The
election offive Directors
who receive the most votes from the shares properly voting at the meeting will be
determined byelected, even if one or more directors does not receive a
pluralitymajority of the votes
cast by holders of the shares present in person or represented by proxy and entitled to vote at the meeting. Approval of the amendment to the Certificate of Incorporation will require the affirmative vote of the holders of a majority of all outstanding
shares.cast. Approval of other items at the meeting will require the affirmativea YES vote of holders offrom at least a majority of the shares present in person or represented by proxy andthat are entitled to vote on such items at the meeting. Accordingly, in the case of shares that are present
Some shareholders may choose to return their proxies or representedappear at the meeting, for quorum purposes, not voting such sharesbut withhold their vote on a certain matter. Withholding a vote for a particular nominee for Director including by withholding authority on the proxy, will not operate to prevent the election of such nominee if he otherwise receives affirmative votes; an abstention on any other item will have the effect ofcount as a vote against that item;Director, since there is no minimum number of votes necessary to elect a broker “non-vote” (which results whenDirector. The Directors with the most votes will be elected and withholding your vote will only prevent it from counting in favor of a broker holdingcertain Director. Withholding your vote or abstaining on a matter that requires a majority approval will count as a vote against that matter. If your shares for a beneficial owner hasare held in your broker’s name and you do not receivedgive your broker timely voting instructions on a certain matters from such beneficial owner) will have the effect of a vote against the proposed amendment to the Certificate of Incorporation butmatter, it will have no effect on the election of Directors, but will count as a vote onagainst any other item.item properly raised at the meeting.
The Company has We have retained EquiServeour transfer agent, American Stock Transfer & Trust Company, NA, its transfer agent, as independent inspector of election to receive and tabulate the proxies,proxies. Our transfer agent will also certify the results and perform any other acts required by the Delaware General Corporation Law.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSecurity Ownership Of Certain Beneficial Owners And ManagementThe following table sets forth certain information regarding beneficial ownership of the Company’s Common Stockour common stock by (i) each person known by the Company to beneficially own more than 5% of the Company’s Common Stock, (ii) each Director, (iii) each Executive Officer named in the Summary Compensation Table and (iv)
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| • | each person we know of who beneficially owns more than 5% of our common stock, |
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| • | each of our Directors, |
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| • | each Executive Officer named in the Summary Compensation Table and |
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| • | all Directors and Executive Officers as a group. |
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The information set forth below is as of February 1, 2004,2005, unless otherwise indicated. Information regarding shareholders other than Directors, Executive Officers and employee benefit plans is based upon information contained in Schedules 13D or 13G filed with the Securities and Exchange Commission (“SEC”) and furnished to the Company by such shareholders.. The number of shares beneficially owned by each shareholder and the percentage of the outstanding Common Stockcommon stock those shares represent include shares that may be acquired by that shareholder within 60 days through the exercise of any option, warrant or right. TheUnless otherwise indicated, the mailing address of the parties listed below is the Company’sour principal business address unless otherwise indicated. Unless otherwise indicated, each person named inand the table hasparties have sole voting power and sole dispositive power over the shares beneficially owned by such person.their shares.
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| | | | | | | | | | | | Shares of | | | Percentage of | |
| | Shares of | | Percentage of | | | Common Stock | | | Common Stock | |
| | Common Stock | | Common Stock | | | Beneficially | | | Beneficially | |
| Name and Address of Beneficial Owner | | Beneficially Owned | | Beneficially Owned | Name and Address of Beneficial Owner | | Owned | | | Owned | |
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| Jefferies Group, Inc. Employee Stock Ownership Plan | | 6,434,991 | (1) | | 11.3 | % | Jefferies Group, Inc. Employee Stock Ownership Plan | | | 6,366,007 | (1) | | | 11.1 | % |
| Richard B. Handler | | 3,365,382 | (2) | | 5.7 | % | Richard B. Handler | | | 4,023,275 | (2) | | | 6.8 | % |
| Earnest Partners LLC | | Earnest Partners LLC | | | 3,875,615 | (3) | | | 6.8 | % |
| | | Residence 75 Fourteenth Street, Suite 2300 | | | | | | | |
| | | Atlanta, Georgia 30309 | | | | | | | |
| John C. Shaw, Jr. | | 1,348,774 | (3) | | 2.3 | % | John C. Shaw, Jr. | | | 1,207,084 | (4) | | | 2.1 | % |
| Richard G. Dooley | | 247,464 | (4) | | * | | Richard G. Dooley | | | 219,209 | (6) | | | * | |
| Joseph A. Schenk | | Joseph A. Schenk | | | 218,372 | (5) | | | * | |
| Frank J. Macchiarola | | 191,874 | (5) | | * | | Frank J. Macchiarola | | | 179,338 | (7) | | | * | |
| Maxine Syrjamaki | | 144,702 | (6) | | * | | Maxine Syrjamaki | | | 144,412 | (8) | | | * | |
| Joseph A. Schenk | | 140,528 | (7) | | * | | |
| Lloyd H. Feller | | 66,666 | (8) | | * | | Lloyd H. Feller | | | 83,342 | (9) | | | * | |
| W. Patrick Campbell | | 47,379 | (9) | | * | | W. Patrick Campbell | | | 42,813 | (10) | | | * | |
| All Directors and Executive Officers | | 5,552,768 | (10) | | 9.8 | % | All Directors and Executive Officers | | | 5,552,768 | (11) | | | 9.8 | % |
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| | * | The percentage of shares beneficially owned does not exceed one percent of the class. |
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| | (1) | The terms ofUnder the Jefferies Group, Inc. Employee Stock Ownership Plan (the “ESOP”) provide for the voting rights associated with the, shares held by the ESOP to be passed through and exercised exclusively by the participants in the ESOP to the extent that such securities are allocated to aaccounts in the name of the individuals who participate in the ESOP. The voting rights for shares in each individual participant’s account. Participantsaccount are passed through to that participant. Because participants can vote shares in their ESOP accounts, but cannot sell them, participants in the ESOP have sole voting power and no dispositive power over shares allocated to their accounts. As of December 31, 2003, all 6,434,9912004, 6,366,007 shares of Common Stock were held in the ESOP Trust, and 6,362,176 of those shares were allocated to the accounts of ESOP participants. The remaining 3,831 shares held in the ESOP were held in a general account for future allocation. Those shares allocated to the accounts of Directors and Executive Officers are indicated on their respective entries in the table and |
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| | are also included in the ESOP figure. The ESOP and the TrusteeBecause of its role as trustee for the ESOP, Wells Fargo Bank, N.A., may also be deemed to have shared dispositive power over the shares held by the ESOP. The ESOP is directed by a committee which serves as its Plan Administrator. Our Board of Directors of the Company appoints the members of the committee, which serves as the Plan Administratorcurrently consist of the ESOP. Messrs. Richard B. Handler, Chairman andour Chief Executive Officer, of the Company, John C. Shaw, Jr., our President and Chief Operating Officer, of the Company, Joseph A. Schenk, Executive Vice President andour Chief Financial Officer, of the Company, and Melvin W. Locke, Jr., our Director of People Services of Jefferies & Company, Inc. (“Jefferies”), presently serve on the committee.Services. These individuals each disclaim beneficial ownership of the shares held by the ESOP except those shares allocated to his ESOP account. Wells Fargo & Company, on behalf of Wells Capital Management Incorporated, Wells Fargo Bank, N.A., Wells Fargo Bank Minnesota, N.A., and Wells Fargo Funds Management, LLC has filed a Schedule 13G with the SEC reportingSEC. In its 13G, Wells Fargo reported that atas of December 31, 2003, Wells Fargo & Company reported2004, it had sole voting power over 405,3105,437 shares, shared voting power over 6,434,9916,366,007 shares, sole dispositive power over 267,004no shares and shared dispositive power over 6,552no shares. The Company believesWe believe that the beneficial ownership reported by such entities includesshares referred to in the Wells Fargo filing include the shares held by the ESOP. |
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| | (2) | Assuming Mr. Handler’s continued employment with the Companyus through the expiration of all applicable vesting and deferral periods, Mr. Handler would beneficially own 4,913,7245,416,505 shares (representing 8.7%9.5% of the currently outstanding class). The table above includes 1,346,308806,664 shares subject to immediately exercisable |
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| | options; 531,47825,076 shares subject to immediately exercisable options held under the DCP; 1,571,127 vested restricted stock units (“RSUs”) which Mr. Handler has a right to acquire within 60 days from February 1, 2004; 62,110 shares of unvested restricted stock as to which Mr. Handler has sole voting and no dispositive power; 52,6962005; 52,988 shares held under the ESOP; and 20 shares held in an account for the benefit of Mr. Handler’s immediate family. The table above excludes 1,142,7601,136,747 RSUs which do not represent a right to acquire within 60 days from February 1, 2004; 266,6682005; 133,336 options subject to vesting later than 60 days after February 1, 2004; 3162005; 136 deferred shares of restricted stock held by the trustee of the ESPP as to which Mr. Handler has neither voting nor dispositive power; 121,618and 123,012 share denominated deferrals under the Deferred Compensation Plan (“DCP”), and 16,980 options held under the DCP.. |
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| | (3) | The indicated interest was reported on a Schedule 13G filed with the SEC by Earnest Partners, LLC on February 14, 2005. In its Schedule 13G, Earnest reported that as of December 31, 2004, it had sole voting power over 2,277,710 shares, shared voting power over 920,005 shares, sole dispositive power over 3,875,615 shares and shared dispositive power over no shares. |
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| (4) | Assuming Mr. Shaw’s continued employment with the Companyus through the expiration of all applicable vesting and deferral periods, Mr. Shaw would beneficially own 1,466,1431,308,691 shares (representing 2.6%2.3% of the currently outstanding class). The table above includes 633,266196,664 shares subject to immediately exercisable options; 392,46313,886 shares subject to immediately exercisable options held under the DCP; 222,403 shares of unvested restricted stock as to which Mr. Shaw has sole voting and no dispositive power; 133,771134,514 shares held under the ESOP; and 1,7541,771 shares held by the Trustee of the Jefferies Group, Inc.our Profit Sharing Plan (the “PSP”). Participants in the PSP have sole voting power and limited dispositive power over shares allocated to their PSP accounts. The table above excludes 66,66833,336 options subject to vesting later than 60 days after February 1, 2004; 8,488 options held2005; 25,438 RSUs which do not represent a right to acquire within 60 days from February 1, 2005; 136 vested and deferred shares under the DCP;ESPP and 42,21342,697 share denominated deferrals under the DCP. |
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| | (4) | Includes 82,756 shares subject to immediately exercisable options. |
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| (5) | Includes 101,812 shares subject to immediately exercisable options; and 698 shares subject to options which will become exercisable within 60 days after February 1, 2004. |
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| (6) | Assuming Ms. Syrjamaki’sMr. Schenk’s continued employment with the Companyus through the expiration of all applicable vesting and deferral periods, Ms. SyrjamakiMr. Schenk would beneficially own 151,663340,630 shares (representing less than 1% of the currently outstanding class). The table above includes 4,131 unvested shares of restricted stock as to which Ms. Syrjamaki has sole voting and no dispositive power; 78,749 shares held under the ESOP; 27,852 shares under the PSP. The table above excludes 632 options held under the DCP; and 6,329 share denominated deferrals under the DCP. |
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| (7) | Assuming Mr. Schenk’s continued employment with the Company through the expiration of all applicable vesting and deferral periods, Mr. Schenk would beneficially own 301,666 shares (representing less than 1% of the currently outstanding class). The table above includes 38,800105,466 shares subject to immediately exercisable options; 28,50611,948 shares of unvested restricted stock assubject to immediately exercisable options held under the DCP; 26,365 vested RSUs which Mr. Schenk has sole voting and no dispositive power; 1,560a right to acquire within 60 days after February 1, 2005; 1,568 shares held under the ESOP; 9,3149,841 shares under the PSP; and 60 shares held in accounts for the benefit of Mr. Schenk’s immediate family. The table above |
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| | excludes 34,78073,982 unvested RSUs which do not represent a right to acquire within 60 days from February 1, 2004; 66,666 options subject to vesting later than 60 days after February 1, 2004 3162005; 305 deferred shares of restricted stock held by the trustee of the ESPP as to which Mr. Schenk has neither voting nor dispositive power; 11,948 options held under the DCP; and 47,428 shares47,971 share denominated deferrals under the DCP. |
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| | (6) | Assuming the expiration of all applicable vesting and deferral periods, Mr. Dooley would beneficially own 249,708 shares (representing less than 1% of the currently outstanding class). The table above includes 74,730 shares subject to immediately exercisable options and 2,529 shares of restricted stock as to which Mr. Dooley has sole voting and no dispositive power. The table above excludes 30,499 deferred shares under our Director Stock Compensation Plan (the “DSCP”) which do not reflect a right to acquire within 60 days after February 1, 2005. |
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| (7) | Assuming the expiration of all applicable vesting and deferral periods, Mr. Macchiarola would beneficially own 194,535 shares (representing less than 1% of the currently outstanding class). The table above includes 94,306 shares subject to immediately exercisable options and 2,529 restricted shares under the DSCP as to which Mr. Macchiarola has sole voting and no dispositive power. The table above excludes 15,197 deferred shares under the DSCP which do not reflect a right to acquire within 60 days after February 1, 2005. |
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| (8) | Assuming Ms. Syrjamaki’s continued employment with us through the expiration of all applicable vesting and deferral periods, Ms. Syrjamaki would beneficially own 152,798 shares (representing less than 1% of the currently outstanding class). The table above includes 2,931 unvested shares of restricted stock as to which Ms. Syrjamaki has sole voting and no dispositive power; 1,708 shares subject to immediately exercisable options held under the DCP; 78,749 shares held under the ESOP; and 28,131 shares under the PSP. The table above excludes 1,241 unvested RSUs which do not represent a |
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| | right to acquire within 60 days from February 1, 2005; and 7,145 share denominated deferrals under the DCP. |
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| (9) | Assuming Mr. Feller’s continued employment with the Companyus through the expiration of all applicable vesting and deferral periods, Mr. Feller would beneficially own 102,025105,371 shares (representing less than 1% of the currently outstanding class). The table above includes 40,00030,000 shares of unvested restricted stock as to which Mr. Feller has sole voting and no dispositive power; and 16,66633,332 shares subject to immediately exercisable options. The table above excludes 2,0255,362 share denominated deferrals under the DCP; 10 shares held under the ESOP and 33,33416,668 options subject to vesting later than 60 days after February 1, 2004. |
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| (9) | Includes 47,284 shares subject to immediately exercisable options.2005. |
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| (10) | Assuming the expiration or termination of all applicable vesting and deferral periods, Mr. Campbell would beneficially own 50,005 shares (representing less than 1% of the currently outstanding class). The table above includes 37,284 shares subject to immediately exercisable options and 2,529 restricted shares under the DSCP as to which Mr. Campbell has voting but no dispositive power. The table above excludes 7,192 deferred shares under the DSCP which do not reflect a right to acquire within 60 days after February 1, 2005. |
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| (11) | Includes 2,266,8921,348,446 shares subject to immediately exercisable options; 698 shares subject to options which will become exercisable within 60 days after February 1, 2004; 527,210255,334 shares of unvested restricted stock; 531,4781,597,492 RSUs which employees have a right to acquire within 60 days from February 1, 2004; 18,22252,618 options held under the DCP; 266,775267,829 shares held under the ESOP;ESOP for the listed directors and 38,920executive officers as a group; and 39,743 shares under the PSP for all Directorsthe listed directors and Executive Officersexecutive officers as a group. |
ELECTION OF DIRECTORSElection Of DirectorsUnder the Company’sour By-Laws, the Board of Directors is authorized tomay determine the number of Directors of the Company, which mayits own size so long as it remains not be less than five nor more than seventeen Directors. Our Board currently consists of five members, and has decided to elect five directors again at this year’s Annual Meeting. The number of authorized Directors to bedirectors elected at thethis Annual Meeting has been fixed at six. Such Directors will be elected to serve a term that lasts until the directors elected at next year’s Annual Meeting and untilof Shareholders assume their successors shall be elected and qualify.duties.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND
EXECUTIVE OFFICERSInformation Concerning Nominees For Director And Executive Officers
The following information is submitted concerningrelates to the nominees for election as Directors:
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| W. Patrick Campbell, 59, a nominee, has been one of our Directors since January 2000. Mr. Campbell was Chairman and Chief Executive Officer of Magex Limited from August 2000 through April 2002 and is currently an independent consultant in the media and telecom field. From 1994 until October 1999, Mr. Campbell was Executive Vice President of Corporate Strategy and Business Development at Ameritech Corp. where he was a member of the Management Committee and directed all corporate strategy and merger and acquisition activity. From 1989 to 1994, Mr. Campbell served as President and Chief Executive Officer of Columbia TriStar Home Video, a Sony Pictures Entertainment Company, and has previously been President of RCA/ Columbia Pictures International Video. Mr. Campbell has also been a director of Black & Veatch since November 1999. Mr. Campbell is Chairman of our Audit Committee, and a member of our Compensation Committee and Corporate Governance and Nominating Committee. |
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| Richard G. Dooley, 75, a nominee, has been one of our Directors since November 1993. From 1978 until his retirement in June 1993, Mr. Dooley was Executive Vice President and Chief Investment Officer of Massachusetts Mutual Life Insurance Company (“Mass Mutual”). Mr. Dooley was a consultant to Mass Mutual from 1993 to 2003. Mr. Dooley has been a director of Kimco Realty Corporation since 1990. Mr. Dooley is also a trustee of Saint Anselm College and member of the Board of The Nellie Mae Education Foundation, Inc. Mr. Dooley is Chairman of our Compensation Committee and a member of our Audit Committee and Corporate Governance and Nominating Committee. |
W. PATRICK CAMPBELL, 58, a nominee, has been a Director of the Company since January 2000. Mr. Campbell was Chairman and Chief Executive Officer of Magex Limited from August 2000 through April 2002 and is currently an independent consultant in the media and telecom field. From 1994 until October 1999, Mr. Campbell was Executive Vice President of Corporate Strategy and Business Development at Ameritech Corp. where he was a member of the Management Committee and directed all corporate strategy and merger and acquisition activity. From 1989 to 1994, Mr. Campbell served as President and Chief Executive Officer of Columbia TriStar Home Video, a Sony Pictures Entertainment Company, and has previously been President of RCA/ Columbia Pictures International Video. Mr. Campbell has also been a director of Black & Veatch since November 1999. Mr. Campbell is Chairman of the Company’s Audit Committee, and a member of the Compensation Committee and the Corporate Governance and Nominating Committee.
RICHARD G. DOOLEY, 74, a nominee, has been a Director of the Company since November 1993. From 1978 until his retirement in June 1993, Mr. Dooley was Executive Vice President and Chief Investment Officer of Massachusetts Mutual Life Insurance Company (“Mass Mutual”). Mr. Dooley was a consultant to Mass Mutual from 1993 to 2003. Mr. Dooley has been a director of Kimco Realty Corporation since 1990. Mr. Dooley is also a trustee of Saint Anselm College and Chairman of the Board of The Nellie Mae Education Foundation, Inc. Mr. Dooley is Chairman of the Company’s Compensation Committee and a member of the Audit Committee and the Corporate Governance and Nominating Committee.
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RICHARD B. HANDLER, 42, a nominee, has been Chairman of the Company since February 2002, and the Chief Executive Officer of the Company and Jefferies since January 2001. He also served as Co-President and Co-Chief Operating Officer of both entities during 2000. Mr. Handler was elected to the Board of Directors of the Company in May 1998. He was Managing Director of High Yield Capital Markets at Jefferies from May 1993 until February 2000, after co-founding that group as an Executive Vice President in April 1990. He is also the President and Chief Executive Officer of the Jefferies Partners Opportunity family of funds. Mr. Handler received an MBA from Stanford University in 1987 and a BA in Economics from the University of Rochester in 1983.
FRANK J. MACCHIAROLA, 62, a nominee, has been a Director of the Company since August 1991. He is currently the President of St. Francis College, where he has served in that capacity since July 1996. He also serves as special counsel to the law firm of Tannenbaum, Halpern, Syracuse & Hirschtritt, LLP. Previously, Mr. Macchiarola was a Professor of Law and Political Science and the Dean of the Benjamin N. Cardozo School of Law at Yeshiva University in New York City from 1991 to 1996, Professor of Business in the Graduate School of Business at Columbia University from 1987 to 1991, and President and Chief Executive Officer of the New York City Partnership, Inc. from 1983 to 1987. Prior to 1985, Mr. Macchiarola was a faculty member at the City University of New York and Chancellor of the New York City Public School System. Mr. Macchiarola has been a Trustee of the Manville Personal Injury Trust since 1991. Mr. Macchiarola is Chairman of the Company’s Corporate Governance and Nominating Committee and a member of the Audit Committee and Compensation Committee.
JOHN C. SHAW, JR., 57, a nominee, has been President and Chief Operating Officer of the Company and Jefferies since January 2001. Mr. Shaw has also been a Director of the Company since January 2000. He also served as Co-President and Co-Chief Operating Officer of both companies during 2000 and as Executive Vice President and National Sales Manager of the Equity Division of Jefferies from 1997 to 2000. Mr. Shaw was Executive Vice President and Regional Manager of the firm’s Boston office from 1994 to 1997 and began his tenure at Jefferies in 1983 as a Senior Vice President and Regional Manager of the firm’s Chicago office. Before joining Jefferies, Mr. Shaw was a Senior Vice President and Institutional Branch Manager at First Boston in Chicago, and previously, was a Senior Vice President and Branch Manager at Cantor Fitzgerald in Chicago, where he started in 1976.
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| Richard B. Handler, 43, a nominee, has been our Chairman since February 2002, and our Chief Executive Officer since January 2001. Mr. Handler has also served as Chief Executive Officer of Jefferies & Company, Inc., our principal operating subsidiary (“Jefferies”), since January 2001, and as Co-President and Co-Chief Operating Officer of both companies during 2000. Mr. Handler was first elected to our Board in May 1998. He was Managing Director of High Yield Capital Markets at Jefferies from May 1993 until February 2000, after co-founding that group as an Executive Vice President in April 1990. He is also the President and Chief Executive Officer of the Jefferies Partners Opportunity family of funds. Mr. Handler received an MBA from Stanford University in 1987 and a BA in Economics from the University of Rochester in 1983. |
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| Frank J. Macchiarola, 63, a nominee, has been one of our Directors since August 1991. He is currently the President of St. Francis College, where he has served in that capacity since July 1996. He also serves as special counsel to the law firm of Tannenbaum, Halpern, Syracuse & Hirschtritt, LLP. Previously, Mr. Macchiarola was a Professor of Law and Political Science and the Dean of the Benjamin N. Cardozo School of Law at Yeshiva University in New York City from 1991 to 1996, Professor of Business in the Graduate School of Business at Columbia University from 1987 to 1991, and President and Chief Executive Officer of the New York City Partnership, Inc. from 1983 to 1987. Prior to 1985, Mr. Macchiarola was a faculty member at the City University of New York and Chancellor of the New York City Public School System. Mr. Macchiarola has been a Trustee of the Manville Personal Injury Trust since 1991. Mr. Macchiarola is Chairman of our Corporate Governance and Nominating Committee and a member of our Audit Committee and Compensation Committee. |
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| John C. Shaw, Jr., 58, a nominee, has been our President and Chief Operating Officer since January 2001, and served in the same capacity at Jefferies during that time. Mr. Shaw has also been one of our Directors since January 2000. Mr. Shaw also served as our Co-President and Co-Chief Operating Officer during 2000, and as Executive Vice President and National Sales Manager of the Equity Division of Jefferies from 1997 to 2000. Mr. Shaw was Executive Vice President and Regional Manager of our Boston office from 1994 to 1997 and began his tenure at Jefferies in 1983 as a Senior Vice President and Regional Manager of the firm’s Chicago office. Before joining Jefferies, Mr. Shaw was a Senior Vice President and Institutional Branch Manager at First Boston in Chicago, and previously, was a Senior Vice President and Branch Manager at Cantor Fitzgerald in Chicago, where he started in 1976. |
Other Executive Officers The
Our Executive Officers
of the Company are appointed by the Board of Directors and serve at the discretion of the Board. Other than Messrs. Handler and Shaw, for whom information is provided above, the following sets forth information as to the Executive Officers:
JOSEPH A. SCHENK, 45, has been Chief Financial Officer and Executive Vice President of the Company since January 2000, Executive Vice President of Jefferies since January 2000, and was a Senior Vice President, Corporate Services, of Jefferies, from September 1997 through December 1999. From January 1996 through September 1997, Mr. Schenk was Chief Financial Officer and Treasurer of Tel-Save Holdings, Inc., now Talk America Holdings, Inc. From September 1993 to January 1996, Mr. Schenk was Vice President, Capital Markets Group, with Jefferies.
LLOYD H. FELLER, 61, has been Executive Vice President, General Counsel and Secretary of the Company since December 2002. Mr. Feller was a Senior Vice President, Secretary and General Counsel of SoundView Technology Group from 1999 to December 2002. Prior to joining SoundView’s predecessor, Wit Capital Group, in 1999, Mr. Feller was a partner at Morgan Lewis & Bockius LLP, where he was the leader of that firm’s securities regulation practice group. Before joining Morgan Lewis in 1979, Mr. Feller worked at the SEC as the Associate Director of the Division of Market Regulation, a position in which he was in charge of the Office of Market Structure and Trading Practices.
MAXINE SYRJAMAKI, 59, has been Controller of the Company since May 1987, an Executive Vice President of Jefferies since November 1986, and Chief Financial Officer of Jefferies since September 1984. Ms. Syrjamaki has also been Chief Financial Officer of both Bonds Direct Securities LLC and Quarterdeck
5
Investment Partners, LLC since 2001. Prior to joining Jefferies in 1983, Ms. Syrjamaki was a C.P.A. in the audit group of Peat Marwick (now KPMG) specializing in financial institutions.
EMPLOYMENT CONTRACTS
LLOYD H. FELLER. Under his employment agreement, Mr. Feller has agreed to serve as Executive Vice President, General Counsel and Secretary of the Company and of Jefferies. His employment agreement expires on December 2, 2004. The agreement specifies that Mr. Feller will receive a salary of $250,000 per annum and a guaranteed bonus of at least $650,000 per annum for each year of the term. Mr. Feller also received options to purchase 50,000 shares of the Company’s Common Stock (on a split adjusted basis) which vest one third annually over three years, and 50,000 shares of restricted stock (on a split adjusted basis) with respect to which the restrictions lapse one fifth annually over five years. Mr. Feller also received a bonus of $100,000 which was invested in Jefferies Employees Opportunity Fund. If his employment is terminated by the Company without “cause,” or if Mr. Feller terminates his employment for “good reason”, the Company will pay him his base salary and any unpaid guaranteed bonus through the end of the contractual employment period in a lump sum payment within 10 days of his termination. However, if his employment is terminated by the Company for “cause,” or by Mr. Feller without “good reason”, the Company must pay him a lump sum cash payment equal to the sum of his unpaid base salary earned to the termination date. If Mr. Feller’s employment is terminated as a result of his death or total disability, Mr. Feller will receive his unpaid base salary and prorated guaranteed bonus through his termination date. The restrictions on his restricted stock will become immediately lifted and his options will immediately vest if a change of control of the Company results in an impact on Mr. Feller’s duties, his employment is terminated by the Company without “cause,” or by Mr. Feller for “good reason,” or as a result of his death or total disability. Mr. Feller is entitled to receive a benefits package commensurate with that received generally by other employees of Jefferies during his employment.
PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY’S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
On March 9, 2004, the Board of Directors approved an amendment to the Amended and Restated Certificate of Incorporation of the Company to increase to 510,000,000 the number of shares of the Company’s stock authorized for issuance, of which 10,000,000 of the authorized shares are designated as preferred stock, and 500,000,000 are designated as Common Stock. All the preferred and Common Stock have a par value of $.0001 per share. The Board directed that the Amended and Restated Certificate of Incorporation (the “Amendment”) attached as Appendix I, be submitted to a vote of shareholders at the Annual Meeting.
Section 4 of the Company’s Amended and Restated Certificate of Incorporation as currently in effect authorizes the issuance of 110,000,000 shares, consisting of 10,000,000 shares of preferred stock and 100,000,000 shares of Common Stock, all par value of $.0001 per share. As of February 2, 2004, no shares of preferred stock were issued or outstanding, and 63,968,307 shares of the Company’s Common Stock were issued, of which 7,203,909 were held as treasury shares of the Company. Approximately 9,304,306 shares of the Company’s common stock have been reserved for future grants pursuant to various employee compensation and benefit plans of the Company and of the Company’s subsidiaries. The Board of Directors believes the number of authorized shares of Common Stock should be increased to make available additional shares for possible stock dividends, stock splits, employee benefit plan issuances, acquisitions, financings and for such other corporate purposes as may arise.
Therefore, the Board of Directors has approved and recommends to shareholders an increase in the number of shares of authorized stock of the Company to an aggregate of 510,000,000 shares, consisting of 500,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, all $.0001 par value per share, in accordance with the Amendment.
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| Joseph A. Schenk, 46, has been our Chief Financial Officer and Executive Vice President since January 2000, Executive Vice President of Jefferies since January 2000, and was a Senior Vice President, Corporate Services, of Jefferies from September 1997 through December 1999. From January 1996 through September 1997, Mr. Schenk was Chief Financial Officer and Treasurer of Tel-Save Holdings, Inc., now Talk America Holdings, Inc. From September 1993 to January 1996, Mr. Schenk was Vice President, Capital Markets Group, with Jefferies. |
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| Lloyd H. Feller, 62, has been our Executive Vice President, General Counsel and Secretary since December 2002. Mr. Feller was a Senior Vice President, Secretary and General Counsel of SoundView Technology Group from 1999 to December 2002. Prior to joining SoundView’s predecessor, Wit Capital Group, in 1999, Mr. Feller was a partner at Morgan Lewis & Bockius LLP, where he was the leader of that firm’s securities regulation practice group. Before joining Morgan Lewis in 1979, Mr. Feller worked at the SEC as the Associate Director of the Division of Market Regulation, a position in which he was in charge of the Office of Market Structure and Trading Practices. |
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| Maxine Syrjamaki, 60, has been our Controller since May 1987, an Executive Vice President of Jefferies since November 1986, and Chief Financial Officer of Jefferies since September 1984. Ms. Syrjamaki was also Chief Financial Officer of Bonds Direct Securities LLC from 2001 through 2004, |
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Other than as set forth above, the Company has no specific plans currently calling for issuance of any of the additional shares of the Company’s Common Stock. The rules of the New York Stock Exchange currently require shareholder approval of issuances of Common Stock under certain circumstances, including those in which the number of shares to be issued is equal to or exceeds 20% of the voting power outstanding. All newly authorized shares would have the same rights as the presently authorized shares, including the right to cast one vote per share and to participate in dividends when and to the extent declared and paid. Under the Company’s Amended and Restated Certificate of Incorporation, shareholders do not have preemptive rights. Accordingly, the rights of existing shareholders may, depending on how additional shares of Common Stock are issued, be diluted by their issuance. While the issuance of shares in certain instances may have the effect of forestalling a hostile takeover, the Board of Directors does not intend or view the increase in authorized Common Stock as an anti-takeover measure, nor is the Company aware of any proposed or contemplated transaction of this type.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK TO 500,000,000.
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| and Chief Financial Officer of Quarterdeck Investment Partners, LLC since 2001. Prior to joining Jefferies in 1983, Ms. Syrjamaki was a C.P.A. in the audit group of Peat Marwick (now KPMG) specializing in financial institutions. |
EQUITY COMPENSATION PLAN INFORMATIONEquity Compensation Plan InformationThe following table provides information regarding the Company’sour compensation plans (other than certain tax qualified plans, such as itsour 401(k) and ESOP), under which our equity securities of the Company were authorized for issuance as of December 31, 2003.2004.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Number of Securities | | | | | | Number of Securities | |
| | Number of Securities | | Weighted-Average | | Remaining Available for | | Number of Securities | | | | | Remaining Available for | |
| | to be Issued upon | | Exercise Price of | | Future Issuance Under | | to be Issued Upon | | | Weighted-Average | | | Future Issuance Under | |
| | Exercise of Outstanding | | Outstanding | | Equity Compensation Plans | | Exercise of | | | Exercise Price of | | | Equity Compensation Plans | |
| | Options, Warrants | | Options, Warrants | | (Excluding Securities | | Outstanding Options, | | | Outstanding Options, | | | (Excluding Securities | |
| | and Rights | | and Rights | | Reflected in Column(a)) | | Warrants and Rights | | | Warrants and Rights | | | Reflected in Column (a)) | |
| Plan Category | | (a) | | (b) | | (c) | | (a) | | | (b) | | | (c) | |
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| | | | | | | | | |
| Equity compensation plans approved by security holders | | 5,335,700 | | $ | 16.39 | (1) | | 9,304,306 | (2) | | | 2,472,397 | | $ | 16.39 | | | 9,052,885 | |
| Equity compensation plans not approved by security holders | | — | | — | | — | | | | — | | | — | | | — | |
Total | | 5,335,700 | | $ | 16.39 | (1) | | 9,304,306 | | | | 2,472,397 | | $ | 16.39 | | | 9,052,885 | |
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| (1) | The weighted average exercise price of outstanding options, warrants and rights is calculated based solely on those awards that have a specified exercise price. If outstanding RSUs and similar rights were included, and deemed to have an exercise price of zero, the weighted average exercise price for plans approved by security holders would be $5.96.$6.96. |
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| (2) | Of the shares remaining available for future issuance, as of December 31, 2003,2004, the numbers of shares that may be issued as restricted stock or deferred stock were as follows: 4,190,0527,039,586 shares under the 2003 Incentive Compensation Plan (the “2003 Plan”) for general use; 4,449,372 shares under the 2003 Plan designated for use under the Deferred Compensation Plan, as amended and restated (the “DCP”); and 664,883860,861 shares under the Director Stock Compensation Plan. These plans also authorize the grant of options and other types of equity awards. The number of shares available for future grants under the 2003 Plan changes pursuant to a formula set forth in the plan. The formula establishes that the number of shares available for grant under the plan shall be equal to 30% of the total number of shares outstanding immediately prior to the grant, less shares outstanding under the 2003 Plan and the 1999 Incentive Compensation Plan. For this purpose, an option is “outstanding” until it is exercised and any other award is “outstanding” in the calendar year in which it is granted and for so long thereafter as it remains subject to any vesting condition requiring continued employment. The DCP provides eligible employees with the opportunity to defer receipt of cash compensation for five years, with an optional deferral of an additional five years. In prior years participants chose whether their deferred compensation was allocated to a cash denominated investment subaccount or to an equity subaccount which permitted a combination of shares, |
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| options and other specified equity investment vehicles. Current participants choose whether their deferred compensation is allocated to a cash subaccount or share denominated subaccount. Restricted shares are allocated to a participant’s subaccount at a predetermined discount of up to 15% of the volume weighted average market price per share of the Companyour Common Stock on the last day of the quarter. The predetermined discount amount for 20032004 was 10%. A maximum of 8,000,000 shares are reserved for restricted share units and options under the DCP. Restricted share units will be credited with dividend equivalents on the last day of each quarter, which will be converted into additional share units in accordance with the terms of the DCP. Restricted share units and options, and the terms thereof, are subject to equitable adjustment by the Compensation Committee in the event of certain extraordinary corporate events. The discounted portion of any amounts credited is forfeitable until the participant has participated in the DCP for three consecutive years or until the participant’s age plus the number of years of service to the Company exceedsequals 65. Options will |
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| become exercisable on the first anniversary of the third year after the year in which the option was granted, or earlier upon the participant’s death or retirement. Options expire at the end of the fifth year after the year of grant or 60 days after termination of employment other than due to death. |
CORPORATE GOVERNANCECorporate Governance The Board of Directors is responsible for supervision of
our overall affairs. During 2004, the
overall affairs of the Company. The Board
of Directors of the Company held
sevensix regular meetings and
onetwo special
meeting during 2003.meetings. To assist in carrying out its duties, the Board has delegated authority to three committees: an Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee. Each incumbent member of the Board of Directors attended
during his term of office, at least 75% of the total number of
20032004 meetings of the Board of Directors and
Committees thereof, of which such Directorits committees that he was
a member. The Company doesrequired to attend. Though we do not have a policy regarding attendance by Directors at the Annual Meeting of
Shareholders. In 2003, fourShareholders, three of the five directors attended the Annual Meeting of
Shareholders.Shareholders in 2004.
The Board has adopted Corporate Governance Guidelines
whichthat contain categorical standards for the determination of director independence, which are available to the public through the Jefferies website at
www.jefco.com. The Board has determined that directors who comply with the standards in the Corporate Governance Guidelines have no material relationship with
the Companyus as required by New York Stock Exchange Rules. The Board has determined that all of
the non-employee directorsMessrs. Campbell, Dooley and Macchiarola meet the independence standards as set forth in the Corporate Governance Guidelines.
The current Audit Committee members are W. Patrick Campbell, Chairman, Frank J. Macchiarola and Richard G. Dooley. The Board of Directors has determined that all of the members of the Audit Committee are “Audit Committee Financial Experts” as defined by
newthe rules of the Securities and Exchange Commission. The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of
theour financial statements,
of the Company, (2)
theour independent auditor’s qualifications and independence, (3) the performance of
the Company’sour internal audit function and independent auditors, and (4)
theour compliance
by the Company with legal and regulatory requirements. The Audit Committee has adopted a written charter which was attached as Appendix 1 to
the Company’sour Proxy Statement dated April 4,
2003.2003, and is also available on our website as described below. During
2003,2004, there were
nineeleven meetings of the Audit Committee.
The current Compensation Committee members are Richard G. Dooley, Chairman, W. Patrick Campbell and Frank J. Macchiarola. The Compensation Committee is appointed by the Board to advise senior management on the administration of
the Company’sour compensation programs, review and approve the compensation of the Executive Officers and prepare any report on executive compensation required by the rules and regulations of the SEC. The Compensation Committee has adopted a written charter which was attached as Appendix 2 to
the Company’sour Proxy Statement dated April 4,
2003.2003, and is also available on our website as described below. During 2004, there were
six regularnine meetings
and one special meeting of the Compensation Committee.
The current Corporate Governance and Nominating Committee members are Frank J. Macchiarola, Chairman, W. Patrick Campbell and Richard G. Dooley. The Corporate Governance and Nominating Committee recommends individuals to the Board for nomination as members of the Board and its committees
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and develops and recommends to the Board a set of corporate governance principles applicableprinciples. In nominating candidates, the Committee takes into consideration such factors as it deems appropriate, which may include judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members, and the extent to which the candidate would be a desirable addition to the Company. The Corporate GovernanceBoard and Nominatingany committees of the Board. Like candidates proposed by management, the Committee willmay consider nominees recommendedcandidates proposed by security holders. Persons suggesting nominees shouldshareholders, but is not required to do so. To suggest a nominee, address your correspondence to Lloyd H. Feller, the Company’sour corporate Secretary, at our address listed at the principal place of businesstop of the Company.front page of this Proxy Statement. The Corporate Governance and Nominating Committee has adopted a written charter which was attached as Appendix 3 to the Company’sour Proxy Statement dated April 4, 2003.2003, and is also available on our website as described below. During 2003,2004, there were foureight meetings of the Corporate Governance and Nominating Committee.
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Important documents related to
theour corporate governance
of the Company are posted on
the Jefferiesour website at
http://www.jefco.com/ and may be viewed by following the “About Us” link near the top of the left
menu.menu, and then the “Corporate Governance” link in the menu that follows. Documents posted include our Code of Ethics, Corporate Governance Guidelines and the Charters for each of the board committees mentioned above, which may be accessed directly at
http://www.jetco.com/www.jefco.com/charters/.. We will also provide
you with any of these documents in print
to a shareholder who requests itupon request without charge. You may direct your request to Investor Relations, Jefferies & Company, Inc., 520 Madison Avenue,
12th12th Floor, New York, NY 10022, or by calling 203-708-5975 or sending an email to
info@jefco.com..We have established a process by which shareholders can contact our Board of Directors, includingthe non-management directors as a group, or a committee of the Board of Directors. To contact the Board, the non-management directors as a group or a Board committee, you can send an email to Lloyd H. Feller, the Company’sour General Counsel, atlfeller@jefco.com, or write to: Lloyd H. Feller, Executive Vice President and General Counsel, Jefferies Group, Inc., 520 Madison Avenue, 12th Floor, New York, NY, 10022-4213.10022.
DIRECTOR COMPENSATIONDirector Compensation Each non-employee Director (Messrs. Campbell, Dooley and Macchiarola) receives an annual retainer of $30,000, paid quarterly, $1,500 for attendance at each of six regular meetings of the Board, and $2,000 for attendance at each special meeting of the Board. In addition, each non-employee member of the Board elected by the shareholders to serve for the coming year will receive an annual grant of $80,000 in restricted stock with three year ratable vesting. The Chairmen of the Audit, Compensation and Corporate Governance and Nominating Committees are also paid an annual fee of $3,000, and Directors receive $1,000 for each Committee meeting attended.
Under
the Company’sour 1999 Directors’ Stock Compensation Plan (the “DSCP”), each non-employee Director may elect to receive annual retainer fees, Board and committee meeting fees and Chairman’s fees in the form of cash, deferred cash, or deferred shares.
A non-employee Director may elect to defer receipt of annual retainer fees, fees for service as chairman of a Board committee, and Board and committee meeting fees by filing an election prior to the beginning of the plan year. If such fees are deferred in the form of cash,
the Companywe will credit a cash account established for the Director with the amount of fees deferred, at the date such fees otherwise would be payable to the Director. Interest will be credited to such account for a plan year at the prime interest rate in effect at the date of the preceding annual meeting of stockholders.
If
Directors’a Director elects to defer fees
are deferred in the form of deferred shares,
the Companywe will credit a deferral account established for the
Director with aDirector. The number of
deferred shares
equal tocredited will be determined by dividing the
amount of fees owed by the market price of our common stock on the date the fees would have been payable. The resulting number of shares (including
any fractional shares)
having an aggregate fair market value at the date fees otherwise would be payable equal to the amount of fees deferred in such form. Dividend equivalents equal to dividends declared and paid on the Common Stock will be credited
to the director’s account. Each time a dividend is paid on
deferredour common stock, an additional number of shares
thenreflecting the value of the dividend that would have been paid to the director will be credited to
a Director’s account, which amounts will be deemed to be reinvested in additional deferred shares.the director’s account.
Directors who are also
our employees
of the Company are not paid Directors’ fees and are not granted restricted stock for serving as Directors.
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Each Director may participate in
the Company’sour Charitable Gifts Matching Program pursuant to which
the Companywe will match 50% of allowable charitable contributions made by a Director, up to a maximum matching contribution of $3,000 per person per year.
Previously, our directors have also been given the opportunity to participate in certain company investments or investment funds on the same basis as our other employees.
The children of Directors may also participate (along with the children of all employees of the Company)our employees) in the Boyd & Stephen Jefferies Educational Grant Program which provides scholarship awards for secondary and post-secondary education based on factors such as financial need, academic merit and personal statements. The grants are made by an independent scholarship committee, none of whose members are affiliated with the Company.us.
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EXECUTIVE COMPENSATIONExecutive CompensationShown below is information concerning the annual and long-term compensation for services in all capacitieswe paid to the Company for the fiscal years ended December 31, 2003, 2002, and 2001, of those persons who were, during 2003,2004, (a) the Chief Executive Officer, (b) theour other four most highly compensated Executive Officers of the Companyas specified by SEC rules, and (c) up to two additional individuals for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer of the Company on December 31, 2004. The compensation described relates to services provided for us by the individuals for the fiscal years ended December 31, 2002, 2003 (collectively, the “Named Executive Officers”).and 2004.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Annual | | | | | |
| | | | Compensation(2)(3) | | Long-Term Compensation | | | |
| | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Annual Compensation(2)(3) | | | | Long-Term Compensation | | | | | |
| | | | | | | Awards | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | | | | | | Awards | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | (a) | | (b) | | | | (c) | | | (d) | | | (e) | | | | (f) | | | (g) | | | | (h) | |
| | | | | | | | | | | Securities | | | | | | | | | | | | | | | | | Securities | | | | | |
| | | | | | | | | Restricted Stock | | Underlying | | All Other | | | | | | | | | | | | | | | Underlying | | | | | |
| | | | | | | | | | | | Other Annual | | | | Restricted | | | Options/ | | | | All Other | |
| Name and | Name and | | | | Salary | | Bonus | | Award(s)(4) | | Options/ | | Compensation(5) | Name and | | | | | Salary | | | Bonus | | | Compensation | | | | Stock Award(s)(4) | | | SARs | | | | Compensation(5) | |
| Principal Position | Principal Position | | Year | | ($) | | ($) | | ($) | | SARS # | | ($) | Principal Position | | Year | | | | ($) | | | ($) | | | ($) | | | | ($) | | | # | | | | ($) | |
|
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Richard B. Handler | | Richard B. Handler | | | 2004 | | | | | 1,000,000 | | | 6,862,000 | | | — | | | | | | | | 16,000,000 | (1) | | | — | | | | | 17,052 | | |
| | | | | | | | | | | | | | | | Chairman & Chief | | | | | | | | | | | | | | | | | | Consisting of: | | | | | | | | | | | | | |
| Richard B. Handler | | 2003 | | 1,000,000 | | 4,466,447 | | 14,653,588 | (1) | | — | | 3,218 | | |
| | | Executive Officer | | | | | | | | | | | | | | | | | | 2005 Long Term | | | 8,000,000 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | 2006 Long Term | | | 8,000,000 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Total | | | 16,000,000 | | | | | | | | | | |
| | Chairman & Chief | | Consisting of: | | | | | 2003 | | | | | 1,000,000 | | | 4,466,447 | | | — | | | | | | | | 14,653,588 | (1) | | | — | | | | | 3,218 | | |
| | Executive Officer | | 2003 Related | | 8,515,588 | | | | | | | | | | | | | | | | | | | | Consisting of: | | | | | | | | | | | | | |
| | | 2004 Long Term | | 6,138,000 | | | | | | | | | | | | | | | | | | | | 2003 Related | | | 8,515,588 | | | | | | | | | | |
| | | |
| | | | | | | | | | | | | | | | | | | | 2004 Long Term | | | 6,138,000 | | | | | | | | | | |
| | | | Total | | 14,653,588 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2002 | | 350,000 | | 1,587,170 | | 8,018,821 | | 416,980 | | 31,650 | | | | | | | | | | | | | | | | | | | | | Total | | | 14,653,588 | | | | | | | | | | |
| | | | 2001 | | 300,000 | | 5,898,640 | | 5,740,973 | | 308,096 | | 7,599 | | | | | 2002 | | | | | 350,000 | | | 1,587,170 | | | — | | | | | | | | 8,018,821 | | | 416,980 | | | | | 31,650 | | |
| John C. Shaw, Jr. | John C. Shaw, Jr. | | 2003 | | 1,000,000 | | 1,695,696 | | 4,909,572 | (1) | | — | | 3,218 | | John C. Shaw, Jr. | | | 2004 | | | | | 1,000,000 | | | 1,532,400 | | | — | | | | | | | | 1,021,600 | | | — | | | | | 13,862 | | |
| | President & Chief Operating | | Consisting of: | | President & Chief | | | 2003 | | | | | 1,000,000 | | | 1,695,696 | | | — | | | | | | | | 4,909,572 | (1) | | | — | | | | | 3,218 | | |
| | Officer | | 2003 Related | | 2,863,572 | | Operating Officer | | | | | | | | | | | | | | | | | | Consisting of: | | | | | | | | | | | | | |
| | | 2004 Long Term | | 2,046,000 | | | | | | | | | | | | | | | | | | | | 2003 Related | | | 2,863,572 | | | | | | | | | | |
| | | |
| | | | | | | | | | | | | | | | | | | | 2004 Long Term | | | 2,046,000 | | | | | | | | | | |
| | | | Total | | 4,909,572 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2002 | | 250,000 | | 1,222,273 | | 2,483,386 | | 108,488 | | 16,832 | | | | | | | | | | | | | | | | | | | | | Total | | | 4,909,572 | | | | | | | | | | |
| | | | 2001 | | 250,000 | | 3,012,758 | | 1,939,422 | | 55,398 | | 7,599 | | | | | 2002 | | | | | 250,000 | | | 1,222,273 | | | — | | | | | | | | 2,483,386 | | | 108,488 | | | | | 16,832 | | |
| Joseph A. Schenk | Joseph A. Schenk | | 2003 | | 275,000 | | 765,492 | | 1,305,805 | | — | | 3,218 | | Joseph A. Schenk | | | 2004 | | | | | 275,000 | | | 725,000 | | | — | | | | | | | | 1,333,333 | | | — | | | | | 14,072 | | |
| | Executive Vice Pres. & | | 2002 | | 275,000 | | 757,005 | | 637,502 | | 42,194 | | 7,919 | | Executive Vice Pres. & | | | 2003 | | | | | 275,000 | | | 765,492 | | | — | | | | | | | | 1,305,805 | | | — | | | | | 3,218 | | |
| | Chief Financial Officer | | 2001 | | 275,000 | | 1,596,899 | | 34,848 | | 70,318 | | 7,599 | | Chief Financial Officer | | | 2002 | | | | | 275,000 | | | 757,005 | | | — | | | | | | | | 637,502 | | | 42,194 | | | | | 7,919 | | |
| Lloyd H. Feller | Lloyd H. Feller | | 2003 | | 250,000 | | 840,291 | | 8,357 | | — | | 3,218 | | Lloyd H. Feller | | | 2004 | | | | | 250,000 | | | 893,000 | | | — | | | | | | | | — | | | — | | | | | 22,207 | | |
| | Executive V.P., | | 2002 | | 20,833 | | 54,167 | | 1,108,750 | | 50,000 | | 100,000 | | Executive V.P., General | | | 2003 | | | | | 250,000 | | | 840,291 | | | — | | | | | | | | 8,357 | | | — | | | | | 3,218 | | |
| | General Counsel & Secretary | | Counsel & Secretary | | | 2002 | | | | | 20,833 | | | 54,167 | | | — | | | | | | | | 1,108,750 | | | 50,000 | | | | | 100,000 | | |
| Maxine Syrjamaki | Maxine Syrjamaki | | 2003 | | 161,500 | | 271,750 | | 72,948 | | — | | 3,218 | | Maxine Syrjamaki | | | 2004 | | | | | 161,500 | | | 290,365 | | | — | | | | | | | | 50,000 | | | — | | | | | 15,203 | | |
| | Controller | | 2002 | | 161,500 | | 228,590 | | 6,111 | | 632 | | 6,495 | | Controller | | | 2003 | | | | | 161,500 | | | 271,750 | | | — | | | | | | | | 72,948 | | | — | | | | | 3,218 | | |
| | | 2001 | | 161,500 | | 259,495 | | 8,102 | | 1,068 | | 7,599 | | | | | 2002 | | | | | 161,500 | | | 228,590 | | | — | | | | | | | | 6,111 | | | 632 | | | | | 6,495 | | |
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| (1) | The Compensation Committee considers that, for 2003,2004, cash and restricted stock compensation to Mr. Handler had a value of $13.985 million and to Mr. Shaw had a value of $5.562$14.008 million, not including stock options. In conjunction with negotiating 20032005 and 20042006 Pay-for-Performance Plans for Mr. Handler and Mr. Shaw in late 2002,2004, the Committee had determined to make grants of restricted stock and stock options that would cover 20032005 and 2004.2006. The restricted stock grant was made in 2003.2004. As required by SEC rules, the dollar value of the restricted stock grants for 20042005 and 2006 ($6,138,0008,000,000 for Mr. Handler and $2,046,000 for Mr. Shaw)each) is included in the line showing 20032004 compensation in the Table above. As discussed in the “Report of the Compensation Committee on Executive Compensation,” the Compensa- |
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| tionCompensation Committee considers those grants as part of 20042005 and 2006 compensation. The Compensation Committee considers one half of the stock options granted in 2002 to Mr. Handler and Mr. Shaw as compensation for 2003 and one-half as compensation for 2004. |
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| (2) | InBy early 2003,2004, the Compensation Committee had authorized annual bonuses under the Pay-for-Performance Incentive Program payable for achievement of specified performance goals. Under the |
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| approved bonus formulas, the Company’sour actual performance in 20032004 would have entitled Mr. Handler to a cash bonus of $10,255,853,$11,131,000 and Mr. Shaw to a cash bonus of $4,247,215, and$4,636,000. The Compensation Committee also intended that Mr. Schenk towould receive a cash bonus under a comparable bonus formula, which would have resulted in a cash bonus of $2,626,531.$2,770,333. However, the three executive officers requested that the Committee substantially reduce their 20032004 bonus payouts under this Program as they did in 2002.2002 and 2003. The Committee agreed to their request. The reduction for each of the executives was as follows: $3,525,466$4,269,000 for Mr. Handler, $1,734,927$2,082,000 for Mr. Shaw and $556,335$712,000 for Mr. Schenk, for a total reduction of $5,816,728.$6,351,712. The bonus amounts that were paid under this Program for 20032004 were as follows: Mr. Handler, total bonus of $6,730,387, consisting of $4,466,447 cash and 62,110 shares of restricted stock;$6,862,000, in cash; Mr. Shaw, total bonus of $2,512,288,$2,554,000, consisting of $1,695,696$1,532,400 cash and 22,40325,438 shares of restricted stock; and Mr. Schenk, total bonus of $2,070,196,$2,058,333, consisting of $765,492$725,000 cash and 37,67126,985 shares of restricted stock. The “Bonus” column in the table above includes current year deferrals of $1,000,000 for Mr. Handler, $100,000 for Mr. Feller, and $25,000 for Ms. Syrjamaki through the Company’sour Deferred Compensation Plan (the “DCP”). The dollar value of the restricted stock is included in the “Restricted Stock Awards” column together with the value of other restricted stock granted in 2003 as a long-term incentive under the 2003 Plan and restricted stock granted upon deferral of cash compensation for 2003units acquired under the DCP, discussedwhich represents the discount on stock units, is reflected in footnote (4).the Other Annual Compensation column. The DCP restricted stock units are non-forfeitable once a participant has participated in the DCP for three consecutive years, a condition met by all of the named executive officers other than Mr. Feller. |
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| (3) | The amounts shown include cash and non-cash compensation earned by the Named Executive Officers as well as amounts earned but deferred under the DCP or invested at the election of those Named Executive Officers.our deferred compensation plans. In addition, the Company haswe have established investment entities and permitted executive officers and others to acquire interests in these entities, including interests paid for withor have permitted deferred bonus amounts shown in the table above. Such arrangements offer wealth-building opportunitiesabove to executive officers and employees similar to deferred compensation plans. Certainbe deemed invested in those entities. Some of these investment entities are funds thatmanaged by Jefferies or its affiliates, some hold equity and derivative securities in companies for which Jefferies or its affiliates have provided investment banking and other services, and others invest on apari passubasis in all trading and investment activities undertaken by Jefferies’ High Yield Division. See “Certain Relationships and Related Transactions.” Certain other investment entities hold equity and derivative securities including those of companies for which Jefferies or affiliates have provided investment banking and other services. |
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| (4) | On December 31, 2003, Named Executive Officers2004, the five individuals in the table held our restricted shares or restricted stock units (“RSUs”) of the Company with an aggregate market value as follows: Mr. Handler held 1,442,7601,259,507 with a market value of $47,639,935;$50,732,942; Mr. Shaw held 470,060252,463 with a market value of $15,521,381;$10,169,210; Mr. Schenk held 34,78083,610 with a market value of $1,148,436;$3,367,811; Mr. Feller held 42,02530,536 with a market value of $1,387,679;$1,229,997; and Ms. Syrjamaki held 2,9202,671 with a market value of $96,418.$107,588. In the case of Mr. Handler, restrictions on 420,000 shares granted March 29, 2001 will lapse on July 1, 2004; restrictions on 122,760 shares granted on January 28, 2003 will lapselapsed on January 28, 2006;2005; restrictions on 600,000 shares granted on May 5, 2003 will lapse on May 5, 2006; restrictions on 62,110 shares granted on January 1, 200320, 2004 will lapse on January 20, 2007; and restrictions on 474,637 shares granted on August 20, 2004 will lapse on January 1, 2006;2008. The totals above do not include certain RSUs which Mr. Handler has deferred the receipt of for tax purposes, including 472,144 RSUs arising upon Mr. Handler’s election to defer the gains from options, 945,972 RSUs arising upon the deferral of the receipt of restricted stock which have now vested, and restrictions29,083 RSUs arising upon the deferral of dividends on 300,000 shares grantedexisting RSUs. Deferrals on January 1, 2002 lapsedthese RSUs will lapse upon the earliest to occur of his reaching age 65 or termination of employment and dividends payable on January 1, 2004.deferred RSUs will continue to be reinvested in additional vested and deferred RSUs. In the case of Mr. Shaw, restrictions on 30,060 restricted shares granted January 28, 2003 will lapselapsed on January 28, 2006;2005; restrictions on 200,000 shares granted January 1,May 5, 2003 will lapse on January 1,May 5, 2006; restrictions on 100,000 restricted shares granted January 1, 2002 lapsed on January 1, 2004; and restrictions on 140,00022,403 shares granted March 29, 2001on January 20, 2004 will lapsevest on July 1, 2004.January 20, 2007. In the case of Mr. Schenk, restrictions on 25,616 shares granted January 28, 2003 lapsed on January 28, 2005; restrictions on 10,997 shares granted October 18, 2004 will lapse on October 18, 2007; restrictions on 9,327 shares granted April 12, 2004 will lapse on April 12, 2007; restrictions on 28,506 shares granted January 20, 2004 will lapse on January 28, 2006;20, 2007; and restrictions on 9,164 shares granted August 4, 2003 will lapse on August 4, 2006. Mr. Schenk has also deferred the receipt of certain vested RSUs for tax purposes, including 749 RSUs arising upon the deferral of dividends on existing RSUs. Deferrals on these vested and deferred RSUs will lapse upon the earliest to occur of his reaching age 65 or termination of employment and dividends payable on deferred RSUs will continue to be reinvested in additional vested and deferred RSUs. In the case of Mr. Feller, restrictions on 10,000 restricted shares will lapse on November 4December 2 of each of 2004, 2005, 2006 and 2007. At December 31,In the case of Ms. Syrjamaki, restrictions on 1,460 shares |
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| granted January 21, 2003 will lapse January 23, 2006; and restrictions on 1,211 shares granted January 20, 2004 will lapse on January 20, 2007. In addition, each of the number of sharesnamed executive officers held by Mr. Feller included 2,025 share denominated deferrals acquired in quarterly transactions under the DCP, of which the risk of forfeiture on 203 shares will lapse on December 31, 2005. At December 31, 2003, the risk of forfeiture lapsed on the share denominated deferrals under the DCP on behalf of each of the other Named Executive Officers other than Mr. Feller, resulting in total share denominated holdings under the DCP as follows: Mr. Handler, 121,618;123,012; Mr. Shaw, 42,213;42,697; Mr. Schenk, 47,428;47,971; Mr. Feller, 4,825 and Ms. Syrjamaki 6,329.7,145. |
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| (5) | The total amounts for 20032004 shown in the “All Other Compensation” column include the following: |
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| | (a)• | The Company’s matchingMatching contributions under the Company’s Sectionour 401(k)/Profit Sharing Plan (“PSP”). During the plan year ended November 30, 2003,2004, Messrs. Handler, Shaw, Schenk, Feller and Ms. Syrjamaki each received $3,000$3,250 as the Company’sour matching contributions.contribution. |
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| | (b)• | ForfeituresMatching contributions under the Company’sour Employee Stock Ownership Plan (“ESOP”). During the plan year ended November 30, 2003,2004, each Named Executive Officer’s account was credited with 9.544 shares of the Company’sfive executive officers received $8,618 as our matching contribution under the ESOP. |
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| • | Reallocation of forfeitures under our ESOP. During the plan year ended November 30, 2004, we credited the accounts of the five executive officers with 9.376 shares of Common Stock at an original cost of $11.737$11.754 per share, for a total value of $112$110 as a result of such forfeitures. |
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| | (c)• | ForfeituresReallocation of forfeitures under the PSP. During the plan year ended November 30, 2003,2004, we credited the accounts of each of the Named Executive Officers was creditedfive executive officers with $106$188 as a result of PSP forfeitures. |
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| | (d)• | In the caseThe value of discount shares acquired under our deferred compensation plans as follows: Mr. Handler, $4,886; Mr. Shaw, $1,696; Mr. Schenk, $1,906; Mr. Feller a $100,000 investment in Jefferies Partners Opportunity Fund as described above under the heading “Employment Contracts”.$10,041; and Ms. Syrjamaki, $3,037. |
AGGREGATED OPTION/Aggregated Option/ SAR EXERCISES IN LAST FISCAL YEARExercises In Last Fiscal Year
AND FY-END OPTION/And FY-End Option/ SAR VALUESValues
| | | | | | | | | | | | | | | | | | |
| | | | | | Number of Securities | | Value of Unexercised | | | | | | | | | | | | | | | | |
| | | | | | Underlying Unexercised | | In-The-Money | | | | | | Number of Securities | | | Value of Unexercised | |
| | | | | | Options/SARs at | | Options/SARs at | | | | | | Underlying Unexercised | | | In-the-Money | |
| | Shares | | | | FY-End (#) | | FY-End ($) | | Shares | | | | | Options/SARs at FY- | | | Options/SARs at FY- | |
| | Acquired on | | Value | | Exercisable (E)/ | | Exercisable/ | | Acquired on | | | Value | | | End (#) Exercisable (E)/ | | | End ($) Exercisable/ | |
| Name | | Exercise (#) | | Realized ($) | | Unexercisable (U) | | Unexercisable(1) | | Exercise (#) | | | Realized ($) | | | Unexercisable (U) | | | Unexercisable(1) | |
| |
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| | | | | | | | | | | | |
| Richard B. Handler | | — | | — | | 1,021,072 | (E) | | $ | 21,751,546 | (E) | | | 672,976 | | $ | 19,775,794 | | | 831,740 | (E) | | $ | 18,639,576 | (E) |
| | | 616,980 | (U) | | $ | 7,008,945 | (U) | | | | | | | | | 133,336 | (U) | | $ | 2,237,378 | (U) |
| John C. Shaw, Jr. | | — | | — | | 613,664 | (E) | | $ | 12,707,340 | (E) | | | 169,934 | | $ | 4,928,086 | | | 510,550 | (E) | | $ | 13,512,715 | (E) |
| | | 100,156 | (U) | | $ | 1,110,506 | (U) | | | | | | | | | 33,336 | (U) | | $ | 559,378 | (U) |
| Joseph A. Schenk | | — | | — | | 42,452 | (E) | | $ | 565,752 | (E) | | | 3,652 | | $ | 85,150 | | | 117,414 | (E) | | $ | 2,175,726 | (E) |
| | | 78,614 | (U) | | $ | 816,184 | (U) | |
| Lloyd H. Feller | | — | | — | | 16,666 | (E) | | $ | 180,743 | (E) | | | — | | | — | | | 33,332 | (E) | | $ | 603,476 | (E) |
| | | 33,334 | (U) | | $ | 361,507 | (U) | | | | | | | | | 16,668 | (U) | | $ | 301,774 | (U) |
| Maxine Syrjamaki | | 28,090 | | $ | 372,754 | | 1,076 | (E) | | $ | 17,577 | (E) | | | | | | | | | 1,708 | (E) | | $ | 37,447 | (E) |
| | | 632 | (U) | | $ | 7,470 | (U) | |
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| (1) | At December 31, 2003,2004, the closing price of the Company’sour Common Stock was $33.02,$40.28, which was the price used to determine the year-end value tables. |
COMPLIANCE WITH SECTIONSection 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company’sour Directors and Executive Officers, and persons who beneficially own more than 10% of
the Company’sour outstanding Common Stock, to file with the SEC, by a specified date, initial reports of beneficial ownership and reports of changes in beneficial ownership of
our Common Stock and other equity securities
of the Company on Forms 3, 4 and 5. Directors, Executive Officers, and greater-than-10% shareholders are required by SEC regulations to furnish
the Companyus with copies of all Section 16(a) forms they file.
During 2002, Mr. Schenk, the Company’s Chief Financial Officer, purchased 10On October 7, 2004, Ms. Syrjamaki acquired 260 shares of
the Company’s common stock in
one transaction forconnection with our acquisition of the
account of one of his children,remaining equity interests in Bonds Direct, which was reported on
an amendeda Form
5. In April4 filed on November 30, 2004. Our acquisition of
1999, immediately prior toBonds Direct is described in greater detail under the
spin-off transaction involving Investment Technology Group, Inc. (“ITG”), Mr. Dooley exercised an option to purchase 4,000 shares (8,000 shares post-split)heading “Certain Relationship and
delivered 880 shares12
Related Transactions.”
(1,760 shares post-split) to the Company as payment of the exercise price, all of which were also reported on an amended Form 5.
Notwithstanding anything to the contrary set forth in any of the Company’sour previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future
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filings, including this Proxy Statement, in whole or in part, the following REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION, REPORT OF THE AUDIT COMMITTEEReport Of The Compensation Committee On Executive Compensation, Report Of The Audit Committee and the Performance Graph on page 1923 shall not be incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATIONReport Of The Compensation Committee
On Executive Compensation
The Compensation Committee of the Board of Directors, the members of which in
20032004 were Messrs. Campbell, Dooley, and Macchiarola, has furnished the following report on executive compensation:
To: The Board of Directors and Shareholders of Jefferies Group, Inc.
Under the supervision
Our Compensation Committee acts on behalf of the CompensationBoard of Directors and shareholders to administer the compensation program for executives. We intend that this compensation program will promote the Company’s long-term success and profitability, to the benefit of shareholders. Our Committee eachoperates under a charter adopted by the Board of Directors, which delegates authority to the Committee and provides for its governance. Each member of which is anthe Committee serving now and throughout 2004 was independent Director, the Company has developedunder New York Stock Exchange and implemented compensation for executives in a manner intended to enhance the Company’s profitability and thus shareholder value.other applicable standards of independence.
We have established compensation policies, plans and programs for executive officers that are designedintended to provide competitive levelsmeet a number of key objectives:
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| • | Provide incentives that reward productivity and profitability, and keep expense of the program in line with performance |
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| • | Provide competitive levels of compensation in order to attract talented employees |
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| • | Provide compensation that is perceived as fair, in comparison to other companies and within the Company |
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| • | Encourage long-term service and loyalty to the Company |
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| • | Promote our entrepreneurial culture, in which executives and employees are shareholders and act in the interest of shareholders. |
We implement a large part of the executive compensation
reward productivity and profitability, attract talented employees and encourage long-term service toprogram under the
Company. In 2003 we administered the 1999 Incentive Compensation Plan, a shareholder-approved plan which providedprovides for cash-based incentive awards. Those awards constitute a major portiontied to measures of each executive’s total compensation opportunity. The 1999 Plan,performance and is successor, the 2003 Incentive Compensation Plan approved by the shareholders at the 2003 Annual Meeting of Shareholders, also provide for grants of stock options, restricted stock and other share-based awards. WeSpecifically, cash annual incentive awards provide executives with an incentive to focus on aspects of Company performance that we believe that suchare key to its success, while equity-based awards which provide increasing rewards to executives if the value of the Company’s stock rises during the life of the award, can benefit the Company bythus encouraging a long-term focus and by aligning the interests of executive officers with the interests of shareholders.
In implementing compensation policies, plans, and programs for 2003,2004, we considered the effects of Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows a public company’s tax deduction for compensation to its chief executive officer and any of the four other most highly compensated executive officers in excess of $1 million in any tax year. Under Section 162(m), compensation that qualifies as “performance-based compensation” is excluded from the $1 million deductibility cap, and therefore remains fully deductible even though such compensation may (together with other compensation) exceed $1 million in a given year. We seek to preserve the tax deductibility of most compensation to executive officers, to the extent that this objective does not impair the operation and effectiveness of the Company’s compensation policies and programs. To this end, the 1999 and 2003 Incentive Compensation Plans werePlan has been designed and have been implemented in a manner so that annual incentive awards, stock options, and some restricted stock/restricted stock unit awards granted to senior executives can qualify as “performance-based compensation” that will remain fully deductible by the Company. We have also adopted programs permitting deferrals of compensation, so that potentially non-deductible compensation will be paid following termination of an executive’s service, at a time when payment of such compensation will not be subject to limits on deductibility under Section 162(m). We
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retain the flexibility however, to enter into arrangements that may result in nondeductible compensation to executive officers, which may include non-qualifying awards under the 1999 Plan or 2003 Plan. We believe, however, that no compensation otherwise deductible for 2003 was subject to the Section 162(m) deductibility limit.
Compensation Paid to Executive Officers Generally
Annual
This report explains our program for paying senior executives for 2004. We make our decisions on executive compensation
paid to executive officers in 2003, including the named executive officers, generally consistedfocusing on total direct compensation for a given year. Total direct compensation includes annual compensation, consisting of
a base salary
and/orand quarterly and annual bonuses,
which were determined (i)and long-term compensation. As you read our report, please keep these key points in
whole or in part by reference to, for some executives, earnings per share, return on equity, and pre-tax profit margin, and, for one executive, net earnings of the Company. In addition, in the case of an executive officer with predominantly13
mind:
administrative functions, in determining the amount of annual bonus payable, we considered individual initiative and performance.
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| • | Many of our determinations concerning the 2004 program were made before 2004. In this way we can set performance goals for executives to achieve in the up-coming year, and actual performance in that year becomes the key determinant of the amount of compensation earned. |
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| • | We decided in 2002 to grant awards that provide the long-term component of compensation over a period of two years. Thus, stock options granted in 2002 and restricted stock granted in 2003 constituted part of the total direct compensation of the Chief Executive Officer (“CEO”) and the President in 2004. |
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| • | Under applicable SEC rules, the Summary Compensation Table shows equity compensation based on the year stock options or restricted stock were actually granted (i.e., some of the options shown as granted in 2002 and some of the restricted stock shown as granted in 2003 are amounts which we view as equity compensation for 2004). |
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| • | In 2004, we granted restricted stock that constitutes the long-term component of the CEO’s compensation for 2005 and 2006; this amount is shown in the Summary Compensation Table as a grant in 2004). |
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| • | We pay part of the short-term incentive to our most senior officers in the form of restricted stock, which is shown as long-term compensation in the Summary Compensation Table. |
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| • | We provide benefits to executives and other employees that are not part of what we consider direct compensation. As discussed further below, we intend these benefits to be generally competitive and to promote other compensation program objectives, but, our evaluation of these benefits generally is separate from our decisions on total direct compensation. |
The Company is engaged in a highly competitive business, and its success depends on the leadership of senior executives and the talent of its key employees. In order to retain highly capable individuals, we
need to ensure that our compensation program provides competitive levels of compensation. Therefore, we review information concerning compensation
paid to executive officers of competitors, including how such compensation correlates to
performance.performance and how the Company’s performance compares to those competitors. To be consistent
in 2000over time, we
identifiedhave used a “peer group” of public companies
we identified in 2000 based on comparable business activities and competition for clients and executive talent. We also considered size of the companies in selecting this group, but found it necessary to include companies that range broadly in size in order to have a group that met our other criteria.
Due to mergers and similar events that caused some peer companies to cease to be comparable or cease to be public companies, we revised the group of peer companies in 2004. To date, we have used this revised peer group in evaluating the Chief Executive Officer’s compensation, and expect to use it going forward for other executive officers.
We
useused the peer group information to provide general guidance in our decision making
providing context for
our decisions2004, particularly regarding levels of total direct compensation for the CEO, the President, and the CFO, the appropriate levels for individual components of direct compensation (salary, bonus, and long-term awards), and the upward and downward variability in short-term incentives based on
compensation and performance rather than precise competitive standards. We consider the peer group information also to identify trends in the industry. Wespecific measures of performance. However, we do not attempt to target an executive officer’s total
direct compensation to a particular level or percentile of the average compensation payable to peer group executives.
We retained Mercer Human Resource Consulting to assist us in setting the compensation ofRather, peer-group information provides context for our
most senior executive officers for 2003. In making decisions on executive compensation we recognizeand performance. We also consider the peer group information to identify compensation trends in the industry.
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This non-formulaic approach is appropriate in view of the fact that the Company is a unique organization, with few, if any, true “peers” in the industry.
We seek to promote anPart of what makes it unique is its entrepreneurial culture that is driven by highly talented and productive individuals. In contrast to many other companies, our two most senior executives have roles that blend both management and production responsibilities. The level of compensation of high-performing producers in the industry generally is high, regardless of executive duties. Our approach has been to maintain the compensation opportunities of executives who also are key producers, but to tie these opportunities to the performance of the Company as a whole.
We have retained Mercer Human Resource Consulting to assist us as we set the compensation of our most senior executive officers. Mercer provides data and analysis regarding the peer companies, and makes recommendations as to the amount and structure of executive compensation under our program. Mercer assisted us in reevaluating the peer group, and provided us with a study in 2004 regarding the competitiveness of our total direct compensation of the CEO based on the revised peer group and that of the CFO based on the prior peer group. The report compared our authorized target level compensation against actual compensation levels for like positions at the peer group companies. Mercer concluded that our 2004 targeted total direct compensation of the CEO approximates the median level of direct compensation by the peer group, and that our 2004 targeted total direct compensation of the CFO exceeded the median for the old peer group.
Annual compensation paid to executive officers in 2004, generally consisted of a base salary and/or quarterly and annual bonuses which were determined in whole or in part by reference to, for some executives, earnings per share, return on equity, and pre-tax profit margin. In addition, in the case of an executive officer with predominantly administrative functions, in determining the amount of annual bonus payable, we considered individual initiative and performance.
The amount of each executive officer’s base salary is intended to provide a predictable level of income to enable the executive to meet living expenses and financial commitments.
ForIn 2003, we determined to set the salaries of our
Chief Executive Officer (“CEO”)CEO and President at $1 million,
representing a substantial increase over salary levels in previous
years.years but not exceeding the permitted level of non-performance based compensation that is fully deductible by the Company under Code Section 162(m). This decision was based primarily on our conclusion that salary as a portion of each officer’s total compensation opportunity
was very low. However, we did not want salary levels to resulthad been relatively low and, in
paymentthe context of
significant amountsour current compensation program, would be reasonable even if in excess of
non-deductible compensation under Code Section 162(m), so we set salaries at the upper limit permitted for full deductibility under Section 162(m). In the future, taxable fringe benefits and perquisites possibly could result in non-deductible compensation to these executives under Section 162(m), absent deferrals of salary. We also considered the fact that, in response to the adoption of the Sarbanes-Oxley legislation in 2002, we had eliminated forfeitable draws against potential annual bonus and changed the way in which bonus payments are made to senior executives periodically during the year. We generally have sought to pay salaries not higher than median
levels of competitive organizations, althoughlevels. As stated above, our determination of the
appropriate level of base salary is
subjective.subjective and not formulaic. We maintained the same level of these salaries in 2004.
In
2003,2004, we implemented the
19992003 Plan’s authorization of cash performance awards by means of the Pay-For-Performance Program. Under that Program, we determined formulas for payment of annual and quarterly bonuses to executive officers by a date early in
2003,2004, so that the performance goals and potential rewards could positively influence executives during the year. The levels potentially earnable in an executive’s incentive opportunity are set, taking into account other components of compensation, with a view to providing an overall compensation opportunity that is competitive and comparable to our established levels of recent compensation for similar performance results. In particular, these formulas provided for no annual bonus if threshold levels of performance were not achieved, a targeted amount of annual bonus for achievement of target performance, and greater- or less-than target payouts for performance that exceeded or fell short of the specified target levels (as the case may be), up to a specified maximum payout. For
2003,2004, the program included quarterly payouts of a portion of the bonus based on achievement of quarterly performance goals. We received significant input from the
Chief Executive Officer (the “CEO”)CEO in determining the bonus formulas for executive officers other than the CEO and the President. We have in some cases considered requests from the affected executive in setting the elements and amounts of the executive’s compensation.
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The setting of the levels and other terms of annual incentivesbonuses potentially payable under the Pay-For-Performance Incentive Plan involves our subjective determinations. In addition, we reserve the right to adjust bonus amounts downward, in our discretion, under the Program. As stated above, for 2004 the annual bonus incentives for four of the named executive officers were to be earned based on earnings per share, return on equity and pre-tax profit margin performance. We originally authorized an annual bonus for the CFO based on a net earnings formula used in previous years, but we concluded during the year that it would be appropriate to
15
limit any payout to the amount that corresponded to the earnings per share, return on equity, and pre-tax profit margin performance levels used for other senior executives’ 2004 annual bonuses. For 2004, performance with respect to earnings per share and pre-tax profit margin were outstanding, exceeding the maximum full-year performance levels. As compared to 2003, earnings per share (fully diluted) grew 45% and pre-tax profit margin increased by 23%. Full-year return on equity performance substantially exceeded the target level as well.
During
2003,2004, three executive officers (Messrs. Handler, Shaw and Schenk) approached the Committee and requested that the Committee substantially reduce their bonus payouts for
2003,2004, a request we viewed as consistent with their leadership positions in the firm. We determined to make downward adjustments to the bonus compensation of
the three executive officers, despite the fact that the measured performance of the Company would have justified substantially greater payouts under the Program.
In 2002, these executive officers also had requestedWe paid a portion of the annual bonus earned by the President and
received a substantial reductionthe CFO under the Pay-For-Performance Incentive Program in the
form of restricted stock, which requires continued service after the performance year in order to vest. These grants in lieu of annual bonus
payout under this Program.generally have three-year vesting periods, and were made with the concurrence of the affected executive officer.
In some cases, we require or permit
cash portions of annual bonus awards to be deferred, and to be deemed invested in specified investment vehicles during the period of deferral. The Company has implemented the Jefferies Group, Inc. Deferred Compensation Plan (the “DCP”), which permits executive officers and other eligible employees to defer cash compensation, some or all of which is deemed invested in
restricted stock units. A portion of the deferrals may also be directed to notional investments in a money market fund or certain of the employee investment
fundsopportunities described under the caption “Certain Relationships and Related Transactions.” Stock units are credited to participants at a discount we establish each year, which was 10% in
2003.2004. The amounts of
20032004 salary and bonus deferred by named executive officers are reflected in the Summary Compensation Table without regard to deferral; the portion of the deferrals under the DCP representing value of the discount on stock units are reflected in the Summary Compensation Table as
a restricted stock award. WeOther Annual Compensation.
As stated above, we granted equity-based awards as
20032004 compensation, apart from the DCP, to
certain executive officers, primarily in the form of restricted stock. (As used in this report, restricted stock may in some cases be in the economically equivalent form of restricted stock units.)
We paid a portion of the annual bonus earned byFor the CEO and
two other executive officers (the Chief Operating Officer and Chief Financial Officer) under the Pay-For-Performance Incentive Program in the form of restricted stock, which requires continued service after the performance year in order to vest. These grants in lieu of annual bonus generally have three year vesting periods, and usually are made with the concurrence of the affected executive officer. We alsoPresident, we granted restricted stock awards as
a portionthe long-term component of the executive’s
long-term component oftotal direct compensation. These grants generally are based on our review of trends in the compensation of executives in the securities industry and our subjective judgment as to the appropriate level of total compensation for the executive officer.
However, we consider grant practices of our peer group of companies to provide context for our decisions. Restricted stock grants to
two executive officersthe CEO and President in 2003 were intended to be a component of total compensation for both 2003 and 2004, but
arethe value of these grants is disclosed in
this proxy statementthe Summary Compensation Table entirely in
2003, the year
granted.of grant. We authorized a stock option grant to these executive officers in 2002 that likewise served as the stock option portion of their long-term compensation for 2003 and 2004, which grants appear as 2002 grants in the Summary Compensation Table. Long-term equity-based awards serve both to align the interests of executive officers with those of shareholders and to promote retention and long-term service to the Company.
In 2003, the Company adopted Statement of Financial Accounting Standards No. 123 (FAS 123) as its method of accounting for stock-based compensation plans. FAS 123 provides a method by which the fair value of equity awards, including the fair value of stock options granted in 2003 and thereafter, can be calculated and reflected in the Company’s financial statements.
In 2003, we adopted The Company expects to adopt the amended version of this accounting standard, FAS 123R, in 2005.
We have implemented a program permitting employees and executive officers to defer equity awards, including restricted stock and the shares that represent the “gain” upon exercise of stock options. Deferrals of restricted stock result in an exchange of the award for an economically equivalent award of restricted stock units, which enable the employee to specify that shares will be delivered in settlement at a date later than the date the risk of forfeiture will lapse. Similarly, an employee is permitted to elect to defer option “gain” shares,
16
so that shares in excess of the number of shares tendered to pay the exercise price will be delivered in settlement of the award not at the time of exercise but at a later date as elected by the employee. This program encourages long-term ownership of a significant equity stake in the Company, which we believe is important to promoting a culture of entrepreneurship. The cost of such a program to the Company results mainly from deferring the time at which tax deductions for the equity compensation may be claimed.
15
In addition to the deferred compensation program, the Company provides benefits to executives and other employees that are not part of what we consider direct compensation. We intend these benefits to be generally competitive, in order to help in our efforts to recruit and retain talented executives. We have not implemented severance arrangements with our executive officers however. We also have adopted a policy, which was in effect in 2004, under which executives must reimburse the Company for personal, non-business use of Company property and services. The amount of this reimbursement is based on our incremental cost; there is no “threshold” or permitted level of perquisites. We provide the CEO with a driver for business transit, including his commute, and provide fuel and maintenance for the CEO’s vehicle in exchange for the use of the vehicle for other business purposes when not needed by the CEO. Compensation Paid to the Chief Executive Officer in 20032004 Our Committee is responsible for evaluating the performance and establishing the compensation level of the Company’s CEO, Richard B. Handler.
Mr. Handler’s compensation package for
2003 which resulted in payment of $13.985 million in cash and restricted stock (not including options)2004 was intended to motivate and reward him for achieving pre-determined goals with respect to earnings per share, return on average equity and pre-tax profit margin, and to provide equity-based compensation that would closely align his interests with those of shareholders. In setting Mr. Handler’s compensation opportunities for
2003,2004, we intended that such compensation would be generally competitive with that of chief executive officers of other comparable companies in the securities industry, with a large percentage of this compensation based upon achievement of objective performance goals. As discussed above, the level of
compensation for Mr.
HandlerHandler’s compensation also reflects his significant contributions to the Company as a producer, particularly with respect to the High Yield Division, investment banking work, and management of the Jefferies Partners Opportunity Funds and Jefferies Employees Opportunity Fund (discussed in “Certain Relationships and Related Transactions” below), in addition to his duties as CEO. Since he assumed the duties of CEO, we have tied his bonus compensation to performance of the Company as a whole, and focused on creating long-term shareholder value through an emphasis on stock awards.
For 2003,
As discussed above, we made a series of decisions before the beginning of 2004 establishing Mr. Handler’s compensation program for 2004. The following table shows the total direct compensation we authorized, including the amount of short-term incentives that would be earned by performance at target levels with respect to earnings per share, return on equity, and pre-tax profit margin:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Bonus | | | Equity Incentives(1) | | | Totals | |
| | | | | | | | | | | | |
| | | Salary | | | Threshold | | | Target | | | Superior Plus | | | Restricted Stock | | | Options | | | At Target | |
| | | | | | | | | | | | | | | | | | | | | | |
| Amount/ Value | | $ | 1,000,000 | | | $ | 2,600,000 | | | $ | 7,600,000 | | | $ | 12,600,000 | | | 300,000 shares/ $6,138,000 | | 200,000 shares/ $1,650,000 | | $ | 16,388,000 | |
| |
| (1) | The restricted stock was granted May 5, 2003, upon approval by shareholders of the 2003 Plan, and is valued in the table at $20.46 per share, the market value of Company common stock on that date. The options were granted on August 16, 2002, and are valued in the table at $8.25 per share, based on our valuation of those options at the date of grant. When we authorized the grant of restricted stock and options we estimated its aggregate value at $6.4 million, but for purposes of this table we are showing the value of the restricted stock calculated in the same way as in the Summary Compensation Table under applicable SEC rules. |
The level of total direct compensation for target level performance was approximately the same for 2004 as for 2003, a determination we made in 2002 based on our assessment that the then current level was competitive. By making equity award grants in advance of 2004, we provided an opportunity to the executive to benefit from a sustained period of good performance, which in fact has occurred since 2002.
17
This total direct compensation for 2004 consisted of
a base salary,
of $1,000,000, an incentive award implemented under and subject to the terms of the Pay-for-Performance Program and equity awards under the
1999 Plan and 2003 Plan.
Our considerations in setting thisAs discussed above, that salary level of
salary are discussed above.$1 million was established for 2003 and continued in 2004. Our aim in setting the CEO’s salary was to provide a non-performance based element of compensation that was certain as to payment, recognizing that some trade-off exists between a desire to avoid exposing the CEO to compensation risk and the desire to align the interests of the CEO as closely as possible with those of the Company’s shareholders.
Company performance for
20032004 substantially exceeded the target levels for the performance goal as a whole and for the
each of the components, earnings per share,
return on equity and pre-tax profit
margin components of the performance goal.margin. This would have entitled the CEO to a bonus of
$10.256$11.131 million under the Pay-for-Performance Incentive Program, an amount substantially in excess of the
$6.85$7.6 million target bonus. We provided for quarterly payouts of a portion of the bonus based on achievement of quarterly performance goals. As discussed above, we reserved the right to adjust bonus amounts downward, in our discretion, under the Pay-For-Performance Program. The CEO and two other executives requested that we substantially reduce their bonus payouts for
2003.2004. The requested reductions totaled
$5,816,728,$7,063,000, including
$3,525,466$4,269,000 by Mr. Handler. We determined to
do so, and consistent with Mr. Handler’s request paid $2.264 million ofreduce the bonus
payouts in
line with the
form of a grant of restricted stock.executives’ request. The reduced bonus paid to the CEO totaled
$6.730 million, calculated in the manner specified for disclosure in the Summary Compensation Table, consisting of $4.466 million cash and 62,110 shares of restricted stock.$6.862 million. Mr. Handler elected to defer portions of the bonus
under the DCP as well as portions of his salary, resulting in crediting of additional restricted stock units having a value equal to the discount on stock units acquired under the DCP, as described above; this value is included in the
restricted stockall other compensation column of the Summary Compensation Table.
We
The long-term incentive component of the CEO’s 2004 compensation was granted
in the form of restricted stock
to the CEO as part of hisin 2003
compensation,and stock options in 2002. Through these grants, we sought to provide a substantial component of compensation that would focus the CEO on long-term growth in the value of the Company’s stock. Generally, we calculate the value of the restricted stock and determine the amount of shares to be granted based on our targeted levels of total compensation for the CEO for the year.
In 2003, we determined to make a grant to the CEO (and one other executive officer) ofThe restricted stock
that would cover the two-year period, 2003 and 2004, as part of our determination to hold the total target compensation for the CEO level in those two years, to provide for an award linked to the performance of our stock with a strong inducement to long-term service, and to recognize the fact that, despite the industry downturn, the Company’s performance had continued to be strong in large part due to the leadership of the CEO. These grants provided for vesting over three years rather than our customary two years, so that the service requirement would
be no less rigorous than would have applied had part of the grant been made incontinue through 2004.
We intend to make no grant in 2004 representing the restricted stock component of long-term compensation to the CEO for 2004, although16
restricted stock may be issued in partial payment of annual incentive awards in 2004, and we may establish elements of 2005 compensation in 2004. This two-year grant of restricted stock to the CEO, consisting of 300,000 shares representing the 2003 grant and 300,000 shares representing the 2004 grant, became effective upon approval by shareholders of our 2003 Incentive Compensation Plan. The description of the proposal to approve that Plan in our 2003 Proxy Statement described the proposed grant. The restricted stock was subject to a performance condition requiring that a minimum level of earnings per share be attained in 2003, in order to qualify the award as “performance based” under Section 162(m) of the Internal Revenue Code. TheThis performance requirement was met in 2003.
As discussed The stock options granted in last year’s Compensation Committee Report, a grant to the CEO in August 2002 of 400,000 options exercisable at $23.50 per share represented the options component of long-term compensation for both 2003 and 2004. Accordingly, no grant of options was made to the CEO in 2003 representing this component of compensation. The option hashad a one year longer than normal vesting schedule. We determined to grant this equity component ofschedule as well. Equity awards provide compensation to cover the two-year period, 2003 and 2004, as part of our determination to hold the total target compensation for the CEO level in those two years, to provide for an award linked to the performance of our stock, with a strong inducement to long-term service, and to recognize the Company’s strong long-term performance despite the industry downturn, attributable to the leadership of the CEO.
During 2004, we granted 474,637 shares of restricted stock to the CEO, with a value of approximately $16 million, as the long-term incentive component of his 2005 and 2006 compensation. For each year, we currently anticipate setting total direct compensation for target level performance to be $15 million, with this long-term component to represent $8 million of that amount in each year. These shares of restricted stock (granted in the form of restricted stock units) will vest on January 1, 2008.
The CEO has not sold any stock which was issued to him under Company plans (or otherwise) since his employment
began in 1990. He has elected to defer equity awards under our deferral programs, including restricted stock and shares representing the gain from exercises of stock options. These arrangements provide to him the advantages of tax deferral, but provide no enhancement by the Company of the net value of his restricted stock and options. In this type of deferral arrangement, the Company’s tax deduction is delayed until the year in which the executive recognizes income, and is generally based on the value of shares delivered at the time of settlement of the deferral arrangement.
The foregoing report has been furnished by:
Richard G. Dooley, Chairman, W. Patrick Campbell
&and Frank J. Macchiarola
* * *
18
REPORT OF THE AUDIT COMMITTEEReport Of The Audit Committee
The Audit Committee has reviewed and discussed the audited financial statements with management to ensure that the financial statements were prepared in accordance with generally accepted accounting principles and accurately reflect
theour financial
position of the Company.position. The Audit Committee has discussed with
the Company’sour independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, and has received written disclosures and a required letter from the independent auditors regarding their independence. Based upon its discussions with management, review of the independent auditor’s letter, discussions with the independent auditors and other appropriate investigation, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in
the Company’sour Annual Report on Form 10-K. The Audit Committee has reviewed the non-audit fees described below and has concluded that the amount and nature of those fees is compatible with maintaining the independent auditor’s independence.
The foregoing report has been furnished by:
W. Patrick Campbell, Chairman
Frank J. Macchiarola and Richard G. Dooley
* * *
Information Regarding Auditors’ Fees
We paid our independent auditors the following fees for services rendered during 2003 and 2004:
| |
| Audit Fees —Our independent auditors have billed us for audit fees in an aggregate amount of $2,223,181 for 2004 and $714,500 for 2003. These amounts include fees for professional services rendered as our principal accountant for the audit of our annual financial statements, review of financial statements included in our Form 10-Q filings, the audit of various affiliates and investment funds managed by Jefferies or its affiliates, the audit of management’s assessment that our internal controls and procedures are effective, the attestation required by Sarbanes-Oxley Item 404 and for other services that are normally provided in connection with statutory and regulatory filings or engagements. The Audit Committee preapproves all auditing services and permitted non-audit services to be performed for us by our independent auditor, subject to certain small exceptions for non-audit services, which are approved by the Audit Committee prior to the completion of the audit. In 2004, the Audit Committee preapproved all auditing services performed for us by the independent auditors. |
|
| Audit-Related Fees —Our independent auditors have billed us for audit-related fees in an aggregate amount of $216,000 for 2004, and $153,646 for 2003. These amounts include fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” above. Specifically, the services provided included accounting questions regarding various issues including compensation, benefits, stock compensation, compliance issues regarding funds managed by Jefferies Asset Management and questions related to the Bonds Direct transaction (see “Certain Relationships and Related Transactions”). |
|
| Tax Fees —Our independent auditors have billed us for tax fees in an aggregate amount of $359,254 for 2004, and $198,512 for 2003. These amounts include fees for tax compliance, tax advice and tax planning. |
|
| All Other Fees —Our independent auditors did not bill us for any services not falling within the above categories during 2004 or 2003. |
1719
INFORMATION REGARDING AUDITORS’ FEESShareholder Return Performance Presentation The following fees were paid by the Company to the independent auditors for services rendered during 2002 and 2003:
Audit Fees —The Company’s independent auditors have billed the Company for audit fees in an aggregate amount of $714,500 for 2003 and $682,327 for 2002. These amounts include fees for professional services rendered as the Company’s principal accountant for the audit of its annual financial statements and review of financial statements included in the Company’s Form 10-Q filings, and for other services that are normally provided in connection with statutory and regulatory filings or engagements. The Audit Committee preapproves all auditing services and permitted non-audit services to be performed for the Company by its independent auditor, subject to certain small exceptions for non-audit services, which are approved by the Audit Committee prior to the completion of an audit. In 2003, the Audit Committee preapproved all auditing services performed for the Company by the independent auditors.
Audit-Related Fees — The Company’s independent auditors have billed the Company for audit-related fees in an aggregate amount of $153,646 for 2003, and $200,284 for 2002. These amounts include fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees” above. Specifically, the services provided included accounting questions regarding various issues including compensation, benefits, stock compensation and questions related to the Quarterdeck transaction (see “Certain Relationships and Related Transactions”).
Tax Fees — The Company’s independent auditors have billed the Company for tax fees in an aggregate amount of $198,512 for 2003, and $107,835 for 2002. These amounts include fees for tax compliance, tax advice and tax planning.
All Other Fees — The Company’s independent auditors did not bill the Company for any services not falling within the above categories during 2003 or 2002.
18
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly change in the cumulative total shareholder return on the Company’sour Common Stock against the cumulative total return of the Standard & Poor’s 500, and the Financial Service Analytics Brokerage (“FSA Composite”) Indices for the period of five fiscal years, commencing January 1, 19992000 (based on prices at December 31, 1998)1999), and ending December 31, 2003.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*2004.
Comparison Of Five Year Cumulative Total Return*
Jefferies Group, Inc.’s Common, Standard & Poor’s 500 and FSA Composite Indices
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | 1999 | | | 2000 | | | 2001 | | | 2002 | | | 2003 | | | 2004 | |
| | 1998 | | 1999 | | 2000 | | 2001 | | 2002 | | 2003 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jefferies Group Inc. | | | | | 100 | | | | | 143 | | | | | 196 | | | | | 195 | | | | | 310 | | | | | 381 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| FSA Composite | | | | | 100 | | | | | 149 | | | | | 116 | | | | | 91 | | | | | 136 | | | | | 154 | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Jefferies Group, Inc. | | 100 | | 123 | | 177 | | 241 | | 240 | | 380 | | |
| FSA Composite | | 100 | | 135 | | 202 | | 157 | | 123 | | 183 | | |
| S&P 500 | | 100 | | 121 | | 110 | | 97 | | 76 | | 97 | | | | | 100 | | | | | 91 | | | | | 80 | | | | | 62 | | | | | 80 | | | | | 89 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| * | Normalized so that the value of the Company’sour Common Stock and each index was $100 on December 31, 1998, assuming all dividends were reinvested and assuming the 1999 spin-off involving ITG resulted in a one time dividend having a value equal to the opening market price of the ITG common stock immediately after the spin-off.1999. |
All
persons who were our employees
of the Company prior to April 1, 1997, who are citizens or residents of the United States, who are 21 years of age, and who have completed one year of service
with the Company are covered by the Jefferies Group, Inc. Employees’ Pension Plan (the “Pension Plan”), a defined benefit plan, which was originally adopted in 1964 and amended in January 1987. The Pension Plan is funded through
our contributions
by the Company and
through earnings on existing assets in conformance with annual actuarial evaluations. The Pension Plan provides for annual benefits following normal retirement at age 65 equal to 1% of the employee’s covered remuneration from January 1, 1987, until termination of employment plus 20% of the first $4,800 and 50% of amounts exceeding $4,800 of annual average covered remuneration for 1985 and 1986, reduced proportionately for service of less than fifteen years (as of December 31, 1986). Benefits
are payable
underfor the
Pension Planremaining life of the participant, and are not subject to deduction for Social Security benefits or other offsets.
Covered remuneration for purposes of the Pension Plan includes the employee’s total annual compensation (salaries, bonuses and commissions) not to exceed $100,000 for 1985 and 1986, and $200,000 for 1987.
19
From 1988 through 1993, this latter dollar limitation was adjusted automatically for each plan year to the amount prescribed by the Secretary of the Treasury, or his delegate, for such plan year. From 1994 until 1996, the maximum covered remuneration was $150,000. From 1997 through 1999, the maximum covered remuneration was $160,000, for 2000 and 2001 the maximum covered remuneration was $170,000, and for
20
2002 and 2003, the maximum covered remuneration was $200,000. For 2004, the maximum covered remuneration was $210,000. An employee who retires upon normal retirement at age 65 with at least four years of service will receive a full vested benefit. An employee who retires at age 55 with at least four years of service will receive the normal retirement benefit reduced by 1/2%1/2% for each month benefit payments commence before age 65. Employees who terminate employment with the Companyus for reasons other than death or retirement will be entitled to the vested portion of their benefits at their normal or early retirement age. Benefits vest at the rate of 0% for the first year of service, 33% for each of the next two years of service, and 34% for the fourth year of service. The retirement benefits payable at age 65 for those employees with service prior to January 1, 1987, will be composed of two items: (1) a benefit for service up to December 31, 1986, in accordance with the original Pension Plan formula recognizing pay as the average of 1985 and 1986 remuneration up to $100,000, and (2) a benefit for service commencing on January 1, 1987, equal to 1% of covered remuneration through the date of termination. Total years of credited service apply to both the original and amended Pension Plans for purposes of determining vesting and eligibility.
As of December 31, 2003,2004, the estimated annual benefits payable upon retirement at normal retirement age for each of the Named Executive Officers ofpersons named in the Companysummary compensation table who are entitled to benefits under the Pension Plan are: Mr. Handler: $72,810;$73,911; Mr. Shaw: $56,026;$56,376; Mr. Schenk: $58,524;$59,525; Ms. Syrjamaki: $52,620.$52,870.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSCertain Relationships And Related Transactions Through Jefferies,
hasour wholly owned broker-dealer subsidiary, we have extended credit to Messrs. Handler, Shaw and Schenk in margin accounts in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectibility or present other unfavorable features.
The Company believesWe believe the foregoing transactions were on terms no less favorable to
the Companyus than could have been obtained from unaffiliated parties.
Executive
Our executive officers and directors
of the Company have
been permitted to make direct and indirect
interestsinvestments in
certain funds
we manage on the same basis as we have given our other employees and investors. Although we commonly refer to these vehicles as funds, they are registered with the Securities & Exchange Commission as broker-dealers. These funds are managed by Jefferies
thatand invest on a
pari passubasis in all trading and investment activities undertaken by Jefferies’ High Yield Division. Two of the funds, the Jefferies Partners Opportunity Funds (the “JPOFs”), are principally capitalized with equity contributions from institutional and high net worth investors. The third fund, Jefferies Employees Opportunity Fund (“JEOF” and, with the JPOFs, the “High Yield Funds”), is principally capitalized with equity investments from
employees of the Company.our employees. Jefferies and certain executive officers or other employees have direct investments in all three High Yield Funds on terms identical to other fund participants, and indirect investments under deferred compensation arrangements that track the financial returns of direct investments. Mr. Handler, Chairman of the Board and Chief Executive Officer, has an aggregate interest of 2.92% in the total members’ equity in the High Yield Funds; Mr. Shaw, President and Chief Operating Officer, has an aggregate interest of 0.22% in such total members’ equity; Mr. Schenk, Executive Vice President and Chief Financial Officer, has an aggregate interest of 0.10% in such total member’s equity; Ms. Syrjamaki, Chief Financial Officer of Jefferies, has an aggregate interest of .01% in such total members’ equity; Mr. Feller, Secretary, General Counsel and Executive Vice President, has an aggregate interest of .03% in such total members’ equity; and Mr. Campbell,
a Directorone of
the Company,our Directors, has an aggregate interest of .02% in such total members’ equity. The High Yield Division and each of the High Yield Funds share gains or losses on all trading and investment activities of the High Yield Division on the basis of a pre-established sharing arrangement related to the amount of capital each has available for such transactions.
TheWe modify the sharing arrangement
is modified from time to time to reflect changes in the respective amounts of available capital. As of December 31,
2003,2004, the High Yield Funds were being allocated an aggregate of 64% of such gains and losses. The High Yield Funds also reimburse Jefferies for their share of allocable trading expenses. At year end
2003,2004, the High Yield Division had
in excess of $945 million of combined
pari passucapital available from the High Yield Funds (including unfunded commitments and availability under the High Yield Funds’ revolving credit facility) and Jefferies for use in the High Yield Division’s investment and trading
20
strategy. The High Yield Funds have a revolving credit facility that is
21
collateralized by their investments which is non-recourse to the Company.us. Jefferies receives a management fee from the JPOFs in an amount equal to 1% per annum of the market value of their investments and is entitled to a carried interest of 20% of all distributions once investors have received a specified threshold return. JEOF pays Jefferies a management fee of 3% per annum and there is no carried interest. Mr. Handler actively manages the High Yield Funds but does not receive any additional compensation from the High Yield Funds or as a direct result of his management of the High Yield Funds. Investors in the High Yield Funds would have the right to redeem their investment should Mr. Handler cease actively managing the High Yield Funds.
In February, 2004, Jefferies hired Michael Handler, brother of
the Company’sour Chief Executive Officer, to manage a private investment fund
and/orand certain managed accounts
(the “Fund”) on behalf of Jefferies Asset
Management.Management, one of our affiliates. Shortly thereafter, we formed that fund and Jefferies and various employees of Jefferies
and Jefferies Asset Management have
agreed to make a significant investmentinvested in the
Fundfund. There are currently no managed accounts under Michael Handler’s management. As of April 1, 2005, Jefferies had an 8.91% interest in the fund, Richard Handler had a 2.52% interest in the fund, Mr. Shaw had a .25% interest in the fund, Mr. Schenk had a .03% interest in the fund, and Michael Handler
and other employees working on the Fund have agreed to investhad a 1.56% interest in the
Fund.fund. Interests of Richard and Michael Handler in the fund include direct investments and indirect investments through our deferred compensation plans. Pursuant to his employment agreement, Michael Handler
will receivereceived an annual salary of
$200,000,$178,075, and a grant of 80,000 shares of restricted stock vesting over five
yearsyears. In addition, pursuant to his employment agreement, Michael Handler and
will be eligible tohis portfolio management team participate in a bonus
pool.pool based upon an agreed percentage of the management and incentive fees received by Jefferies Asset Management from the fund, including the Jefferies investment. The
sizedistribution of the bonus pool
will beamong the fund’s portfolio management team is based
onupon the recommendation of Michael Handler for so long as Michael Handler remains employed as a
percentageportfolio manager of the
incentivefund and
is subject to the prior approval of senior management
fees that are paid by investors in the Fund, including the Company and its affiliates. In addition, dependingof Jefferies Asset Management. For 2004, Michael Handler’s share of this bonus pool was $1,776,555. Depending on the size of the fund in 2006, Mr. Handler may
also receive additional shares of restricted stock at that time. Michael Handler’s relationship with Jefferies, his employment contract, which was based on the recommendation of the management of Jefferies Asset Management, and the compensation structure for the members of his group were reviewed and approved by the
Corporate Governance and Nominating Committee of the Board of Directors. In reviewing Michael Handler’s contract, the Corporate Governance and Nominating Committee took into consideration management’s statements that the contract was the result of an
armsarm’s length negotiation and that the contract was comparable to a contract that Jefferies Asset Management would enter into with an unrelated person having the same background and skills as Michael Handler. The Chief Executive Officer has recused himself from all direct or indirect supervision of the
Fundfund or Michael Handler’s activities. Jefferies Asset Management is responsible for the supervision of Michael Handler’s activities and has put in place a supervisory structure designed to provide reasonable assurances that any conflicts of interest created by the relationship between Richard and Michael Handler will be appropriately addressed. In addition to the regular review of the
Fund’sfund’s activities by the compliance group at Jefferies Asset Management,
KPMG, our independent auditors, have audited the fund’s 2004 year end financial statements and the Committee has requested that internal audit, which reports directly to the Audit Committee, periodically review the activities of the
Fund. In March 2003, the Company purchased two insurance policies through Shaw, Moses, Mendenhall & Associates, an insurance brokerage firm in which Ted R. Shaw, brother of the Company’s President, is a partner and acted as broker of record. In connection with the purchases, the brokerage firm will receive commissions of $58,940 over the next ten years as the broker of record in connection with the purchase of the policies.
Jefferiesfund.
We also
employsemploy John
C. Shaw III, son of
the Company’sour President as a Senior Vice President in
itsthe Jefferies Program Trading Department and Thomas E. Tarrant, the brother-in-law of
the Company’sour Chief Executive Officer, as the Director of Marketing.
For their services during 2004 they were paid $778,618, based on a variable compensation formula tied to the productivity of the Program Trading Desk, and $317,861 respectively. Payments were made in a combination of cash and restricted stock.
In October of 2004, we purchased the remainder of Bonds Direct Securities LLC (“Bonds Direct”) is a provider of investment grade fixed income transaction execution for institutions acting as principal, which is majoritythat was not owned by us for cash and shares of our common stock having an aggregate value of approximately $20.6 million. We purchased this interest from the Company. In addition to providing clearance, settlement and administrative support services toprevious holders of Bonds Direct the Company and its affiliates routinely engage in principal transactions withwhich included management of Bonds Direct, in the ordinary coursecurrent and former employees of business. Previous funding for Bonds Direct operations had been provided in part by loans fromours, including Ms. Syrjamaki, and an employee investment fund in which Mr.Messrs. Handler, Mr. Shaw and Mr. Schenk each directly or indirectly ownowns an interest. The acquisition price was paid to these holders pro-rata in accordance with their fully diluted ownership interests and from a direct loan by Ms. Syrjamaki, who is also the Chief Financial Officer of Bonds Direct. AllOn an aggregate basis, the named executive officers held an aggregate of .8% of the above loans matured and were repaid by Bonds Direct during 2003. Continuing capital requirements of Bonds Direct have been supported by new loans directly from the Company and Jefferies. Each of the participants still retains any interest in the warrants that were attached to the repaid loans. The warrants entitle the holders to acquire Class C Interests in Bonds Direct, which will participate in the equity of Bonds Direct, to the extent of ten percent of the net worth of Bonds Direct at the time they were issued in excess of $5 million. Holders may exercise the warrants by making a contribution equal to their pro rata portion of a $500,000 aggregate exerciseownership
2122
priceinterests and received a proportionate amount of the acquisition price. The percentage interest of each executive officer was as follows: Ms. Syrjamaki, .08%; Mr. Handler, .47%; Mr. Shaw, .12%; and Mr. Schenk, .12%, resulting in an aggregate payments of $179,250 with each receiving $17,990, $107,506, $26,877 and $26,877 respectively. We may issue additional cash and shares of our common stock to the previous holders of Bonds Direct, within ten business days of (a) a sale, (b) a merger, consolidation, exchange of sharesincluding direct or other extraordinary transaction that results in a change of control, (c) a conversionindirect payments to a corporation, or (d) five years fromMs. Syrjamaki and Messrs. Handler, Shaw and Schenk, pursuant to the closing date5-year earn-out provision of the investment.acquisition agreement. The warrantsterms of the acquisition were negotiated between the Co-Chief Executive Officers of Bonds Direct and Class C Interests are subjectBrian Friedman, Chairman of the Executive Committee of Jefferies. The acquisition, including the payments to dilution pro rata withMs. Syrjamaki and Messrs. Handler, Shaw and Schenk, was reviewed and approved by the Class A and Class B Interests. The warrants are not transferable.independent members of our Board of Directors.
ANNUAL REPORT AND INDEPENDENT AUDITORSAnnual Report And Independent Auditors The Company’s
Our Annual Report on Form 10-K for the
Company’s fiscal year ended December 31,
2003,2004, accompanies this Proxy Statement, but is not deemed a part of the proxy soliciting material.
KPMG LLP served as
the Company’sour independent auditors for the year ended December 31,
2003.2004. The appointment of independent auditors is approved annually by the
Board of DirectorsAudit Committee and is based, in part, on the recommendations of the Audit Committee. In making its recommendations, the Audit Committee reviews both the audit scope and estimated audit fees for the coming year as well as the qualifications and independence of the audit firm. Shareholder approval is not sought in connection with this selection.
A representative of KPMG LLP, the independent auditors who examined theour consolidated financial statements of the Company for 2003,2004, is expected to be present at the meeting to respond to appropriate questions of shareholders and will have the opportunity to make a statement if he so desires.
OTHER MATTERSOther MattersManagement has received no shareholder proposal as of applicable deadlines specified under Securities and Exchange Commission rules, and otherwise does not know of any other matters to come before the Annual Meeting. However, if any additional matters are properly presented to the meeting, it is the intention of the persons named in the accompanying proxy to vote such proxy in accordance with their best judgment on such matters.
INCORPORATION BY REFERENCEIncorporation By ReferenceCertain financial and other information has been provided in the Annual Report on Form 10-K delivered with this Proxy Statement. The following sections of the Annual Report are hereby incorporated by reference: “Financial Statements and Supplementary Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Changes in and Disagreements with Accountants on Accounting and Financial Disclosure,” and “Quantitative and Qualitative Disclosures About Market Risk.”
SHAREHOLDER PROPOSALSShareholder Proposals Shareholder proposals for inclusion in the proxy material relating to the 2005our 2006 Annual Meeting of Shareholders mustshould be received by the Company at itssent to our principal executive offices at 520 Madison Avenue, 12th Floor, New York, New York, 10022,10022. To be considered timely under federal securities laws, any proposals must be received no later than December 11, 2004,14, 2005, to be included in the Company’snext year’s proxy statement and proxy card, and no later than February 18, 2005,27, 2006, if to be presented at the meeting but not included in the proxy statement or proxy card in ordercard. Though we will consider all proposals, we are not required to be considered timely under federal securities laws. Nothing in this paragraph shall be deemed to require the Company to include in its proxy materials relating to the 2005 Annual Meeting of Shareholders, any shareholder proposal which does not meet all of thein our proxy
2223
materials relating next year’s annual meeting unless it meets all of the requirements for inclusion established by the Securities and Exchange Commission and the Company’s By-Laws at that time in effect.our By-Laws.
| |
| | For the Board of Directors, |
| |
| | LLOYDLloyd H. FELLER,Secretary |
[April 12, 2004]
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APPENDIX 1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
JEFFERIES GROUP, INC.
FIRST: The name of the corporation is Jefferies Group, Inc. (hereinafter referred to as the “Corporation”).
SECOND: The registered office of the Corporation is to be located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (“GCL”).
FOURTH:
A. Authorized Stock.
The total number of shares of stock which the Corporation shall have authority to issue five hundred ten million (510,000,000) shares, consisting of five hundred million (500,000,000) shares of common stock, each with a par value of $0.0001 per share (hereinafter referred to as the “Common Stock”), and ten million (10,000,000) shares of preferred stock, each with a par value of $0.0001 per share (hereinafter referred to as the “Preferred Stock”). The powers, designations, preferences and relative, participating, optional or other special rights (and the qualifications, limitations or restrictions thereof) of the Common Stock and the Preferred Stock are as follows:
B. Preferred Stock.
The Board of Directors is hereby expressly authorized at any time, and from time to time, to create and provide for the issuance of shares of Preferred Stock in one or more series (the “Preferred Stock”) and, by filing a certificate pursuant to the GCL (hereinafter referred to as a “Preferred Stock Designation”), to establish the number of shares to be included in each such series, and to fix the designations, preferences and relative, participating, optional or other special rights of the shares of each such series and the qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors, including, but not limited to, the following:
| Feller, |
| | (i) the designation of and the number of shares constituting such series, which number the Board of Directors may thereafter (except as otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares of such series then outstanding); |
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| (ii) the dividend rate for the payment of dividends on such series, if any, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends, if any, shall bear to the dividends payable on any other class or classes of or any other series of capital stock, the conditions and dates upon which such dividends, if any, shall be payable, and whether such dividends, if any, shall be cumulative or non-cumulative; |
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| (iii) whether the shares of such series shall be subject to redemption by the Corporation, and, if made subject to such redemption, the times, prices and other terms and conditions of such redemption; |
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| (iv) the terms and amount of any sinking fund provided for the purchase or redemption of the shares of such series; |
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| (v) whether or not the shares of such series shall be convertible into or exchangeable for shares of any other class or classes of, any other series of any class or classes of capital stock of, or any other security of, the Corporation or any other corporation, and, if provision be made for any such conversion orSecretary |
April 20, 2005
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| exchange, the times, prices, rates, adjustments and any other terms and conditions of such conversion or exchange; |
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| (vi) the extent, if any, to which the holders of the shares of such series shall be entitled to vote as a class or otherwise with respect to the election of directors or otherwise; |
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| (vii) the restrictions, if any, on the issue or reissue of shares of the same series or of any other class or series; |
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| (viii) the amounts payable on and the preferences, if any, of the shares of such series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and |
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| (ix) any other relative rights, preferences and limitations of that series. |
ANNUAL MEETING OF SHAREHOLDERS OF
Each holder of Common Stock shall have one voteJEFFERIES GROUP, INC.
May 23, 2005
Please date, sign and mail
your proxy card in respect of each share of Common Stock held by such holder of record on the books of the Corporation for the election of directors
envelope provided as soon
as possible.
â Please detach along perforated line and on all other matters on which stockholders of the Corporation are entitled to vote. Subject to any rights that may be conferred upon any holders of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation (excluding Common Stock), upon dissolution, the holders of Common Stock then outstanding shall be entitled to receive the net assets of the Corporation. Such net assets shall be divided among and paid to the holders of Common Stock, on a pro-rata basis, according to the number of shares of Common Stock held by them. Subject to any rights that may be conferred upon any holders of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation (excluding Common Stock), the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in stock or otherwise.
FIFTH: The Corporation is to have perpetual existence.
SIXTH:
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| A. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation (excluding Common Stock) to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed, and may be increased or decreased from time to time, in such a manner as may be prescribed by the By-laws of the Corporation. |
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| B. Unless and except to the extent that the By-laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. |
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| C. Directors shall be elected and hold such terms of office as provided in the By-laws of the Corporation. |
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| D. Advance notice of stockholder nominations for the election of directors and advance notice of other stockholder action proposed to be taken at a stockholder’s meeting shall be given in the manner provided in the By-laws of the Corporation. |
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| E. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock (excluding Common Stock) as set forth in this Certificate of Incorporation to elect directors under specified circumstances and applicable law, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Vacancies in the Board of Directors shall be filled in the manner provided in the By-laws of the Corporation. |
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| F. Subject to the rights of the holders of any Preferred Stock or any other series or class of stock (excluding Common Stock) set forth in the Certificate of Incorporation, a special meeting of the |
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| stockholders shall be called only by the secretary of the Corporation at the request of (i) a majority of the total number of directors which the Corporation at the time would have if there were no vacancies or (ii) by any person authorized by the Board of Directors (through a vote of a majority of the total number of directors which the Corporation at the time would have if there were no vacancies) to call a special meeting. Notwithstanding the foregoing, stockholders shall have no right to call a special meeting of stockholders. |
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| G. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock (excluding Common Stock) set forth in the Certificate of Incorporation to elect additional directors under specified circumstances or to consent to specific actions taken by the Corporation, any action required or permitted to be taken by the stockholders of the Corporation must be taken at an annual or special meeting of the stockholders and may not be taken by any consent in writing by such stockholders. |
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| H. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of shares representing at least 66 2/3% of the voting power of the then outstanding voting stock of the Corporation entitled to vote in elections of directors generally, voting together as a single class, shall be required to amend, repeal or adopt any provisions inconsistent with this Article SIXTH. |
SEVENTH: The Board of Directors shall have the power, in addition to the stockholders, to make, alter, or repeal the By-laws of the Corporation.
EIGHTH: A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit.
The Corporation shall, to the fullest extent permitted by section 145 of the GCL, as the same may be amended and supplemented, indemnify each director and officer of the Corporation from and against any and all expenses, liabilities or other matters referred to in or covered by said section and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-laws, agreement, vote of stockholders, vote of disinterested directors or otherwise, and shall continue as to a person who has ceased to be a director of officer and shall inure to the benefit of heirs, executors and administrators of such persons and the Corporation may purchase and maintain insurance on behalf of any director or officer to the extent permitted by section 145 of the GCL.
Neither the amendment nor repeal of this Article EIGHTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article EIGHTH, shall eliminate or reduce the effect of this Article EIGHTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article EIGHTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation,mail in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders are granted subject to this reservation.
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envelope provided.â
Annual Meeting of Shareholders
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DATE:
| | May 24, 2004 |
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TIME:
| | 9:30 a.m. |
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PLACE:
| | Jefferies & Company, Inc.
520 Madison Avenue, 12th Floor
New York, NY 10022 |
Dear Shareholders,
After several challenging years, the capital markets improved steadily over the course of 2003, ending on a positive note. Jefferies continued to gain momentum, focusing on the prudent growth, diversification and integration of our investment banking, sales & trading, research and asset management divisions-resulting in a fourth consecutive year of record net revenues and net earnings and optimism for 2004.
Improving capital markets and our diversification efforts, combined with hard work and a growing client base, all contributed to our outstanding performance. We have meaningfully diversified our business mix over the past few years to better serve middle-market clients with a more complete offering of products and services.
To be a leading investment bank serving middle-market, growth companies and their investors, we will continue to foster a team-oriented approach and build meaningful relationships. We will also strive to keep our organization flat and flexible as we invest in additional human capital and contain costs at every level.
Four consecutive record years are truly a tribute to the loyalty of our clients and the determination of our employee-shareholders and we believe 2003 is only a glimpse of what we can accomplish. As always, we are extremely appreciative of the continued support of our shareholders and clients.
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Richard B. Handler
Chairman and CEO | | John C. Shaw, Jr.
President and COO |
DETACH HERE
PROXY
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PTHE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS.
R
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X
Y | | JEFFERIES GROUP, INC.
Proxy for the Annual Meeting of Shareholders May 24, 2004
Solicited on Behalf of the Board of Directors of the Company |
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The undersigned holder(s) of common shares of JEFFERIES GROUP, INC., a Delaware corporation (the “Company”), hereby appoints Richard B. Handler and John C. Shaw Jr., and each of them, attorneys of the undersigned, with power of substitution, to vote all shares of the common shares that the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held on Monday, May 24, 2004, at 9:30 a.m. local time, and at any adjournment thereof, as directed on the reverse hereof, hereby revoking all prior proxies granted by the undersigned. |
1. Election of Directors, Nominees for directors are:
(01) W. Patrick Campbell, (02) Richard G. Dooley, (03) Richard B. Handler,
(04) Frank J. Macchiarola, (05) John C. Shaw, Jr.
2. Approval of the Amended and Restated Certificate of Incorporation. (Company Proposal)
3. In their discretion, upon such other business as may properly come before the meeting, or at any adjournment thereof.
PLEASE VOTE,SIGN, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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HAS YOUR ADDRESS CHANGED? | | DO YOU HAVE ANY COMMENTS? |
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JEFFERIES GROUP, INC.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8042 EDISON, NJ
08818-8042
Voter Control Number
Your vote is important. Please vote immediately.
Vote-by-Internet
1. | | Log on to the Internet and go to http://www.eproxyvote. com/jef |
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2. | | Enter your Voter Control Number listed above and follow the easy steps outlined on the secured website. |
Vote-by-Telephone
1. | | Call toll-free 1-877-PRX-VOTE (1-877-779-8683) |
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2. | | Enter your Voter Control Number listed above and follow the easy recorded instructions. |
If you vote over the Internet or by telephone,
please do not mail your card.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
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x
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votes as indicated
in this example. |
This proxy, when properly executed, will be voted in the manner directed by the undersigned shareholder. If no direction is made, this proxy will be voted FOR election of Directors and approval of the Amended and Restated Certificate of Incorporation.
JEFFERIES GROUP, INC.
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1. | | 1. Election of Directors.
(Please see reverse) |
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| | | NOMINEES: |
oFOR ALL NOMINEES | | WITHHELD¡ | | W. Patrick Campbell |
| | | ¡ | | Richard G. Dooley |
oWITHHOLD AUTHORITY | | ¡ | | Richard B. Handler |
FOR ALL NOMINEES | | ¡ | | Frank J. Macchiarola |
| | | | WITHHELD | |
| ALL | o¡ | | o | FROM ALL | John C. Shaw, Jr. |
| NOMINEES | | | | NOMINEES | |
oFOR ALL EXCEPT | | | | |
| (See instructions below) | | | | |
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INSTRUCTION: | | To withhold authority to vote for any individual nominee(s), mark“FOR except vote withheld fromALL EXCEPT” and fill in the following nominees(s):circle next to each nominee you wish to withhold, as shown here:l |
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| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | | | | o |
| | | | FOR | | AGAINST | | ABSTAIN |
| 2. | | Approval of the Amended and Restated Certificate of Incorporation. | | | | | | |
3. | | In their discretion, upon such other business as may properly come before the meeting, or at any adjournment thereof. | | | | | | |
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD.
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Mark box at right if an address change or comment has been noted on the reverse side of this card. |
Shareholders should date this proxy and sign here exactly as name appears at left. If stock is held jointly, both owners should sign this proxy. Executors, administrators, trustees, guardians and others signing in a representative capacity should indicate the capacity in which they sign. Receipt is acknowledged of Notice of the above meeting, the Proxy Statement relating thereto, and the Annual Report on Form 10-K for the fiscal year ended December 31, 2003. |
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Signature:Signature of Shareholder | | | | Date: | | | | Signature:Signature of Shareholder | | | | Date: | | |
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Note: | | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
We are proud to announce our fifth consecutive year of record total revenues and net earnings, and earnings per share. For five years we have invested heavily in our most valuable asset, human capital. We have worked hard to expand and diversify our product offerings throughout the firm to add value for our clients. By combining our substantial investment in human capital and leveraging one of the strongest capital markets platforms on Wall Street, we have evolved into a well-positioned full service investment bank and institutional securities firm focused on growing and mid-sized companies and their investors.
We will continue to work our hardest to achieve superior short- and long-term results for our shareholders. We will also continue to invest heavily in our unique platform to best position ourselves as a leader for middle market issuers and investors. We will strive to maintain a high employee ownership level. We will work hard to maintain our high ethical standards, our variable cost structure, our non-bureaucratic and responsive management structure, and our entrepreneurial spirit. We will differentiate ourselves by providing the best client service in the industry.
We are thankful to all of our constituents and could not have achieved these results without the loyalty and support of an active and successful client base, the hard work and dedication of our employees, the guidance and wisdom of our fellow Board and Executive Committee members, and the confidence of our shareholders.
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Richard B. Handler
Chairman and CEO | | John C. Shaw, Jr.
President and COO |
PROXY
JEFFERIES GROUP, INC.
Proxy for the Annual Meeting of Shareholders May 23, 2005
Solicited on Behalf of the Board of Directors of the Company
The undersigned holder(s) of common shares of JEFFERIES GROUP, INC., a Delaware corporation (the “Company”), hereby appoints Richard B. Handler and John C. Shaw Jr., and each of them, attorneys of the undersigned, with power of substitution, to vote all shares of the common shares that the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held on Monday, May 23, 2005, at 9:30 a.m. local time, and at any adjournment thereof, as directed on the reverse hereof, hereby revoking all prior proxies granted by the undersigned.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
JEFFERIES GROUP, INC.
May 23, 2005
PROXY VOTING INSTRUCTIONS
MAIL —Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- OR -
TELEPHONE —Call toll-free1-800-PROXIES (1-800-776-9437) from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
- OR -
INTERNET —Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page.
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COMPANY NUMBER
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ACCOUNT NUMBER
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You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM
Eastern Time the day before the cut-off or meeting date.
â Please detach along perforated line and mail in the envelope providedIF you are not voting via telephone or the Internet.â
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
1. Election of Directors.
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| | NOMINEES: |
oFOR ALL NOMINEES | | ¡ | | W. Patrick Campbell |
| | ¡ | | Richard G. Dooley |
oWITHHOLD AUTHORITY | | ¡ | | Richard B. Handler |
FOR ALL NOMINEES | | ¡ | | Frank J. Macchiarola |
| | ¡ | | John C. Shaw, Jr. |
oFOR ALL EXCEPT | | | | |
| (See instructions below) | | | | |
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INSTRUCTION: | | To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:l |
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| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | o |
| 2. | In their discretion, upon such other business as may properly come before the meeting, or at any adjournment thereof. |
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE OF THIS CARD.
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| Signature of Shareholder | | | | Date: | | | | Signature of Shareholder | | | | Date: | | |
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Note: | | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
