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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (AMENDMENT NO.(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
[ ]/ / Preliminary Proxy Statement
[ ]/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X]/X/ Definitive Proxy Statement
[ ]/ / Definitive Additional Materials
[ ]/ / Soliciting Material Pursuant to Section 240.14a-11(c)Section240.14a-11(c) or
Section 240.14a-2.Section240.14a-12
LEHMAN__________________________LEHMAN BROTHERS HOLDINGS INC.
- --------------------------------------------------------------------------------INC._________________________
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(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
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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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.
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(4) Date Filed:
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LEHMAN BROTHERS HOLDINGS INC.
- ------------------------------------------------------------------------------------------------------------------------------------------------------
RICHARD S. FULD, JR.
Chairman and Chief Executive Officer
February 19, 199824, 2000
Dear Stockholder:
The 19982000 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
will be held on Tuesday, March 31, 1998,April 4, 2000, at 10:30 a.m. (New York Time), attime) in the
26th Floor Auditorium of 3 World Financial Center, 200 Vesey Street, New York,
New York 10285. A notice of the meeting, a proxy card and a proxy statement
containing information about the matters to be acted upon are enclosed. You are
cordially invited to attend.
Please note that this year we have introduced online voting via the internet
as an alternative to telephonic voting and the traditional proxy card method.
All holders of record of the Company's outstanding shares of Common Stock,
Cumulative Convertible Voting Preferred Stock, Series A and Series B, and
Redeemable Voting Preferred Stock at the close of business on February 10, 199815, 2000
will be entitled to vote at the Annual Meeting. It is important that your shares
be represented at the meeting. You will be asked to (i) elect fourthree Class IIIII
Directors; (ii) ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the 19982000 fiscal year; and (iii) approve amendmentsan amendment 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
ten15.5 million to 15.521 million shares and (b) make an additional class of senior
officers of the Company eligible to participate in the Plan.shares. Accordingly, we request that you promptly
sign, date and return the enclosed proxy card, or register your vote online or
by telephone according to the instructions on the proxy card, regardless of the
number of shares you hold.
Very truly yours,
/s/ Richard S. Fuld, Jr.
Richard S. Fuld, Jr.[LOGO]
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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 19982000 ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Lehman Brothers Holdings Inc.:
The 19982000 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
(the "Company") will be held on Tuesday, March 31, 1998,April 4, 2000, at 10:30 a.m. (New York
Time), attime) in the 26th Floor Auditorium of 3 World Financial Center, 200 Vesey
Street, New York, New York 10285, to:
(i)1. Elect fourthree Class IIIII Directors for terms of three years each;
(ii)2. Ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the 19982000 fiscal year;
(iii)3. Approve amendmentsan amendment 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 ten15.5 million to 15.521 million sharesshares; and
(b) make an additional class of senior officers of the Company eligible to
participate in the Plan; and
(iv)4. Act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business on February 10, 199815, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
THE COMPANY WILL ADMIT TO THE ANNUAL MEETING ALL STOCKHOLDERS OF RECORD AT
THE CLOSE OF BUSINESS ON FEBRUARY 10, 1998,15, 2000, ANY PERSONS HOLDING PROOF OF
BENEFICIAL OWNERSHIP OR WHO HAVE BEEN GRANTED PROXIES AND ANY OTHER PERSON THAT
THE COMPANY, IN ITS SOLE DISCRETION, MAY ELECT TO ADMIT. IF YOU PLAN TO ATTEND
THE ANNUAL MEETING, PLEASE CHECK THE APPROPRIATE BOX ON YOUR PROXY CARD OR
REGISTER YOUR INTENTION WHEN VOTING ONLINE OR BY TELEPHONE ACCORDING TO THE
INSTRUCTIONS ON THE PROXY CARD.
A copy of the Company's Annual Report to Stockholders is enclosed herewith
unless the Stockholder is afor all Stockholders other than Lehman Brothers employee. The Company'semployees, to whom the Annual
Report to Stockholders is being separately distributed to Lehman Brothers
employees.distributed.
By Order of the Board of Directors
[MANE SIG][LOGO]
Jennifer Marre
Secretary
New York, New York
February 19, 199824, 2000
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID
ENVELOPE.ENVELOPE, OR REGISTER YOUR VOTE ONLINE OR BY TELEPHONE ACCORDING TO THE
INSTRUCTIONS ON THE PROXY CARD.
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LEHMAN BROTHERS HOLDINGS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
February 19, 199824, 2000
PROXY STATEMENT
------------------------
INTRODUCTION
VOTE BY PROXY. This proxy statement (the "Proxy Statement") is furnished in
connection with the solicitation of the accompanying proxyproxies by the Board of Directors of Lehman
Brothers Holdings Inc. (the "Company" and, together with its subsidiaries, the
"Firm") for use at the 19982000 Annual Meeting of Stockholders of the Company to be
held on Tuesday, March 31, 1998April 4, 2000 at 10:30 a.m. (New York Time)time), or any adjournment
thereof (the "Annual Meeting"). ThisThe Company expects to mail this Proxy Statement
and the accompanying proxy (a "proxy card" or "proxy") are expected to be mailedcard to the Company's stockholders of record at the
close of business on February 10, 199815, 2000 (the "Stockholders") on or about
February 20, 1998.24, 2000.
You are cordially invited to attend the Annual Meeting, but whether or not
you expect to attend in person, you are urged to complete, sign and date the
enclosed proxy card and return it as promptly as possible in the enclosed,
prepaid envelope.envelope, or vote your shares online or by telephone according to the
instructions on the proxy card. Stockholders have the right to revoke their
proxies at any time prior to the time their shares are actually voted by
(i) giving written notice to the Corporate Secretary of the Company, (ii) by
subsequently filing a later dated proxy or (iii) by attending the Annual Meeting
and voting in person. Please note that attendance at the meeting will not by
itself revoke a proxy.
The enclosed proxy indicates on its face the number of shares of common and/or
voting preferred stock registered in the name of each Stockholder at the close
of business on February 10, 199815, 2000 (the "Record Date"). Proxies furnished to
Company employees also indicate the number of shares, if any, (i) held by the
employee under the Lehman Brothers Holdings Inc. Employee Stock Purchase Plan
(the "ESPP"), (ii) allocated to the account of the employee under the Lehman
Brothers Holdings Inc. Employee Stock Ownership Plan (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") and (iv)(iii) held by the
employee in a brokerage accountsaccount at the Company's wholly owned subsidiary, Lehman
Brothers Inc. ("LBI"),
and/or a brokerage account at Fidelity Brokerage
Services, Inc. ("Fidelity"Fidelity Brokerage"). Proxies returned by
employees with respect to shares allocated to the employee under the ESOP will
be considered to be voting instructions returned to the ESOP trustee (the "ESOP
Trustee") with respect to 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 the 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"The Voting
Stock." Proxies returned by employees with LBI or Fidelity brokerageBrokerage accounts
will be considered to be voting instructions returned to LBI or Fidelity
Brokerage, as applicable, with respect to the shares held in each such account.
Under the Lehman Brothers Holdings Inc. Tax Deferred Savings Plan (the "TDSP"),
the trustees of the TDSP shall vote all the shares held in participating
employees' accounts in a manner that such trustees judge to be in the best
interest of the TDSP participants.
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GENERAL. Unless contrary instructions are indicated on the proxy or in a
vote registered online or by telephone, all shares represented by valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted as follows:
FOR the election of the fourthree nominees for Class IIIII Directors named below;
FOR the ratification of the Board of Directors' selection of Ernst & Young
LLP as the Company's independent auditors for the 19982000 fiscal year; and
FOR the approval of amendmentsan amendment (the "1996 Plan Amendments"Amendment") 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
ten15.5 million to 15.521 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.shares.
In the event a Stockholder specifies a different choice on the proxy or by
online or telephone vote, his or her shares will be voted in accordance with the
specification so made. Confidential voting is not provided for in the Company's
Certificate of Incorporation or By-Laws.
The Company's 19971999 Annual Report has been distributed to Stockholders in
connection with this solicitation. A copy (exclusive of exhibits) of the
Company's Annual Report to1999 Form 10-K as filed with the Securities and Exchange Commission
(the "SEC") on Form 10-K, exclusive of
exhibits, may be obtained without charge by writing to: Lehman Brothers
Holdings Inc., 3 World Financial Center, 24th Floor, New York, New York 10285
Attn.: Corporate Secretary. The Company's 19971999 Annual Report and 1997 Annual Report on1999 Form 10-K
also will be available through the Lehman Brothers Web Siteweb site at
http://www.lehman.com.
COST OF SOLICITATION. The cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
directors, officers or employees of the Company in person or by telephone or
telegram, or other means of communication, for which no additional compensation
will be paid. The Company has engaged the firm of Georgeson & CompanyShareholder
Communications Inc. to assist the Company in the distribution and solicitation
of proxies. The Company has agreed to pay Georgeson a fee of $15,000$11,000 plus
expenses for its services.
The Company also will reimburse brokerage houses, including 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 four 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"Voting Preferred Stock," and
the Common Stock and the Voting Preferred Stock are collectively referred to
herein as the "Voting Stock").
As of the Record Date, therethe following shares of Voting Stock were
119,097,077outstanding:
- 120,798,286 shares of Common Stock outstanding (exclusive of 904,7681,841,927 shares held in
the treasury), each entitled to one vote per share with respect to each matter to
be voted on at the Annual Meeting,
and
there were outstanding 32,100- 2,300 shares of Series A Preferred Stock, 12,967,900entitled to .3178313 votes per
share,
- 3,834,017 shares of Series B Preferred Stock, and 1,000 shares of Redeemable Preferred
Stock. Each of the Series A Preferred Stock and the Series B Preferred Stock is entitled to .3178313 votes
per share, and
the- 1,000 shares of Redeemable Preferred Stock, is entitled to 1,059 votes per
share.
There is no cumulative voting provision for Common Stock or Voting Preferred
Stock. The Common Stock and the Voting Preferred Stock will vote together as a
single class on each matter to be voted on at the meeting.
AsThe four classes of Voting Stock will represent the Record Date,following aggregate
votes at the Annual Meeting:
- The Common Stock is entitled towill represent an aggregate of 119,097,077120,798,286 votes, or
95.82%98.1488% of the total number of votes entitled to be cast,
at the Annual
Meeting; the- The Series A Preferred Stock is entitled towill represent an aggregate of 10,202.38731.01 votes,
or 0.01%0.0006% of the total number of votes entitled to be cast,
at the Annual
Meeting; the2
- The Series B Preferred Stock is entitled towill represent an aggregate of 4,121,604.521,218,570.61
votes, or 3.32%0.9901% of the total number of votes entitled to be cast, at
the Annual Meeting; and
the- The Redeemable
2
7 Preferred Stock is entitled towill represent an aggregate of 1,059,000
votes, or 0.85%0.8605% of the total number of votes entitled to be cast at the Annual Meeting.cast.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of the shares of Common Stock and Voting Preferred Stock outstanding
and entitled to vote on the Record Date shall constitute a quorum.
The 1997 Trust holds shares of Common Stock ("Trust Shares") issuable to
future, current and former employees of the Company in connection with the
granting to such employees of restricted stock unit awards ("RSU Awards") under
the Company's Employee Incentive Plan (the "Employee Incentive Plan"), the
Company's 1994 Management Ownership Plan (the "1994 Plan") and the Company's
1996 Management Ownership Plan (together with the Employee Incentive Plan and
the 1994 Plan, the "Plans").
The 1997 Trust provides that the 1997 Trust Trustee will vote all Trust
Shares in accordance with instructions received from persons who have received
RSU Awards under the Plans ("Current Participants"). For each Current
Participant, the 1997 Trust Trustee shall vote or abstain from voting, according
to instructions received from such Current Participant, with respect to that
number of Trust Shares that results from multiplying (x) the number of Trust
Shares existing on the Record Date by (y) a fraction, the numerator of which is
the number of RSU Awards held by such Current Participant and as to which the
1997 Trust Trustee has received voting instructions from such Current
Participant, and the denominator of which is the total number of RSU Awards held
by all Current Participants and as to which the 1997 Trust Trustee has received
voting instructions. As is the case for all Voting Stock of the Company, voting
instructions given with respect to RSU Awards will not be confidential.
As of the Record Date, 18,246,76025,557,589 Trust Shares (representing approximately
14.7%20.7656% of the
votes entitled to be cast at the Annual Meeting) were held by the 1997 Trust.
As of the Record Date, American Express Company ("American Express") 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 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 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.
STOCKHOLDERS ENTITLED TO VOTE. Only Stockholders of record on the Record
Date are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
To the knowledge of management, except for the 1997 Trust (described above)
and as described below, no person beneficially owned more than five percent of
any class of Voting Stock as of December 31, 1997.the Record Date.
NUMBER OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER SHARES CLASS
- -------------------------------- -------------------------------- ------------------------- ---------------------------------- --------- ----------
Common Stock....................Stock.............................. FMR Corp.(a) 7,137,424(b) 6.0%6,328,483 (b) 5.2
The Prudential Insurance Company
of America(c) 7,079,321(d) 5.9%
Cumulative Convertible Voting
Preferred Stock, Series B..... American Express(e) 9,163,683(f) 70.7%America (c) 6,311,386 (d) 5.2
Redeemable Voting Preferred Stock...............Stock......... American Express 928(f) 92.8%(e) 928 (f) 92.8
Nippon Life Insurance Company(g) 72(h) 7.2%Company (g) 72 (h) 7.2
- ---------------------------------------
(a) According to Amendment No. 5 to Schedule 13G, datedfiled February 14, 19982000 (the "Fidelity
Schedule 13G"), filed by FMR Corp. ("Fidelity"), Edward C. Johnson 3d and
Abigail P. Johnson, the address of FMR Corp. is 82 Devonshire Street,
Boston, Massachusetts 02109.
(b) The information in this footnote has been extracted from the Fidelity
Schedule 13G.13G, and the number of shares shown is as of December 31, 1999. On
such date, Fidelity Management & Research Company ("Fidelity"Fidelity Management &
Research"), a wholly-owned subsidiary of FMR Corp., isFidelity, was the beneficial owner
of 6,161,1715,527,531 shares of Common Stock as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940, and 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").1940. On such date, (1) Edward C. Johnson 3d,
FMR Corp.,chairman of Fidelity, (2) Fidelity, through its control of Fidelity
Management & Research, and (3) certain unspecified funds (the "Funds"), each
havehad sole power to dispose of the 6,129,8715,527,531 shares owned by certainthe Funds.
Neither FMR
Corp.Fidelity nor Edward C. Johnson 3d hashad 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 Management & Research
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.Also on such date, Fidelity Management Trust
Company ("Fidelity Management Trust"), a wholly-owned subsidiary of
FMR Corp.,
isFidelity, was the beneficial owner of 779,453789,722 shares of Common Stock as a
result of its serving as investment manager of certain unspecified
institutional account(s) (the "Accounts"). Edward C. Johnson 3d and
FMR Corp.,Fidelity, through its control of Fidelity Management Trust, Company, each havehad sole
dispositive power over 779,453789,722 shares and sole power to vote or to direct
the voting of 654,573684,482 shares, and no power to vote or to direct the voting
of 124,880105,240 shares of Common Stock owned by the institutional account(s) as reported above.Accounts. An additional
11,230 shares were owned by Fidelity International Limited ("FIL"), which
had sole power to vote and sole power to dispose of such shares. FIL
and various foreign-based
subsidiaries provideprovides investment advisory and management services to a number
of non-U.S.various 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.Management & Research. 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 31,300 shares held by FASST.Fidelity Management &
Research.
(c) According to Amendment No. 24 to Schedule 13G, dated February 10, 1998filed January 31, 2000 (the
"Prudential Schedule 13G"), filed by The Prudential Insurance Company of
America ("Prudential"), the address of Prudential is 751 Broad Street,
Newark, New Jersey 07102.
4
(d) The information in this footnote has been extracted from the Prudential
Schedule 13G.13G, and the number of shares shown is as of December 31, 1999. On
such date, Prudential held 13,400 shares of Common Stock for the benefit of
its general account. In addition, Prudential disclosed that it may have had
direct or indirect voting and/or investment discretion over 7,079,3216,297,986 shares
of Common Stock 4
9
which arewere held for the benefit of its clients by its
separate accounts, externally managed accounts, registered investment
companies, subsidiaries and/or other affiliates. Prudential has disclosed in the Prudential Schedule 13G
that it hasalso had sole
power to vote or to direct the vote and sole power to dispose or direct the
disposition with respect to 16,187of 241,087 shares, and shared power to vote or to direct the vote5,981,816 shares and
shared power to dispose or direct the disposition with respect to 7,063,134of 6,070,299 shares.
(e) The address of American Express is 3 World Financial Center, New York, New
York 10285.
(f) Based on information furnished by American Express, American Express has
sole investment and sole voting power over all shares.
The 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 5,487,8024,239,292 shares of Common Stock, representing approximately 4.6%3.5% of
that class as of the Record Date, and has sole investment and sole voting
power over all shares.
5
PROPOSAL 1
ELECTION OF CLASS IIIII DIRECTORS
At the Annual Meeting fourthree Class IIIII Directors are to be elected, each to
serve until the Annual Meeting in 20012003 and until his or her successor is elected
and qualified. The Restated Certificate of Incorporation of the Company
establishes a classified Board of Directors with three classes, designated
Class I, Class II and Class III. The terms of the Class III and Class IIII Directors
continue until the Annual Meetings in 19992001 and 2000,2002, respectively, and until
their respective successors are elected and qualified.
The fourthree nominees for Director are: Michael L. Ainslie, Roger S. Berlind,
Hideichiro Kobayashiare Thomas H. Cruikshank, Henry Kaufman and
Dina Merrill. Messrs. Ainslie, Berlind and Kobayashi
and Ms. MerrillJohn D. Macomber, who were first elected Class II Directors in 1996, 1985, 19971995 and 1988,1994,
respectively.
Provided that a majority of the outstanding Voting Stock votes on the
proposal, the fourthree 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. Abstentions and broker non-votes will be disregarded and will have no
effect on the vote for directors. Except as stated in the following sentence,
the persons specified inon the enclosed proxy card intend to vote for the 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(s).
NOMINEES FOR ELECTION AS CLASS IIIII DIRECTORS TO SERVE
UNTIL THE 20012003 ANNUAL MEETING OF STOCKHOLDERS
MICHAEL L. AINSLIE DIRECTOR SINCE 1996 AGE: 54
Private Investor and former President
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 68
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF HALLIBURTON
COMPANY. Mr. Cruikshank was the Chairman and Chief Executive Officer of
Sotheby's
Holdings. Mr. Ainslie,Halliburton Company, a private investor, ismajor petroleum industry service company, from 1989 to
1995. He joined the former President, Chief
Executive Officercompany in 1969, and served as a Director of Sotheby's Holdings. He was Chief Executive
Officer of Sotheby's from 19841977 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.,1996.
Mr. Cruikshank is 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
Chairmanmember of the Board of Directors of the New York Landmarks Conservancy, as
well as a Trustee of Vanderbilt University.The Goodyear Tire &
Rubber Company and The Williams Companies, Inc. Mr. Ainslie serves as a Director of
the United States Tennis Association and is also Chairman of the Posse
Foundation. Mr. AinslieCruikshank serves as a
member of the Audit Committee.
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 67
Theatrical Producer.
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 72
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, a member of
the Board of Trustees of New York University, the Chairman of the Board of
Overseers of the Stern School of Business of New York University and 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
6
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.
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 72
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 IRI International, Mettler-Toledo International, and Textron Inc. He
is Chairman of the Council for Excellence in Government, Rand McNally & Company
and Vice Chairman of the Atlantic Council. He is a Director of the National
Campaign to Prevent Teen Pregnancy and the Smithsonian Institute 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.
CLASS II DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
2001 ANNUAL MEETING OF STOCKHOLDERS
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 69
THEATRICAL PRODUCER. Roger S. Berlind, who is also a private investor, has been
a theatrical producer and principal of Berlind Productions since 1981.
Mr. Berlind is also a Director of LBI, a Governor of the League of American
Theaters and Producers and has served as a Trustee of Princeton University, the
Eugene O'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: 55
DIRECTOR SINCE 1997 AGE: 53
Director and General Manager for the Americas of Nippon Life.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 International Finance and Planning Department from 1994 to 1995. He was
General Manager of the International Finance Department from 1993 to 1994.
Mr. Kobayashi was General Manager of the International Investment Department of
Nippon Life from 1992 to 1993 and President of NLI International Inc. and Chief
Representative of New York from 1989 to 1992. Mr. Kobayashi has been a Director
since May 1997 of PanAgora Asset Management, Inc. Mr. Kobayashi serves as a
member of the Audit Committee and the Finance Committee.
DINA MERRILL DIRECTOR SINCE 1988 AGE: 71
DIRECTOR SINCE 1988 AGE: 69
Director and Vice Chairman ofAND VICE CHAIRMAN OF RKO Pictures, Inc. and Actress.PICTURES, INC. AND ACTRESS. Dina Merrill, a
Director and Vice Chairman of RKO Pictures, Inc., is an actress and also a
private investor. Ms. Merrill was a Presidential Appointee to the Kennedy Center
Board of Trustees and is a Vice President of the New York City Mission Society,
a Trustee of the Eugene O'Neill Theater Foundation and a member of the boardBoard of
Project Orbis, the Juvenile Diabetes Foundation and the Museum of Television and
Radio. Ms. Merrill serves as a member of the Compensation and Benefits Committee
and the Nominating Committee.
7
CLASS I DIRECTORS WHOSE TERMS CONTINUE
UNTIL THE 19992002 ANNUAL MEETING OF STOCKHOLDERS
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 63
Retired
MICHAEL L. AINSLIE DIRECTOR SINCE 1996 AGE: 56
PRIVATE INVESTOR AND FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF SOTHEBY'S
HOLDINGS. Mr. Ainslie, a private investor, is the former President, Chief
Executive Officer and a Director of Sotheby's Holdings. He was Chief Executive
Officer of Sotheby's from 1984 to 1994. From 1980 to 1984 he was President and
Chief Executive Officer of the National Trust for Historic Preservation. From
1975 to 1980 he was Chief Operating Officer of N-Ren Corp., a Cincinnati-based
chemical manufacturer. From 1971 to 1975, he was President of Palmas Del Mar, a
real estate development company. He began his career as an associate with
McKinsey & Company. Mr. Ainslie is a Director of the St. Joe Company and Artesia
Technologies, an internet software provider. He is a Trustee of Vanderbilt
University. Mr. Ainslie serves as a Director of the United States Tennis
Association and is also Chairman of International Business Machines Corporation.the Posse Foundation. Mr. Ainslie serves as
a member of the Audit Committee.
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 65
RETIRED CHAIRMAN OF INTERNATIONAL BUSINESS MACHINES CORPORATION. Mr. Akers, a
private investor, is the retired Chairman of the Board of Directors of
International Business Machines Corporation. Mr. Akers served as Chairman of the
Board of Directors and Chief Executive Officer of IBM from 1985 until his
retirement on May 1, 1993, completing a 33-year career with IBM. Mr. Akers is a
Director of W. R. Grace & Co., theThe New York Times Company, PepsiCo, Inc.,
Hallmark Cards, Inc. and Springs Industries and a member of the U.S. Advisory
Board of Zurich Insurance Company and the Advisory Board of Directorship.Industries. He is a former member of the Board
of Trustees of the California Institute of Technology and The Metropolitan
Museum of Art, as well as the former Chairman of the Board of Governors of
United Way of America. Mr. Akers is also a former member of President George
Bush's Education Policy Advisory Committee. Mr. Akers serves as a member of the
Finance Committee and the Compensation and Benefits Committee.
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 51
Chairman and Chief Executive Officer.
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 53
CHAIRMAN AND CHIEF EXECUTIVE OFFICER. Mr. Fuld has been Chairman of the Board
of Directors of the Company and LBI since April 1994 and Chief Executive Officer
of the Company and LBI since November 1993. He is alsoMr. Fuld serves as the Chairman of
the Executive Committee and as Chairman and a nonvoting member of the Corporate
ManagementNominating
Committee. Mr. Fuld was President and Chief
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 of Shearson
Lehman Brothers Inc. from August 1990 to March 1993. Mr. Fuld was a Vice
Chairman of LBIShearson Lehman Brothers from August 1984 until 1990. He also serves as a Director and
executive officer of several of the Company's subsidiaries. Mr. Fuld has
been a Director of LBI since 1984 and a Director of the Company since 1990.1984. Mr. Fuld joined Lehman Brothers in 1969.
Mr. Fuld is
a trustee of Mount Sinai Medical Center, a member of the Executive Committee of
Mount Sinai Children's Center Foundation, and a Director of Ronald McDonald
House, a member of the Board of Governors of the New York Stock Exchange
and is Chairman of the U.S. Thailand Business Council (USTBC). He is also a
former member of the President's Advisory Committee on Trade Policy
Negotiations. Mr. Fuld is a trustee of the Mount Sinai Medical Center, and
former Chairman of the Mount Sinai Children's Center Foundation. He currently
serves on the foundation's Executive Committee. In addition, he is a member of
the University of Colorado Business Advisory Council. Mr.
Fuld serves as the Chairman of the Executive Committee and as Chairman and a
non-voting member of the Nominating Committee.
MASAHIRO YAMADA DIRECTOR SINCE 1997 AGE: 52
Managing Director of Nippon Life. Mr. Yamada 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 1968 and has been Managing
Director since March 1997. Mr. Yamada was Director and General Manager for the
Corporate Planning Department from 1995 to 1997 and was Director and General
Manager of the Actuarial Department from 1994 to 1995. He was Branch Manager of
the Hiroshima Branch Office from 1992 to 1994. Mr. Yamada was General Manager of
the International Investment Department of Nippon Life from 1990 to 1992 and
Deputy General Manager of the International Planning Department from 1989 to
1990. He was Manager of the International Securities Investment Department from
1984 to 1989. Mr. Yamada 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. CruikshankCouncil, 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 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 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
12
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 of the New York City Partnership and serves on the Nominating Committee.Board of
Directors of Ronald McDonald House.
8
13
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 reservereserves to the full Board of Directors. The Executive Committee
acted by unanimous written consent 1310 times during the fiscal year ended
November 30, 19971999 ("Fiscal 1997"1999").
AUDIT COMMITTEE. The Audit Committee consists of Mr. Berlind, who chairs
the Audit Committee, and Messrs. Ainslie, Cruikshank and 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, and approves non-audit services to be performed by the auditors and
related fees. The Audit Committee held three meetings during Fiscal 1997.1999.
COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits
Committee (the "Compensation Committee") consists of Mr. Macomber, who chairs
the Compensation Committee, and Mr. Akers and Ms. Merrill, all of whom are
Non-employee Directors. The Compensation Committee establishes corporate policy
and programs with respect to the compensation of officers and employees of the
Firm, including establishing compensation policies and practices, such as
salary, cash incentive, restricted stock, long-term incentive compensation and
stock purchase plans and other programs, and making grants under such plans. The
Compensation Committee also establishes and administers all of the Company's
employee benefit and compensation plans and has the authority, where
appropriate, to delegate its duties. The Compensation Committee held seventwo
meetings and acted by telephone or unanimous written consent oncenine times during
Fiscal 1997.1999.
FINANCE COMMITTEE. The Finance Committee consists of Dr. Kaufman, who
chairs the Finance Committee, and Messrs. Akers, Berlind and 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 Fiscal 1997.1999.
NOMINATING COMMITTEE. The Nominating Committee consists of Mr. Fuld, who
chairs the Nominating Committee but is a nonvoting 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 acted by unanimous written
consent onceheld one meeting during Fiscal
1997.1999. The Nominating Committee will consider nominees for Director recommended
by Stockholders. Stockholders wishing to submit recommendations for the 19992001
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 By-Laws contain time limitations, procedures and
requirements relating to Stockholder nominations.
9
ATTENDANCE AT MEETINGS BY DIRECTORS
The Board of Directors held seven meetings and acted by unanimous written
consent once during Fiscal 1997.1999. All Directors other than Mr. 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 Fiscal 19971999 is set forth above.
COMPENSATION OF DIRECTORS
Non-employee Directors receive an annual cash retainer of $45,000 and are
reimbursed for reasonable travel and related expenses. The annual retainer is
paid quarterly; however, the fourth quarter payment will be withheld for failure
to attend 75% of the total number of meetings. During Fiscal 1997,In addition, each Non-employee
Director who served as a chairman of a Committee of the Board of Directors
received an additional annual retainer of $7,500$15,000 per Committee, and each
Non-employee Director who served as a member of the Executive Committee
received 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 receivereceived $1,500 per
Committee meeting, payable whethermeeting.
RESTRICTED STOCK UNIT AND OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS. An
annual equity retainer in the Committee meets in person or
telephonically or acts by unanimous written consent.
Restricted Stock Unit Grants for Non-Employee Directors. Under the termsform of the 1994 Plan, a grant of Restricted Stock Units ("RSUs")
representing $30,000$80,000 fair market value of Common Stock (as of the date of the
Annual Meeting) will beis made to each Non-employee Director on the first business day
following the Company's Annual Meeting of Stockholders for each year thatStockholders. The number of RSUs
granted is based on the closing price of the Common Stock on the NYSE on the day
such plan is in
effect.units are awarded. As of each date that a dividend is paid on Common Stock,
each Non-employee Director holding RSUs shall beis credited with a number of additional
RSUs equal to the product of (A) the dividend paid on one share of Common Stock,
multiplied by (B) the number of RSUs held by the Non-employee Director, divided
by (C) the closing price of the Common Stock on the NYSE on such date. One-third of
theThe RSUs
granted to Non-employee Directors will vest on each of the first three
anniversaries of the date of grant, or, if earlier, immediately and are payable in Common Stock upon death, disability or
termination of service asservice.
Alternatively, a Non-employee Director after serving
ten years. One-third of a Non-employee Director's vested RSUs is payable in
Common Stock on each ofmay elect to receive options, for
three times the first three anniversaries following death,
disability or termination of service. The number of RSUs granted will be based
onhe or she would have received, with an exercise
price equal to the closing price of the Common Stock on the NYSE on the day such unitsdate the
award is made. The options have a ten-year term, are awarded.
The Company's Deferred Compensation Plan for Non-employee Directors.not forfeitable, and become
exercisable in one-third increments on each of the first three anniversaries of
the award date or, if sooner, upon termination of service.
THE COMPANY'S DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS. The
Company's Deferred Compensation Plan for Non-employee Directors is a
non-qualifiednonqualified deferred compensation plan, which provides each Non-employee
Director an opportunity to elect to defer receipt of cash compensation to be
earned for services on the Board of Directors. Each Non-employee Director may
elect to defer all or a specified percentageportion of his or her future cash compensation (or such
election may be limited to such Non-employee Director's annual retainer fees) with
respect to one or more terms as Director. Such an election can be revoked only by a
showing of financial hardship and with the consent of the Compensation
Committee. Amounts deferred are credited quarterly with interest, based upon the
average 30-day U.S. Treasury Bill rate, and compounded annually. Deferred
amounts will be paid in either a lump sum or in annual installments over a
period not to exceed ten years as elected by the Non-employee Director. Payments
will commence pursuant to an election byas the Non-employee Director elects, at a specified date in the future
or upon termination of service as a Non-employee Director.
The Company's Frozen Retirement Plan for Non-employee Directors.THE COMPANY'S FROZEN RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS. Prior to
May 1994, the Company maintained the Company's Retirement Plan for Non-employee
Directors which was a non-qualifiednonqualified retirement plan which provided a limited
annual retirement benefit for Non-employee Directors who had earned five or more
years of service as defined in the plan. Participation in this plan was frozen
on May 31, 1994. Any Non-employee Director who had, on such date, completed at
least five years of service as a Director (determined in accordance with thisthe
plan) has vested benefits under
this10
the plan. Any individual who was a Non-employee Director on such date, but had
not completed five years of service as of such date, will acquireacquired vested benefits
under this plan at the time such individual completescompleted such five years of service
as a Director. Any individual who becomesbecame a Non-employee Director after such date
iswas ineligible to participate in this plan. Vested benefits under this plan will
be paid after the individuala participant ceases to be a Director.
10
15
EXECUTIVE OFFICERS OF THE COMPANY
Biographies of the current Executive Officers of the Company (the "Executive
Officers"), who comprise the Firm's Executive Committee, are set forth below,
excluding Mr. Fuld whose biography is included above. 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: 54
Chief of Operations and Technology. Mr. Callaghan is the Firm's Chief of
Operations and Technology. He has been a Managing Director of LBI since 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 general 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 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: 43
Chief Administrative Officer.Directors.
CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER. Mr. Cecil has been Chief
Administrative Officer of the Company and LBI as well as a Managing Director of LBI since January 1994.1994 and has been Chief
Financial and Administrative Officer of the Company since July 1998. He is
responsible for Finance, Technology, Operations, Human Resources, Expense
Management and Strategic Planning. Mr. Cecil is also a member of the OperatingFirm's
Executive Committee and the Corporate ManagementOperating Committee. Mr. Cecil joined McKinsey & Company
Inc. in 1980, where he was elected a partner in 1986, and was a Director from 1991 through
December 1993. Mr. Cecil is a member of the Advisory Council of the Bendheim
Center for Finance at Princeton University. Mr. Cecil is a Vice Chairman of the
Board of Directors of Graham-Windham Agency andAgency.
JOSEPH M. GREGORY AGE: 47
HEAD OF GLOBAL EQUITIES. Mr. Gregory is the Chairman of its Executive Committee.
CHARLES B. HINTZ AGE: 48
Chief Financial Officer. Mr. Hintz has been Chief Financial OfficerHead of the Company and LBI andFirm's Global Equities
Division, in charge of the overall equities business, a Managing Director of LBIposition he has held
since March 1996. HeMr. Gregory is also a member of the OperatingFirm's Executive Committee and
the Corporate ManagementOperating Committee. He
also has been since March 1996. He is responsible forFrom 1994 to 1996 he was Head of the Firm's Financial
Management and Control, Treasury and Tax and Capital Planning, Asset/Liability
Management, and Creditor and Rating Agency Relations.Fixed Income
Division. He was named Co-Head of the Fixed Income Division in 1991. From 1980
to 1989, he held various management positions in the Fixed Income Division,
including Head of the Firm's Mortgage Business. Mr. Hintz served from 1985
to March 1996 with Morgan Stanley Group, most recentlyGregory joined the Firm in
1974 as Managing Director and
Treasurer.a commercial paper trader. Mr. HintzGregory is a member of the Treasury Managers Association (CCM), and
a memberBoard of
Directors of the Financial Executives Institute and the National Investor
Relations Institute. HeDorothy Rodbell Cohen Foundation.
HEAD OF INVESTMENT BANKING. Mr. Jack is a Lieutenant Commander in the U.S. Naval Reserve.
THOMAS A. RUSSO AGE: 54
Chief Legal Officer. Mr. Russo isHead of the Firm's Chief Legal Officer. HeInvestment Banking
business, responsible for the Division's global industry, product and geographic
groups, a position he has been a
Managing Director of LBIheld since 1993. He1996. Mr. Jack is also a member of the
Firm's Executive Committee and Operating Committee. From 1993 to 1996 he was a
Sector Head in Investment Banking, responsible for Lehman Brothers' businesses
involving Debt Capital Markets, Financial Services, Leveraged Finance and Real
Estate. Mr. Jack has been with Lehman Brothers Operating Committeefor 15 years, joining the Firm in
1984 as an associate in the Fixed Income Division. Previously, he was Head of
the Firm's Fixed-Income Global Syndicate activities. In addition to his
responsibilities at Lehman Brothers, Mr. Jack is a member of the Board of
Directors of the Dorothy Rodbell Cohen Foundation and a member of the Corporate Management CommitteeBoard of
Regents of the Company. HeAmerican Architectural Foundation.
STEPHEN M. LESSING AGE: 45
HEAD OF GLOBAL SALES AND RESEARCH. Mr. Lessing is Head of Global Sales and
Research, responsible for the Company's Legal, Compliance, Corporate
Communications, Internal Audit, Investor Relations, Government Relations,
Diversified Asset GroupFirm's Fixed Income and the Transactions Management Documentation Group
Departments,Equity Sales and Research
organizations, as well as the Firm InvestmentPrivate Client Services business, which focuses on
high-net-worth individuals and Investment Banking Commitment
Committees.middle market institutions. He has held this
position since 1996. Mr. RussoLessing is also serves as Chairmana member of the Company's New ProductsFirm's Executive
Committee and Operating Exposures Committee. From 1977 until1992 to 1996 he was Head of Global Fixed
Income Sales. From 1982 to 1992 Mr. Lessing held various management positions in
the Fixed Income Division, including Head of the Mortgage Business and National
Sales Manager for Money Markets, Governments and Central
11
Funding. Mr. Lessing joined LBIthe Firm in 1993,1980 as an associate in the Fixed Income
Division. Mr. RussoLessing is a member of the Board of Directors of the Dorothy
Rodbell Cohen Foundation, a member of the Board of Directors of the
International Tennis Hall of Fame and a member of the Board of Directors of
Lessing's Inc.
MICHAEL F. MCKEEVER AGE: 48
HEAD OF PRIVATE EQUITY. Mr. McKeever is Head of the Firm's Private Equity
Division, which encompasses the Firm's Merchant Banking, Venture Capital and
other private investment activities, a position he has held since 1999. From
1996 to 1999 Mr. McKeever was Co-Head of Investment Banking responsible for the
Division's global industry, product and geographic groups. Mr. McKeever is also
a member of the Firm's Executive Committee and Operating Committee. From 1991 to
1996 he was a partner atSector Head in Investment Banking, responsible for the law firmFirm's
businesses involving Telecommunications, Media, Technology, Merchandising, and
Consumer Products, as well as all investment banking activities in the Midwest
region. From 1986 to 1990 he was Co-Head of Cadwalader, Wickersham & Taft
wherethe Firm's equity, debt and
derivatives origination business. Mr. McKeever is a member of the Board of
Directors of the Dorothy Rodbell Cohen Foundation.
JEFFREY VANDERBEEK AGE: 42
HEAD OF FIXED INCOME. Mr. Vanderbeek is Head of the Fixed Income Division, in
charge of the overall fixed income business, a position he hadhas held since 1996.
Mr. Vanderbeek is also a financial marketsmember of the Firm's Executive Committee and general corporate practice.
11Operating
Committee. He became Chief Operating Officer of the Fixed Income Government
Securities Department in May 1993 and Chief Operating Officer of the Fixed
Income Derivatives Department in June 1993. Mr. Vanderbeek joined Lehman
Brothers in February 1984 as Managing Director and Chief Operating Officer in
the Fixed Income Central Funding Department. Mr. Vanderbeek is a member of the
Board of Directors of the Dorothy Rodbell Cohen Foundation.
12
16
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership information as of
January 25, 2000 with respect to the Common Stock as
of the Record Date for each current Director of
the Company (which include all nominees for Director), each Executive Officer
and all current Directors and Executive Officers as a group. Except as described
below, each of the persons listed below has sole voting and investment power
with respect to the shares shown. None of the individuals beneficially ownsowned any
of the Company's outstanding Preferred Stock or as much as 1.0% of the outstanding 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.January 25, 2000.
NUMBER OF SHARES OF
COMMON STOCK WHICH MAY PERCENT OF
NUMBER OF SHARES BE ACQUIRED WITHIN 60 DAYS OUTSTANDING
BENEFICIAL OWNER OF COMMON STOCK (A) DAYSOF JANUARY 25, 2000 COMMON STOCK (B)
- -------------------------------------------------------------------- ------------------- ------------------------------------------------ ----------------
Michael L. Ainslie.................................. 1,000 0Ainslie................... 11,968 401 *
John F. Akers....................................... 1,000 0Akers........................ 3,209 401 *
Roger S. Berlind.................................... 80,000(b) 0
Jeremiah M. Callaghan............................... 9,188 462,761Berlind (c)................. 125,677 401 *
John L. Cecil....................................... 7,616 755,000Cecil........................ 906,015 1,007,000 1.6
Thomas H. Cruikshank................................ 4,000Cruikshank................. 9,718 0 *
Richard S. Fuld, Jr................................. 203,463(c) 1,387,589
Charles B. Hintz.................................... 24,039 175,000Jr. (d)............. 1,831,327 1,898,320 3.0
Joseph M. Gregory.................... 982,947 1,138,000 1.7
Bradley H. Jack...................... 587,662 876,835 1.2
Henry Kaufman....................................... 35,000(d)Kaufman (e).................... 39,336 0 *
Hideichiro Kobayashi................................Kobayashi................. 1,750 0 0*
Stephen M. Lessing................... 880,624 1,266,000 1.8
John D. Macomber.................................... 22,000 0Macomber..................... 29,677 401 *
Michael McKeever..................... 657,761 858,000 1.2
Dina Merrill........................................ 5,240 0
Thomas A. Russo..................................... 26,217 350,120
Masahiro Yamada..................................... 0 0Merrill......................... 10,917 401 *
Jeffrey Vanderbeek................... 652,836 895,000 1.3
All Currentcurrent Directors and Executive
Officers as a group (14(15
individuals)............................ 418,763 3,130,470....................... 6,731,424 7,941,160 11.4
- ---------------------------------------
* Less than one percent.
(a) This table does notAmounts include 5,609.89 RSUs held by each of Messrs. Berlind,
Macombervested and Ms. Merrill; 3,884.60 RSUs held by Dr. Kaufman; 2,182.89 RSUs
held by Mr. Akers; 956.22 RSUs held by Messrs. Ainslie and Cruikshank; and
the RSUs held by the Executive Officers, which are set forth in footnote (a)
of the Summary Compensation Table on page 15.unvested RSUs. RSUs are convertible 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 the table, are not convertible within 60 days following
January 25, 2000. A portion of the Record Date.vested RSUs held by the Executive
Officers are subject to forfeiture for detrimental or competitive activity.
Nonetheless, a holder ofan Executive Officer who holds RSUs will be entitled to direct
the 1997 Trust Trustee to vote a number of Trust Shares that is
proportionate to the number of RSUs held by such person;irrespective of vesting; such
number of Trust Shares will be calculated prior to the Annual Meeting and
will be determined by the number of Trust Shares held by the 1997 Trust on
the Record Date and the extent to which Current Participants under the Plans
return voting instructions to the 1997 Trust Trustee. See "Introduction -- The"Introduction--The
Voting Stock."
(b) ExcludesPercentages are calculated in accordance with applicable SEC rules.
(c) Includes 40,000 shares of Common Stock held by Mr. Berlind's wife, as to
which Mr. Berlind disclaims beneficial ownership.
(c)(d) Includes 3,593 shares of Common Stock held by Mr. Fuld's children, as to
which Mr. Fuld acts as custodian.
(d)(e) Held by Dr. Kaufman's various family trusts, foundations and partnerships.
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.
1213
17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE OFFICER COMPENSATION
The Compensation Committee makes decisionsoversees the Compensation Programs of the
Company, with respectparticular attention to the compensation of the Company's Chief
Executive Officer and the other Executive Officers. The Compensation Committee
is composedcomprised of Mr. Macomber, who chairs the Compensation Committee, Mr. Akers
and Ms. Merrill.
In making its decisions with respect to the compensation of Executive
Officers, the Compensation Committee has adopted several practicalthe following philosophical
positions and philosophical positions:policies:
- Deliver a significant portion of total compensation in equity-based
awards, thereby aligning the financial interest of Executive Officers with
Stockholdersstockholders and encouraging prudent long-term strategic decisions. Where
feasible, based on market conditions and other factors, shares will be
repurchased in the market to avoid Stockholderstockholder dilution.
- Tie compensation for Executive Officers to annual and long-term
performance goals, which further harmonizesaligns the interests of Executive
Officers with those of Stockholdersstockholders and rewards Executive Officers for
achievements.
- Ensure that compensation opportunities are comparable with those at major
competitors, so that the Firm may recruit and retain talented Executive
Officers who are key to the Company's long-term success.
The elements and weightings of the compensation program at the Company are
comparable to those used in the investment banking industry, but are
considerably different from those of other major corporations operating in
different industries. The securities industry typically pays higher levels of
compensation than other industries, such as manufacturing, transportation,
utilities or retail. The nature of the securities industry requires that the
workforce consist of a large percentage of highly skilled professionals, who are
in great demand due to the revenue they can generate. Competitive pressure to
hire these professionals results in high levels of compensation in order to
attract and retain the talent needed to compete effectively.
Total compensation is comprised of base salary and both cash and non-cashnoncash
incentive compensation. Base salaries are intended to make up a small portion of
total compensation. The greater part of total compensation is based on the
Company's financial performance and other factors and is delivered through a
combination of cash and equity-based awards. This approach results in overall
compensation levels which will vary significantly withfollow the financial performance of the Company.
As in 19951996, 1997 and 1996,1998, a key element of Executive Officer compensation
for Fiscal 19971999 was pre-established compensation formulas for each Executive
Officer, which in Fiscal 19971999 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"), which are subject to significant vesting and 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 19951996, 1997 and 1996,1998, Fiscal 19971999 Executive Officer Compensation
included a long-term incentive plan ("LTIP") as a component of total
compensation. Whereas the cash and RSU components of total compensation are
based upon annual performance goals, the LTIP awards performance stock unitsPerformance Stock Units
("PSUs") over a longer period. Under the LTIP, the Company's return on equity,
its relative performance with a competitor group and the share price of the
Company, together determine an award of RSUs which vest in one-third increments
in 2002 through 2004. The performance 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 result in a meaningful award.
The Compensation Committee also utilized stock option awards in Fiscal 19971999
to further encourage Executive Officers to strive for long-term Stockholder
value. The options were awarded with
14
exercise prices equal to fair market value on the date of the grant, and will
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 1997,1999, the
Compensation Committee also considered a number of business factors and
conditions. Fiscal 19971999 was a record year for the Company which posted the
highest level of revenues, pretax income, net income and return on equity pretax income and net income in its
history. Productivity improved, dramatically, expenses were further reducedcontrolled and the balance sheet
and liquidity were 13
18substantially strengthened. Share price was up significantly
strengthened.at fiscal year end 1999 from fiscal year end 1998. In addition, the Compensation
Committee reviewed compensation provided in the prior year, along with estimates
of compensation for the current year, for competitor firms. In making its
determinations, the Compensation Committee had available to it third-party
advisors knowledgeable of industry practices.
In establishing Fiscal 19971999 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 record financial results of the Company.
- Building and growingFurther diversifying the sources of revenues by strengthening the Firm's
higher margin businesses.
- Strengthening organization structure and management team.
- Controlling non-personnel expenses while growing revenues.Maintaining discipline around expense reduction.
On the general criteria of leadership, management and governance, it is the
Compensation Committee's judgment that Mr. Fuld's Fiscal 19971999 performance was
above expectations. In addition,Notably, the actual financial results of the Company for
Fiscal 19971999 were significantly higher than for 1996.1998. Since the major portion of
Mr. Fuld's compensation is based on financial results, his Fiscal 19971999
compensation reflects an increase from 1996.1998.
Section 162(m) of the Internal Revenue Code (the "Code") limits the tax
deductibility of compensation in excess of $1 million unless the payments are
made under qualifying performance-based plans. For the compensation year ended
November 30, 1997,1999, these procedures were adhered to. While the Compensation
Committee currently seeks to maximize the deductibility of compensation paid to
Executive Officers, it will maintain flexibility to take other actions which may
be based on considerations other than tax deductibility.
Compensation and Benefits Committee:
John D. Macomber, Chairman
John F. Akers
Dina Merrill
February 19, 199824, 2000
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, John D. Macomber, John F. Akers and
Dina Merrill served on the Compensation Committee. None of these individuals has
ever served as an officer or employee of the Firm.
1415
19
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the years ended November 30, 1997, 19961999, 1998 and
1995,1997, as applicable, the cash and other compensation paid or accrued and certain
long-term awards made to the Executive Officers for services in all capacities.
Mr. Callaghan was not anMessrs. Gregory, Jack, Lessing, McKeever and Vanderbeek became Executive
Officer prior to 1996. Mr. Hintz was hiredOfficers in March1998. All Executive Officers, other than the Chairman, received the
same total compensation, based on the same broad financial and other performance
goals. The Compensation Committee believes this compensation structure will
build a team/partnership approach at the most senior level of 1996.the Firm.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------------AWARDS
------------------------------------- -----------------------
NAME AND PRINCIPAL ------------------------------------- RESTRICTED SECURITIES ALL OTHER
POSITION AT FISCAL OTHER ANNUAL STOCK UNIT UNDERLYING COMPENSATIONALL OTHER
NOVEMBER 30, 19971999 YEAR SALARY BONUS COMPENSATION AWARDS(A)AWARDS (A) OPTIONS COMPENSATION (B)
OPTIONS (C)
- --------------------- ---------------------------------------- -------- -------- ---------- ------------- ------------- ---------- ------------------------- ----------------
R.S.R. S. Fuld, Jr........ 1997Jr.................... 1999 $750,000 $3,125,000$4,500,000 $ 0 $ 5,536,325 325,000 $ 7,570$7,500,350 400,000 $8,778
Chairman and Chief 1996Executive 1998 750,000 2,000,0002,350,000 0 3,927,994 375,000 7,528
Executive6,643,437 350,000 7,908
Officer 19951997 750,000 1,450,0003,125,000 0 2,750,010 400,000 7,5565,536,325 325,000 7,570
J. L. Cecil.......... 1997Cecil....................... 1999 $450,000 $3,300,000$3,550,000 $ 0 $ 3,214,640 225,000 $ 0
Chief
Administrative 1996 450,000 1,950,000 0 2,285,379 250,000 0
Officer 1995 450,000 1,787,500 0 1,203,131 200,000 0
J. M. Callaghan...... 1997 $450,000 $ 950,000 $ 0 $ 1,214,420 75,000 $ 0
Chief of Operations 1996 450,000 950,000 0 857,018 100,000 0
and Technology
T.A. Russo........... 1997 $450,000 $ 750,000 $ 0 $ 928,674 75,000 $ 0
Chief Legal 1996 450,000 550,000 0 714,182 100,000 0
Officer 1995 450,000 552,500 0 371,873 100,000 0
C.B. Hintz........... 1997 $450,000 $ 650,000 $ 0 $ 857,237 75,000$4,285,914 350,000 $ 0
Chief Financial 1996 349,615 747,749(b)and 1998 450,000 2,300,000 0 1,023,356 100,0003,928,915 300,000 0
Administrative Officer 1997 450,000 3,300,000 0 3,214,640 225,000 0
J. M. Gregory..................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $4,810
Head of Global Equities 1998 450,000 2,300,000 0 3,928,915 300,000 4,333
B. H. Jack........................ 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $ 0
Head of Investment Banking 1998 450,000 2,300,000 0 3,928,915 300,000 0
S. M. Lessing..................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $2,114
Head of Global Sales and 1998 450,000 2,300,000 0 3,928,915 350,000 1,905
Research
M. F. McKeever.................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $ 0
Head of Private Equity 1998 450,000 2,300,000 0 3,928,915 300,000 0
J. Vanderbeek..................... 1999 $450,000 $3,550,000 $ 0 $4,285,914 350,000 $ 709
Head of Fixed Income 1998 450,000 2,300,000 0 3,928,915 300,000 610
- ---------------------------------------
(a) Fiscal 19971999 amounts represent RSUs awarded under the Company's 1996
Management Ownership Plan. The values indicated are based on the closing
trading price of the Common Stock on the NYSE for December 11, 1997, $48.5625,November 30, 1999,
$76.375, which is also the undiscounted award price for the Fiscal 19971999
awards. These awardsHowever, RSUs actually are issued at a discount because they are
subject to significant vesting and forfeiture restrictions and cannot be
sold or transferred until they convert to Common Stock on November 30, 2002.
(b)2004.
Dividends are payable by the Company on all such holdings from their date of
the award, and are reinvested in additional RSUs.
At November 30, 1997,1999, the Executive Officers held the following RSUs, which
are subject to different vesting and forfeiture provisions and are therefore
outlined separately. Thetotal number of RSUs awarded for fiscal year 1994
performance at the then current market price of $14.75 to each ofheld by Messrs. Fuld, Cecil,
CallaghanGregory, Jack, Lessing, McKeever and RussoVanderbeek is 161,017, 47,458, 54,2371,258,489.01, 785,915.77,
832,338.36, 514,653.99, 653,396.63, 537,640.55 and 22,034,
respectively and the 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 $1,114,094,535,012.48, 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
number1999 closing price per share
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 earned 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
value 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
appreciation above the market price of the Common Stock at the date of the
award.
(c)$76.375 is $96,117,098, $60,024,317, $63,569,842,
$39,306,698, $49,903,168, $41,062,297 and $40,861,578, respectively.
(b) Amounts reported under "All Other Compensation" for Fiscal 19971999 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.
16
The following table contains information concerning the grant of
nonqualified stock options in Fiscal 19971999 to the Executive Officers. These
hypothetical present values are presented pursuant to SEC rules even though
there is no assurance that such values will ever be realized. The actual amount,
if any, realized upon the exercise of stock options would depend upon the market
price of Common Stock relative to the exercise price per share of the stock
option at the time the stock option is exercised.
There is no assurance
that the potential value of the stock options reflected in this table will
actually be realized.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES OR BASE PRICE EXPIRATION PRESENT
NAME GRANTED(A)GRANTED (A) IN FISCAL YEAR PER SHARE DATE VALUE(B)
- -------------------------------------- ----------VALUE (B)
---- ----------- -------------- ------------- ---------- ----------
R.S.R. S. Fuld, Jr......................... 325,000 14.4% $ 30.50 1/7/2002 $1,836,250
J.L. Cecil............................ 225,000 10.0% 30.50 1/7/2002 1,271,250
J.M. Callaghan........................ 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 423,750Jr.................... 350,000 3.2% $40.875 12/13/2003 $3,087,000
50,000 0.5% 76.875 11/30/2004 995,500
J. L. Cecil....................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
J. M. Gregory..................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
B. H. Jack........................ 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
S. M. Lessing..................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
M. F. McKeever.................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
J. Vanderbeek..................... 300,000 2.8% 40.875 12/13/2003 2,646,000
50,000 0.5% 76.875 11/30/2004 995,500
- ---------------------------------------
(a) Five-year non-qualifiednonqualified stock options were granted on January 8, 1997, whichDecember 14, 1998 and
December 1, 1999. These options becomeare exercisable in one-third increments when
the closing price of the Common Stock on the NYSE reaches $39, $42,$55, $65 and $45,$75,
respectively for the December 14, 1998 grant and $90, $100 and $110,
respectively for the December 1, 1999 grant, for 15 out of 20 consecutive
trading days (the "Closing Price Conditions") or, if sooner, become exercisable entirely in four and one-half
years. The Closing
Price Conditions were satisfied during Fiscal 1997 and thereforeyears after the options
are currently exercisable.date of grant.
(b) These values were calculated using the Black-Scholes option pricing model as
of the grant date. The Black-Scholes model is a mathematical formula that is
widely used and accepted for valuing traded stock options. The model is
premised on immediate exercisability and transferability of the options.
Thisoptions
which is not true for the Company's options granted to Executive Officers.
Therefore, certain discounting assumptions about the time of exercise and
risk of forfeiture were applied, as indicated below.
The values shownfollowing assumptions were calculated usingused in employing the following assumptions: theBlack-Scholes option
pricing model: an exercise price is an amount
aboveequal to the closing price of the Common
Stock on January 8, 1997; the date of grant; an expected option life of approximately three
years; a dividend rate of $0.24$0.30 per share for Fiscal 1997 based on the Company's actual
regular quarterly dividends;December 14, 1998 grant
and $0.36 per share for the December 1, 1999 grant; a risk-free rate of
return equal to the yield for the 16
21
U.S. Treasury Strip security with a
maturity date closest to the expiration
dateexpected option life of the option grant; andan expected
common stockCommon Stock price volatility used is
the historic volatility of the Peer Group. In addition, the assumed option
term of the awards reflects the likelihood of exercise before the expiration
of the maximum term. Stock options such as these withrate based on historical volatility; and a five-year term are
assumed to be exercised in three years. The10%
per annum adjustment for nontransferability or risk of forfeiture during the
vesting period is 10%
per annum.period.
17
The following table sets forth information concerning the exercise of stock
options during Fiscal 19971999 by each of the Executive Officers and the fiscal
year-end value of unexercised options. During Fiscal 1997, other than Mr. Fuld,
none of the Executive Officers exercised any of the Company's stock options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARESACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END(A)
ACQUIREDEND (B)
ON VALUE ----------------------------- -------------------------------------------------------- ---------------------------
NAME EXERCISE (A) REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------- ------------ ----------------------- ----------- ------------- ----------- -------------
R.S.R. S. Fuld, Jr........ 14,415(b) $ 424,515 1,387,589 0 $37,720,867 $ 0Jr................ 189,269 $6,553,756 1,781,653 166,667 $80,507,127 $4,141,679
J. L. Cecil..........Cecil................... 0 0 755,000 0 19,697,188 0907,000 150,000 35,297,875 3,550,000
J. M. Callaghan......Gregory................. 0 0 462,761 0 12,956,155 0
T. A. Russo..........1,038,000 150,000 42,355,875 3,550,000
B. H. Jack.................... 0 0 350,120 0 9,575,752 0
C. B. Hintz..........776,835 150,000 28,604,566 3,550,000
S. M. Lessing................. 85,835 3,787,469 1,166,000 150,000 49,746,500 3,550,000
M. F. McKeever................ 0 0 175,000758,000 150,000 27,627,500 3,550,000
J. Vanderbeek................. 0 4,110,938 0 795,000 150,000 29,546,875 3,550,000
- ---------------------------------------
(a) Option grantsOnly those options scheduled to expire during Fiscal 1999 were made in 1994, 1995, 1996 and 1997 atexercised by
executive officers. No discretionary exercises occurred during the then market
prices of $18.00, $20.875, $24.00 and $30.50 per share, respectively.year.
(b) Aggregate values shown above represent the excess of $50.5625$76.375 per share, the
closing price of the Common Stock on November 28, 199730, 1999 on the NYSE, over the
respective exercise prices of the options. The dramatic increase inactual amount, if any,
realized upon exercise of stock options will depend upon the market price of
the Common Stock relative to the exercise price during Fiscal 1997 has created over 70%per share of the value
notedstock
option at the time the stock option is exercised. There is no assurance that
the values of unexercised in-the-money options reflected 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
22be
realized.
PENSION BENEFITS
Lehman Brothers Holdings Inc. Retirement Plan (the "Holdings Retirement
Plan") is a funded, qualified, noncontributory, integrated, defined benefit
pension plan covering eligible employees.
All employees of the Company or a designated subsidiary who have attained
the age of 21 and completed one year of service are generally eligible to
participate in the Holdings Retirement Plan. The Holdings Retirement Plan
formula provides for an annual retirement benefit payable at age 65, calculated
as a straight life annuity. Pensionable earnings are total Form W-2 earnings
(plus elective deferrals under the Lehman Brothers Holdings Inc. Tax Deferred
Savings Plan and certain other health plan deferral amounts) up to the Internal
Revenue Service maximum of $150,000 in 1995 and 1996. For each year of plan
participation prior to 1989, the annual accrual was based on percentages of
pensionable earnings up to and in excess of the social security taxable wage
base. After 1988 the annual accrual is equal to one percent of pensionable
earnings up to the average Social Security taxable wage base plus 1.65% of
pensionable earnings in excess of the average taxable wage base. Generally,
participants have a non-forfeitablenonforfeitable right to their accrued benefits upon
completing five years of vesting service. As of November 30, 1997,1999, the estimated
annual projected benefits payable upon retirement at a normal retirement age of
65 for Messrs. Fuld, Cecil, Callaghan, RussoGregory, Jack, Lessing, McKeever and HintzVanderbeek are
approximately $94,884, $54,236, $37,845, $33,779$96,480, $54,840, $104,856, $89,127, $102,882, $94,607 and
$40,271,$97,344, respectively.
18
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has adopted a nonqualified, noncontributory Supplemental
Retirement Plan ("SRP") covering members of the Executive Committee of the
Company who are at least age 60 and who have completed at least five years of
service or whose age plus service equals or exceeds 85. The SRP is a defined
benefit plan and provides for the payment of reduced benefits payable at age 60
if the participant is above age 45 and has completed five years of service.
Benefits are not payable in cases of termination or employment by a competitor.
In addition, eligibility for SRP benefits is subject to continued employment
through July 1, 2001. As of November 30, 1999, the estimated annual projected
benefits payable upon retirement at age 60 for Mr. Fuld are $1.25 million, and
for each of Messrs. Cecil, Gregory, Jack, Lessing, McKeever and Vanderbeek are
$700,000. In the event of a change in control, vesting is accelerated.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
Pursuant to its authority to accelerate the vesting and waive the transfer
restrictions for grants of RSUs, in 1994 the Compensation Committee determined
to accelerate the vesting and waive the transfer restrictions of the RSUs
received by the Executive Officers (and made comparable provisions for all other
employees) in the event of a Hostile Change of Control, which generally means a
tender offer, acquisition of 20% of the Company's voting securities or a change
of a majority of the incumbent Board of Directors, in each case without the
prior approval of a majority of the independent members of the incumbent Board
of Directors. To the extent there is a Change of Control which is not Hostile,
then the RSUs would be paid out but the difference between the acquisition price
and the RSU value at grant would be deferred for the shorter of two years or the
term of any remaining restrictions and the conditions of the original RSU grant
would govern the deferred amounts. Comparable arrangements were implemented for
options and restricted stock held by the Executive Officers and all other
employees. Prior
toIn the completioncase of PSU award grants made in 1996 the performance period, PSUs have pro ratanumber of RSUs
payable upon a Change of Control would be approximately twice, and in the case
of PSU award grants made in 1997 would be approximately 2.5 times, the number of
RSUs otherwise payable (which aggregate payouts, upon a Change of Control, and in the case of the 1996 PSU Award Grant, approximately
twice the number of RSUs are payable (which aggregate payout, upon a Change of
Control, representswould
represent the full awardawards earned pursuant to the performance formula). In
addition, under a Cash Awards Plan, if a Change of Control occurs within six
months after a grant of RSUs, then the Chief Executive Officer receives a
payment equal to 350% of his previous annual cash compensation, the Chief
Administrative Officer shall receive 300% and the other Corporate Management
Committee membersparticipants shall
receive from 200% to 300%.
1819
23
PERFORMANCE GRAPH
The performance graph below illustrating cumulative stockholder return
compares the performance of the Common Stock, formeasured at each of the Company's
last five fiscal quarter following the May 31, 1994 spin-off from American
Express,year-ends, with that of the S&P 500 Index and(1) an index comprised of the Company's
Peer Group (Morgan Stanley, Dean Witter, Discover & Co.,common
stocks of The Bear Stearns Companies Inc., Donaldson, Lufkin & Jenrette, Inc.,
J.P. Morgan & Co. Incorporated and Salomon Inc).Paine Webber Group, Inc. (the "Peer Group"),
and (2) the S&P 500 Index. Because Donaldson, Lufkin & Jenrette, Inc. has been a
publicly traded company only since October 1995, its common stock is not
included in the Peer Group index results for fiscal 1995.
The graph assumes $100 was invested in the Common Stock and each index on
May 31,November 30, 1994, and that all dividends were reinvested.reinvested in full. The
investment in the stocks comprising the peer group index has been weighted at
the beginning of each measurement period according to the issuing companies'
market capitalizations, in accordance with SEC rules.
CUMULATIVE TOTAL RETURN
PERFORMANCEFOR LEHMAN BROTHERS HOLDINGS INC. COMMON STOCK,
A PEER GROUP INDEX AND THE S&P 500 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MEASUREMENT PERIOD LEHMAN BROTHERS
(FISCAL YEAR COVERED) HOLDINGS INC. S&P 500 PEER GROUP11/94 11/95 11/96 11/97 11/98 11/99
5/31/94
LEHMAN BROTHERS HOLDINGS INC. 100.00 153.61 199.32 348.17 346.20 532.14
PEER GROUP 100.00 143.24 178.46 255.20 261.05 312.43
S & P 500 100.00 8/31/94 90.97 104.91 94.93136.98 175.15 225.09 278.35 336.52
CUMULATIVE TOTAL RETURN (IN DOLLARS)
---------------------------------------------------------------
11/30/94 83.61 100.85 79.93
2/28/95 101.94 108.97 89.73
5/31/95 111.25 119.73 103.81
8/31/95 133.06 126.76 106.51
11/30/95 127.78 137.05 107.44
2/29/96 139.86 145.51 115.73
5/31/96 138.75 152.55 125.26
8/30/96 120.28 149.63 118.62
11/29/96 165.00 173.49 142.73
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
11/28/97 285.43 220.31 252.8511/30/98 11/30/99
-------- -------- -------- -------- -------- --------
Lehman Brothers Holdings Inc............... 100.00 153.61 199.32 348.17 346.20 532.14
Peer Group................................. 100.00 143.24 178.46 255.20 261.05 312.43
S & P 500.................................. 100.00 136.98 175.15 225.09 278.35 336.52
20
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 19
24
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
Fiscal 1997,1999, the Company, through certain of its subsidiaries, in the ordinary
course of business has provided investment, financial advisory and other
services to certain corporations and entities with which its Directors and prior
Directors are affiliated.
In April 1997,1999, the Company entered into a one-year consulting agreement with
Henry Kaufman & Company, Inc. ("HK Company") pursuant to which HK Company
will provide,provides, upon request, advice to the Firm on global initiatives, economic
forecasts and other matters. HK Company receives a consulting fee of $12,500 per
month. Henry Kaufman, a Director of the Company, is a principal of HK Company.
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 Fiscal 1997,
Messrs. Berlind and Fuld received $1.7 million and $1.1 million, respectively,
in 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. Capital Partners III may enter into
high riskhigh-risk investment opportunities of all kinds in all markets globally. Each of
the Executive Officers and Messrs. Berlind and Kaufman are limited partners in
Capital Partners III. The Company as general partner is making a capital
contribution to Capital 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 fixed return thereon, will
generally be distributed to the general partner before any distributions are
made to the limited partners. The general partner's fixed return is determined
on a formulaic basis and was approximately 6.6735% as of December 31, 1997.
After the general partner has received back its
capital contribution and fixed return, any subsequent profits are allocated 90%
to the limited partners and 10% to the general partner. During Fiscal 1997, Mr.1999,
Messrs. Berlind, Kaufman, Cecil, Fuld, Gregory, Jack, Lessing, McKeever and
Vanderbeek received $86,856$66,000 and 12,424 shares of common stock of L-3
Communications Holdings, Inc. (such stock, the "L-3 Common Shares"), $66,000 and
12,424 L-3 Common Shares, $132,000 and 24,848 L-3 Common Shares, $231,000 and
43,484 L-3 Common Shares, $165,000 and 31,060 L-3 Common Shares, $66,000 and
12,424 L-3 Common Shares, $132,000 and 24,848 L-3 Common Shares, $82,500 and
15,530 L-3 Common Shares, and $82,500 and 15,530 L-3 Common Shares,
respectively, in distributions from Capital Partners III.
Lehman Brothers Venture Capital Partners IV,I L.P. ("Capital Partners IV"Venture") is a limited
partnership established in 19971999 to provide senior officers and other employees,
consultantsdirectors and directorsconsultants of the Firm with the opportunity to invest in a
portfolio of investment opportunities. Capital Partners IVprivate equity fund. Venture will participate
in all investments to be made byco-invest with a Lehman Brothers Merchant Bankingsubsidiary,
LB I Group Inc., and with Lehman Brothers Venture Partners II
L.P. ("LB Fund II"), a private
equity fund organized for third party investors, generally on a pro rata basisin proportions based
on unfundedupon the respective outstanding capital commitments.commitments of the three investing
entities. A subsidiary of the Company acts as general partner for each of
Capital Partners IV and LB Fund II.Venture. The
investment objectivesobjective of both areVenture is to achieve long-termseek substantial capital appreciation
through a diverse group of
equity-orientedventure capital investments. LB Fund IIVenture has capital commitments of
$2 billion$60.8 million from the limited partners and Capital Partners IV has capital commitments of approximately $300$0.6 million which may be increased to as much as $400 million. Each offrom the general
partner, respectively. The Executive Officers and Messrs. Ainslie, Berlind Cruikshank and KaufmanCruikshank
are limited partners in Capital Partners IV. The limited partners are contributing an
aggregateVenture. Distributions of $240 million,investment proceeds in respect
of which recourse financing of $180 million is
available from the Company. The general partner is making a venture 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 returnsinvestment will be determined on a
formulaic basis. Thereafter, capital contributions will be distributedmade to the limited partners and the
general partner and any subsequent profits will be
divided 90%pro rata in proportion to the limited partners and 10% to the general partner.each of their capital contributions.
21
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
$32.3 million$196,703 in respect of these investments in Fiscal 1997.
20
251999.
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. TRS also provides the Corporate
Card to employees of the Firm, for which TRS has 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 March 1997 to extend such arrangements with respect to the
Corporate Card and travel services 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, 1997,1999, deferred compensation with an
aggregate balance of approximately $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, the 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
$88,360,137approximately $88.4 million as of December 31, 1997,1999, with a maturity of
December 31, 2000, payable by American Express to the Company.
Portions of this note will be prepaid byDuring Fiscal 1999, the Company repurchased from American Express
prior to such date in proportion to$220 million (aggregate liquidation preference) of the Company's payments and
prepayments on any indebtedness related to the World Financial Center.Series B Preferred Stock
at par.
The Firm, from time to time, provides investment banking, commercial paper
placement, brokerage and various other financial services such as repurchase
transactions, investment advisory, strategic advisory and derivative products to
American Express and its subsidiaries, including acting as placement agent for
medium-term notes, dealer for commercial paper and advisor regarding certain
dispositions. The Firm, American Express and its subsidiaries also engage in the
ordinary course of business in various trading and short-term funding
transactions, including foreign exchange and precious metals transactions. In
addition to the services referred to above, American Express and its
subsidiaries provide banking and other financial services to the Firm. All of
these transactions are done on an arm's-length basis with customary fees.
The Company and American Express entered into an Agreement dated May 26,
1994 (the "Tax Allocation Agreement"), which provided for the allocation,
settlement and payment of the Company's federal, state and local income tax
liabilities for the years during which the Company and any of its subsidiaries
were included in the American Express consolidated Federal income tax return or
any combined or unitary state and local tax returns. Under the terms of the Tax
Allocation Agreement, American Express retained significant control and
discretion over issues relating to the allocation, settlement and payment of the
covered tax liabilities, including the resolution of proposed audit adjustments.
For income tax filings relating to periods commencing on or after June 1, 1994
(the spin-off date), the Company files its own consolidated Federal income tax
return and applicable state and city filings.
The Company, LBI and Lehman Commercial Paper Inc. (collectively, the "LB
Co-tenants") are co-tenants together with American Express and certain of its
subsidiaries (the "AXP Co-tenants" and,
22
together with the LB Co-tenants, the "Co-tenants") of the leasehold interest in
3 World Financial Center in New York City (the "Property"). The Co-tenants'
relationship with respect to the Property is governed by an Agreement of
Tenants-In-Common. The agreement provides, among other things, that each
Co-tenant is obligated to pay its proportionate share of all Property
obligations and limits the actions that may be taken by individual Co-tenants.
The AXP Co-tenants and LB Co-tenants are liable, on a limited recourse basis,
for their proportionate share of the debt (with maturities
through the year(zero-coupon notes which mature in
December 2000) issued by the Co-tenants to finance the Property. The LB
Co-tenants' share of such debt as of December 31, 19971999 amounts to approximately
$157$191.7 million and has been guaranteed by American Express. Certain of suchSuch debt is secured
by a first and/or second mortgage granted on the interest of the Co-tenants as
tenants-in-common in the Property.
21
26
CERTAIN TRANSACTIONS AND AGREEMENTS WITH NIPPON LIFE
Nippon Life has 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 $175.8 million in
respect of this investment for Fiscal 1997. During Fiscal 1997, Nippon committed
$150 million for investments to 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.
Throughout Fiscal 1997, each of the Company and Nippon Life owned 50% of
the outstanding capital stock of PanAgora Asset Management, Inc. ("PanAgora")
and PanAgora Asset Management Limited ("PanAgora Ltd."). PanAgora and PanAgora
Ltd. were sold on February 13, 1998.
CERTAIN TRANSACTIONS WITH OTHER INSTITUTIONAL INVESTORS
AND THEIR SUBSIDIARIES
In November 1997,June 1999 Fidelity and the Firm sold, pursuantCompany announced an alliance across a broad
spectrum of investment products, research, and distribution channels. Under the
alliance, certain of Fidelity's brokerage clients will gain greater access to an asset purchase agreement,
certain accounts serviced bya
wide range of equity and fixed income products, including Lehman Brothers
research and the possibility of participating in Lehman Brothers lead-managed
initial and secondary public offerings, and Fidelity will be the principal
channel for Lehman Brothers to distribute underwritten securities to eligible
retail branch officesbrokerage customers outside its own network of LBI in London,
Singapore and Hong Kong to Prudential Securities Group Inc. and its affiliates.
The sales price was comprised of annual earn-out payments over a three year
post-closing period. 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.net worth retail
brokers.
In the ordinary course of business and at customary and usual fees therefor,
the Firm may provide to PrudentialFidelity and its subsidiaries, FMR Corp.Prudential and its
subsidiaries, and other institutional stockholders, brokerage and other
financial services, andservices; on the same basis, such companies may provide mutual fund,
insurance and other financial services to the Firm.
23
PROPOSAL 2
RATIFICATION OF THE COMPANY'S SELECTION OF ITS AUDITORS
The Board of Directors recommends to the Stockholders that they ratify the
selection of Ernst & Young LLP, independent auditors, to audit the accounts of
the Firm for fiscal year 1998.Fiscal 2000.
The affirmative vote of the majority of Voting Stock present in person or by
proxy at the meeting is required to ratify the selection of auditors.
In the event that the Stockholders fail to ratify the appointment, the Board
of Directors will consider it a direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Board of Directors, in
its discretion, may direct the appointment of a new independent accounting firm
at any time during the year if the Board feels that such a change would be in
the best interests of the Company and its Stockholders.
For Fiscal 1999, fees related to the annual examination of the Firm's
financial statements amounted to approximately $5.3 million.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will have the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
22
27
PROPOSAL 3
AMENDMENTSAMENDMENT 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.Amendment. Such approval would amend Section 3 of the 1996 Plan to
increase the number of shares of Common Stock with respect to which awards may
be granted under the 1996 Plan from ten15.5 million to 15.521 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 DirectorSenior Vice President
or above. The Compensation Committee has discretion to select the individuals to
whom Awards will be granted and to determine the type, size and terms of each
Award and the authority to administer, construe and interpret the 1996 Plan. As
of the Record Date, approximately 3151,240 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.Plan.
As of the Record Date, the Company had granted awards under the 1996 Plan
with respect to 813.065 million shares of Common Stock. The Board of Directors
believes approval of an additional 5.5 million shares is advisable in order to
permit the Company to continue to compensate senior officers in part with RSUs,
options and other stock-based awards instead of cash. Stock-based awards provide
an incentive to management to continue to work for the financial success of the
Company and encourage management to remain with the Company.
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 sectionssection of the 1996 Plan, as theyit would be amended by the 1996
Plan Amendments, areAmendment, is attached hereto as Appendix A. The changeschange that would result
from the 1996 Plan Amendments areAmendment is marked on such Appendix.
24
The affirmative vote of the majority of Voting Stock present in person or by
proxy at the meeting is required to ratify the 1996 Plan Amendments.Amendment. In
determining whether the proposal has received the requisite number of
affirmative votes, abstentions and broker non-votes will be counted and will
have the same effect as votes against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
MATERIAL PROVISIONS OF THE 1996 PLAN
The Board of Directors (the "Board") adopted the 1996 Plan on January 30,
1996, subject to approval by the Company's Stockholders, which was obtained on
April 10, 1996. Stockholder approval will permit the Company to maintain the
tax-deductible status of any RSUs and other stock-based awards to the Company's
Chief Executive Officer and any other Executive Officers.executive officers. The 1996 Plan is
designed to permit it to be administered to grant "performance-based" awards to
Executive Officersexecutive 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 23
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"Introduction--Vote By Proxy" and "-- The"--The Voting Stock."
Set forth below are the types of Awards which may be granted under the 1996
Plan.
Stock Options.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
25
relates. A Limited Right can be exercised within the 30-day period following a
Change in Control. A Limited Right will only be exercisable during the term of
the related Option. A "Change in Control" is deemed to occur when: (i) 20% or
more of the combined voting power of Holdings' voting securities is acquired in
certain instances; (ii) individuals who are members of Holdings' Board prior to
the Change in Control cease, subject to certain exceptions, to constitute at
least a majority of such Board; or (iii) Stockholders approve certain mergers,
consolidations, reorganizations, a liquidation of Holdings or an agreement for
the sale or other disposition of all or substantially all the assets of
Holdings.
Stock Appreciation Rights.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."
24
29
Other Stock-Based Awards.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-basedperformance-
26
based compensation under Section 162(m), the performance objectives for awards
made under the 1996 Plan will be based upon one or more of the following
criteria: (i) before or after tax net income; (ii) earnings per share;
(iii) book value per share; (iv) stock price; (v) return on Stockholders'
equity; (vi) the relative performance of peer group companies; (vii) expense
management; (viii) return on investment; (ix) improvements on capital structure;
(x) profitability of an identifiable business unit or product; (xi) profit
margins; (xii) budget comparisons; and (xiii) total return to Stockholders.
Participants who have primary responsibility for a business unit of the Company
may be measured on business unit operating profit, business unit operating
profit as a percent of revenue, and/or measures related to business unit
profitability above its cost of capital, in place of some or all of the
corporate performance measures. The Compensation Committee must certify as to
the attainment of the applicable performance goals prior to payment of any Other
Stock-based Award, and may reduce the amount of any Other Stock-based Award.
Additional Information.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 FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. Certain of the federal
income tax consequences to Optionees and their employers of Options granted
under the 1996 Plan should generally be as set forth in the following summary:
An employee to whom an incentive stock option ("ISO") which qualifies under
Section 422 of the Code is granted will not recognize income at the time of
grant or exercise of such Option. No federal income tax deduction will be
allowable to the employee's employer upon the grant or exercise of such ISO.
However, upon the exercise of an ISO, the excess of the fair market value over
the Option exercise price will be a tax preference item in the year of the
exercise of the ISO, pursuant to special alternative minimum tax rules which
apply for the employee. When the employee sells such shares more than one year
after the date of transfer of such shares and more than two years after the date
of grant of such ISO, the employee will normally recognize a mid-term or
long-term capital gain or loss, as the case may be, depending on the holding
period, equal to the difference, if any, between the sale
27
prices of such shares and the Option exercise price. If the employee does not
hold such shares for this period, when the employee sells such shares, the
employee will recognize ordinary compensation income in such amounts as are
prescribed by the Code and regulations thereunder, and the employee's employer
will generally be entitled to a federal income tax deduction in the amount of
such ordinary compensation income.
An individual to whom a non-qualified Option is granted will not recognize
income at the time of the grant of such Option. When such Optionee exercises
such non-qualified Option, the Optionee will recognize ordinary compensation
income equal to the difference, if any, between the Option Price paid and the
fair market value, as of the date of option exercise, of the share the Optionee
receives. The tax basis of such shares to such Optionee will be equal to the
Option Price paid plus the amount includableincludible 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 includableincludible in the gross income of an employee in respect of a
non-qualified Option will be subject to appropriate federal, state, local and
foreign income and employment taxes.
The discussion set forth above does not purport to be a complete analysis of
all potential tax consequences relevant to recipients of Options or their
employers or to describe tax consequences based on particular circumstances and
does not address Awards other than options. It is based on federal income tax
law and interpretational authorities as of the date of this Proxy Statement,
which are subject to change at any time. Employees who receive Options/other
Awards under the 1996 Plan should therefore consult their own tax advisors
regarding the federal, state and local income tax consequences of the 1996 Plan
and of the Options/other Awards granted pursuant thereto.
28
OTHER MATTERS
Management does not know of any business to be transacted at the meeting
other than as indicated herein. Should any such matter properly come before the
meeting for a vote, the persons designated as proxies will vote thereon in
accordance with their best judgment.
26
31
You are urged to sign, date and return the enclosed proxy incard as promptly
as possible, using the prepaid envelope provided for such purpose.purpose, or vote
online or by telephone according to the instructions on the proxy. It is hoped
that registered Stockholders will give us advance notice of their plans to
attend the Annual Meeting by marking the box provided on the proxy card.card or by
registering their intention when voting online or by telephone.
If you will need special assistance at the Annual Meeting because of a
disability, please contact the Corporate Secretary of the Company, Ms. Jennifer
Marre, at (212) 526-1936 or at Jennifer Marre@usccmail.lehman.com.jmarre@lehman.com. Directions to the meeting are
on the last page of this Proxy Statement.
DEADLINE FOR SUBMITTING PROPOSALS FOR NEXT YEAR'S MEETING. Stockholders who
intend to present proposals for inclusion in the proxy material to be
distributed by the Company in connection with the Company's 19992001 Annual Meeting
of Stockholders must submit their proposals to the Corporate Secretary of the
Company on or before October 23, 1998.27, 2000.
In addition, in accordance with Article II, Section 9 of the Company's
By-Laws, in order to be properly brought before the 2001 Annual Meeting, a
matter must have been (a) specified in a notice of meeting given by or at the
direction of the Board of Directors (which would be accomplished if a
stockholder proposal were received by the Secretary of the Company as set forth
in the preceding paragraph), (b) otherwise properly brought before the meeting
by or at the direction of the Board of Directors or (c) otherwise properly
brought before the meeting by a stockholder. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 90 nor more than 120 days prior to the
first anniversary of the date of this year's Annual Meeting. Accordingly, any
notice given by or on behalf of a stockholder pursuant to the foregoing
clause (c) in connection with the 2001 Annual Meeting must be received no later
than January 4, 2001.
Jennifer Marre
Secretary
New York, New York
February 19, 1998
2724, 2000
29
32
APPENDIX A
EXCERPTSEXCERPT FROM THE
LEHMAN BROTHERS HOLDINGS INC.
1996 MANAGEMENT OWNERSHIP PLAN
If the 1996 Plan Amendments areAmendment is approved, Section 3 of the 1996 Plan would be
amended to read as follows:
SECTION 3 -- SHARES3--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, the 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 ten15.5 million(1)
15.521 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 areAmendment is approved at the 19982000 Annual
Meeting.
(2) Language in bold type will be included in the 1996 Plan if the 1996 Plan
Amendments areAmendment is approved at the 19982000 Annual Meeting.
28
33
DIRECTIONS TO THE LEHMAN BROTHERS HOLDINGS INC.
19982000 ANNUAL MEETING OF STOCKHOLDERS
The Firm's World Headquarters, site of the 19982000 Annual Meeting of
Stockholders, is located at 200 Vesey Street, 3 World Financial Center, on the
west side of lower Manhattan in the office complex known as the World Financial
Center. The World Financial Center is a part of Battery Park City, a development
of office buildings, residences and parks amongst formeralongside the Hudson River piers on the
southwestern tip of Manhattan. It is connected to the World Trade Center by two
pedestrian overpasses and is also accessible at street level by automobile.
BY SUBWAY
Take any of the several subway lines (A, C, E, N, R or the 1, 2, 3, 4, 5 or
9 trains) that stop at or near the World Trade Center. Walk from the World Trade
Center across West Street (formerly known as the Westside Highway (also known as West Street)Highway) via one of
the two pedestrian overpasses. The Company's offices are in 3 World Financial
Center, which is the building on the north side of the Winter Garden in the
World Financial Center.
BY AUTOMOBILE OR TAXICAB
Proceed to West Street (formerly known as the Westside Highway (also known as West Street)Highway) in lower
Manhattan, orienting toward the twin towers of the World Trade Center. Enter the
World Financial Center, which is directly across the Westside HighwayWest Street from the towers, by
turning west on either Murray Street or Vesey Street. Proceed to the main
entrance of 3 World Financial Center, which is the building located at the
southwest corner of Vesey Street and the Westside Highway.West Streets. There is only very limited
underground parking in the building. Such parking requires the payment of a fee.
Building security may inspect your car before permitting you to park.
29
34
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 DIRECTORSProxy for Annual Meeting of Stockholders
This proxy is solicited by the Board of Directors
Jennifer Marre, Karen M. MullerJoseph Polizzotto and Thomas A. Russo, or each of them
(with full power to act without the otherothers 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,April 4, 2000, and any adjournment thereof, and to
vote and act for the undersigned on the matters listed on the reverse side
hereof, which are set forth onin detail in 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
1997 WAS ANOTHER RECORD YEAR FOR LEHMAN BROTHERS HOLDINGS INC.
- -- 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.
- -- THE BOARD OF DIRECTORS CHANGED THE ANNUAL COMMON STOCK DIVIDEND POLICY FROM
$0.24 TO $0.30 PER SHARE - A 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 PROPOSALS 1, 2 AND 3.
1. Election of Class II Directors.
[ ] FOR [ ] WITHHELD
NOMINEES: Michael L. Ainslie, Roger S. Berlind, Hideichiro Kobayashi, Dina
Merrill
[ ]
- --------------------------------------------------------------------------------
ForThis proxy revokes all nominees except as noted on the line above
2. Ratification of Ernst & Young LLP as independent auditors for fiscal year
1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of Amendmentsprevious proxies. Unless specified to the 1996 Management Ownership Plancontrary,
it will be voted FOR all proposals. In their discretion, the proxies are
authorized to increase the
number of shares of Common Stock available to be granted by 5.5 million
shares and to enlarge the class of eligible participants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To act onvote upon any other business which may properly come before the
Annual Meeting or any adjournment thereof.
(Continued, and to be signed and dated, on the reverse side.)
LEHMAN BROTHERS HOLDINGS INC.
P.O. BOX 11034
NEW YORK, N.Y. 10203-0034
LEHMAN BROTHERS VOTE BY TELEPHONE OR INTERNET
LEHMAN BROTHERS HOLDINGS INC. 24 HOURS A DAY, 7 DAYS A WEEK
THREE WORLD FINANCIAL CENTER
NEW YORK, NY 10285
TELEPHONE
800-574-7049
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below; then just follow the simple directions.
INTERNET
http://proxy.shareholder.com/leh
Use the internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your control number, located
in the box below; then just follow the simple directions.
MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
Your telephone or internet vote authorizes the named proxies to vote
your shares in the same manner as if you marked, signed and returned
the proxy card.
-------------------------------------
If you have submitted your proxy by
telephone or the internet there is no
need for you to mail back your proxy.
-------------------------------------
----------------------------
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
----------------------------
DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE OR INTERNET
- -------------------------------------------------------------------------------
If Mailing Your Proxy, Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
/ /
The Board of Directors recommends a vote FOR all nominees and
FOR proposals 2 and 3.
1. Election of Class Ill Director Nominees: 01-Thomas H. Cruikshank 02-Henry
Kaufman 03-John D. Macomber
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
[ ] FOR [ ]all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
for all nominees x
*Exceptions_____________________________________________________________________
2. Ratification of Ernst & Young LLP as independent auditors for the fiscal
year 2000. FOR AGAINST [ ] ABSTAIN
[ ] MARK HERE3. Approval of amendment to the 1996 Management Ownership Plan to increase
shares available for grants by 5.5 million. 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.AGAINST ABSTAIN
4. To act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
Mark here if you plan Address Change and/or
to attend the meeting. Comments Mark Here x
IMPORTANT: Please sign exactly as
your name or names appear hereon and
when signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
the signature is by a corporation, sign the full
corporate name by a
duly authorized officer.
Signature:
- ----------------------------------- Date:
- ------------ Signature:
- ----------------------------------- Date:
- ------------
36
Dear Incentive Plans Participant:
The Annual Meeting of Stockholders of Lehman Brothers Holdings Inc. will be
held on March 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 heldofficer should sign
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 the 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 anfull corporate name. Dated:
______________________________, 2000
SIGNATURE(S)
PLEASE SIGN, DATE AND MAIL YOUR PROXY VOTES MUST BE INDICATED
CARD PROMPTLY IN THE ENCLOSED ENVELOPE (X) IN BLACK OR BLUE INK. X
in the appropriate boxes
on your voting instruction card, sign and date the card, 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 Record 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 Record Date,
you hold 50 Voting Awards, and 600 shares vote, the vote allocated to you would
equal 1,000 x 50/600 or 83.33 votes.
BECAUSE YOUR VOTE IS IMPORTANT,UNLESS YOU ARE STRONGLY ENCOURAGED TO SEND YOUR VOTING
INSTRUCTIONS TO THE TRUSTEE AS SOON AS POSSIBLE.
Sincerely,
STATE STREET BANK AND TRUST COMPANYHAVE VOTED BY TELEPHONE OR
INTERNET.