, which haveare subject to significant vesting and sales restrictions.forfeiture restrictions and
cannot be sold or transferred until converted to Common Stock. The percentage of
total compensation consisting of RSUs for Executive Officers increases with the
level of executive responsibility. (The Compensation 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.)
As in 1995 theand 1996, Fiscal 1997 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 units 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, 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 1997
to further encourage Executive Officers to strive for long-term Stockholder
value. The options were awarded with exercise prices equal to fair market value
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 1997, the
Compensation Committee also considered a number of business factors and
conditions. Fiscal 1997 was a record year for the Company which posted the
highest level of revenues, return on equity, pretax income and net income in its
history. Productivity improved dramatically, expenses were further reduced and
the balance sheet and liquidity were
13
18
significantly strengthened. 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 1997 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 growing higher margin businesses.
- Developing further the Company's global franchise, particularly in
Europe.Strengthening organization structure and management team.
- 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.Controlling non-personnel expenses while growing revenues.
On the general criteria of leadership, management and governance, it is the
Compensation Committee's judgment that Mr. Fuld's 1996Fiscal 1997 performance was
above expectations. In addition, the actual financial results of the Company for
1996Fiscal 1997 were higher than for 1995.1996. Since the major portion of Mr. Fuld's
compensation is based on financial results, his 1996Fiscal 1997 compensation
reflects an increase from 1995.1996.
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, 1997, 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, 199719, 1998
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.
1214
1619
COMPENSATION OF EXECUTIVE COMPENSATIONOFFICERS
The following table shows, for the calendar years ending December 31,ended November 30, 1997, 1996 1995 and
1994,1995, 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. Callaghan was not an Executive Officer prior to 1996. Mr. Hintz was hired in
March of 1996.
Mr. Callaghan was not an
Executive Officer of the Company prior to 1996.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------------AWARDS
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------------- ---------
OTHER RESTRICTED LONG-TERM--------------------------
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ INCENTIVE------------------------------------- RESTRICTED SECURITIES ALL OTHER
POSITION AT FISCAL OTHER ANNUAL STOCK UNIT UNDERLYING COMPENSATION
NOVEMBER 30, 1997 YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
DECEMBER 31, 1996 YEAR ($) ($) ($) ($) (# SHARES) ($) ($)AWARDS(A)(B) OPTIONS (C)
- ------------------------ ---- ------- --------- --------------------------------- ------ -------- ---------- ------------- ------------- ---------- --------- ---------------------------
R. S.R.S. Fuld, Jr..........Jr........ 1997 $750,000 $3,125,000 $ 0 $ 5,536,325 325,000 $ 7,570
Chairman and Chief 1996 750,000 2,000,000 0 3,927,994(a)3,927,994 375,000 0 7,528(b)
Chairman and7,528
Executive Officer 1995 750,000 1,450,000 0 2,750,010 400,000 0 7,556
Chief Executive
Officer 1994 750,000 675,000 85,093 2,375,000 317,004 858,529 8,562
J. L. Cecil.............Cecil.......... 1997 $450,000 $3,300,000 $ 0 $ 3,214,640 225,000 $ 0
Chief
Administrative 1996 450,000 1,950,000 0 2,285,379(a)2,285,379 250,000 0
0
Chief AdministrativeOfficer 1995 450,000 1,787,500 0 1,203,131 200,000 0
0
Officer 1994 432,692 1,167,308 80,000 820,000 80,000 0 0
J. M. Callaghan.........Callaghan...... 1997 $450,000 $ 950,000 $ 0 $ 1,214,420 75,000 $ 0
Chief of Operations 1996 450,000 950,000 0 857,018(a)857,018 100,000 0
and Technology
T.A. Russo........... 1997 $450,000 $ 750,000 $ 0 $ 928,674 75,000 $ 0
Chief of Operations
and Technology
C. B. Hintz............. 1996 349,615 747,749 0 1,023,356(c) 100,000 0 0
Chief Financial
Officer
T. A. Russo.............Legal 1996 450,000 550,000 0 714,182(a)714,182 100,000 0 0
Chief Legal
Officer 1995 450,000 552,500 0 371,873 100,000 0
C.B. Hintz........... 1997 $450,000 $ 650,000 $ 0 1994 450,000 825,000 8,438 325,000 75,120 107,529$ 857,237 75,000 $ 0
Chief Financial 1996 349,615 747,749(b) 0 1,023,356 100,000 0
Officer
- ---------------
(a) 1996Fiscal 1997 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 November 30, 2001. RSUsthe
NYSE for December 11, 1997, $48.5625, which is also the undiscounted award
price for the Fiscal 1997 awards. These awards are subject to significant
vesting and forfeiture restrictions and cannot be sold or transferred until
they convert to Common Stock.Stock on November 30, 2002.
(b) At November 30, 1997, the Executive Officers held the following RSUs, which
are subject to different vesting and forfeiture provisions and are therefore
outlined separately. The value indicated above reflects the average
closing trading price of the Company's Common Stock for 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 byawarded for fiscal year 1994
performance at the then current market price of $14.75 to each of Messrs.
Fuld, Cecil, Callaghan and Russo is: 438,681.66, 187,982.79, 124,708.37,is 161,017, 47,458, 54,237 and 65,851.03,22,034,
respectively and the total value of these holdings at the November 30, 1997
closing price per share of Common Stock of $50.5625 (the "November 30, 1997
Closing Price") is $8,141,422, $2,399,595, $2,742,358 and $1,114,094,
respectively. These holdings are subject to vesting and forfeiture
provisions that extend through the year 1999. The number of RSUs awarded for
fiscal year 1995 performance at the then current market price of $19.75 to
each of Messrs. Fuld, Cecil, Callaghan and Russo is 139,241, 60,918, 39,873,
and 18,829, respectively and the value of these holdings at the November 30,
1997 Closing Price is $7,040,373, $3,080,166, $2,016,079 and $952,041,
respectively. These holdings are subject to vesting and forfeiture
provisions that extend through the year 2000. The number of RSUs awarded for
fiscal year 1996 performance at the then current market price of $29.21 to
each of Messrs. Fuld, Cecil, Callaghan and Russo is 134,474, 78,240, 29,340
and 24,450, respectively and the value of these holdings at the November,
30, 1997 Closing Price is $6,799,342, $3,956,010, $1,483,504, and
$1,236,253, respectively. Mr. Hintz received special grants totaling 41,292
RSUs at a weighted average then current market price of $24.6875, of which
only 37,164 RSUs remain outstanding. The value of these holdings at the
November 30, 1997 Closing Price is $1,879,105. These holdings are subject to
vesting and forfeiture provisions that extend through the year 2001. The
number of RSUs awarded for Fiscal 1997 performance at the then current
market price of $48.5625 to each of Messrs. Fuld, Cecil, Callaghan, Russo
and Hintz is 114,004, 66,196, 25,007, 19,123
15
20
and 17,652, respectively and the value of these holdings at the November 30,
1997 Closing Price is $5,764,327, $3,347,035, $1,264,416, $966,907 and
$892,529, respectively. These holdings are subject to vesting and forfeiture
provisions that extend through the year 2002. Additionally, performance
units granted in 1995 for the 1995 to 1996 performance period were converted
to RSUs during January 1997 at the then current market price of $31.625. The
number of such RSUs basedearned by each of Messrs. Fuld, Cecil, Callaghan and
Russo is 241,396, 166,582, 140,048 and 70,024 and the value of these
holdings at the November 30, 1997 Closing Price is $12,205,585, $8,422,802,
$7,081,177 and $3,540,589, respectively. These holdings are subject to
vesting and forfeiture provisions that extend through the year 2002.
Dividends are payable by the Company on such holdings from their date of
award, and are reinvested in additional RSUs. The number of RSUs held
through dividend reinvestments by each of Messrs. Fuld, Cecil, Callaghan,
Russo and Hintz is 8,350, 3,590, 2,938, 1,389 and 398, respectively and the
December 31,
1996 closingvalue of these holdings at the November, 30, 1997 Closing Price is $422,197,
$181,520, $148,553, $70,231 and $20,124, respectively. Over 40% of the
November 30, 1997 value of the RSU holdings is due to stock price
is $31.375appreciation above the market price of $13,763,637, $5,897,960, $3,912,725 and
$2,066,076.
(b)the Common Stock at the date of the
award.
(c) Amounts reported under "All Other Compensation" for 1996Fiscal 1997 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 $1,300,508.
13
17
The following table contains information concerning the grant of
nonqualified stock options in 1996Fiscal 1997 to the named executives:
OPTION/SARExecutive Officers. The actual
amount, if any, realized upon the exercise of stock options would depend upon
the market price of Common Stock relative to the exercise price per share of the
stock option at the time the stock option is exercised. There is no assurance
that the potential value of the stock options reflected in this table will
actually be realized.
OPTION GRANTS IN 1996LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/SARS
NUMBER OFOPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARSOPTIONS EMPLOYEES OR BASE PRICE ($/PER EXPIRATION PRESENT
NAME GRANTED(a)GRANTED(A) IN 1996 SHARE)FISCAL YEAR PER SHARE DATE VALUES($)(b)
--------------------------- ------------ ------------ ------------VALUE(B)
- -------------------------------------- ---------- -------------------------- ------------- ---------- ----------
R. S.R.S. Fuld, Jr............. 375,000 14.29%Jr......................... 325,000 14.4% $ 24.000 03/17/01 $1,653,750
J. L. Cecil................ 250,000 9.52% $ 24.000 03/17/01 $1,102,50030.50 1/7/2002 $1,836,250
J.L. Cecil............................ 225,000 10.0% 30.50 1/7/2002 1,271,250
J.M. Callaghan............. 100,000 3.81% $ 24.000 03/17/01 $ 441,000
C. 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 $ 441,000Callaghan........................ 75,000 3.3% 30.50 1/7/2002 423,750
T.A. Russo............................ 75,000 3.3% 30.50 1/7/2002 423,750
C.B. Hintz............................ 75,000 3.3% 30.50 1/7/2002 423,750
- ---------------
(a) GrantedFive-year non-qualified stock options granted on March 18, 1996, except for Mr. Hintz, whose grant date was May
28, 1996. These options have a five-year term. TheJanuary 8, 1997, which
options become exercisable in one-third increments when the closing price of
the Common Stock on the NYSE reaches $28, $30,$39, $42, and $32$45, respectively, for 3015
out of 20 consecutive trading days (the "Closing Price Conditions"). or, if
sooner, become exercisable entirely in four and one-half years. The Closing
Price Conditions of $28 and
$30 were satisfied in Januaryduring Fiscal 1997 and therefore two/thirds of the options
are currently exercisable. The remaining one/third becomes exercisable in
four and one-half years or upon satisfaction of the $32 Closing Price
Condition.
(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.
This 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 on the market value of the Common Stock at a future date. The values shown were
calculated using the following assumptions: the exercise price is equal to 100% ofan amount
above the closing price of the Common Stock on March 18,
1996 and May 28, 1996;January 8, 1997; the dividend
rate is $0.20of $0.24 per share for 1996Fiscal 1997 based on the Company's actual
regular quarterly dividends; thea risk-free rate of return equal to the yield
for the
16
21
U.S. Treasury stripStrip security with a maturity date closest to the expiration
date of the option grant; and expected common 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 with a five yearfive-year term are
assumed to be exercised in three years. The adjustment for
non-transferabilitynontransferability or risk of forfeiture during the vesting period is 10%
per annum.
14
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 1997 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.unexercised options. During 1996,Fiscal 1997, other than Mr. Fuld,
none of the Executive Officers exercised any of the Company's stock options.
AGGREGATED OPTION/SAROPTION EXERCISES IN 1996LAST FISCAL YEAR
AND FISCAL YEAR-END 1996
OPTION/SAROPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1996FISCAL YEAR END AT DECEMBER 31, 1996(a)
SHARESFISCAL YEAR END(A)
ACQUIRED ON VALUE -------------------------------------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- --------------------- ----------- ----------- ------------- ------------------------ -------------
R. S.R.S. Fuld, Jr. ..... 15,000Jr........ 14,415(b) $ 106,875 359,230 717,774 $4,421,368.88 $6,583,559.63424,515 1,387,589 0 $37,720,867 $ 0
J. L. Cecil.......... 0 0 119,999 410,001 $1,413,321.88 $3,600,428.13
J.M. Callaghan.......755,000 0 19,697,188 0
J. M. Callaghan...... 0 0 129,173 258,588 $1,536,024.13 $2,475,279.25462,761 0 12,956,155 0
T. A. Russo.......... 0 0 350,120 0 9,575,752 0
C. B. Hintz.......... 0 0 175,000 0 100,000 $ 0.00 $ 687,500.00
T. A. Russo..........4,110,938 0 0 83,412 191,708 $1,019,803.13 $1,772,426.88
- ---------------
(a) The value representsOption grants were made in 1994, 1995, 1996 and 1997 at the then market
prices of $18.00, $20.875, $24.00 and $30.50 per share, respectively.
Aggregate values shown above represent the excess of $31.375,$50.5625 per share, the
closing price of the Lehman
Brothers Common Stock on December 31, 1996November 28, 1997 on the NYSE, over the
respective exercise prices of thesethe options. 15The dramatic increase in the
Common Stock price during Fiscal 1997 has created over 70% of the value
noted above and satisfied all price based performance vesting acceleration
provisions on outstanding grants.
(b) Mr. Fuld exercised options that were scheduled to expire during 1997.
The following table sets forth information concerning LTIP awards made in
Fiscal 1997 to the Executive Officers.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
TARGET PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL
NAME UNITS(A) MATURATION OR PAYOUT(B)
- ------------------------------------------------------------- --------- -----------------------
R. S. Fuld, Jr............................................... 100,000 11/30/2002 - 2004
J. L. Cecil.................................................. 66,000 11/30/2002 - 2004
J. M. Callaghan.............................................. 15,000 11/30/2002 - 2004
T. A. Russo.................................................. 15,000 11/30/2002 - 2004
C. B. Hintz.................................................. 15,000 11/30/2002 - 2004
- ---------------
(a) Performance Stock Units ("PSUs") are earned based upon the 1997, 1998 and
1999 return on equity for the Company and its relative performance compared
with a competitor group and the price appreciation of Company Stock from
December 1, 1997 through November 30, 1999. Based upon actual performance,
participants have the opportunity to earn from zero units up to a multiple
of the target number of units.
(b) The aggregate number of units earned, if any, will convert to RSUs on
December 31, 1999 and vest in one-third increments on November 30, 2002,
November 30, 2003 and November 30, 2004.
17
1922
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-forfeitable right to their accrued benefits upon
completing five years of vesting service. As of December 31, 1996,November 30, 1997, the estimated
annual projected benefits payable upon retirement at a normal retirement age of
65 for Messrs. Fuld, Cecil, Callaghan, Russo and CallaghanHintz are $98,825.18, $50,079.84,
$32,083.30approximately
$94,884, $54,236, $37,845, $33,779 and $32,267.92,$40,271, respectively. Mr. Hintz is not yet a participant in
the Holdings Retirement Plan.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND OTHERCHANGE OF CONTROL ARRANGEMENTS
WITH EXECUTIVE OFFICERS
Pursuant to its authority to accelerate the vesting and waive transfer
restrictions for grants of RSUs, in 1994 the Compensation Committee determined
to accelerate the vesting and 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 to RSUs,the completion of the performance period, PSUs have pro rata cash payouts inupon a
Change of Control and in Control.the case of the 1996 PSU Award Grant, approximately
twice the number of RSUs are payable (which aggregate payout, upon a Change of
Control, represents the full award 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 members 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.
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PERFORMANCE GRAPH
The performance graph below compares the performance of the Company's Common Stock
for each fiscal quarter following the May 31, 1994 spin-off from American
Express, with that of the S&P 500 Index and an index comprised of the Company's
Peer Group (Morgan Stanley, Group Inc.Dean Witter, Discover & Co., The Bear Stearns
Companies Inc. and Salomon Inc). The graph assumes $100 iswas invested in the
Company's Common Stock and each index on May 31, 1994, using the closing price of $18, and that all dividends were
reinvested.
TOTAL RETURN PERFORMANCE
MEASUREMENT PERIOD LEHMAN BROTHERS
(FISCAL YEAR COVERED) HOLDINGS INC. S&P 500 PEER GROUP
5/31/94 100.00 100.00 100.00
8/31/94 90.97 104.91 97.3894.93
11/30/94 83.61 100.85 83.0479.93
2/28/95 101.94 108.97 93.1089.73
5/31/95 111.25 119.73 105.80103.81
8/31/95 133.06 126.76 112.92106.51
11/30/95 127.78 137.05 113.75107.44
2/29/96 139.86 145.51 123.91115.73
5/31/96 138.75 152.55 131.70125.26
8/30/96 120.28 149.63 133.18118.62
11/29/96 165.00 173.49 155.41142.73
2/28/97 190.33 181.72 164.10
5/30/97 231.64 195.10 173.59
8/29/97 247.25 207.16 203.01
11/28/97 285.43 220.31 252.85
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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
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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 1997, 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 earlyApril 1997, and the balance is
expected to be repaid by mid-year 1997.
In April 1996, the Company entered into a one-year consulting agreement
with Henry Kaufman & Company, Inc. ("HK Company") pursuant to which HK Company
will provide, 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.Fiscal 1997,
Messrs. Berlind and Fuld received $1.7 million and Mr. Berlind received $277,204 and $415,806,$1.1 million, 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 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. AsThe general partner's fixed return is determined
on a result, the limited partners may not receive a returnformulaic basis and was approximately 6.6735% as of any of their capital.December 31, 1997.
After the general partner has received back its capital contribution and preferredfixed
return, any subsequent profits are allocated 90% to the limited partners and 10%
to the general partner. During Fiscal 1997, Mr. Fuld received $86,856 in
distributions from Capital Partners III.
Lehman Brothers Capital Partners IV, L.P. ("Capital Partners IV") is a
limited partnership established in 1997 to provide senior officers and other
employees, consultants and directors of the Firm with the opportunity to invest
in a portfolio of investment opportunities. Capital Partners IV will participate
in all investments to be made by Lehman Brothers Merchant Banking Partners II
L.P. ("LB Fund II"), generally on a pro rata basis based on unfunded capital
commitments. A subsidiary of the Company acts as general partner for each of
Capital Partners IV and LB Fund II. The investment objectives of both are to
achieve long-term capital appreciation through a diverse group of
equity-oriented investments. LB Fund II has capital commitments of $2 billion
and Capital Partners IV has capital commitments of approximately $300 million,
which may be increased to as much as $400 million. Each of the Executive
Officers and Messrs. Ainslie, Berlind, Cruikshank and Kaufman are limited
partners in Capital Partners IV. The limited partners are contributing an
aggregate of $240 million, of which recourse financing of $180 million is
available from the Company. The general partner is making a capital contribution
to Capital Partners IV of $60 million. A fixed return on the general partner's
capital contribution will generally be distributed to the general partner before
any other distributions are made, followed by a fixed return on the recourse
financing portion of the limited partners' capital contributions being
distributed to the limited partners. The fixed returns will be determined on a
formulaic basis. Thereafter, capital contributions will be distributed to the
limited partners and the general partner, and any subsequent profits will be
divided 90% to the limited partners and 10% to the general partner. There were no distributions on
investments in Capital Partners III during fiscal 1996.
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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$32.3 million in respect of these investments in 1996.Fiscal 1997.
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25
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, 1996,1997, 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 $150 million$88,360,137
as of December 31, 1996,1997, 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, the Company repurchased, at the request of American
Express, $200 million of 8.44% Cumulative 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.
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, 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 2000) issued by the Co-tenants to finance the Property. The LB
Co-tenants' share of such debt as of December 31, 19961997 amounts to approximately
$219$157 million and has been guaranteed by American Express. Certain of such 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.
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26
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 Lifehas 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$175.8 million in
respect of this investment for fiscal 1996.
The Company's relationship withFiscal 1997. During Fiscal 1997, Nippon Life also provides the Company with
accesscommitted
$150 million for investments to numerous Asian institutions for private placements and underwritings.be made by LB Fund II. There have been no LB
Fund II partnership distributions to date.
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.
EachThroughout Fiscal 1997, each of the Company and Nippon Life ownsowned 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 orwere 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
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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.February 13, 1998.
CERTAIN TRANSACTIONS WITH OTHER INSTITUTIONAL INVESTORS
AND THEIR SUBSIDIARIES
In December 1995,November 1997, the Firm sold, pursuant to an asset purchase agreement,
certain accounts serviced by the retail businesses of six European branch offices of LBI in London,
Singapore and Hong Kong to Prudential Securities Group Inc. and its affiliates.
The sales price was comprised of certain specified payments at closing plus semi-annualannual 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 Group Inc. is a subsidiary of Prudential.
In the ordinary course of business and at customary and usual fees
therefor, the Firm may provide to Prudential and its subsidiaries, FMR Corp. and
its subsidiaries, and other institutional stockholders brokerage and other
financial services, and on the same basis, such companies may provide mutual
fund, insurance and other financial services to the Firm.
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 1997.1998.
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.
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.
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PROPOSAL 3
AMENDMENTS TO THE 1996 MANAGEMENT OWNERSHIP PLAN RELATING
TO THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE TO BE GRANTED
AND THE CLASS OF ELIGIBLE PARTICIPANTS
The Board of Directors recommends to the Stockholders that they approve the
1996 Plan Amendments. 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 ten million to 15.5 million shares. It would
also amend Section 4 of the 1996 Plan and the definition of "Participant" in
Exhibit A to the 1996 Plan to make Senior Vice Presidents of the Company
eligible to participate in the 1996 Plan.
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 Managing Director 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 315 individuals were eligible to participate
in the 1996 Plan; if the 1996 Plan Amendments are approved, approximately 769
additional individuals also will be eligible to participate.
As of the Record Date, the Company had granted awards under the 1996 Plan
with respect to 8 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. Senior Vice
Presidents are integral to the Company's continued financial success and should
be part of the senior officer group eligible for awards under the 1996 Plan.
The relevant sections of the 1996 Plan, as they would be amended by the
1996 Plan Amendments, are attached hereto as Appendix A. The changes that would
result from the 1996 Plan Amendments are marked on such Appendix.
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 Amendments. 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
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28
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 incentive 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 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."
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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-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
25 30
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 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 includable 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 includable 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.
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.
26
31
You are urged to sign, date and return the enclosed proxy in the prepaid
envelope provided for such purpose. 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.
If you will need special assistance at the Annual Meeting because of a
disability, please contact the Corporate Secretary of the Company at (212)
526-1911526-1936 or at Karen Manson@usccmail.1ehman.com.Jennifer Marre@usccmail.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 in connection with the Company's 19981999 Annual Meeting
of Stockholders must submit their proposals to the Corporate Secretary of the
Company on or before October 20, 1997.
KAREN C. MANSON23, 1998.
Jennifer Marre
Secretary
New York, New York
February 19, 1998
27
32
APPENDIX A
EXCERPTS FROM THE
LEHMAN BROTHERS HOLDINGS INC.
1996 MANAGEMENT OWNERSHIP PLAN
If the 1996 Plan Amendments are 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 ten million(1) 15.5 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.
If the 1996 Plan Amendments are approved, Section 4 of the 1996 Plan would
be amended to read as follows:
SECTION 4 -- ELIGIBILITY
Members of the Corporate Management Committee and the Operating
Committee (and successor entities of such committees), all SENIOR VICE
PRESIDENTS(2), all Managing Directors and officers holding a title senior
to Managing Director are eligible to be Participants in the Plan.
If the 1996 Plan Amendments are approved, the definition of "Participant"
in Exhibit A to the 1996 Plan would be amended to read as follows:
EXHIBIT A
(k) "Participant" shall mean a member of the Corporate Management
Committee or the Operating Committee (and successor entities of such
committees), a SENIOR VICE PRESIDENT(2), a Managing Director or an officer
holding a title senior to Managing Director who is selected by the
Committee to receive an Award under the Plan.
- ---------------
(1) Underscored language appears in the 1996 Plan as currently in effect and
will be deleted if the 1996 Plan Amendments are approved at the 1998 Annual
Meeting.
(2) Language in bold type will be included in the 1996 Plan if the 1996 Plan
Amendments are approved at the 1998 Annual Meeting.
28
2633
DIRECTIONS TO THE LEHMAN BROTHERS HOLDINGS INC.
19971998 ANNUAL MEETING OF STOCKHOLDERS
The Firm's World Headquarters, site of the 19971998 Annual Meeting of
Stockholders, is located at 200 Vesey Street 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 former 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 the Westside Highway (also known as West Street) 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 the Westside Highway (also known as West Street) in lower
Manhattan, orienting toward the twin towers of the World Trade Center. Enter the
World Financial Center, which is directly across the Westside Highway 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
corner of Vesey Street and the Westside Highway. 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.
2329
27
LEHMAN BROTHERS34
PROXY THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
LEHMAN BROTHERS HOLDINGS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Jennifer Marre, Karen M. Muller and Thomas A. Russo, or each of them (with
full power to act without the other and with full power of substitution) are
hereby appointed attorneys and proxies to attend the Annual Meeting of
Stockholders to be held on March 31, 1998, and any 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 OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT.
COMPANY HIGHLIGHTS
19961997 WAS AANOTHER RECORD YEAR FOR LEHMAN BROTHERS HOLDINGS INC.
* The Firm earned, after a special item, a record $415 million in- -- THE FIRM REPORTED NET INCOME OF $647 MILLION IN 1997.
- -- NET INCOME INCREASED 56% OVER THE PRIOR YEAR'S RESULTS.
- -- 1997 EARNINGS PER SHARE WERE $4.72, A 46% INCREASE OVER THE $3.24 REPORTED IN
1996.
* Net Income increased 84% from 1995.
* 1996 Earnings Per Share were $3.24, compared with $1.76 for 1995.
* The Board of Directors changed the Annual Common Stock Dividend Policy from
$0.20 to- -- THE BOARD OF DIRECTORS CHANGED THE ANNUAL COMMON STOCK DIVIDEND POLICY FROM
$0.24 per shareTO $0.30 PER SHARE - a 20% increase in the dividend rate.
DETACH HERE
/X/ Please mark votes in this example
---------------------------------------------------------------
The Board of Directors recommends a voteA 25% INCREASE IN THE DIVIDEND RATE.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
35
[X] PLEASE MARK VOTES AS
IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR proposalsPROPOSALS 1, and 2.
---------------------------------------------------------------2 AND 3.
1. Election of Class of DirectorsII Directors.
[ ] FOR [ ] WITHHELD
NOMINEES: Michael L. Ainslie, Roger S. Berlind, Hideichiro Kobayashi, Dina
Merrill
[ ]
- --------------------------------------------------------------------------------
For all nominees except as noted on the line above
2. Ratification of Ernst & Young LLP as independent auditors for Nominees: Thomas H. Cruikshank, Henry fiscal year
1997.
Kaufman1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of Amendments to the 1996 Management Ownership Plan to increase the
number of shares of Common Stock available to be granted by 5.5 million
shares and John D. Macomber
FOR AGAINST OBSTAIN
FOR WITHHELD / / / / / /
/ / / /
3.to enlarge the class of eligible participants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To act on any business which may properly come before the Annual Meeting or
any adjournment thereof.
/ /________________________________________
For all nominees as noted on the line above.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] MARK HERE FOR ADDRESS CHANGE
AND / /
NOTE AT LEFT
[ ] MARK HERE IF YOU PLAN TO
ATTEND / / THE MEETING
PLEASE SIGN, DATE AND MAIL YOUR
PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
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___________________Signature:
- ----------------------------------- Date:
- ------------ Signature:
- ----------------------------------- Date:
- ------------
28
DETACH HERE
LEHMAN BROTHERS HOLDINGS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
P
THIS PROXY IS SOLICITED 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 the36
Dear Incentive Plans Participant:
The Annual Meeting of Stockholders toof Lehman Brothers Holdings Inc. will be
held on March 26,31, 1998. State Street Bank and Trust Company, as Trustee of the
1997 Trust under Lehman Brothers Holdings Inc. Incentive Plans, will vote the
shares held in the Trust as directed by Participants who have Voting Awards
allocated to their accounts.
Enclosed in this package are the following materials:
-- Notice of 1998 Annual Meeting of Stockholders and Proxy Statement
explaining the matters to be voted by stockholders at any
Y adjournment thereof, andthe meeting
-- Voting Instruction Card
-- Postage Paid Return Envelope
As a Participant holding Voting Awards under the Plans, you may direct the
Trustee how to vote the number of shares of Lehman Brothers Holdings Inc. held
in the Trust equivalent to the Voting Awards allocated to you, according to the
formula described below. To do so, please place an X in the appropriate boxes
on your voting instruction card, sign and act fordate the undersignedcard, and return it in the
enclosed postage paid envelope. Your votes with respect to the matters set
forth in the Proxy Statement will not be confidential.
Participants' number of votes will be determined by multiplying the total
number of Trust shares existing on the matters
listedRecord Date by a number determined by
dividing the number of Voting Awards you own by the total number of Voting
Awards voted. For example: if the Trust holds 1,000 shares on the reverse side which are set forth onRecord Date,
you hold 50 Voting Awards, and 600 shares vote, the accompanying Proxy
Statement.
This proxy revokes all previous proxies. Unless specifiedvote allocated 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 meetingyou would
equal 1,000 x 50/600 or any adjournment.
SEE REVERSE
CONTINUED83.33 votes.
BECAUSE YOUR VOTE IS IMPORTANT, YOU ARE STRONGLY ENCOURAGED TO SEND YOUR VOTING
INSTRUCTIONS TO THE TRUSTEE AS SOON AS POSSIBLE.
Sincerely,
STATE STREET BANK AND TO BE SIGNED ON REVERSE SIDE SIDETRUST COMPANY