<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
of the Commission
Only (as permitted)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
by Rule 14a-6(c)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
DONALDSON, LUFKIN & JENRETTE, INC.
- -----------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- -----------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- -----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC.
277 PARK AVENUE
NEW YORK, NEW YORK 10172
March 12, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Donaldson, Lufkin & Jenrette, Inc. The meeting will be held at the Company's
offices, 8th Floor, 277 Park Avenue, New York, New York 10172, on Wednesday,
April 16, 1997 at 10:00 a.m., New York City time.
The business of the meeting will be to elect directors to the Company's
Board of Directors, to consider and vote on the approval of the Company's 1996
Non-Employee Directors Stock Plan, and to ratify the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors for the fiscal year ending
December 31, 1997. Information on these matters can be found in the
accompanying proxy statement.
Whether or not you plan to attend the meeting in person, your shares should
be represented and voted at the meeting. Accordingly, after reading the
enclosed proxy statement, kindly mark the proxy card to indicate your vote,
date and sign the proxy card, and return it in the enclosed postage-paid
envelope as soon as conveniently possible. If you desire to vote in accordance
with management's recommendations, you need not mark your votes on the proxy
card but need to sign, date and return it in the enclosed postage-paid envelope
in order to record your vote. If you later decide to attend the meeting and
wish to vote your shares personally, you may revoke your proxy at any time
before it is exercised.
Sincerely,
John S. Chalsty
Chairman and Chief Executive Officer
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
Donaldson, Lufkin & Jenrette, Inc.:
Notice is hereby given that the 1997 Annual Meeting (the "Annual Meeting")
of the stockholders of Donaldson, Lufkin & Jenrette, Inc. (the "Company") will
be held at the Company's offices, 8th Floor, 277 Park Avenue, New York, New
York 10172, on Wednesday, April 16, 1997, at 10:00 a.m., New York City time,
for the following purposes:
1. To elect all of the members of the Company's board of directors to serve
until the Company's next annual meeting and until such directors' successors
are elected and shall have qualified.
2. To consider and vote upon a proposal to approve and adopt the
Donaldson, Lufkin & Jenrette, Inc. 1996 Non-Employee Directors Stock Plan.
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the Annual
Meeting or at any adjournments thereof.
A proxy statement describing the matters to be considered at the Annual
Meeting is attached to this notice. Only stockholders of record at the close of
business on March 5, 1997 are entitled to notice of, and to vote at, the Annual
Meeting and at any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas E. Siegler
Secretary
March 12, 1997
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL INSURE
THAT YOUR SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES.
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC.
277 PARK AVENUE
NEW YORK, NEW YORK 10172
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Donaldson, Lufkin & Jenrette, Inc., a Delaware
corporation (the "Company"), of proxies to be voted at the 1997 annual meeting
of stockholders to be held on Wednesday, April 16, 1997 at 10:00 a.m., New York
City time, at the Company's offices, 8th Floor, 277 Park Avenue, New York, New
York 10172, and at any adjournments thereof (the "Annual Meeting"). The Notice
of Annual Meeting, this Proxy Statement and the accompanying proxy card are
first being mailed to stockholders on or about March 12, 1997, to all
stockholders entitled to vote at the Annual Meeting.
At the Annual Meeting, the Company's stockholders will be asked (i) to
elect the following persons as directors of the Company to serve until the
Company's next annual meeting and until such directors' successors are
elected and shall have qualified: John S. Chalsty, Joe L. Roby, Carl B.
Menges, Anthony F. Daddino, Hamilton E. James, Richard S. Pechter, Theodore
P. Shen, Claude Bebear, Henri de Castries, Jerry M. de St. Paer, Denis
Duverne, Louis Harris, Henri G. Hottinguer, Francis Jungers, W. Edwin
Jarmain, Joseph J. Melone, W.J. Sanders III and John C. West, (ii) to
consider and vote upon a proposal to approve and adopt the Donaldson, Lufkin
& Jenrette, Inc. 1996 Non-Employee Directors Stock Plan, (iii) to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for the fiscal year ending December 31, 1997, and (iv) to take such other
action as may properly come before the Annual Meeting or any adjournments
thereof.
GENERAL INFORMATION
SOLICITATION AND VOTING OF PROXIES; REVOCATION; RECORD DATE
All proxies duly executed and received by the Company will be voted on all
matters presented at the Annual Meeting in accordance with the instructions
given therein by the person executing such proxy or, in the absence of such
instructions, will be voted in favor of the election to the Company's Board of
Directors of the eighteen nominees for director identified in this Proxy
Statement, the approval and adoption of the 1996 Non-Employee Directors Stock
Plan, and the ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending December 31, 1997.
Any stockholder may revoke his or her proxy at any time prior to the Annual
Meeting before it is voted by written notice to such effect delivered to the
Company at 277 Park Avenue, New York, New York 10172, Attention: Thomas E.
Siegler, Secretary, by delivery prior to the Annual Meeting of a subsequently
dated proxy or by attending the Annual Meeting and voting in person.
Solicitation of proxies may be made by mail and may also be made by personal
interview, telephone and facsimile transmission, and by directors, officers and
regular employees of the Company without special compensation therefor. The
expenses of the preparation of proxy materials and the solicitation of proxies
for the Annual Meeting will be paid by the Company. The Company expects to
reimburse banks,
<PAGE>
brokers and other persons for their reasonable out-of-pocket expenses in
handling proxy materials for beneficial owners, which expenses are expected to
amount in aggregate to approximately $25,000.
Only holders of record of the common stock, par value $0.10 per share, of
the Company (the "Common Stock") at the close of business on March 5, 1997 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting.
At the Close of Business on the Record Date, there were issued and outstanding
54,504,664 shares of Common Stock each of which is entitled to one vote.
A quorum for the Annual Meeting consists of a majority of the total number
of shares of Common Stock outstanding on the Record Date. Directors of the
Company will be elected by a plurality vote of the shares of Common Stock
represented at the Annual Meeting and entitled to vote. Accordingly,
abstentions and broker non-votes will not affect the outcome of the election.
The affirmative vote of a majority of the shares of Common Stock represented at
the Annual Meeting and entitled to vote is required for approval and adoption
of the 1996 Non-Employee Directors Stock Plan, and for the ratification of the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
the fiscal year ending December 31, 1997. On any such item, an abstention will
have the same effect as a negative vote, but, because shares held by brokers
will not be considered entitled to vote on matters as to which the brokers
withhold authority, a broker non-vote will have no effect on the vote.
As of March 5, 1997, The Equitable Companies Incorporated ("EQ" and,
together with its subsidiaries other than the Company, "Equitable")
beneficially owned an aggregate of 42,635,000 shares of Common Stock,
representing approximately 78.2% of the total number of shares of Common Stock
outstanding, and the directors and executive officers of the Company
beneficially owned an aggregate of 2,004,266 shares of Common Stock,
representing 3.6% of the total number of shares of Common Stock outstanding.
AXA-UAP beneficially owns 85,000 shares of Common Stock. AXA-UAP is the largest
shareholder of EQ and, therefore, may be considered to beneficially own
42,720,000 shares of Common Stock, representing 78.4% of the total number of
shares of Common Stock outstanding. See "Security Ownership of Certain
Beneficial Holders and Management." The affirmative vote of the shares of
Common Stock beneficially owned by EQ is sufficient to ensure election of the
nominees to the Board of Directors named herein, approval and adoption of the
1996 Non-Employee Directors Stock Plan, and ratification of the appointment of
KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending December 31, 1997.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR OF THE COMPANY (AS
SPECIFIED BELOW), THE APPROVAL AND ADOPTION OF THE 1996 NON-EMPLOYEE DIRECTORS
STOCK PLAN, AND THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1997.
2
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
All the Company's directors will be elected at the Annual Meeting to serve
until the next succeeding annual meeting of the Company and until their
successors are elected and shall have qualified. All the nominees listed below
are currently serving as members of the Board of Directors and, except as
stated in the subsequent paragraph, the proxies solicited hereby will be voted
FOR the election of such nominees unless the completed proxy card directs
otherwise.
The Board of Directors has been informed that all of the nominees listed
below are willing to serve as directors, but if any of them should decline or
be unable to act as a director, the individuals named in the proxies may vote
for a substitute designated by the Board of Directors. The Company has no
reason to believe that any nominee will be unable or unwilling to serve.
NOMINEES FOR ELECTION AS DIRECTORS
The name, age, principal occupation for the last five years, selected
biographical information and period of service as a director of the Company of
each nominee are set forth below. All of the nominees currently serve as
directors of the Company.
JOHN S. CHALSTY (63) was elected Chairman of the Board of the Company in
February 1996. Mr. Chalsty has been Chief Executive Officer of the Company
since 1986 and also served as President of the Company from 1986 until February
1996, after having served as Chairman of the Company's Capital Markets Group
for more than two years. Mr. Chalsty joined the firm in 1969 as an oil analyst.
He was named Director of Research in 1971, was appointed head of investment
banking in 1979, and was named Chairman of the Capital Markets Group in 1984.
Mr. Chalsty has been a director of the Company since 1971 and is also a
director of EQ, Anchor Glass Container Corporation, IBP, Inc., Occidental
Petroleum Corporation, and SDW Holdings Corporation. From 1990 to 1994 he
served as Vice Chairman of the New York Stock Exchange, Inc.
JOE L. ROBY (57) was elected President of the Company in February 1996 and
also has served as Chief Operating Officer of the Company since November
1995. Previously, Mr. Roby had served as Chairman of the Company's Banking
Group since 1989. Mr. Roby joined the Company as a Vice President in the
Investment Banking group in 1972 and became head of the group in 1984. Mr.
Roby has been a director of the Company since 1989. He is also a director of
Advanced Micro Devices, Inc. and Sybron International Corporation.
CARL B. MENGES (66) was elected Vice Chairman of the Board of the Company
in 1987. Mr. Menges joined the Company in 1965 as an institutional salesman
and has held various executive positions at the Company since then, including
Director of the International division, Managing Director of the Equities
division, Chairman of the Company's Financial Services Group and Chairman of
Wood, Struthers & Winthrop Management Corp., a wholly-owned subsidiary of the
Company ("Wood, Struthers & Winthrop"). Mr. Menges has been a director of the
Company since 1979.
ANTHONY F. DADDINO (56) was appointed Executive Vice President and Chief
Financial Officer of the Company in 1983 and also serves as Chairman of the
Finance Committee. Mr. Daddino has been a director of the Company since 1985.
He joined the Company in 1976 from the accounting firm of Peat, Marwick,
Mitchell & Co. where he was a Partner. He served as the Company's Chief
Accountant and as a Group Managing Director prior to 1983. He is also a
director of International Commodities Export Corp.
3
<PAGE>
HAMILTON E. JAMES (46) was appointed Chairman of the Company's Banking
Group in November 1995. Mr. James joined the Company as an Associate in the
Investment Banking group in 1975 and since then has held various executive
positions in the group until his appointment as Chairman of the Banking
Group. Mr. James has been a director of the Company since February 1996. He
is also a director of Price/Costco, Inc. and County Seat Holdings, Inc.
RICHARD S. PECHTER (51) was appointed Chairman of the Company's Financial
Services Group in 1987. Mr. Pechter joined the Company in 1969 as a research
analyst and has held various executive positions at the Company since then,
including Chief Financial Officer, Executive Vice President and Chief
Administrative Officer, and Chief Executive Officer of the Company's Pershing
Division ("Pershing"). Mr. Pechter has been a director of the Company since
1979. He is also a director of the Securities Industry Association.
THEODORE P. SHEN (52) was appointed Chairman of the Company's Capital
Markets Group in 1986. Mr. Shen joined the Company in 1968 as a research
analyst and has held various executive positions at the Company since then,
including Senior Vice President of Corporate Planning, Director of Research
and Managing Director of the Equities division. Mr. Shen has been a director
of the Company since 1984.
CLAUDE BEBEAR (61) has been a director of the Company since February
1996. In January 1997, Mr. Bebear was appointed Chairman of the Executive
Board of AXA-UAP. Prior thereto, he was Chairman and Chief Executive Officer of
AXA, a position he has held since 1989. Mr. Bebear has been the Chief
Executive Officer of the AXA Group since 1974 and serves as Chairman or
Director of numerous subsidiaries and affiliated companies of the AXA Group. He
is also a director of Saint-Gobain, Havas S.A., Schneider S.A., Alliance
Capital Management Corporation ("Alliance"), the general partner of Alliance
Capital Management, L.P., and Louis Vuitton Mo|f5t Hennessy, and serves as a
member of the Supervisory Board of Compagnie Financi|f4re de Paribas. Mr.
Bebear also serves as Chairman of the Board of EQ and is a director of The
Equitable Life Assurance Society of the United States ("Equitable Life") and
Equitable Real Estate Investment Management, Inc. ("Equitable Real Estate"),
wholly-owned subsidiaries of EQ.
HENRI DE CASTRIES (42) has been a director of the Company since 1993. Mr. de
Castries has been Senior Executive Vice President Financial Services and Life
Insurance Activities of AXA-UAP since 1996. Prior thereto, Mr. de Castries was
Executive Vice President Financial Services and Life Insurance Activities from
1993 to 1996, General Secretary from 1991 to 1993 and Central Director of
Finances from 1989 to 1991 of AXA. He is also a director or officer of various
subsidiaries and affiliates of the AXA Group. He has been director of EQ since
May 1994 and Equitable Life since September 1993. He is also a director of
Alliance and Equitable Real Estate.
JERRY M. DE ST. PAER (55) has been a director of the Company since 1993.
Mr. de St. Paer has served as Senior Executive Vice President and Chief
Financial Officer of EQ since May 1996 and with Equitable Life as Executive
Vice President since December 1990, and Chief Financial Officer since April
1992. He is also Executive Vice President of AXA-UAP. Mr. de St. Paer has
held a number of executive positions with EQ, Equitable Life and their
subsidiary companies since joining Equitable Life in 1987. He is also a
director of Alliance, Equitable Real Estate, Nicos Seimei Hoken (formerly
Equitable Seimei Hoken) and Economic-Sciences Corporation, and a member of
the Advisory Board of Directors of Peter Wodtke (U.K.) and (U.S.).
4
<PAGE>
DENIS DUVERNE (43) has been a director of the Company since February 1997.
Mr. Duverne has been Senior Vice President--International Life of AXA-UAP
since 1995. Prior to that Mr. Duverne was a member of the Executive
Committee, Operations of Banque Colbert from 1992 to 1995. Mr. Duverne was
Secretary General of Compagnie Financi|f4re IBI from 1991 to 1992. Mr. Duverne
worked for the French Ministry of Finance serving as Deputy Assistant
Secretary for Tax Policy from 1988 to 1991 and director of the Corporate
Taxes Department from 1986 to 1988. Mr. Duverne is also a Director of
Alliance, Equitable Real Estate, AXA Equity & Law Life Assurance Society plc
("AXA Equity & Law") and AXA Levenzverzekeringen (Nederlands).
LOUIS HARRIS (75) has been a director of the Company since 1995. Mr.
Harris has been an independent public opinion consultant since 1992. Prior
thereto, Mr. Harris was President of Louis Harris and Associates, Inc., an
opinion research company he founded in 1956. Mr. Harris had previously served
on the Board of Directors of the Company from 1971 to 1985 and had been an
Advisory Director of the Company from 1985 until his re-election to the Board
in 1995.
HENRI G. HOTTINGUER (61) has been a director of the Company since 1992. He
has been a partner of Hottinguer & Company since 1968. Mr. Hottinguer is also
Chairman and Chief Executive Officer of Banque Hottinguer and Soci|fet|fe
Financi|f4re pour le Financement de Bureaux et d'Usines-Sofibus, Vice President
and Director of Financi|f4re Hottinguer, a director of Investissement
Hottinguer S.A., AXA-UAP and of various subsidiaries and affiliates of the AXA
Group, representative of Financi|f4re SGTE at the board of Schneider S.A., the
Partner of Hottinguer & Cie Zurich, Chairman of the Board of Hottinguer Capital
Corp., and a director of Swiss Helvetia Fund, Inc., Hottinguer US Inc., and
Alliance.
W. EDWIN JARMAIN (58) has been a director of the Company since 1992. Mr.
Jarmain is President of Jarmain Group Inc. (a private investment holding
company), a position he has held since 1979, and is also an officer and
director of several affiliated companies. He is also a director of EQ,
Equitable Life, AXA Insurance (Canada), Anglo Canada General Insurance
Company, AXA Pacific Insurance Company and an alternate director of National
Mutual Life Association of Australia, National Mutual Asia Limited and
National Mutual Insurance Company Limited of Hong Kong. Mr. Jarmain serves as
non-executive chairman and director of FCA International Ltd. (financial
collection services) and previously served as president, CEO and director
during 1992 and 1993.
FRANCIS JUNGERS (70) has been a director of the Company since 1995. Mr.
Jungers is an independent consultant on energy and the Middle East and has been
so since 1978 when he retired as Chairman of the Board and Chief Executive
Officer of Arabian American Oil Company, an oil producing company with which
Mr. Jungers was associated for over thirty years. Mr. Jungers had previously
served on the Board of Directors of the Company from 1978 to 1985 and had been
an Advisory Director of the Company from 1985 until his re-election to the
Board in 1995. Mr. Jungers is also a director of the AES Corporation,
Georgia-Pacific Corporation, Thermo Ecotek Corporation, Thermo Electron
Corporation and Thermo Quest, Inc.
JOSEPH J. MELONE (65) has been a director of the Company since 1991. Mr.
Melone has been President and Chief Executive Officer of EQ since February
1996. He was President and Chief Operating Officer of EQ from May 1992 to
February 1996. He has been Chairman of Equitable Life since February 1994, its
Chief Executive Officer from September 1992 to February, 1996, and a director
since November 1990. Mr. Melone was President of The Prudential Insurance
Company of America from December 1984 until October 1990. He is currently a
director of Equitable Real Estate and Alliance. He is also a director of AXA
Equity & Law, AT&T Capital Corporation and Foster Wheeler Corporation.
5
<PAGE>
W.J. SANDERS III (60) has been a director of the Company since 1995. Mr.
Sanders is Chairman of the Board and Chief Executive Officer of Advanced
Micro Devices, Inc., a semiconductor manufacturer he founded in 1969. Mr.
Sanders had previously served on the Board of Directors of the Company from
1979 to 1985 and had been an Advisory Director of the Company from 1985 until
his re-election to the Board in 1995.
JOHN C. WEST (74) has been a director of the Company since 1995. Mr. West
is an attorney who has served as the United States Ambassador to the Kingdom
of Saudi Arabia and as Governor of the State of South Carolina. Mr. West had
previously served on the Board of Directors of the Company from 1981 to 1985
and had been an Advisory Director of the Company from 1985 until his
re-election to the Board in 1995. Mr. West is Chairman of the Board of
Seibels Bruce Group, Inc. He is also Distinguished Professor of Middle East
Studies at the University of South Carolina.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR
LISTED ABOVE.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors has a standing Audit Committee (the "Audit
Committee") and a standing Compensation and Management Committee (the
"Compensation and Management Committee"). The Company does not currently have a
standing nominating committee.
The Audit Committee currently consists of Messrs. Jungers (Chairman) and
Jarmain. Among other things, the Audit Committee makes recommendations to the
Board of Directors regarding the engagement of the Company's independent
auditors, reviews the plan, scope and results of the audit, reviews with the
auditors and management the Company's policies and procedures with respect to
internal accounting and financial controls and reviews changes in accounting
policy and the scope of the non-audit services which may be performed by the
Company's independent auditors.
The Compensation and Management Committee currently consists of Messrs. West
(Chairman), Harris and Jarmain. The Compensation and Management Committee has
primary responsibility for all aspects of executive officer compensation and
benefits, including salaries and grants and awards under the Company's 1995
Restricted Stock Unit Plan, 1996 Stock Option Plan and 1996 Incentive
Compensation Plan.
During 1996, the Board of Directors held five meetings, the Compensation and
Management Committee held six meetings and the Audit Committee held three
meetings. During 1996, each of the directors attended at least seventy-five
percent of the meetings of the Board of Directors held during the period that
he was a director and seventy-five percent of the meetings of the Audit
Committee and the Compensation and Management Committee held during the period
that he served on such committees, except Messrs Bebear and Sanders who
each missed two of the five meetings he was eligible to attend.
6
<PAGE>
COMPENSATION OF DIRECTORS
The Company's policy is not to pay compensation to directors who are also
employees of the Company, Equitable or any affiliates of Equitable. The
Company's policy is to pay independent directors an annual retainer of $25,000
plus $1,000 for each Board Meeting attended and $500 for each meeting of a
committee of the Board attended. Subject to stockholder approval of the
Company's 1996 Non-Employee Directors Stock Plan, on November 21, 1996 each
independent director was granted an option to purchase 4,000 shares of Company
stock. In addition, under that plan each eligible director will receive an
annual option grant to purchase 4,000 shares of Company stock at the end of
each Annual Meeting of Stockholders. See also the "1996 Non-Employee Directors
Stock Plan" proposal for additional information about compensation of such
independent directors.
7
<PAGE>
EXECUTIVE COMPENSATION AND BENEFIT PLANS
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers based on 1996 salary and annual bonuses
(collectively, the "Named Executive Officers") who were serving as executive
officers at the end of the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
OTHER
SALARY BONUS ANNUAL
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) COMPENSATION $
<S> <C> <C> <C> <C>
John S. Chalsty ............ 1996 $500,000 $10,000,000 $167,645 (6)
Chairman & Chief 1995 500,000 7,000,000 159,496 (6)
Executive Officer 1994 465,385 7,500,000 133,470 (6)
Joe L. Roby ................ 1996 175,000 8,500,000 97,672 (8)
President and 1995 175,000 0(7) 62,190 (8)
Chief Operating Officer 1994 175,000 0(7) 26,033 (8)
Carl B. Menges ............. 1996 190,000 1,000,000 55,324 (9)
Vice Chairman 1995 190,000 1,000,000 26,318 (9)
1994 190,000 2,000,000 33,386 (9)
Anthony F. Daddino ......... 1996 175,000 3,000,000 27,112 (10)
Executive Vice President 1995 175,000 3,000,000 28,936 (10)
& Chief Financial Officer 1994 175,000 3,600,000 27,971 (10)
Michael M. Bendik 1996 140,000 850,000 10,527 (11)
Senior Vice President & 1995 140,000 750,000 14,402 (11)
Chief Accounting Officer . 1994 140,000 900,000 10,734 (11)
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------------
RESTRICTED OPTIONS/ LTIP
STOCK SARS PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION AWARDS($)(2) (#)(3) ($)(4) COMPENSATION (5)
<S> <C> <C> <C> <C>
John S. Chalsty ............ -- -- -- $695,447
Chairman & Chief $9,705,393 636,357 -- 144,184
Executive Officer -- -- -- 157,956
Joe L. Roby ................ -- 250,000 $23,983,762 403,765
President and 7,279,065 477,268 11,083,075 --
Chief Operating Officer -- -- -- --
Carl B. Menges ............. -- -- 672,534 151,466
Vice Chairman 1,010,988 66,287 2,209,923 --
-- -- -- --
Anthony F. Daddino ......... -- -- 6,996,750 242,702
Executive Vice President 4,043,925 265,149 4,143,605 171,704
& Chief Financial Officer -- -- -- --
Michael M. Bendik -- -- -- 55,667
Senior Vice President & 303,291 19,886 -- --
Chief Accounting Officer . -- -- -- --
</TABLE>
- --------------
(1) Includes amounts contributed by each of the Named Executive Officers
under various deferred compensation plans maintained by the Company.
<PAGE>
(2) The amounts shown in the table for 1995 were calculated by multiplying
$27.00 per share, the initial public offering price of the Common Stock
in October 1995, by the number of restricted stock units received by
each of the Named Executive Officers under the Company's 1995 Restricted
Stock Unit Plan (the "1995 Restricted Stock Unit Plan") at the time of
the initial public offering (the "Initial Public Offering"). Such
amounts, therefore, are gross amounts which have not been reduced by the
amounts accrued under certain multi-year compensation arrangements
maintained by the Company which were surrendered by the Named Executive
Officers in exchange for the restricted stock units received. Messrs.
Chalsty, Roby, Menges, Daddino and Bendik surrendered $6,940,518,
$5,205,389, $722,920, $2,892,031 and $216,891, respectively. Each
restricted stock unit represents the right to receive a share of Common
Stock, subject to certain conditions described below. Units awarded
under the 1995 Restricted Stock Unit Plan fall into two categories:
"Base Units" and "Premium Units." Base Units will generally vest in two
equal installments in February 1997 and February 1998. Premium Units
will generally vest in three equal installments in February 1998,
February 1999 and February 2000. No dividends or dividend equivalents
are paid on the restricted stock units. As of December 31, 1996, the
last day of trading during the fiscal year ended December 31, 1996, the
aggregate value of the restricted stock units, based on the average of
the high and low prices of Common Stock as reported on the New York
Stock Exchange on such date of $36.3125 was $13,052,854, $9,789,668,
$1,359,685, $5,438,959 and $407,898 for Messrs. Chalsty, Roby, Menges,
Daddino and Bendik, respectively.
8
<PAGE>
(3) The options shown for Mr. Roby for 1996 have an exercise price of
$32.50, a term of ten years, and will become exercisable in four equal
installments on May 16, 1997, May 16, 1998, May 16, 1999 and May 16,
2000. The options shown for 1995 were granted under the Company's 1995
Stock Option Plan (the "1995 Stock Option Plan") in return for
reductions of $6.075 per share of the Named Executive Officer's
interests under certain multi-year cash compensation arrangements
maintained by the Company. Messrs Chalsty, Roby, Menges, Daddino and
Bendik surrendered $3,865,869, $2,899,403, $402,694, $1,610,780, and
$120,807, respectively, of such interests. The options have an exercise
price of $27.00, which is equal to the Initial Public Offering price of
the Common Stock, have a ten-year term and become exercisable in two
equal installments in February 1997 and February 1998. The Company's
stock plans do not permit the granting of stock appreciation rights
("SARS").
(4) The amounts shown for Messrs. Menges and Daddino reflect payments made
in 1995 of amounts earned under the Company's 1991-1993 Long Term
Incentive Plan and payments made in 1996 of amounts earned under the
Company's 1994-1996 and 1991-1996 Long Term Incentive Plans. The amounts
shown for Mr. Roby reflect payment of amounts earned under the Company's
1991-1993 and 1994-1996 Long Term Incentive Plans and amounts previously
earned under a prior multi-year bonus program.
(5) Of the amounts shown in the table $144,807, $167,954 and $142,954 for
1996 and all of the amounts for 1995 and 1994 reflect the value of
premiums paid by the Company on behalf of Messrs. Chalsty, Roby, and
Daddino, respectively, under split-dollar life insurance policies. The
amounts represent the present value of the interest projected, on an
actuarial basis, to accrue for the benefit of Messrs. Chalsty, Roby ,
and Daddino, respectively, on the portions of the premiums paid by the
Company in that year. In addition, $550,640, $235,811, $151,466, $99,748
and $55,667 is included for 1996 for Messrs. Chalsty, Roby, Menges,
Daddino and Bendik, respectively, to reflect distribution in 1996 in
respect of units awarded in prior years under a plan which allocated to
the participants a portion of the profits realized by the Company on
certain investments.
(6) Of the amounts shown in the table for Mr. Chalsty, $16,487, $12,935 and
$12,504 reflect the value of an automobile leased on his behalf by the
Company (as well as related operating expenses therefor) during 1996,
1995 and 1994, respectively. These amounts have not been reduced by the
proportion of the automobile's use for business rather than personal
reasons. In addition, $55,158, $50,561 and $30,966 of the amounts shown
reflect the value of financial planning services provided on his behalf
by the Company during 1996, 1995 and 1994, respectively, and $96,000,
$96,000 and $90,000 of the amounts shown reflect contributions by the
Company toward the cost of an apartment for Mr. Chalsty during 1996,
1995 and 1994, respectively.
(7) During these years, Mr. Roby participated in a multi-year bonus program.
See footnote (4), above.
(8) Of the amounts shown in the table for Mr. Roby, $23,552, $18,618, and
$15,897 reflect the value of an automobile leased on his behalf by the
Company (as well as related operating expenses therefor) during 1996,
1995 and 1994, respectively. These amounts have not been reduced by the
proportion of the automobile's use for business rather than personal
reasons. In addition, $74,120, $43,572 and $10,136 of the amounts shown
reflect the value of financial planning services provided on Mr. Roby's
behalf by the Company during 1996, 1995 and 1994, respectively.
(9) Of the amounts shown in the table for Mr. Menges, $22,801, $18,265 and
$20,594 reflect the value of an automobile leased on his behalf by the
Company (as well as related operating expenses therefor) during 1996,
1995 and 1994, respectively. These amounts have not been reduced by the
proportion of the automobile's use for business rather than personal
reasons. In addition, $32,523, $8,053 and $12,792 of the amounts shown
reflect the value of financial planning services provided on Mr. Menges'
behalf by the Company during 1996, 1995 and 1994, respectively.
(10) Of the amounts shown in the table for Mr. Daddino, $21,404, $20,687 and
$18,832 reflect the value of an automobile leased on his behalf by the
Company (as well as related operating expenses therefor) during 1996,
1995 and 1994, respectively. These amounts have not been reduced by the
proportion of the automobile's use for business rather than personal
reasons. In addition, $5,708, $8,249 and $9,139 of the amounts shown
reflect the value of financial planning services provided on Mr.
Daddino's behalf by the Company during 1996, 1995 and 1994,
respectively.
(11) The amounts shown in the table for Mr. Bendik reflect the value of an
automobile leased on his behalf by the Company (as well as related
operating expenses therefor) during 1996, 1995 and 1994, respectively.
These amounts have not been reduced by the proportion of the
automobile's use for business rather than personal reasons.
9
<PAGE>
STOCK OPTION TRANSACTIONS IN 1996
The following table sets forth certain information concerning stock options
granted during 1996 by the Company to Mr. Roby, the only Named Executive
Officer who received a grant in 1996. The hypothetical present value on date of
grant shown below is presented pursuant to the rules of the Securities and
Exchange Commission (the "Commission") and is calculated under the Modified
Black-Scholes Model for pricing options. The actual before-tax amount, if any,
realized upon the exercise of a stock option will depend upon the excess, if
any, of the market price of the Common Stock over the exercise price per share
of the stock option at the time the stock option is exercised. There is no
assurance that the hypothetical present value of the stock option reflected in
this table will be realized.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES IN BASE PRICE GRANT DATE
NAME OPTIONS GRANTED (1) FISCAL YEAR(2) ($/SH) EXPIRATION DATE PRESENT VALUE $(3)
<S> <C> <C> <C> <C> <C>
JOE L. ROBY .. 250,000 11.8% $32.50 5/15/ 2006 $1,950,000
</TABLE>
- --------------
(1) The option to Mr. Roby was granted May 16, 1996 and becomes exercisable
in four equal installments on May 16, 1997, May 16, 1998, May 16, 1999
and May 16, 2000.
(2) The percentage shown is based on total option grants to employees in
1996 of 2,110,000 shares. These options have exercise prices ranging
from $29.875 to $33.125.
(3) The hypothetical present value on grant date is calculated under the
Modified Black-Scholes Model, which is a mathematical formula used to
value options traded on stock exchanges. This formula considers a number
of factors in hypothesizing an option's present value. Factors used to
value the option granted, which expires on May 15, 2006, include the
stock's expected volatility rate (27.68%, based upon the average
volatility of the Peer Group used in the Common Stock Performance graph,
see "Common Stock Performance"), risk free rate of return (6.64%),
dividend yield (1.54%), projected time of exercise (five years) and
projected risk of forfeiture rate for vesting period (25%).
10
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1996)
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED OPTIONS AT FY-END (#)(1) AT FY-END ($)(2)
NAME ON EXERCISE(1) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
John S. Chalsty ... -- -- 636,357 $5,926,075
Joe L. Roby ........ -- -- 727,268 5,397,683
Carl B. Menges ..... -- -- 66,287 617,298
Anthony F. Daddino -- -- 265,149 2,469,200
Michael M. Bendik . -- -- 19,886 185,188
</TABLE>
- --------------
(1) As of December 31, 1996, all options were unexercisable. See "Summary
Compensation Table--Options/SARs(#)."
(2) An "in-the-money option" is an option for which the market price of the
underlying Common Stock at year-end 1996 exceeds the exercise price of
the option. The value of unexercised, in-the-money options shown above
is based upon the difference between the exercise price of all options
and $36.3125, the average of the high and low prices of the Common Stock
as reported on the New York Stock Exchange on December 31, 1996, the
last day of trading during the fiscal year ended December 31, 1996. The
actual amount, if any, realized upon exercise of stock options will
depend upon the market price of the Common Stock relative to the
exercise price per share of the stock option at the time the stock
option is exercised. There is no assurance that the values of
unexercised in-the-money stock options reflected in this table will be
realized.
LONG-TERM INCENTIVE PLANS
No long-term incentive plan awards were made by the Company to its Chief
Executive Officer and the other Named Executive Officers during the fiscal year
ended December 31, 1996.
CERTAIN DEFERRED COMPENSATION PLANS AND ARRANGEMENTS
Certain employees, including the Named Executive Officers, deferred a
portion of their 1983 or 1984 compensation in return for which the Company
agreed to pay each of them a specified annual benefit for 15 years beginning at
age 65. Benefits are based upon the participant's age and the amount deferred
and are calculated to yield an approximate 12.5% annual compound return. In the
event of the participant's disability or death, an equal or lesser amount is to
be paid to the participant or his beneficiary. After age 55, participants, the
sum of whose age and years of service is equal to or greater than 80, may elect
to have their benefits begin before age 65, in an actuarially reduced amount.
The Company has funded its obligations through the purchase of life insurance
policies. The table below shows as to the Named Executive Officers the
estimated annual benefit payable at age 65. Each of these individuals is fully
vested in the applicable benefit.
<TABLE>
<CAPTION>
ESTIMATED
NAME ANNUAL BENEFITS
<S> <C>
John S. Chalsty .................................... $ 47,053
Joe L. Roby ......................................... 56,527
Carl B. Menges ..................................... 33,047
Anthony F. Daddino .................................. 107,313
Michael M. Bendik ................................... 91,781
</TABLE>
11
<PAGE>
COMPENSATION AND MANAGEMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation and Management Committee during the fiscal
year ended December 31, 1996 was an officer or employee of the Company. Mr.
Jarmain has been a director of EQ and Equitable Life since 1992. See
"Security Ownership of Certain Beneficial Holders and Management" and
"Certain Relationships and Related Transactions."
COMPENSATION AND MANAGEMENT COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Committee of the Board of Directors (for the
purposes of this report, the "Committee") is composed entirely of independent
outside directors, none of whom is a current officer or employee of the Company
or its subsidiaries. The Committee is responsible for the establishment of
policies governing and for the implementation, administration and
interpretation of all aspects of executive officer compensation, which includes
base salary, short term performance incentives, long term performance
incentives and equity based incentives. The Committee reviews the compensation
of executive officers on an ongoing basis, developing and executing cost and
tax-effective plans with the following objectives:
o Support the Company's business strategies and goals,
o Attract and retain the highest caliber executive officers by providing
compensation opportunities comparable to those offered by other leading
financial services firms with whom the Company competes for business and
talent,
o Motivate high performance in an entrepreneurial incentive-driven
culture,
o Closely align executive officers' interests with stockholders'
interests, and
o Reward results achieved short term and in the long term creation of
shareholder value.
The compensation policy of the Company is to base total compensation on
performance. By virtue of the Company's establishment of relatively low fixed
base compensation and highly-leveraged incentive opportunities, total
compensation will vary directly with the financial results of the Company and
the total returns to its stockholders, and may exceed the 75th percentile for
superior performance of the Company's peer group.
The Committee was established immediately prior to the Initial Public
Offering. As such, the Committee will be administering certain plans that were
approved and in place prior to its establishment. The Committee views such
plans as appropriate and supportive of the policies and objectives discussed
above.
In its deliberations, the Committee utilizes the services of an independent
consulting firm with expertise in executive compensation among financial
services firms, as well as historical marketplace survey data. The survey data
reviewed in setting compensation levels for executive officers is based on a
peer group of 12 companies. Of these firms, four are included in the Peer Group
Index used for the Common Stock Performance graph set forth below. See "Common
Stock Performance." The firms not included in the Peer Group Index are either
not publicly traded or owned, or have a mix of businesses not representative of
the Company on an overall basis, although various segments are comparable to
certain divisions of the Company.
12
<PAGE>
It is the intention of the Committee that executive officer compensation be
determined and administered on the basis of total compensation, rather than
based on separate free-standing components. In keeping with the Company's
policy of sustaining its entrepreneurial incentive-driven culture, no
Company-paid retirement benefits are provided to executive officers.
The total compensation program for executive officers established by the
Committee is comprehensive and integrated to include salary, short term and
long term performance incentives and equity-based incentives.
SALARY
Salaries are generally below median for similar positions within the
financial services industry. Salaries are reviewed annually by the Committee
for appropriateness in consideration of the Company's compensation policy,
marketplace practice, the Company's financial results, individual position
responsibilities and performance. Of the ten current executive officers, only
three have received salary increases since 1987.
SHORT TERM AND LONG TERM PERFORMANCE INCENTIVES
1996 Incentive Compensation Plan. The 1996 Incentive Compensation Plan,
which is administered by the Committee, provides for the award of short term
and long term incentives based on Company profitability. At the beginning of
each performance period, each executive officer is assigned an interest in one
or more award pools. After completion of each performance period, the Committee
evaluates the performance of each executive officer based on the criteria
discussed below and, in its sole and absolute discretion, may reduce or
increase awards, except that the Committee may only reduce and may not increase
an award to a current Named Executive Officer. Awards may be paid in cash,
stock-based payments or any combination thereof.
Short Term Performance Incentives. Aggregate short term incentive
compensation awards are based primarily on the Company's profitability over a
one or two year period. Individual awards are based on an assessment of
individual, business unit, and Company performance.
In assessing such performance, the Committee evaluates a number of
quantitative and qualitative factors without assigning weights and considers
absolute and relative results achieved and strategic progress during the prior
one or two years, as well as over a period of years. Such performance is
evaluated by comparisons to prior years, peer companies and overall industry
performance. Factors considered may include the quality, consistency and level
of earnings, growth, return on equity, cost control and margins, as well as the
services rendered and value added to clients of the Company.
With regard to 1996, pre-tax profits rose 59% over 1995, and awards to
executive officers were, for the most part, maintained or increased from prior
year levels in recognition of this performance and competitive pay levels.
Long Term Performance Incentives. Long term performance incentives are
generally based on the Company's adjusted cumulative net income and return on
equity over a period of three years or longer. Such incentives are designed to
strengthen the coincidence of interest of executive officers and the Company's
shareholders in the long term growth of enterprise value, as well as to
encourage retention among key managers of the Firm through vesting and
competitive compensation opportunities.
13
<PAGE>
The number of units awarded to each executive officer is subject to annual
review and reflects their individual performance, responsibility level, and
potential impact on the long term financial results of the Company. Long term
incentive payments made in 1996 to executive officers named in the Summary
Compensation Table represent amounts earned under the Company's 1991-1993,
1994-1996, and 1991-1996 Long Term Incentive ("LTI") Plans, as well as, in the
case of Mr. Roby, amounts earned under a prior multi-year bonus program.
EQUITY-BASED INCENTIVES
o 1995 Restricted Stock Unit Plan. As discussed above, executive
officers were granted restricted stock units in 1995 under the 1995
Restricted Stock Unit Plan. These grants were made to executive
officers in return for reductions in the value of their interests in
the 1991 or 1994 LTI Plan. Restricted stock units granted in 1995
will vest in installments from February 1997 to February 2000.
o 1995 Stock Option Plan. Executive officers were granted options to
purchase shares of common stock under the 1995 Stock Option Plan.
These grants were made to executive officers in exchange for
reduction in the value of their interests in the 1991 or 1994 LTI
Plan. Options granted under the 1995 Stock Option Plan will vest in
February 1997 and February 1998. No further grants will be made
under this plan which has been replaced by the 1996 Stock Option
Plan, as discussed below.
The value of restricted stock units and stock options awarded under
the 1995 Restricted Stock Unit Plan and the 1995 Stock Option Plan
may be realized only after vesting from 1997 to 2000, and will
depend on the market value of the Company's common stock in the
future. Thus, the ultimate value of such restricted stock unit and
stock option awards will provide a continuing incentive to executive
officers for the creation of shareholder value.
o 1996 Stock Option Plan. At the 1996 Annual Meeting stockholders
approved the 1996 Stock Option Plan which is administered by the
Committee and provides for the award of stock options to employees
of the Company. In recognition of his contributions to the Company's
long term success and his promotions to the positions of President
in February 1996 and Chief Operating Officer in November 1995, Mr.
Roby was granted an option under the Plan on 250,000 shares. No
other executive officer received an option grant in 1996.
The Committee does not consider stock holdings, prior option or
stock grants, prior long term performance incentive awards or the
appreciation thereon when making future option, stock and long term
performance incentive award determinations.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Both the quantitative and qualitative criteria referenced above are applied
in assessing the performance and determining the compensation of the Chief
Executive Officer, who participates in the Company's executive compensation
program on the same basis as all other executive officers.
14
<PAGE>
In setting the Chief Executive Officer's 1996 total compensation, the
Committee took into account the outstanding annual and long-term performance of
the Company under his leadership and its strategic progress, all of which were
viewed as critical to the success realized by the Company in 1996.
The Company's strong 1996 performance included 27% growth in revenues and a
63% increase in net income over 1995, recording the highest profit year in the
Company's history. Return on equity rose to 20.6% from 17.1% in 1995. Based on
such outstanding performance, the Chief Executive Officer received an annual
incentive award of $10 million for 1996. His salary of $500,000 was last
increased from $400,000 in 1994 based on a review of peer salaries in other
firms. Due to his participation in restricted stock unit and stock option plans
as part of the Initial Public Offering, the Chief Executive Officer was not
granted any stock options in 1996.
The Committee believes that the total compensation of the Chief Executive
Officer is appropriate relative to his performance, the performance of the
Company and the compensation of other heads of high-performing investment
firms.
TAX CONSIDERATIONS
The Committee's policy is to preserve corporate tax deductions while
maintaining the flexibility to approve compensation arrangements that it deems
to be in the best interests of the Company and its stockholders, but which may
not always qualify for full tax deductibility.
Compensation and Management Committee
Louis Harris
W. Edwin Jarmain
John C. West, Chairman
15
<PAGE>
COMMON STOCK PERFORMANCE
The following chart compares the Company's cumulative total return on
stockholder investment since the date of the Initial Public Offering (October
24, 1995) with that of the Standard & Poor's 500 and a Peer Group Index
(consisting of The Bear Stearns Companies, Inc., Lehman Brothers Holdings,
Inc., Morgan Stanley Group, Inc. and Salomon, Inc.). All indices include the
reinvestment of dividends.
[GRAPHIC OMITTED]
INDEX POINTS
<TABLE>
<CAPTION>
10/26/95 12/31/95 12/31/96
<S> <C> <C> <C>
Donaldson, Lufkin & Jenrette, Inc. $100.00 $115.74 122.94
S&P 500 ............................ 100.00 111.20 130.81
Peer Group ......................... 100.00 98.23 137.90
</TABLE>
16
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth, as of March 5, 1997, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by each
director and nominee for director, by each person known to the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock, by the
Named Executive Officers and by all current directors and executive officers as
a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
GIVING EFFECT TO
BENEFICIAL OWNERSHIP CONVERSION OF ALL
GIVING EFFECT TO RESTRICTED STOCK
CURRENT CONVERSION OF ALL UNITS AND ALL STOCK
BENEFICIAL OWNERSHIP(1) RESTRICTED STOCK UNITS(2) OPTIONS(3)
----------------------- ------------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT SHARES PERCENT
<S> <C> <C> <C> <C> <C> <C>
AXA-UAP(4) .......................... 42,720,000 78.4% 42,720,000 73.2% 42,720,000 61.5%
23 Avenue Matignon
75008 Paris, France
The Equitable Companies
Incorporated(5) .................... 42,635,000 78.2 42,635,000 73.0 42,635,000 61.4
787 Seventh Avenue
New York, New York 10019
The Equitable Life Assurance
Society of the United States(6) ... 19,230,770 35.3 19,230,770 32.9 19,230,770 27.7
787 Seventh Avenue
New York, New York 10019
John S. Chalsty(7) .................. 450,416 * 681,347 1.2 999,526 1.4
Joe L. Roby(8) ...................... 335,030 * 508,229 * 996,863 1.4
Carl B. Menges(9) ................... 46,531 * 70,587 * 103,731 *
Anthony F. Daddino(10) .............. 186,127 * 282,349 * 414,924 *
Hamilton E. James(11) ............... 232,659 * 352,936 * 518,654 *
Richard S. Pechter(12) .............. 335,030 * 508,229 * 746,863 1.1
Theodore P. Shen(13) ................ 335,030 * 508,229 * 746,863 1.1
Michael M. Bendik(14) ............... 13,959 * 21,176 * 31,119 *
Claude Bebear(15) ................... 1,000 * 1,000 * 1,000 *
Henri de Castries(16) ............... 1,000 * 1,000 * 1,000 *
Jerry M. de St. Paer(17) ............ 300 * 300 * 300 *
Denis Duverne ....................... 0 * 0 * 0 *
Louis Harris ........................ 4,000 * 4,000 * 8,000 *
Henri G. Hottinguer ................. 2,000 * 2,000 * 6,000 *
W. Edwin Jarmain(18) ................ 5,024 * 5,024 * 9,024 *
Francis Jungers ..................... 1,000 * 1,000 * 5,000 *
Joseph J. Melone(19) ................ 1,024 * 1,024 * 1,024 *
W.J. Sanders III .................... 1,405 * 1,405 * 5,405 *
John C. West(20) .................... 11,200 * 11,200 * 15,200 *
All directors and executive officers
as a group(21) ..................... 2,004,266 3.6 3,026,622 5.1% 4,709,227 6.8
</TABLE>
- --------------
* Less than 1.0%.
(1) The number of shares owned are those "beneficially owned," as determined
under the rules of the Commission, and such information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which a
person has sole or shared voting power or investment power and any
shares of Common Stock which the person has the right to acquire within
60 days through the exercise of any option, warrant or right, through
conversion of any security, or pursuant to the automatic termination of
power of attorney or revocation of trust, discretionary account or
similar arrangement.
(2) In connection with the Initial Public Offering, approximately 500
employees of the Company exchanged an aggregate of $100.0 million of
their interests under certain cash compensation arrangements, including
the Company's 1991-1993 Long Term
17
<PAGE>
Incentive Plan (the "1991 LTI Plan") and the Company's 1994-1996 Long
Term Incentive Plan (the "1994 LTI Plan"), for restricted stock units
representing an aggregate of approximately 5.2 million shares of Common
Stock (the "LTI Restricted Stock Unit Exchange"). Approximately 36% of
these units vested on February 1, 1997 and are included in the Current
Beneficial Ownership column. The balance of these units, included in
this column, are subject to forfeiture in certain circumstances and will
vest annually in specified proportions from February 1998 through
February 2000.
(3) In connection with the Initial Public Offering, employees acquired
options to purchase an aggregate of approximately 9.2 million shares of
Common Stock at a price of $27.00 per share by foregoing an aggregate of
$55.7 million of their future interests under cash compensation
arrangements (the "LTI Option Exchange"). In addition, Mr. Roby was
granted an option to purchase 250,000 share of Common Stock in 1996 and
Messrs Harris, Hottinguer, Jungers, Jarmain, Sanders and West have each
been granted an option to purchase 4,000 shares of Common Stock subject
to stockholder approval of the Company's 1996 Non-Employee Directors
Stock Plan. The table provides certain information regarding the
beneficial ownership of the Company's Common Stock by AXA-UAP, EQ,
Equitable Life, each of the Company's executive officers and all
employees as a group assuming the issuance of all of the Common Stock
pursuant to outstanding restricted stock units and options.
(4) AXA-UAP is EQ's largest stockholder, beneficially owning $392.2 million
of EQ's Series E convertible preferred stock and approximately 60.7% of
EQ's outstanding common stock (without giving effect to the conversion
of the Series E convertible preferred stock owned by AXA-UAP). As of
March 5, 1997, a group of four French mutual insurance companies (the
"Mutuelles AXA") controlled directly or indirectly, through various
holding companies, approximately 26.1% of the outstanding shares
representing approximately 38% voting power of AXA-UAP. For insurance
regulatory purposes the shares of capital stock of EQ beneficially owned
by AXA-UAP and its subsidiaries have been deposited into a voting trust
to ensure that certain of the indirect minority shareholders of AXA-UAP
do not exercise control over EQ or certain of its insurance
subsidiaries.
(5) The number listed includes shares of Common Stock beneficially owned by
EQ's wholly-owned subsidiary, Equitable Life.
(6) The number listed includes shares of Common Stock beneficially owned
through its wholly-owned subsidiary, Equitable Holding Corporation.
(7) Includes 1,000 shares owned by Mr. Chalsty's wife, 128,528 vested
restricted stock units and 318,178 shares subject to options held by
Mr. Chalsty. In addition, Mr. Chalsty beneficially owns 76,000 shares
of common stock of EQ, including 60,000 option shares exercisable
within 60 days.
(8) Includes 96,396 vested restricted stock units and 238,634 shares
subject to options held by Mr. Roby. In addition, Mr. Roby holds an
option to purchase common stock of EQ which is exercisable within 60
days with respect to 30,000 shares.
(9) Includes 13,388 vested restricted stock units and 33,143 shares subject
to options held by Mr. Menges.
(10) Includes 34,053 vested restricted stock units and 132,574 shares
subject to options held by Mr. Daddino. In addition, Mr. Daddino holds
an option to purchase common stock of EQ which is exercisable within 60
days with respect to 30,000 shares.
(11) Includes 165,718 shares subject to options held by Mr. James.
(12) Includes 96,396 vested restricted stock units and 238,634 shares
subject to options held by Mr. Pechter. In addition, Mr. Pechter holds
an option to purchase common stock of EQ which is exercisable within 60
days with respect to 30,000 shares.
(13) Includes 96,396 vested restricted stock units and 238,634 shares
subject to options held by Mr. Shen. In addition, Mr. Shen holds an
option to purchase common stock of EQ which is exercisable within 60
days with respect to 30,000 shares.
(14) Includes 9,943 shares subject to options held by Mr. Bendik.
(15) Mr. Bebear also beneficially owns 1,274,375 shares of common stock of
AXA-UAP, including 1,169,733 option shares exercisable within 60 days,
and his wife owns 22 shares of common stock of AXA-UAP.
(16) Mr. de Castries also beneficially owns 33,188 shares of common stock of
AXA-UAP, including 32,188 option shares exercisable within 60 days.
(17) Mr. de St. Paer also beneficially owns 80,000 shares of common stock of
EQ, including 80,000 option shares exercisable within 60 days.
(18) Mr. Jarmain also beneficially owns 10,000 shares of common stock of EQ.
(19) Mr. Melone also beneficially owns 260,186 shares of common stock of EQ,
including 250,000 option shares exercisable within 60 days and be
beneficially owns 2,000 shares of the common stock of AXA-UAP.
(20) Of the Common Stock beneficially owned by Mr. West, 5,500 shares are
held on his behalf by a profit sharing plan. In addition, 200 shares are
owned directly by his wife, as to which shares Mr. West disclaims
beneficial ownership.
(21) All directors and executive officers as a group also beneficially own
546,186 shares of common stock of EQ and 1,309,585 shares of common
stock of AXA-UAP.
18
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten-percent of a registered class of the Company's equity
securities, to file initial statements of beneficial ownership (Form 3), and
statements of changes in beneficial ownership (Forms 4 or 5), of Common Stock
and other equity securities of the Company with the Commission and the New York
Stock Exchange, Inc. Officers, directors and greater than ten-percent
shareholders are required by Commission regulation to furnish the Company with
copies of all such forms they file.
To the Company's knowledge, based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no additional forms were required for those persons, the Company believes
that all filing requirements applicable to its officers, directors, and greater
than ten-percent beneficial owners were complied with during 1996.
ITEM 2: ADOPTION AND APPROVAL OF THE DONALDSON, LUFKIN &
JENRETTE, INC. 1996 NON-EMPLOYEE DIRECTORS STOCK PLAN
GENERAL INFORMATION
The Board of Directors adopted the 1996 Non-Employee Directors Stock Plan
("Directors Stock Plan") on November 21, 1996 to enable part of the
compensation of non-employee directors to be paid in the form of equity of the
Company, thereby increasing such directors' interests in the Company's
continued financial success as well as enhancing the ability of the Company to
attract qualified individuals to serve as directors. The Directors Stock Plan
is subject to approval by the Company's stockholders at the 1997 Annual Meeting
of stockholders. The following summary of the Directors Stock Plan is qualified
in its entirety by reference to the complete text of such Plan, which is
included as Annex A to this Proxy Statement.
SHARES SUBJECT TO THE PLAN
A total of 200,000 shares are authorized for grant under the Directors Stock
Plan, but to the extent shares are so delivered the number of shares authorized
under the Company's 1996 Stock Option Plan is reduced. The shares to be
delivered under the Directors Stock Plan will be made available from the
authorized but unissued shares of the Company or from shares reacquired by the
Company. Shares tendered to the Company in satisfaction or partial satisfaction
of the exercise price of any option will again be available for grant under the
Company's Directors Stock Plan.
ADMINISTRATION
The Directors Stock Plan is administered by the Board of Directors (the
"Board"). The Board shall have the sole and complete authority to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
operation of the Directors Stock Plan as it shall deem advisable, and to
interpret its terms and provisions.
19
<PAGE>
ELIGIBILITY
Each director of the Company who is not an employee of the Company, its
subsidiaries or any of its affiliates (as defined in the Plan) is eligible to
participate in the Directors Stock Plan. No director who is an employee of the
Company is eligible to receive an award under the Plan. There are currently 6
eligible directors.
GRANTS
The Plan provides for an automatic grant of an option to purchase 4,000
shares of Common Stock to each person who is an eligible director on the date
the Plan was approved by the Board, subject to approval of the Plan by the
Company's stockholders. This grant was made on November 21, 1996 at an exercise
price of $33.50 per share. Thereafter, each person who is an eligible director
at the end of each annual meeting of stockholders shall be granted an option to
purchase 4,000 shares effective as of the date of such meeting. The automatic
options granted under the Directors Stock Plan are nonstatutory options, the
exercise price of which shall be equal to the fair market value of the
Company's Common Stock on the date of grant. The term of each option is 10
years from date of grant and options will become exercisable in four equal
installments on each of the first four anniversaries of the date of grant.
If an optionee's service as a director of the Company is terminated by
reason of death, disability (as determined by the Board) or retirement at or
after age 65, such director's automatic options shall become fully exercisable
and may be exercised for the period set forth below, following such termination
of service (but not beyond the ten-year term): (i) 12 months following
termination by reason of death, (ii) 36 months following termination by reason
of disability, and (iii) for the remainder of the ten-year term in the event of
retirement at or after age 65. If an optionee's service as a director is
terminated for cause, such director's automatic options shall terminate
immediately upon his or her termination of service. If an optionee's service as
a director is terminated for any other reason, such director's automatic
options may be exercised for 12 months following such termination (but not
beyond the ten-year term), and only to the extent such automatic options were
vested on the date of termination of service.
The exercise price of options granted under the Directors Stock Plan, as
well as any amounts required to be withheld upon exercise, may be paid in cash,
stock or a combination of the two. To the extent permitted by the Board, shares
otherwise receivable upon exercise using the stock payment method may be
deferred at the prior election of the optionee.
In the event (i) options lapse, are canceled or are forfeited by a
recipient, (ii) shares are surrendered to pay withholding or the exercise price
of options, or (iii) awards are otherwise terminated without the issuance of
shares, the applicable number of shares will be available for additional grants
under the Directors Stock Plan.
The Board may also make discretionary grants of nonstatutory stock options
to eligible directors. The Board shall specify the term of these options, the
date or dates of exercisability and the effect of a director ceasing to serve
as a director of the Company. The option price shall not be less than the fair
market value of the Company's Common Stock on the date of grant except to the
extent the option is granted in substitution of another award or other payment
to which the eligible director is entitled at the time of grant. In addition,
the Board may make grants of stock appreciation rights, which entitle the
holder to receive the increase in the value of the Company's Common Stock, or a
restricted stock award which is
20
<PAGE>
the issuance of shares of the Company's Common Stock subject to such vesting
rules as the Board may prescribe. Generally, the Board has the authority to
determine the terms and conditions of stock appreciation rights and restricted
stock awards, including the applicable rules for a person ceasing service as a
director.
ADJUSTMENTS
The total number of shares of Common Stock that may be allocated pursuant to
options and awards under the Directors Stock Plan, the number of shares of
Common Stock subject to outstanding options and awards, the exercise price for
such options and other terms and conditions of options and awards may be
equitably adjusted by the Board in the event of changes in the Company's
capital structure resulting from certain corporate transactions, including a
spin-off, stock dividend, stock split or a subdivision, recapitalization,
reorganization, combination or reclassification of shares, a merger or
consolidation, change of control or similar event.
ASSIGNABILITY
The terms of each award are evidenced in writing and delivered to the
participant. The awards authorized under the Directors Stock Plan are subject
to applicable tax withholding requirements and, except to the extent provided
by the Board, may not be assigned or transferred, except by will or the laws of
descent and distribution.
AMENDMENTS AND TERMINATION
The Directors Stock Plan may be amended or terminated at any time by the
Board of Directors, except that no amendment may be made without shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement, including any approval requirement which is a prerequisite for
exemptive relief from Section 16(b) of the 1934 Act. In addition, no amendment
may adversely affect any outstanding option or award without the holder's
consent.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the Federal income tax consequences of
the Directors Stock Plan.
(1) When an optionee exercises an option and acquires shares, the difference
between the option price and any higher fair market value of the shares on the
date of exercise will be ordinary income to the optionee and the Company will
be allowed a deduction for Federal income tax purposes. When an optionee
disposes of shares acquired pursuant to the exercise of an option, any amount
received in excess of the market value of the shares on the date of exercise
will be treated as long or short term capital gain, depending upon the holding
period of the shares. If the amount received is less than the market value of
the shares on the date of exercise, the loss will be treated as long or short
term capital loss, depending upon the holding period of the shares.
(2) To the extent that an optionee pays all or part of the option price of
an option by tendering shares of Common Stock owned by the optionee, the normal
rules described in (1) above apply except that the number of shares received
upon such exercise which is equal to the number of shares surrendered as
21
<PAGE>
payment of the option price shall have the same tax basis and tax holding
period as the shares surrendered. Generally, the additional shares received
upon such exercise have a tax basis equal to the amount of ordinary income
recognized on such exercise (plus cash paid upon exercise, if any) and a
holding period which commences on the date of exercise.
(3) To the extent a director exercises a stock appreciation right, the
director will have taxable ordinary income equal to any cash received plus the
fair market value of any shares received and the Company will be entitled to a
deduction for Federal income tax purposes in the same amount.
(4) Restricted stock grants result in ordinary income equal to the fair
market value of the shares on the first day such shares are not subject to
substantial risk of forfeiture. Alternatively, a director may elect, within 30
days of the date of transfer, to report ordinary income based on the value of
the shares at the date of transfer. In either scenario the Company will be
allowed a deduction equal to the ordinary income recognized by the director.
The director will recognize any subsequent change in value of the shares as
capital gain or loss upon the sale of such shares.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE 1996 NON-EMPLOYEE
DIRECTORS STOCK PLAN.
ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors has
appointed KPMG Peat Marwick LLP to audit the accounts of the Company for the
fiscal year ending December 31, 1997. KPMG Peat Marwick LLP has audited the
consolidated financial statements of the Company since the Company was founded.
KPMG Peat Marwick LLP representatives will be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
Stockholder ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors is not required by the Company's bylaws or
otherwise. The Board of Directors has elected to seek such ratification as a
matter of good corporate practice. Should the stockholders fail to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
the fiscal year ending December 31, 1997, the Board of Directors will consider
whether to retain that firm for such year.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT
MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REGISTRATION RIGHTS AND INDEMNIFICATION AGREEMENT
Under a Registration Rights and Indemnification Agreement between the
Company and EQ, the Company has granted Equitable the right to require the
Company to register shares of Common Stock held by Equitable for sale in
accordance with Equitable's intended method of disposition thereof (a "demand
registration"). Equitable may require up to six such demand registrations, with
no more than
22
<PAGE>
one every six months. Additionally, the Company has granted to Equitable the
right subject to certain exceptions to participate in registrations of Common
Stock initiated by the Company on its own behalf or on behalf of its
stockholders (a "piggy-back registration"). The Company is required to pay
expenses (other than underwriting discounts and commissions) incurred by
Equitable in connection with the demand and piggy-back registrations. Subject
to certain limitations specified in the Registration Rights and Indemnification
Agreement, Equitable's registration rights are assignable to third parties. The
Registration Rights and Indemnification Agreement provides for indemnification
and contribution by the Company for the benefit of Equitable and permitted
assigns and their related persons relating to the demand and piggy-back
registrations. In addition, such Agreement provides for indemnification and
contribution by the Company for the benefit of Equitable and its related
persons with respect to other securities offerings by the Company and financial
and other information provided by the Company to Equitable and in Exchange Act
reports.
TAX SHARING AGREEMENTS
The Company was included in EQ's consolidated tax group for Federal income
tax purposes through December 31, 1996. In connection with the Initial Public
Offering, the Company and EQ entered into a Federal income tax sharing
agreement (the "Federal Income Tax Sharing Agreement"). Pursuant to the Federal
Income Tax Sharing Agreement, the Company and EQ generally make payments
between them such that, with respect to any period in which the Company was a
member of EQ's consolidated tax group for Federal income tax purposes (a
"Pre-Deconsolidation Period"), the amount of Federal income taxes to be paid by
the Company will be determined as though the Company were to file for such
period and all prior periods separate Federal income tax returns (generally
including any amounts determined to be due as a result of a redetermination of
the Federal income tax liability of the EQ consolidated group arising from an
audit or otherwise) as the common parent of an affiliated group of corporations
filing a consolidated return rather than being a consolidated subsidiary of EQ.
The Company is also entitled to receive certain payments from EQ in respect of
carrybacks of tax assets, if any, of the Company, determined on a separate
return basis, arising in a Pre-Deconsolidation Period beginning after the
completion of the Initial Public Offering. The amount of any such payment will
generally be determined, in the case of a carryback to a Pre-Deconsolidation
Period ending on or before the completion of the Initial Public Offering, by
the actual tax benefit received by the EQ consolidated group from such
carryback, or, in the case of a carryback to any Pre-Deconsolidation Period
beginning after the completion of the Initial Public Offering, by the benefit
that the Company would have received from such carryback on a separate return
basis.
With respect to the period the Company was a part of the EQ consolidated
group, EQ continues to have all the rights of a common parent of a consolidated
group, will be the sole and exclusive agent for the Company in any and all
matters related to the Federal income tax liability of the Company and will be
responsible for the preparation and filing of consolidated Federal income tax
returns. In addition, each member of a consolidated group for Federal income
tax purposes is jointly and severally liable for the Federal income tax
liability of each other member of its consolidated group. Accordingly, under
the Federal Income Tax Sharing Agreement, EQ has agreed to indemnify the
Company against such liabilities to the extent that they relate to the Federal
income tax liability of the EQ consolidated group for periods that the Company
is included in the EQ consolidated group, except to the extent attributable to
the Company.
23
<PAGE>
The Federal Income Tax Sharing Agreement also contains provisions in respect
of certain Federal income tax matters relating to a carryback of a tax asset,
if any, of the Company from a period beginning on or after the date on which
the Company ceases to be eligible for inclusion in EQ's consolidated group (a
"Post-Deconsolidation Period") to a Pre-Deconsolidation Period. Under the
Federal Income Tax Sharing Agreement, (i) the Company will agree to forego the
carryback of any net operating losses to a Pre-Deconsolidation Period unless EQ
consents to such carryback, which consent shall not be unreasonably withheld,
and (ii) the Company may be entitled to receive certain payments form EQ in
respect of any tax assets carried back to Pre-Deconsolidation Periods.
The Company also files combined, consolidated or unitary income tax returns
with ACMC, Inc. ("ACMC"), an indirect wholly-owned subsidiary of EQ, in certain
states and localities for periods through December 31, 1996. The Company and
ACMC have entered into a tax sharing agreement (the "State Tax Sharing
Agreement"), pursuant to which the Company and ACMC have agreed that with
respect to any period in which the Company and ACMC have filed or file a
combined, consolidated or unitary income tax return in a state or local taxing
jurisdiction, the amount of combined, consolidated or unitary income taxes to
be paid by ACMC will be determined as though ACMC were to file for such period
and all prior periods separate income tax returns with respect to such state or
local taxing jurisdiction. The Company has agreed to indemnify ACMC against any
combined, consolidated or unitary income taxes for periods in which the Company
files combined, consolidated or unitary income tax returns with ACMC, except to
the extent attributable to ACMC.
EMPLOYEES' SECURITIES COMPANY
Selected employees of the Company, including executive officers, are offered
the opportunity to become members of the DLJ First ESC L.L.C. (the "ESC"), an
investment vehicle which qualifies as an "employees' securities company" for
purposes of the Investment Company Act of 1940, as amended. The ESC invests in
the Company's merchant banking portfolio companies, typically acquiring between
30% and 40% of the Company's investment in such companies. The amounts invested
by members are augmented in the ratio of 4:1 by a combination of recourse loans
from the Company and preferred contributions to the ESC by the Company which
have a capped return equal to the prime rate plus 1 3/4%, each of which is
repaid to the Company upon realization of the applicable portfolio investments.
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<PAGE>
Amounts invested in the ESC by each of the Company's executive officers in
1996 are set forth below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
NAME 1996
<S> <C>
Michael M. Bendik ......................... $ 10,000
Michael A. Boyd ........................... 10,000
John S. Chalsty ........................... 270,000
Anthony F. Daddino ......................... 100,000
Hamilton E. James ......................... 160,000
Carl B. Menges ............................. 60,000
Richard S. Pechter ......................... 120,000
Gerald B. Rigg ............................. 10,000
Joe L. Roby ................................ 200,000
Theodore P. Shen .......................... 100,000
</TABLE>
The amount of loans made to the Company's executive officers and preferred
contributions made in the ESC by the Company on behalf of the Company's
executive officers in 1996, as well as the amount of such loans outstanding at
December 31, 1996, are set forth below:
<TABLE>
<CAPTION>
LOANS AND PREFERRED
CONTRIBUTIONS DURING LOANS OUTSTANDING
YEAR ENDED AT
NAME DECEMBER 31, 1996 DECEMBER 31, 1996
<S> <C> <C>
Michael M. Bendik .. $ 24,782 $ 45,970
Michael A. Boyd .... 24,782 45,970
John S. Chalsty .... 669,126 1,241,182
Anthony F. Daddino . 247,824 459,698
Hamilton E. James .. 396,519 790,314
Carl B. Menges ..... 148,695 321,236
Richard S. Pechter . 297,390 506,219
Gerald B. Rigg ..... 24,782 45,970
Joe L. Roby ........ 495,649 828,560
Theodore P. Shen ... 247,824 459,698
</TABLE>
DLJ FUND INVESTMENT PARTNERS, L.P.
Selected employees of the Company, including certain executive officers, are
limited partners of DLJ Fund Investment Partners, L.P. ("FIP"), an investment
vehicle organized to allow these employees to invest on a leveraged basis in
funds and other investment vehicles sponsored by certain of the Company's
clients and potential clients and on a co-investment basis in transactions in
which the Company's clients also invest. Amounts invested by the limited
partners are augmented in the ratio of 2:1 by preferred contributions to FIP by
the Company which have a capped return equal to the prime rate plus 1 3/4%.
25
<PAGE>
Amounts committed to FIP by each of the Company's executive officers are set
forth below:
<TABLE>
<CAPTION>
NAME AT DECEMBER 31, 1996
<S> <C>
Michael M. Bendik ....................... $ 0
Michael A. Boyd ......................... 0
John S. Chalsty ......................... 2,000,000
Anthony F. Daddino ....................... 500,000
Hamilton E. James ....................... 2,000,000
Carl B. Menges ........................... 1,000,000
Richard S. Pechter ....................... 750,000
Gerald B. Rigg ........................... 0
Joe L. Roby .............................. 2,000,000
Theodore P. Shen ........................ 1,000,000
</TABLE>
The amounts of preferred contributions made to FIP by the Company on behalf
of each of the Company's executive officers in 1996 as well as the loan
balances outstanding at December 31, 1996 are set forth below:
<TABLE>
<CAPTION>
PREFERRED
CONTRIBUTIONS LOANS
DURING OUTSTANDING
YEAR ENDED AT
DECEMBER 31, DECEMBER 31,
NAME 1996 1996
<S> <C> <C>
Michael M. Bendik .............. $ 0 $ 0
Michael A. Boyd ................ 0 0
John S. Chalsty ................ 725,941 758,216
Anthony F. Daddino .............. 181,485 189,554
Hamilton E. James .............. 725,941 758,216
Carl B. Menges .................. 362,970 379,108
Richard S. Pechter .............. 272,228 284,331
Gerald B. Rigg .................. 0 0
Joe L. Roby ..................... 725,941 758,216
Theodore P. Shen ............... 362,970 379,108
</TABLE>
OTHER AFFILIATED TRANSACTIONS
The Company, Equitable and their respective affiliates engage in a variety
of transactions in the ordinary course of their respective businesses. As a
general rule, the Company has not retained an independent third party to
evaluate transactions with Equitable and there has been no independent
committee of the Board of Directors to evaluate such transactions.
Notwithstanding this fact, the Company believes that each of the arrangements
described below was made on an arm's-length basis. This belief is based on the
fact that the terms and conditions of such transactions (including the fees or
other amounts paid by the Company in connection with such transactions) were
established through arm's-length negotiations which took into account (i) the
terms and conditions of transactions of the same
26
<PAGE>
or a similar nature entered into by the Company with unaffiliated third
parties, (ii) the terms and conditions of transactions of the same or a similar
nature entered into by Equitable with unaffiliated third parties, and/or (iii)
the terms and conditions of market transactions of the same or a similar nature
entered into by unaffiliated third parties. Notwithstanding the foregoing,
there can be no assurance that the Company could not have obtained more
favorable terms from an unaffiliated third party. While there can be no
assurance, the Company anticipates that future transactions with Equitable will
be made on an arm's-length basis consistent with past practice.
FINANCIAL SERVICES PROVIDED BY OR TO THE COMPANY
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") from time to
time provides investment banking and other services, including administrative
services to Equitable, AXA-UAP and their subsidiaries. The fees related to
investment banking services were $1.5 million and the fees related to
administrative services were $439,000 in 1996. DLJSC from time to time also
provides brokerage and research services to Equitable, AXA-UAP and their
subsidiaries. Such services were provided on an arm's-length basis in the
ordinary course of business at rates comparable to those paid at the time by
unaffiliated third parties.
DLJSC and Pershing distribute certain Alliance sponsored funds and cash
management products and receive standard sales concessions and distribution
payments. In addition, Alliance and Pershing have an agreement pursuant to
which Pershing recommends to certain of its correspondent firms the use of
Alliance cash management products for which it is allocated a portion of the
revenues derived by Alliance from sales through the Pershing correspondents.
Amounts paid by Alliance to the Company in connection with the above
distribution services during 1996 totaled $24.7 million.
Equico Securities Inc., a wholly-owned subsidiary of Equitable Life
("Equico"), has arrangements with each of DLJSC and Wood, Struthers & Winthrop
pursuant to which Equico's registered representatives are compensated for
referring investment advisory clients to DLJSC and Wood, Struthers & Winthrop.
Referral amounts paid by DLJSC and Wood, Struthers & Winthrop during 1996
totaled $831,000.
Equico distributes Wood, Struthers & Winthrop's mutual funds for which it
receives standard sales concessions, which during 1996 totaled $1 million.
Equico and the Company are parties to a portfolio manager agreement with
respect to Equitable Classic Strategies, a wrap fee investment program offered
through Equico. Amounts paid to Equico by the Company were $756,000 in 1996.
Alliance and Wood, Struthers & Winthrop share investment management
responsibility for a number of institutional accounts. The amount of advisory
fees received from such accounts that were allocated to Wood, Struthers &
Winthrop during 1996 totaled $320,000.
On May 24, 1996, DLJSC issued 15,000 additional shares of its non-voting
Adjustable Rate Cumulative Preferred Stock, for an aggregate purchase price of
$1.5 million, to WSW 1995 Exchange Fund, L.P. At December 31, 1996, 315,000
shares were issued and outstanding. The General Partner of such partnership is
a subsidiary of Wood, Struthers & Winthrop. Such preferred stock will
automatically be redeemed by DLJSC 15 years from the date of issuance thereof
and may be redeemed at the option of DLJSC at any time prior to such date.
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<PAGE>
Certain directors, officers and employees of the Company, Equitable, AXA-UAP
and their subsidiaries maintain margin accounts with DLJSC. Margin account
transactions for such directors, officers and employees are conducted by DLJSC
in the ordinary course of business and are substantially on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unaffiliated persons and did not involve more than
the normal risk of collectibility or present other unfavorable features. DLJSC
also, from time to time and in the ordinary course of business, enters into
transactions involving the purchase or sale of securities from or to such
directors, officers and employees and members of their immediate families, as
principal. Such transactions on a principal basis are effected on substantially
the same terms as similar transactions with unaffiliated third parties. DLJSC
offers its employees reduced commission rates.
Certain directors and executive officers of the company during 1996 had
investments or commitments to invest in six funds sponsored by subsidiaries of
the Company. Such investments or commitments have been made on the same basis
as those made by investors not affiliated with the Company. Mr. Melone
committed to invest $1,000,000 in WSW 1996 Buyout Fund (the "Buyout Fund"),
Messrs Bebear and Jarmain (acting through Jarmain Group Management
Corporation) committed to invest $2,000,000 and $1,500,000 respectively in WSW
1996 Buyout Fund II (the "Buyout Fund II"). Messrs Chalsty and de Castries
committed to invest $1,000,000 and $100,000 respectively in WSW Special Buyout
fund L.P. (the "Special Buyout Fund"). Messrs Bebear and Melone each
committed $250,000 to DLJ Millennium Partners, L.P. ("Millennium"). Messrs
Chalsty and Melone invested $2,000,000 and $250,000 respectively in WSW Hedge
Fund, L.P. (the "Hedge Fund"). Mr. Chalsty committed to invest $2,000,000 in
WSW International Private Equity Fund, L.P. (the "International Private Equity
Fund"). Each of the Buyout Fund and Buyout Fund II is a limited partnership
which makes investments in other investment funds, including DLJ Merchant
Banking Partners II, L.P. ("DLJ MB II") and DLJ Real Estate Capital Partners,
L.P. ("DLJ Real Estate"). Both DLJ MB II and DLJ Real Estate are managed by
subsidiaries of the Company. The general partner of Buyout Fund and Buyout Fund
II is WSW Capital, Inc., a wholly-owned subsidiary of Wood, Struthers &
Winthrop. Millennium is a limited partnership of which DLJ Merchant Banking II,
Inc., a wholly-owned subsidiary of the Company, acts as general partner.
Millennium invests on a side-by-side basis with DLJ MB II and with DLJ MB
Overseas Partners II, C.V., an entity formed by the Company and the partners in
DLJ MB II in order to facilitate investments in foreign entities. The Special
Buyout Fund is a limited partnership whose general partner is WSW Capital, Inc.
It is also a "fund of funds" and invests in the Buyout Fund and Buyout Fund II,
among others. Each of the Hedge Fund and International Private Equity Fund is a
limited partnership whose general partner is WSW Capital, Inc. Each is a "fund
of funds" which invests in other investment funds. None of the investments or
commitments referred to above to any fund exceeds 2% of the total investments
or commitments to such fund.
INSURANCE COVERAGE OBTAINED FROM EQUITABLE
DLJSC is a member of the Securities Investor Protection Corporation ("SIPC")
which provides coverage to protect brokerage customers in the event of, among
other things, the insolvency of a member brokerage firm. SIPC coverage is
limited to $500,000 for each brokerage account covered, which includes a limit
of $100,000 on cash claims. Until February 28, 1996, DLJSC purchased excess
insurance coverage from Equitable Casualty Insurance Company of Vermont, an
indirect wholly-owned subsidiary of EQ, protecting securities in customers'
accounts up to an additional $24.5 million and up to an additional $49.5
million for managed accounts. Amounts paid by the Company to Equitable Casualty
Insurance Company were $117,000 in 1996.
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The Company has purchased split-dollar life insurance policies on the lives
of Messrs. Chalsty, Roby, Daddino and Pechter from Equitable Life at rates
comparable to those paid at the time by unaffiliated third parties. The
aggregate amount of premiums for these policies borne by the Company in 1996
were approximately $174,000 for Mr. Chalsty and $185,000 each for Messrs.
Roby, Daddino and Pechter.
Equitable arranges for directors and officers liability insurance coverage
for itself and its subsidiaries, including the Company under a policy written
by insurance companies unaffiliated with Equitable. Based on a review of market
rates, the Company believes that such rates are at least as favorable to the
Company as could be obtained from unaffiliated third parties. During 1996, the
Company paid Equitable $81,000 as the Company's share of the premiums on these
policies.
FINANCIAL SERVICES OBTAINED FROM AFFILIATES
Alliance provides investment management services to certain of the Company's
employee benefit plans at rates comparable to those paid at the time by
unaffiliated third parties. Advisory fees from these accounts during 1996
totaled $1.3 million.
An affiliate of AXA-UAP, AXA Asset Management Partenaires ("AXA Asset
Management"), provides investment management services to the Winthrop
Opportunity Funds (the "Funds"), a series of mutual funds sponsored by Wood,
Struthers & Winthrop pursuant to a sub-advisory agreement between Wood,
Struthers & Winthrop and AXA Asset Management. Advisory fees of $474,000 were
paid by the Funds to AXA Asset Management during 1996. In addition, Wood
Struthers & Winthrop pays for various direct fund expenses on behalf of the
Funds and AXA Asset Management reimburses Wood Struthers & Winthrop for 50% of
such expenses. The total amount of expenses reimbursed during 1996 was
approximately $129,000.
LOANS AND ADVANCES
The aggregate outstanding amount of payables, primarily inter-company tax
allocations, between the Company and EQ and its affiliates was $24.4 million as
of December 31, 1996.
OTHER TRANSACTIONS WITH EQUITABLE
In 1993, Equitable Life purchased 200,000 shares of the Company's Cumulative
Exchangeable Preferred Stock for $20.0 million. The Company paid dividends on
its outstanding Cumulative Exchangeable Preferred Stock to Equitable Life of
$1.7 million in 1996. Such dividends were paid on a pro rata basis to all
holders of Cumulative Exchangeable Preferred Stock, including unaffiliated
third parties. In December, 1996, Equitable sold 85,000 shares of the Company's
Common Stock to AXA-UAP at a price equal to the closing price on the New York
Stock Exchange on the date of sale. This sale did not affect the total
ownership of the Company by AXA-UAP and Equitable.
Equitable has committed, subject to approval by Equitable on a
transaction-by-transaction basis, to provide $750 million of subordinated debt
financing to the DLJ Bridge Fund. Interest payments and other distributions to
Equitable Life from the DLJ Bridge Fund during 1996 totaled $12.7 million. The
Company has agreed to pay Equitable the first $25 million of aggregate
principal losses incurred by Equitable with respect to all bridge loans
outstanding on September 30, 1995 and the first $25 million of aggregate
principal losses incurred by Equitable with respect to bridge loans made after
September 30,
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1995. To the extent such payments by the Company do not fully cover any such
losses incurred by Equitable, Equitable is entitled to receive all other
distributions otherwise payable to the Company with respect to DLJ Bridge Fund
activities until such losses have been recovered. The Company has also agreed
to pay Equitable the amount, if any, by which any principal loss on an
individual loan exceeds $150 million. In addition, Equitable is entitled to
one-third of any equity securities obtained in connection with any bridge loan.
Column Financial, Inc. ("Column") was created as a joint venture between
Equitable Real Estate Investment Management, Inc., an indirect wholly-owned
subsidiary of EQ, and DLJ Mortgage Capital, Inc. ("DLJMC") in July 1993. Column
originates and underwrites mortgage loans for securitization and sale in the
form of CMOs through DLJMC. DLJMC has committed to purchase, at Column's
option, all mortgage loans held for sale at the face amount of such loans.
DLJMC initially invested $350,000 in Column in return for its equity interest
and contributed an additional $375,000 to Column's capital in 1994. Column has
a line of credit with DLJ which bears interest at 30-day LIBOR plus 2 1/8%
secured by mortgage loans held for sale. During 1996 (i) the maximum aggregate
amount outstanding under such line of credit at any month-end was $356.2
million, (ii) the aggregate interest expense paid to DLJMC was $17.4 million,
(iii) the aggregate amount of fees paid to Column by DLJMC for originating and
underwriting services was $ 1.5 million and (iv) the aggregate amount of
mortgages purchased from Column by DLJMC was $686.7 million.
Equitable Life has invested an aggregate of $27.2 million in Sprout Growth,
L.P., Sprout Growth II, L.P., Sprout Capital V, L.P., Sprout Capital VI, L.P.,
and Sprout Capital VII, L.P., (collectively, the "Sprout Funds"), venture
capital funds sponsored by the Company. Distributions to Equitable Life from
the Sprout Funds during 1996 were $10.6 million. Such distributions were paid
on a pro rata basis to all investors, including unaffiliated third parties.
The Company currently leases certain of its office facilities from joint
ventures in which Equitable participates. Total lease payments by the Company
with respect to such facilities were $1.8 million for 1996.
STOCKHOLDER PROPOSALS
Under the rules and regulations of the Commission as currently in effect,
any holder of at least $1,000 in market value of Common Stock who has held such
Common Stock for at least one year and who desires to have a proposal presented
in the Company's proxy material for use in connection with the annual meeting
of stockholders to be held in 1998 must transmit that proposal (along with his
or her name, address, the number of shares of Common Stock that he or she holds
of record or beneficially, the dates upon which the securities were acquired
and documentary support for a claim of beneficial ownership) in writing as set
forth below. Proposals of stockholders intended to be presented at the annual
meeting of stockholders to be held in 1998 must be received by Thomas E.
Siegler, Secretary, Donaldson, Lufkin & Jenrette, Inc., 277 Park Avenue, New
York, New York 10172, no later than January 1, 1998.
Holders of Common Stock who want to have proposals submitted for
consideration at future meetings of the stockholders should consult the
applicable rules and regulations of the Commission with respect to such
proposals, including the permissible number and length of proposals and other
matters governed by such rules and regulations.
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ADDITIONAL INFORMATION
THE COMPANY WILL MAKE AVAILABLE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996, WHEN IT BECOMES AVAILABLE, AND ANY QUARTERLY
REPORTS ON FORM 10-Q OF THE COMPANY FILED THEREAFTER, WITHOUT CHARGE, UPON
WRITTEN REQUEST TO THE SECRETARY, DONALDSON, LUFKIN & JENRETTE, INC., 277 PARK
AVENUE, NEW YORK, NEW YORK 10172. EACH SUCH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT, AS OF THE RECORD DATE (MARCH 5, 1997), THE PERSON MAKING
THE REQUEST WAS A BENEFICIAL OWNER OF COMMON STOCK ENTITLED TO VOTE.
In order to ensure timely delivery of any such document prior to the Annual
Meeting, any request should be received by the Company promptly.
OTHER BUSINESS
The Company knows of no other matters which may come before the Annual
Meeting. However, if any such matters properly come before the Annual Meeting,
the individuals named in the proxies will vote on such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas E. Siegler
Secretary
March 12, 1997
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ANNEX A
DONALDSON, LUFKIN & JENRETTE, INC.
1996 NON-EMPLOYEE DIRECTORS STOCK PLAN
SECTION 1. PURPOSE. The purpose of the Donaldson, Lufkin & Jenrette, Inc.
1996 Non-Employee Directors Stock Plan is to enable Donaldson, Lufkin &
Jenrette, Inc. to pay part of the compensation of its Non-Employee Directors
in the form of equity of the Company, thereby increasing such directors'
proprietary interests in the Company.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:
"AFFILIATE" shall mean (i) any entity that, directly or indirectly, controls
or is controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Board.
"AWARD" shall mean any Stock Option, Stock Appreciation Right, Restricted
Stock, Deferred Stock, or Other Stock Based Award together with any other right
or interest granted to a Non-Employee Director under the Plan.
"BOARD" shall mean the Board of Directors of the Company.
"COMPANY" shall mean Donaldson, Lufkin & Jenrette, Inc., together with any
successor thereto.
"DEFERRED STOCK" shall mean a right, granted to a Non-Employee Director
under Section 11 hereof, including rules thereunder and successor provisions
and rules thereto.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.
"FAIR MARKET VALUE" shall mean on any date, (i) in the case of a security
which is traded on an established securities market, the closing price of such
security on such date and (ii) in the case of any other property, the fair
market value of such property, as determined by the Board in its sole
discretion.
"NON-EMPLOYEE DIRECTOR" shall mean any director of the Company other than
one who is an employee of the Company or an Affiliate.
"OTHER STOCK BASED AWARD" shall mean an Award granted to a Non-Employee
Director under Section 12 hereof.
"PLAN" shall mean the Donaldson, Lufkin & Jenrette, Inc. 1996 Non-Employee
Directors Stock Plan.
"RESTRICTED STOCK" shall mean Shares granted to a Non-Employee Director
under Section 10 hereof, that are subject to certain restrictions and to a risk
of forfeiture.
"SHARES" shall mean shares of the Common Stock, par value $0.10 per share,
of the Company, or such other securities of the Company which may be designated
by the Board from time to time.
"STOCK APPRECIATION RIGHT" shall mean a right granted to a Non-Employee
Director under Section 9 hereof.
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"STOCK OPTION" shall mean a right granted to a Non-Employee Director under
Sections 7 or 8 hereof, to purchase Shares or other Awards at a specified price
during a specified period.
SECTION 3. TYPES OF AWARDS. Non-Employee Directors shall automatically
receive Stock Options having the terms and conditions set forth in Section 7.
In addition, Non-Employee Directors may be granted Awards in one or more of the
following forms on a discretionary basis: (i) Stock Options; (ii) Stock
Appreciation Rights; (iii) Restricted Stock; (iv) Deferred Stock; and (v) Other
Stock Based Awards. One or more types of Awards may be granted, which may be
independent or granted in tandem. If two Awards are granted in tandem, the
holder may exercise (or otherwise receive the benefit of) one Award only to the
extent he or she relinquishes the tandem Award.
SECTION 4. ADMINISTRATION.
(a) The Plan shall be administered by the Board. The Board shall have the
authority to grant Awards to persons eligible to receive them; to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall deem advisable; to interpret the terms and provisions of the
Plan and any Award granted under the Plan; and to otherwise supervise the
administration of the Plan. In particular and without limiting its authority
and powers, the Board shall have the authority:
(1) to determine whether and to what extent any Award or combination of
Awards will be granted hereunder, including whether any Awards will be
granted in tandem with each other;
(2) to select the persons to whom Awards will be granted from among
those eligible;
(3) to determine the number of Shares to be covered by each Award
granted hereunder subject to the limitations contained herein;
(4) to determine the terms and conditions of any Award granted
hereunder, including, but not limited to, any vesting or other restrictions
and to determine whether the terms and conditions of the Award are
satisfied;
(5) to determine the treatment of Awards upon a holder's retirement,
disability, death, or other termination of service with the Company;
(6) to determine that amounts equal to the amount of any dividends
declared with respect to the number of Shares covered by an Award (i) will
be paid to the holder currently, (ii) will be deferred and deemed to be
reinvested or (iii) will otherwise be credited to the holder, or that the
holder has no rights with respect to such dividends;
(7) to determine whether, to what extent, and under what circumstances
Shares and other amounts payable with respect to an Award will be deferred
either automatically or at the election of an Award holder, including
providing for and determining the amount (if any) of deemed earnings on any
deferred amount during any deferred period;
(8) to amend the terms of any Award (including those granted under
Section 7), prospectively or retroactively; provided, however, that no
amendment shall impair the rights of the Award holder without his or her
written consent; and
(9) to substitute new Awards for previously granted Awards, or for
awards granted under other plans or agreements.
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(b) All determinations made by the Board pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Award
holders.
(c) Each member of the Board shall be entitled to, in good faith, rely or
act upon any report or other information furnished to him or her by any
executive officer, other officer or employee of the Company or its Affiliates,
the Company's independent auditors, consultants or any other agents assisting
in the administration of the Plan. Members of the Board and any officer or
employee of the Company or its Affiliates acting at the direction or on behalf
of the Board shall not be personally liable for any action or determination
taken or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company with
respect to any such action or determination.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) The total number of Shares which may be issued under the Plan shall be
200,000, subject to adjustment as provided below. Such Shares may consist of
authorized but unissued shares or treasury shares. The exercise of a Stock
Appreciation Right for cash or the payment of any other Award in cash shall not
count against this Share limit. Any Shares issued under the Plan shall reduce
the number of Shares issuable under the Company's 1996 Stock Option Plan.
(b) To the extent a Stock Option terminates without having been exercised,
or an Award terminates without the Award holder having received payment of the
Award in Shares, or Shares awarded are forfeited, the Shares subject to such
Award shall again be available for distribution in connection with future
Awards under the Plan. Shares equal in number to the Shares surrendered in
payment of the option price or withholding taxes (if any) shall not count
against the above limit, and shall again be available for grants under the
Plan.
(c) In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, Share dividend, Share split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Shares, a substitution or adjustment, as may
be determined to be appropriate by the Board in its sole discretion, shall be
made in the aggregate number of Shares reserved for issuance under the Plan,
the number and type of Shares as to which Awards will be automatically granted
to any individual in any calendar year, the number and type of Shares subject
to outstanding Awards and the amounts to be paid by Award holders or the
Company, as the case may be, with respect to outstanding Awards; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding Award.
SECTION 6. ELIGIBILITY. Awards under the Plan shall be made solely to
Non-Employee Directors.
SECTION 7. AUTOMATIC GRANT OF STOCK OPTIONS.
(a) Each person who is a Non-Employee Director on the date the Plan is
adopted by the Board will be granted a Stock Option to purchase 4,000 Shares,
subject to approval of the Plan by the Company's stockholders at the next
meeting of stockholders. Thereafter, each person who is or becomes a
Non-Employee Director on the date of an annual meeting of the Company's
stockholders and whose service on the Board will continue after such meeting
shall be granted a Stock Option to purchase 4,000 Shares effective as of the
date of such meeting. Notwithstanding the foregoing, if on any date on which
Stock Options are to be granted under this Section 7(a) the remaining Shares
available for issuance under
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the Plan are insufficient to enable each Non-Employee Director to receive a
Stock Option to purchase the applicable number of Shares set forth above, each
Non-Employee Director who is entitled to be granted a Stock Option pursuant to
this Section 7(a) on such date shall be granted a Stock Option to purchase his
or her pro rata portion of such remaining Shares.
(b) Stock Options granted under this Section 7 shall be non-qualified stock
options and shall have the following terms and conditions.
(1) Option Price. The option price per Share purchasable under the Stock
Option shall be equal to the Fair Market Value per Share on the date of
grant.
(2) Term of Option. The term of the Stock Option shall be ten years from
the date of grant, subject to earlier termination in the event of
termination of service as a Director, as set forth in Section 7(b)(5) below.
(3) Exercisability. Subject to Section 7(b)(5) below, each Stock Option
shall vest and become exercisable with respect to one-fourth of the
underlying Shares on each of the first four anniversaries of the date of
grant, provided that the optionee is a Director of the Company on such date.
(4) Method of Exercise. The Stock Options may be exercised in whole or
in part at any time during the period in which the option is exercisable by
giving written notice of exercise to the Company specifying the number of
Shares to be purchased, accompanied by payment of the purchase price.
Payment of the purchase price shall be made in cash (including cash
equivalents), by delivery of Shares, or by any combination of the foregoing.
Shares delivered as payment of the purchase price shall be valued at the
closing price of the Shares on the date of exercise (or, if the Shares are
not traded on such date, at the weighted closing prices on the nearest
trading dates before and after such date).
(5) Termination of Service as Director. If an optionee's service as a
director of the Company is terminated by reason of death, disability (as
determined by the Board) or retirement at or after age 65, such director's
Stock Options shall become fully exercisable and may be exercised for the
period set forth below following such termination of service (but not beyond
the ten-year term): (i) 12 months following termination by reason of death,
(ii) 36 months following termination by reason of disability, and (iii) for
the remainder of the ten-year term in the event of retirement at or after
age 65. If an optionee's service as a director is terminated for cause, such
director's Stock Options shall terminate immediately upon his or her
termination of service. If an optionee's service as a director is terminated
for any other reason, such director's Stock Options may be exercised for 12
months following such termination (but not beyond the ten-year term), and
only to the extent such Stock Options were vested on the date of termination
of service.
(6) Non-transferability. Unless otherwise provided by the Board, (i)
Stock Options shall not be transferable by the optionee other than by will
or by the laws of descent and distribution, and (ii) during the optionee's
lifetime, all Stock Options shall be exercisable only by the optionee or by
his or her guardian or legal representative.
(7) Shareholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a shareholder.
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SECTION 8. DISCRETIONARY GRANT OF STOCK OPTIONS.
(a) Subject to the following provisions, Stock Options awarded under this
Section 8 of the Plan shall be non-qualified stock options and shall be in such
form and shall have such terms and conditions as the Board may determine:
(1) Option Price. The option price per Share purchasable under a Stock
Option shall be determined by the Board, but may not be less than the Fair
Market Value of a Share on the date of the award of the Stock Option except
as provided under Section 15(c) below.
(2) Option Term. The term of each Stock Option shall be fixed by the
Board.
(3) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Board. The Board may waive such exercise provisions or accelerate the
exercisability of the Stock Option at any time in whole or in part.
(4) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of
exercise to the Company specifying the number of shares to be purchased,
accompanied by payment of the purchase price. Payment of the purchase price
shall be made in such manner as the Board may provide in the Award, which
may include cash (including cash equivalents), delivery of Shares, any other
manner permitted by law as determined by the Board, or any combination of
the foregoing.
(5) Shareholder Rights. The holder of a Stock Option shall, as such,
have none of the rights of a shareholder.
(6) Surrender Rights. The Board may provide that options may be
surrendered for cash upon any terms and conditions set by the Board.
(7) Non-transferability. Unless otherwise provided by the Board, (i)
Stock Options shall not be transferable by the optionee other than by will
or by the laws of descent and distribution, and (ii) during the optionee's
lifetime, all Stock Options shall be exercisable only by the optionee or by
his or her guardian or legal representative.
(8) Termination of Service. Following the termination of an optionee's
service as a Director of the Company, the Stock Option shall be exercisable
to the extent determined by the Board. The Board may provide different
post-termination exercise provisions with respect to termination of service
for different reasons.
SECTION 9. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right shall
entitle the holder thereof to receive payment of an amount, in cash, Shares or
a combination thereof, as determined by the Board, equal in value to the excess
of the Fair Market Value of the number of Shares as to which the Award is
granted on the date of exercise over an amount specified by the Board. Any such
Award shall be in such form and shall have such terms and conditions as the
Board may determine. The grant shall specify the number of Shares as to which
the Stock Appreciation Right is granted.
SECTION 10. RESTRICTED STOCK. Subject to the following provisions, all
Awards of Restricted Stock shall be in such form and shall have such terms
and conditions as the Board may determine:
(a) The Restricted Stock Award shall specify the number of Shares of
Restricted Stock to be awarded, the price, if any, to be paid by the recipient
of the Restricted Stock and the date or dates on
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which, or the conditions upon the satisfaction of which, the Restricted Stock
will vest. The grant and/or the vesting of Restricted Stock may be conditioned
upon the completion of a specified period of service with the Company, upon the
satisfaction of specified conditions or upon such other criteria as the Board
may determine.
(b) Stock certificates representing the Restricted Stock awarded under the
Plan shall be registered in the Award holder's name, but the Board may direct
that such certificates be held by the Company on behalf of the Award holder.
Except as may be permitted by the Board, no share of Restricted Stock may be
sold, transferred, assigned, pledged or otherwise encumbered by the Award
holder until such share has vested in accordance with the terms of the
Restricted Stock Award. At the time Restricted Stock vests, a certificate for
such vested shares shall be delivered to the Award holder (or his or her
designated beneficiary in the event of death), free of all restrictions.
(c) The Board may provide that the Award holder shall have the right to vote
and receive dividends on Restricted Stock. Unless the Board provides otherwise,
Stock received as a dividend on, or in connection with a stock split of,
Restricted Stock shall be subject to the same restrictions as the Restricted
Stock.
(d) Except as may be provided by the Board, in the event of an Award
holder's termination of service before all of his or her Restricted Stock has
vested, or in the event any conditions to the vesting of Restricted Stock have
not been satisfied prior to any deadline for the satisfaction of such
conditions set forth in the Award, the shares of Restricted Stock which have
not vested shall be forfeited, and the Board may provide that (i) any purchase
price paid by the Award holder shall be returned to the Award holder or (ii) a
cash payment equal to the Restricted Stock's Fair Market Value on the date of
forfeiture, if lower, shall be paid to the Award holder.
(e) The Board may waive, in whole or in part, any or all of the conditions
to receipt of, or restrictions with respect to, any or all of the Award
holder's Restricted Stock.
SECTION 11. DEFERRED STOCK. Subject to the following provisions, all
Awards of Deferred Stock shall be in such form and shall have such terms and
conditions as the Board may determine:
(a) The Deferred Stock Award shall specify the number of shares of Deferred
Stock to be awarded and the duration of the period (the "Deferral Period")
during which, and the conditions under which, receipt of the Shares will be
deferred. The Board may condition the grant or vesting of Deferred Stock, or
receipt of Shares or cash at the end of the Deferral Period, upon the
satisfaction of specified conditions or such other criteria as the Board may
determine.
(b) Except as may be provided by the Board, Deferred Stock Awards may not be
sold, assigned, transferred, pledged or otherwise encumbered during the
Deferral Period.
(c) At the expiration of the Deferral Period, the Award holder (or his or
her designated beneficiary in the event of death) shall receive (i)
certificates for the number of Shares equal to the number of Shares covered by
the Deferred Stock Award, (ii) cash equal to the Fair Market Value of such
Shares, or (iii) a combination of Shares and cash, as the Board may determine.
(d) Except as may be provided by the Board, in the event of an Award
holder's termination of service before the Deferred Stock has vested, his or
her Deferred Stock Award shall be forfeited.
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(e) The Board may waive, in whole or in part, any or all of the conditions
to receipt of, or restrictions with respect to, Shares or cash under a Deferred
Stock Award.
SECTION 12. OTHER STOCK BASED AWARDS. The Board is authorized, subject to
limitations under applicable law, to grant to Non-Employee Directors such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by the
Board to be consistent with the purposes of the Plan, including without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Shares, purchase rights for Shares, Awards
with value and payment contingent upon performance of the Company or any other
factors designated by the Board, and Awards valued by reference to the book
value of Shares or the value of securities of, or the performance of, specified
subsidiaries. The Board shall determine the terms and conditions of such
Awards. Shares delivered pursuant to an Award in the nature of a purchase right
granted under this Section 12 shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Shares, other Awards, or other property, as the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 12.
SECTION 13. ELECTION TO DEFER AWARDS. The Board may permit a Non-Employee
Director to elect to defer receipt of an Award for a specified period or until
a specified event, upon such terms as are determined by the Board.
SECTION 14. AMENDMENTS AND TERMINATION. The Board may discontinue the Plan
at any time and may amend it from time to time. No amendment or discontinuation
of the Plan shall adversely affect any Award previously granted without the
holder's written consent. Amendments may be made without stockholder approval
except as required to satisfy Rule 16b-3 under the Exchange Act, stock
exchange, or other regulatory requirements.
SECTION 15. GENERAL PROVISIONS.
(a) Each Award under the Plan shall be subject to the requirement that, if
at any time the Board shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, (ii) the consent or approval of any
government regulatory body or (iii) an agreement by the recipient of an Award
with respect to the disposition of Shares is necessary or desirable (in
connection with any requirement or interpretation of any federal or state
securities law, rule or regulation) as a condition of, or in connection with,
the granting of such Award or the issuance, purchase or delivery of Shares
thereunder, such Award shall not be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Board.
(b) Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the Plan
nor any Award hereunder shall confer upon any Director of the Company any right
to continued service as a Director.
(c) Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, an Affiliate, or any business entity to be acquired by the Company or
an Affiliate, or any other right of a Non-Employee Director to receive payment
from the Company or
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any Affiliate. Such additional, tandem, and substitute or exchange Awards may
be granted at any time. If an Award is granted in substitution or exchange for
another Award or award, the Board shall require the surrender of such other
Award or award in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash
amounts payable under other plans of the Company or any Affiliate, in which the
value of Shares subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which the
exercise price, grant price or purchase price of the Award in the nature of a
right that may be exercised is equal to the Fair Market Value of the underlying
Shares minus the value of the cash compensation surrendered (for example, Stock
Options granted with an exercise price "discounted" by the amount of the cash
compensation surrendered).
(d) Determinations by the Board under the Plan relating to the form, amount,
and terms and conditions of Awards need not be uniform, and may be made
selectively among persons who receive or are eligible to receive Awards under
the Plan, whether or not such persons are similarly situated.
SECTION 16. EFFECTIVE DATE OF PLAN. The provisions of this Plan were
adopted effective November 21, 1996, subject to approval by the Company's
stockholders.
A-8
<PAGE>
STOCKHOLDER'S PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
DONALDSON, LUFKIN & JENRETTE, INC.
To: Donaldson, Lufkin & Jenrette, Inc.
I appoint Michael A. Boyd and Thomas E. Siegler, individually and together,
as my proxies, with power of substitution, to vote all of my DONALDSON, LUFKIN
& JENRETTE, INC. common stock at the Annual Meeting of stockholders of
DONALDSON, LUFKIN & JENRETTE, INC. to be held at the Company's offices, 8th
Floor, 277 Park Avenue, New York, New York 10172, on Wednesday, April 16, 1997,
at 10:00 a.m., New York City time, and at any adjournment or postponement of
the meeting.
MY PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY AS DIRECTED ON
THE OTHER SIDE OF THIS CARD, BUT IN THE ABSENCE OF ANY INSTRUCTIONS FROM ME, MY
PROXIES WILL VOTE "FOR" THE ELECTION OF ALL THE NOMINEES LISTED UNDER ITEM 1
AND "FOR" ITEM 2 AND ITEM 3. MY PROXIES MAY VOTE ACCORDING TO THEIR DISCRETION
ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING. I MAY REVOKE
THIS PROXY PRIOR TO ITS EXERCISE.
DONALDSON, LUFKIN & JENRETTE, INC.
PLEASE MARK YOUR CHOICES LIKE THIS [X] IN BLUE OR BLACK INK
The Board of Directors recommends that you vote "FOR" all the nominees
listed under Item 1 and "FOR" Item 2 and Item 3.
Item 1. Election of all the members of the Company's Board of Directors.
FOR all nominees [ ] WITHHOLD AUTHORITY for all nominees [ ]
NOMINEES: John S. Chalsty, Joe L. Roby, Carl B. Menges, Anthony F. Daddino,
Hamilton E. James, Richard S. Pechter, Theodore P. Shen, Claude Bebear, Henri
de Castries, Jerry M. de St. Paer, Denis Duverne, Louis Harris, Henri G.
Hottinguer, Francis Jungers, W. Edwin Jarmain, Joseph J. Melone, W.J. Sanders
III and John C. West.
For, except vote withheld for the following nominee(s):
------------------------
PLEASE SIGN AND DATE THE OTHER SIDE OF THIS CARD.
(Please fill in the appropriate boxes on the other side.)
<PAGE>
(Continued from the other side)
Item 2. Approval and adoption of the Donaldson, Lufkin & Jenrette, Inc. 1996
Non-Employee Directors Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 3. Ratification of the appointment of KPMG Peat Marwick LLP as Donaldson,
Lufkin & Jenrette, Inc.'s independent auditors for 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
SIGNATURE(S):
--------------------------------
--------------------------------
--------------------------------
DATE: , 1997
---------------------
NOTE: PLEASE SIGN EXACTLY AS
NAME(S) APPEAR(S) ABOVE. IF
ACTING AS AN EXECUTOR,
ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC., YOU SHOULD SO
INDICATE IN SIGNING. IF THE
STOCKHOLDER IS A CORPORATION,
PLEASE SIGN THE FULL CORPORATE
NAME, BY A DULY AUTHORIZED
OFFICER. IF SHARES ARE HELD
JOINTLY, EACH STOCKHOLDER NAMED
SHOULD SIGN. DATE AND PROMPTLY
RETURN THIS CARD IN THE ENVELOPE
PROVIDED.
