<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
[X] Definitive Proxy Statement of the Commission
[ ] Definitive Additional Materials Only (as permitted)
by Rule 14a-6(c)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
</TABLE>
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.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
===============================================================================
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC.
277 PARK AVENUE
NEW YORK, NEW YORK 10172
May 3, 1999
Dear Stockholder:
You are cordially invited to attend a Special 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 Tuesday, May
25, 1999 at 10:00 a.m., New York City time.
The business of the meeting will be to consider and vote upon the approval
of the Company's DLJdirect 1999 Incentive Compensation Plan. Information on
this matter 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,
Joe L. Roby John S. Chalsty
President and Chairman of the Board
Chief Executive Officer
<PAGE>
DONALDSON, LUFKIN & JENRETTE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of
Donaldson, Lufkin & Jenrette, Inc.:
Notice is hereby given that a Special Meeting (the "Special 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 Tuesday, May 25, 1999, at 10:00 a.m., New York City time, for the
following purposes:
1. To consider and vote upon the approval of the Company's DLJdirect 1999
Incentive Compensation Plan.
2. To transact such other business as may properly come before the Special
Meeting or at any adjournments thereof.
A proxy statement describing the matter to be considered at the Special
Meeting is attached to this notice. Only stockholders of record at the close of
business on April 16, 1999 are entitled to notice of, and to vote at, the
Special Meeting and at any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Marjorie S. White
Secretary
May 3, 1999
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 a special
meeting of stockholders to be held on Tuesday, May 25, 1999 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 "Special Meeting"). The
Notice of Special Meeting, this Proxy Statement and the accompanying proxy card
are first being mailed to stockholders on or about May 4, 1999, to all
stockholders entitled to vote at the Special Meeting.
At the Special Meeting, the Company's stockholders will be asked to
consider and vote upon the approval of the Company's DLJdirect 1999 Incentive
Compensation Plan and to take such other action as may properly come before the
Special 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 Special 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 approval of the Company's DLJdirect
1999 Incentive Compensation Plan. Any stockholder may revoke his or her proxy
at any time prior to the Special 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: Marjorie S. White, Secretary, by delivery prior to the
Special Meeting of a subsequently dated proxy or by attending the Special
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 Special Meeting will be paid by the Company.
The Company expects to reimburse banks, 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 Common Stock at the close of business on April
16, 1999 (the "Record Date") will be entitled to notice of and to vote at the
Special Meeting. At the close of business on the Record Date, there were issued
and outstanding 124,938,455 shares of Common Stock, each of which is entitled
to one vote.
A quorum for the Special Meeting consists of a majority of the total
number of shares of Common Stock outstanding on the Record Date. The
affirmative vote of a majority of the shares of Common Stock represented at the
Special Meeting and entitled to vote is required for the approval of the
Company's DLJdirect 1999 Incentive Compensation Plan. An abstention will have
the same effect as a negative vote.
<PAGE>
As of March 1, 1999, The Equitable Companies Incorporated ("EQ" and,
together with its subsidiaries other than the Company, "Equitable")
beneficially owned an aggregate of 88,603,837 shares of Common Stock,
representing approximately 71.3% of the total number of shares of Common Stock
outstanding. AXA and certain of its affiliates beneficially owns 1,836,669
shares of Common Stock. AXA is the largest shareholder of EQ and, therefore,
may be considered to beneficially own 90,440,006 shares of Common Stock,
representing 72.7% 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 approval of the Company's DLJdirect 1999 Incentive
Compensation Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE COMPANY'S DLJDIRECT 1999 INCENTIVE COMPENSATION PLAN.
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 $500 for each meeting of a
Committee of the Board attended. Under the Company's 1996 Non-Employee
Directors Stock Plan, on November 21, 1996, April 16, 1997 and April 22, 1998
each independent director was granted an option to purchase 8,000 shares of
Common Stock. In addition, under that plan each eligible director receives an
annual option grant to purchase shares of Common Stock at the end of each
Annual Meeting of Stockholders. Each option will have an exercise price equal
to the fair market value of a share of Common Stock as of the date of grant,
will vest and be exercisable with respect to one fourth of the covered shares
on each of the first four anniversaries of the date of grant and will have a
ten-year term. Except for a person whose service as a director is terminated
for cause, after a person ceases to be a director options remain exercisable
for various periods, depending on the reason for the termination. If the
Company's DLJdirect 1999 Incentive Compensation Plan is approved by
stockholders the Board of Directors may determine to grant certain directors
options to purchase DLJdirect shares.
2
<PAGE>
EXECUTIVE COMPENSATION AND BENEFIT PLANS
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers based on 1998 salary and annual bonuses
(collectively, the "Named Executive Officers") who were serving as executive
officers at the end of the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
SALARY BONUS OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) COMPENSATION $
- ---------------------------- ------ ----------- ------------- -----------------
<S> <C> <C> <C> <C>
Joe L. Roby(6) .............. 1998 $175,000 $ 8,500,000 $ 115,770(7)
President and 1997 175,000 9,500,000 107,664(7)
Chief Executive Officer 1996 175,000 8,500,000 97,672(7)
John S. Chalsty(6) .......... 1998 500,000 8,000,000 159,931(8)
Chairman 1997 500,000 12,500,000 155,400(8)
1996 500,000 10,000,000 167,645(8)
Anthony F. Daddino .......... 1998 175,000 3,375,000 25,868(9)
Executive Vice President and 1997 175,000 3,750,000 25,201(9)
Chief Financial Officer 1996 175,000 3,000,000 27,112(9)
Michael A. Boyd ............. 1998 150,000 770,000 14,130(10)
Senior Vice President and 1997 150,000 825,000 14,452(10)
General Counsel 1996 150,000 750,000 14,065(10)
Michael M. Bendik ........... 1998 140,000 850,000 11,779(11)
Senior Vice President and 1997 140,000 950,000 10,467(11)
Chief Accounting Officer 1996 140,000 850,000 10,527(11)
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------
RESTRICTED OPTIONS/ LTIP ALL OTHER
STOCK SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION AWARDS($)(2) (#)(3) ($)(4) (5)
- --------------------------- -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Joe L. Roby(6) .............. -- -- $ 2,559,098 $237,429
President and -- -- 2,414,243 163,797
Chief Executive Officer -- 500,000 23,983,762 403,765
John S. Chalsty(6) .......... -- -- -- 358,466
Chairman -- -- -- 369,886
-- -- -- 695,447
Anthony F. Daddino .......... -- -- 1,993,127 210,019
Executive Vice President and -- -- 1,823,705 193,093
Chief Financial Officer -- -- 6,996,750 242,702
Michael A. Boyd ............. -- -- 871,188 5,051
Senior Vice President and -- -- 821,876 --
General Counsel -- -- 904,303 13,202
Michael M. Bendik ........... -- -- 614,574 18,082
Senior Vice President and -- -- 579,788 36,336
Chief Accounting Officer -- -- -- 55,667
</TABLE>
- ----------
(1) Includes amounts contributed by each of the Named Executive Officers under
various deferred compensation plans maintained by the Company.
(2) In exchange for surrendering amounts accrued under certain multi-year
compensation arrangements maintained by the Company, each of the Named
Executive Officers received restricted stock units under the Company's
1995 Restricted Stock Unit Plan at the time of the Company's initial
public offering in October 1995 (the "Initial Public Offering"). 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 vested 50% in February 1997 and February
1998. Premium Units vest in three equal installments in each of February
1998, February 1999 and February 2000. No dividends or dividend
equivalents are paid on the restricted stock units. As of December 31,
1998, the last day of trading during the fiscal year ended December 31,
1998, the aggregate value of the unvested 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 $41.3125 was $4,230,565,
$5,640,726, $2,350,351, $352,561 and $176,322 for Messrs. Roby, Chalsty,
Daddino, Boyd and Bendik, respectively.
(3) The options shown for Mr. Roby for 1996 have an exercise price of $16.25,
a term of ten years, and become exercisable in four equal installments on
May 16, 1997, May 16, 1998, May 16, 1999 and May 16, 2000. The Company's
stock plans do not permit the granting of stock appreciation rights
("SARs").
3
<PAGE>
(4) All amounts shown for 1998 reflect amounts earned under the Company's
1994-1996 Long Term Incentive Plan. The amounts shown for Mr. Roby in 1997
and 1996 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. The amounts shown for Mr. Daddino
reflect payments made in 1997 and 1996 of amounts earned under the
Company's 1994-1996 and 1991-1996 Long Term Incentive Plans.
(5) Of the amounts shown in the table $153,178, $124,869 and $160,736 for
1998, $163,797, $138,394 and $169,066 for 1997 and $167,954, $144,807, and
$142,954 for 1996 reflect the value of premiums paid by the Company on
behalf of Messrs. Roby, Chalsty 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. Roby, Chalsty and Daddino, respectively, on the
portions of the premiums paid by the Company in that year. In addition,
$84,251, $233,597, $49,283, $5,051 and $18,082 is included for 1998 for
Messrs. Roby, Chalsty, Daddino, Boyd and Bendik, respectively, $231,492,
$24,027 and $36,336 is included for 1997 for Messrs. Chalsty, Daddino and
Bendik, respectively, and $235,811, $550,640, $99,748, $13,202 and $55,667
is included for 1996 for Messrs. Roby, Chalsty, Daddino, Boyd and Bendik,
respectively, to reflect distributions in 1998, 1997 and 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) Effective February 23, 1998 Mr. Chalsty stepped down as Chief Executive
Officer but remains Chairman of the Board. On the same date Mr. Roby was
elected Chief Executive Officer and relinquished the title of Chief
Operating Officer. Effective February 17, 1999, Mr. Chalsty's salary is
$175,000 per annum.
(7) Of the amounts shown in the table for Mr. Roby, $51,246, $28,547 and
$23,552 reflect the use of transportation equipment provided by the
Company in 1998, 1997 and 1996, respectively. In addition, $64,524,
$79,117 and $74,120 of the amounts shown reflect the value of financial
planning services provided on Mr. Roby's behalf by Wood, Struthers &
Winthrop during 1998, 1997 and 1996, respectively.
(8) Of the amounts shown in the table for Mr. Chalsty, $42,456, $18,804 and
$16,487 reflect the use of transportation equipment provided by the
Company in 1998, 1997 and 1996, respectively. In addition, $21,475,
$40,596 and $55,158 of the amounts shown reflect the value of financial
planning services provided on his behalf by Wood, Struthers & Winthrop
during 1998, 1997 and 1996, respectively, and $96,000, $96,000 and $96,000
of the amounts shown reflect contributions by the Company toward the cost
of an apartment for Mr. Chalsty during 1998, 1997 and 1996, respectively.
(9) Of the amounts shown in the table for Mr. Daddino, $21,291, $22,001 and
$21,404 reflect the use of transportation equipment provided by the
Company in 1998, 1997 and 1996, respectively. In addition, $4,577, $3,200
and $5,708 of the amounts shown reflect the value of financial planning
services provided on Mr. Daddino's behalf by Wood, Struthers & Winthrop
during 1998, 1997 and 1996, respectively.
(10) Of the amounts shown in the table for Mr. Boyd, $10,930, $11,252 and
$11,065 reflect the use of transportation equipment in 1998, 1997 and
1996, respectively. In addition, $3,200, $3,200 and $3,000 of the amounts
shown reflect the value of financial planning service provided on Mr.
Boyd's behalf by Wood, Struthers & Winthrop during 1998, 1997 and 1996,
respectively.
(11) The amounts shown for Mr. Bendik reflect the use of transportation
equipment provided by the Company in 1998, 1997 and 1996, respectively.
4
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1998)
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
SHARES UNDERLYING UNEXERCISED MONEY OPTIONS AT FY-END
ACQUIRED ON VALUE REALIZED OPTIONS AT FY-END (#) ($)(1)
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- -------------- ---------------- --------------------------- -----------------------------
<S> <C> <C> <C> <C>
Joe L. Roby -- -- 1,198,834/250,000 $32,659,473/6,265,625
John S. Chalsty -- -- 1,272,714/0 $35,397,358/0
Anthony F. Daddino -- -- 530,298/0 $14,748,913/0
Michael A. Boyd -- -- 79,544/0 $2,212,317/0
Michael M. Bendik -- -- 39,772/0 $1,106,159/0
</TABLE>
- ----------
(1) An "in-the-money option" is an option for which the market price of the
underlying Common Stock at year-end 1998 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
$41.3125, the average of the high and low prices of the Common Stock as
reported on the New York Stock Exchange on December 31, 1998, the last
day of trading during the fiscal year ended December 31, 1998. 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.
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>
Joe L. Roby ......................... $ 56,527
John S. Chalsty ..................... 47,053
Anthony F. Daddino .................. 107,313
Michael A. Boyd ..................... 75,369
Michael M. Bendik ................... 91,781
</TABLE>
COMPENSATION AND MANAGEMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation and Management Committee during the fiscal
year ended December 31, 1998 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."
5
<PAGE>
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.
The Committee was established immediately prior to the Initial Public
Offering. As such, the Committee is 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. For
1998, the survey data reviewed in setting compensation levels for executive
officers is based on a group of nine firms. Of these firms, three 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.
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.
6
<PAGE>
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.
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 1998, pre-tax profits declined 9.2% from 1997, and awards
to most executive officers were reduced 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 Company through vesting and
competitive compensation opportunities.
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 1998 to executive officers named in the Summary
Compensation Table represent amounts earned under the Company's 1994 -- 1996
Long Term Incentive ("LTI") Plans. Awards of units have been made for the
1997-1999 performance period.
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
7
<PAGE>
made to executive officers in exchange for reduction in the value of
their interests in the 1991 or 1994 LTI Plan. Restricted stock units
granted in 1995 vest in installments from February 1997 to February
2000. No executive officer received a restricted stock unit grant in
1998.
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 vested 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. No executive officer received an option grant in 1998.
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.
Mr. Roby was elected Chief Executive Officer in February, 1998. In setting
the Chief Executive Officer's 1998 total compensation, the Committee took into
account the annual and long-term performance of the Company under his
leadership and its outstanding strategic progress, all of which were viewed as
critical to the results realized by the Company in 1998.
The Company's 1998 performance included a 16.5% growth in revenues from
1997. A combination of higher costs associated with an aggressive expansion
strategy and an industry-wide business decline in the second half of 1998
resulted in profit performance that was below 1997. 1998 profit was 9.2% under
the record earnings achieved in 1997. In consideration of the difficult year,
the Chief Executive Officer received an annual incentive award of $8.5 million
for 1998. This represented a 10.6% decline from his 1997 annual incentive
award. His salary of $175,000 was last increased in 1987. The Chief Executive
Officer was not granted any restricted stock units or stock options in 1997 or
1998.
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.
8
<PAGE>
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
9
<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. All
indices include the reinvestment of dividends.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Compound
Annual
10/26/95 12/31/95 12/31/96 12/31/97 12/31/98 Return Rate
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donaldson, Lufkin & Jenrette, Inc. $ 100.00 $ 115.74 $ 122.94 $ 274.20 $ 284.53 38.9%
S&P 500 $ 100.00 $ 96.74 $ 141.64 $ 246.09 $ 276.04 37.6%
Peer Group* $ 100.00 $ 111.20 $ 130.81 $ 174.44 $ 224.29 28.9%
</TABLE>
* Peer group includes Bear Stearns Companies, Lehman Brothers Holdings, Morgan
Stanley Group (10/26/95 - 5/30/97) and Morgan Stanley Dean Witter & Co.
(6/1/97-12/31/98). Assumes conversion of Morgan Stanley Group shares into
Morgan Stanley Dean Witter & Co. on 6/1/97.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth, as of March 1, 1999, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by each
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. All numbers
reflect the 2 for 1 stock split that was effective May 11, 1998.
<TABLE>
<CAPTION>
CURRENT
BENEFICIAL OWNERSHIP(1) TOTAL(1)
------------------------ -------------------------
NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT
<S> <C> <C> <C> <C>
AXA(2) ...................................................... 90,440,006 72.7% 90,440,006 59.1%
9 Place Venome
75001 Paris, France
The Equitable Companies
Incorporated(3) ............................................ 88,603,337 71.3 88,603,337 57.9
1290 Avenue of the Americas
New York, New York 10104
The Equitable Life Assurance
Society of the United States(4) ............................ 39,961,542 32.1 39,961,542 26.1
1290 Avenue of the Americas
New York, New York 10104 ...................................
Joe L. Roby(5) .............................................. 1,692,524 1.3 1,993,726 1.3
John S. Chalsty(6) .......................................... 1,931,263 1.5 1,999,532 1.3
Anthony F. Daddino(7) ....................................... 781,402 * 834,848 *
David DeLucia(8) ............................................ 180,000 * 470,000 *
Hamilton E. James(9) ........................................ 1,001,751 * 1,287,308 *
Richard S. Pechter(10) ...................................... 1,442,524 1.1 1,668,726 1.1
Stuart M. Robbins (11) ...................................... 591,052 * 762,386 *
Theodore P. Shen(12) ........................................ 1,300,424 1.0 1,351,626 *
Michael A. Boyd(13) ......................................... 119,609 * 123,876 *
Michael M. Bendik(14) ....................................... 60,104 * 62,238 *
Henri de Castries(15) ....................................... 2,000 * 2,000 *
Denis Duverne(16) ........................................... 2,000 * 2,000 *
Jane Mack Gould ............................................. 0 * 0 *
Louis Harris(17) ............................................ 8,880 * 22,880 *
Michael Hegarty(18) ......................................... 0 * 0 *
Henri G. Hottinguer(19) ..................................... 14,000 * 28,000 *
W. Edwin Jarmain(20) ........................................ 20,048 * 34,048 *
Francis Jungers(21) ......................................... 12,000 * 26,000 *
Edward D. Miller(22) ........................................ 0 * 0 *
Stanley B. Tulin (23) ....................................... 1,000 * 1,000 *
W.J. Sanders III(24) ........................................ 12,810 * 26,810 *
John C. West(25) ............................................ 31,600 * 45,600 *
All directors and executive officers as a group(26) ......... 9,204,991 7.0 10,802,090 7.1
</TABLE>
- ----------
* Less than 1.0%.
11
<PAGE>
(1) The table provides certain information regarding the beneficial ownership
of the Company's Common Stock by AXA, EQ, Equitable Life, each of the
Company's directors and all directors and executive officers as a group
assuming, in the case of the Total column, the issuance of all of the
Common Stock pursuant to outstanding restricted stock units and options.
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 Incentive Plan and the Company's 1994-1996
Long Term Incentive Plan for restricted stock units representing an
aggregate of approximately 10.4 million shares of Common Stock.
Approximately 90% of these units have vested as of February 1, 1999 and
are included in the Current Beneficial Ownership column. The balance of
these units, located in the Total column, will vest in February 2000.
In connection with the Initial Public Offering, employees acquired options
to purchase an aggregate of approximately 18.4 million shares of Common
Stock at a price of $13.50 per share by foregoing an aggregate of $55.7
million of their future interests under cash compensation arrangements
(the "LTI Option Exchange"). As of February 1, 1998, all outstanding
options received in the LTI Option Exchange have vested and are included
in the Current Beneficial Ownership column. In addition, Mr. Roby was
granted an option to purchase 500,000 shares of Common Stock in 1996 and
Messrs. Harris, Hottinguer, Jungers, Jarmain, Sanders and West have each
been granted options to purchase 24,000 shares of Common Stock under the
Company's 1996 Non-Employee Directors Stock Plan.
(2) AXA is EQ's largest stockholder, beneficially owning approximately 59% of
EQ's outstanding common stock. As of March 1, 1999, a group of four French
mutual insurance companies (the "Mutuelles AXA") owned, directly or
indirectly through various holding companies, approximately 23.9% of the
issued shares representing 37.6% of the voting power of AXA. For insurance
regulatory purposes the shares of capital stock of EQ beneficially owned
by AXA and its subsidiaries have been deposited into a voting trust to
ensure that certain of the indirect minority shareholders of AXA do not
exercise control over EQ or certain of its insurance subsidiaries.
(3) The number listed includes shares of Common Stock beneficially owned by
EQ's wholly-owned subsidiary, Equitable Life.
(4) The number listed includes shares of Common Stock beneficially owned
through its wholly-owned subsidiary, Equitable Holdings, L.L.C.
(5) The Current Beneficial Ownership column for Mr. Roby includes 476,546
vested restricted stock units and 1,198,384 option shares exercisable
within 60 days. The Total column includes 51,202 unvested restricted stock
units and 250,000 stock options that become exercisable more than 60 days
after March 1, 1999. In addition, Mr. Roby holds an option to purchase
50,000 shares of common stock of EQ which is exercisable within 60 days,
2,500 American Depositary Receipts ("ADRs") of AXA and 2,500 option shares
of AXA which are exercisable within 60 days.
(6) The Current Beneficial Ownership column for Mr. Chalsty includes 2,500
shares owned by Mr. Chalsty's wife, 650,649 vested restricted stock units
and 1,272,714 option shares exercisable within 60 days . The Total column
includes 68,269 unvested restricted stock units. In addition, Mr. Chalsty
beneficially owns 116,000 shares of common stock of EQ, including 100,000
option shares exercisable within 60 days, 2,500 ADRs of AXA and 5,000
option shares of AXA which are exercisable within 60 days.
(7) The Current Beneficial Ownership column for Mr. Daddino includes 198,755
vested restricted stock units and 530,298 option shares exercisable within
60 days. The Total column includes 28,446 unvested restricted stock units
and 25,000 stock options that become exercisable more than 60 days after
March 1, 1999. Mr. Daddino beneficially owns 100 shares of common stock EQ
which are held in an insurance trust for the benefit of his wife and
children and also holds an option to purchase 50,000 shares of common
stock of EQ which is exercisable within 60 days.
(8) The Current Beneficial Ownership column for Mr. DeLucia includes 180,000
option shares exercisable within 60 days. The total column includes
470,000 stock options that become exercisable more than 60 days after
March 1, 1999.
(9) The Current Beneficial Ownership column for Mr. James includes 662,872
option shares exercisable within 60 days. The Total column includes 35,557
unvested restricted stock units and 250,000 stock options that become
exercisable more than 60 days after March 1, 1999. Mr. James also holds an
option to purchase 50,000 shares of common stock of EQ which is
exercisable within 60 days and 1,000 ADRs of AXA.
(10) The Current Beneficial Ownership column for Mr. Pechter includes 954,536
option shares exercisable within 60 days. The Total column includes
51,202 unvested restricted stock units and 175,000 stock options that
become exercisable more than 60 days after March 1, 1999. Mr. Pechter
also holds an option to purchase 50,000 shares of common stock of EQ
which is exercisable within 60 days.
12
<PAGE>
(11) The Current Beneficial Ownership column for Mr. Robbins includes 397,724
option shares exercisable within 60 days. The Total column includes
21,334 unvested restricted stock units and 150,000 stock options that
become exercisable more than 60 days after March 1, 1999.
(12) The Current Beneficial Ownership column for Mr. Shen includes 954,536
option shares exercisable within 60 days. The Total column includes
51,202 unvested restricted stock units. Mr. Shen also holds an option to
purchase 50,000 shares of common stock of EQ which is exercisable within
60 days and 1,000 ADRs of AXA.
(13) The Current Beneficial Ownership column for Mr. Boyd includes 79,544
option shares exercisable within 60 days. The Total column includes 4,267
unvested restricted stock units.
(14) The Current Beneficial Ownership column for Mr. Bendik includes 39,772
option shares exercisable within 60 days. The Total column includes 2,134
unvested restricted stock units.
(15) Mr. de Castries also beneficially owns 13,333 shares of Common Stock of
EQ, all of which are option shares exercisable within 60 days, and 70,188
shares of common stock of AXA, including 69,188 option shares exercisable
within 60 days.
(16) Mr. Duverne also owns 10,333 shares of EQ, including 8,333 option shares
exercisable within 60 days. Of his EQ holding 2,000 shares are owned with
his wife. Mr. Duverne also beneficially owns 11,042 shares of common
stock of AXA, of which 1,000 shares are owned with his wife and 10,000
are option shares of AXA which are exercisable within 60 days.
(17) The Current Beneficial Ownership column for Mr. Harris includes 6,000
option shares exercisable within 60 days. The Total column includes
14,000 stock options that become exercisable more than 60 days after
March 1, 1999.
(18) Mr. Hegarty beneficially owns 48,228 shares of common stock of EQ,
including 48,039 option shares exercisable within 60 days.
(19) The Current Beneficial Ownership column for Mr. Hottinguer includes
10,000 option shares exercisable within 60 days. The Total column
includes 14,000 stock options that become exercisable more than 60 days
after March 1, 1999.
(20) The Current Beneficial Ownership column for Mr. Jarmain includes 10,000
option shares exercisable within 60 days. The Total column includes
14,000 option shares that become exercisable more than 60 days after
March 1, 1999. Mr. Jarmain also beneficially owns 10,545 shares of common
stock of EQ.
(21) The Current Beneficial Ownership column for Mr. Jungers includes 10,000
option shares exercisable within 60 days. The Total column includes
14,000 stock options that become exercisable more than 60 days after
March 1, 1999.
(22) Mr. Miller beneficially owns 142,745 shares of common stock of EQ, all of
which are option shares exercisable within 60 days.
(23) The 1,000 shares shown are owned with his wife. Mr. Tulin also
beneficially owns 87,437 shares of common stock of EQ, including 82,819
option shares exercisable within 60 days. Of these shares 4,000 are owned
with his wife. In addition, Mr. Tulin owns 2,000 ADRs of AXA and 2,500
option shares of AXA which are exercisable within 60 days.
(24) The Current Beneficial Ownership column for Mr. Sanders includes 10,000
option shares exercisable within 60 days. The Total column includes
14,000 stock options that become exercisable more than 60 days after
March 1, 1999.
(25) The Current Beneficial Ownership column for Mr. West includes 10,000
option shares exercisable within 60 days. The Total column includes
14,000 option shares that become exercisable more than 60 days after
March 1, 1999. Of the Common Stock beneficially owned by Mr. West, 11,000
shares are held on his behalf by a profit sharing plan. In addition, 400
shares are owned directly by his wife, as to which shares Mr. West
disclaims beneficial ownership.
(26) The Current Beneficial Ownership column includes 1,325,950 vested
restricted stock units and 6,326,380 option shares exercisable within 60
days and the Total column includes 316,458 unvested restricted stock
units and 1,404,000 stock options that become exercisable more than 60
days after March 1, 1999. All directors and executive officers as a group
also beneficially own 678,721 shares of common stock of EQ, 91,230 shares
of common stock of AXA and 9,000 ADRs of AXA.
13
<PAGE>
APPROVAL OF DLJDIRECT 1999 INCENTIVE COMPENSATION PLAN
DLJdirect is a leading provider of online discount brokerage and related
investment services, offering customers automated securities order placement
and information and research capabilities through the Internet and online
service providers. The term "DLJdirect" does not represent a separately
incorporated entity but rather those businesses, assets and liabilities
intended to represent Donaldson, Lufkin & Jenrette Inc's online discount
brokerage and related investment services businesses. DLJdirect Holdings Inc.
is the corporate entity that owns, directly or indirectly, a substantial
majority of the business assets and liabilities of DLJdirect.
On March 17, 1999, the Company filed with the Securities and Exchange
Comission ("SEC") a preliminary Registration Statement on Form S-3 with respect
to a proposed offering by the Company of DLJdirect Common Stock. This DLJdirect
Common Stock is a new series of common stock of the Company which is a
"tracking stock" intended to reflect the performance of DLJdirect.
As described in an Information Statement enclosed with this Proxy
Statement, stockholders are being asked to consent to changes in the Company's
Certificate of Incorporation to authorize issuance of DLJdirect Common Stock as
part of the offering referred to above.
DLJDIRECT 1999 INCENTIVE COMPENSATION PLAN
The board of directors has adopted the DLJdirect 1999 Incentive
Compensation Plan (the "Compensation Plan") subject to stockholder approval.
The board of directors believes that attracting and retaining key employees and
service providers is essential to DLJdirect's continued growth and success. In
addition, the board of directors believes that the long term success of
DLJdirect is enhanced by a competitive and comprehensive compensation program,
which may include tailored types of incentives designed to motivate and reward
such persons for outstanding service, including awards that link compensation
to applicable measures of DLJdirect's performance and the creation of
stockholder value. Such awards will enable DLJdirect to attract and retain key
employees and service providers and enable such persons to acquire and/or
increase their proprietary interest in DLJdirect and thereby align their
interests with the interests of DLJdirect's stockholders. In addition, the
board of directors has concluded that its Compensation and Management Committee
(the "Compensation Committee") should be given as much flexibility as possible
to provide for annual and long term incentive awards contingent on performance.
The following is a brief description of the material features of the
Compensation Plan. Such description is qualified in its entirety by reference
to the full text of the Compensation Plan, which is attached as Exhibit A.
Types of Awards. The terms of the Compensation Plan provide for grants of
stock options, stock appreciation rights, restricted stock, restricted stock
units, other stock-related awards, and annual incentive or performance awards
that may be settled in cash, stock, or other property (collectively referred to
as "Awards").
Shares Subject to the Compensation Plan; Annual Per-Person
Limitations. Under the Compensation Plan, the total number of shares of
DLJdirect Common Stock reserved and available for delivery to participants in
connection with Awards is (i) 10 million, plus (ii)7.5% of the number of shares
of DLJdirect Common Stock issued or delivered during the term of the
Compensation Plan (excluding any issuance or
14
<PAGE>
delivery in connection with Awards, or any other compensation or benefit plan
of DLJdirect, or in connection with the offering referred to above); provided,
however, that the total number of shares of DLJdirect Common Stock with respect
to which incentive stock options may be granted shall not exceed 10 million.
Shares of DLJdirect Common Stock subject to an Award that is canceled, expired,
forfeited, settled in cash, or otherwise terminated without a delivery of
shares to the participant, including DLJdirect Common Stock withheld or
surrendered in payment of any exercise or purchase price of an Award or taxes
relating to an Award, will again be available for Awards under the Compensation
Plan. Any shares of DLJdirect Common Stock delivered under the Compensation
Plan may consist of authorized and unissued shares or treasury shares.
In addition, the Compensation Plan imposes individual limitations on the
amount of certain Awards. Under these limitations, during any fiscal year the
number of options, stock appreciation rights, shares of restricted stock,
restricted stock units, shares of DLJdirect Common Stock issued as a bonus or
in lieu of other obligations, and other stock-based Awards granted to any one
participant shall not exceed 2 million shares for each type of such Award,
subject to adjustment in certain circumstances. The maximum cash amount that
may be earned as a final annual incentive award or other cash Award in respect
of any fiscal year by any one participant is $5 million.
The Compensation Committee is authorized to adjust the number and kind of
shares subject to the aggregate share limitations and annual limitations under
the Compensation Plan and subject to outstanding Awards (including adjustments
to exercise prices and number of shares of options and other affected terms of
Awards) in the event that a dividend or other distribution (whether in cash,
shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event affects the
DLJdirect Common Stock so that an adjustment is appropriate. The Compensation
Committee is also authorized to adjust performance conditions and other terms
of Awards in response to these kinds of events or in response to changes in
applicable laws, regulations, or accounting principles.
Eligibility. Executive officers, and other officers and employees of
Donaldson, Lufkin & Jenrette, Inc. or DLJdirect, as well as other persons who
provide services to Donaldson, Lufkin & Jenrette, Inc. or DLJdirect, including
directors of Donaldson, Lufkin & Jenrette, Inc. and DLJdirect Holdings Inc.,
shall be eligible to be granted Awards under the Compensation Plan. It is
estimated that approximately 500 persons are eligible to receive Awards and it
is anticipated that most, if not all, employees of DLJdirect will be granted
Awards under the Compensation Plan.
Administration. The Compensation Plan will be administered by the
Compensation Committee except to the extent the board of directors elects to
administer the Compensation Plan. Subject to the terms and conditions of the
Compensation Plan, the board of directors or the Compensation Committee is
authorized to interpret the Compensation Plan, construe terms, adopt rules and
regulations, prescribe forms, make all determinations under the Compensation
Plan and, subject to such terms and conditions as they may establish, delegate
authority to officers and managers of DLJ. The Compensation Plan provides that
Compensation Committee members are not personally liable, and are fully
indemnified for all actions taken or made in good faith under the Compensation
Plan.
Stock Options and Stock Appreciation Rights. The Compensation Committee is
authorized to grant stock options, including both incentive stock options that
can result in potentially favorable tax treatment
15
<PAGE>
to the participant and non-qualified stock options (i.e, options not qualifying
as incentive stock options) and stock appreciation rights entitling the
participant to receive the excess of the fair market value of a share of
DLJdirect Common Stock on the date of exercise over the grant price of the
stock appreciation right. The exercise price per share subject to an option and
the grant price of a stock appreciation right is determined by the Compensation
Committee, but must not be less than the fair market value of a share of
DLJdirect Common Stock on the date of grant (except to the extent of
in-the-money awards or cash obligations surrendered by the participant at the
time of grant). All other terms regarding each option or stock appreciation
right are fixed by the Compensation Committee, except that no option or stock
appreciation right may have a term exceeding ten years. Options may be
exercised by payment of the exercise price in cash, DLJdirect Common Stock,
outstanding Awards, or other property as determined by the Compensation
Committee.
Restricted Stock and Restricted Stock Units. The Compensation Committee is
authorized to grant restricted stock and restricted stock units. Restricted
stock is a grant of DLJdirect Common Stock which may not be sold or disposed
of, and which may be forfeited in the event of certain terminations of
employment and/or failure to satisfy stated performance requirements. A
participant granted restricted stock generally has all of the rights of a
shareholder of DLJdirect, including voting and dividend rights. An Award of
restricted stock units confers upon a participant the right to receive shares
at the end of a specified deferral period, subject to possible forfeiture of
the Award in the event of certain terminations of employment and/or failure to
satisfy stated performance requirements. Prior to settlement, an Award of
restricted stock units carries no dividend or other ownership rights, except
for dividend equivalents, if granted.
Dividend Equivalents. The Compensation Committee is authorized to grant
dividend equivalents conferring on participants the right to receive cash,
shares, other Awards, or other property equal in value to dividends paid on a
specific number of shares or other periodic payments. Dividend equivalents may
be granted on a free-standing basis or in connection with another Award.
Bonus Stock and Awards in Lieu of Cash Obligations. The Compensation
Committee is authorized to grant shares as a bonus free of restrictions, or to
grant shares or other Awards in lieu of obligations to pay cash under other
plans or compensatory arrangements.
Other Stock-Based Awards. The Compensation Plan authorizes the
Compensation Committee, subject to limitations under applicable law, to grant
Awards that are denominated or payable in shares. The Compensation Committee
determines the terms and conditions of such Awards, including consideration to
be paid to exercise Awards in the nature of purchase rights, the period during
which Awards will be outstanding, and forfeiture conditions and restrictions on
Awards.
Performance and Annual Incentive Awards. A participant's right to exercise
or receive a grant or settlement of an Award may be subject to performance
conditions as specified by the Compensation Committee. In addition, the
Compensation Plan authorizes specific annual incentive awards, which represent
a conditional right to receive cash, shares or other Awards upon achievement of
preestablished performance goals during a specified one-year period.
The performance goals to be achieved as a condition of payment or
settlement of a performance award or annual incentive award will consist of (a)
one or more business criteria and (b) a targeted level or levels of performance
with respect to each such business criteria. In the case of performance awards
16
<PAGE>
or annual incentive awards intended to meet the requirements of Internal
Revenue Code Section 162(m), if applicable, the business criteria used must be
one of those specified in the Compensation Plan, although for other
participants the Compensation Committee may specify any other criteria. The
business criteria specified in the Compensation Plan are: (1) earnings per
share; (2) revenues; increase in revenues; the excess of all or a portion of
revenues over operating expenses (excluding expenses determined by the
Compensation Committee at the time performance goals are established); (3) cash
flow; (4) cash flow return on investment; (5) return on net assets, return on
assets, return on investment, return on capital, return on equity; (6)
management value added; (7) operating margin; (8) net income; pretax earnings;
pretax earnings before interest, depreciation, amortization and/or incentive
compensation; pretax operating earnings; operating earnings (with or without
investment gains or losses); (9) total shareholder return; (10) reduction in
costs; (11) increase in the fair market value of the DLJdirect Common Stock;
and (12) any of the above goals as compared to the performance of a published
or special index deemed applicable by the Compensation Committee including, but
not limited to, the Standard & Poor's 500 Stock Index or a group of comparable
companies.
Subject to the requirements of the Compensation Plan, the Compensation
Committee will determine other performance award and annual incentive award
terms, including the required levels of performance with respect to the
business criteria, the corresponding amounts payable upon achievement of such
levels of performance, termination and forfeiture provisions, and the form of
settlement.
Other Terms of Awards. Awards may be settled in the form of cash,
DLJdirect Common Stock, other Awards, or other property, in the discretion of
the Compensation Committee. The Compensation Committee may require or permit
participants to defer the settlement of all or part of an Award. The
Compensation Committee is authorized to place cash, shares, or other property
in trusts or make other arrangements to provide for payment of obligations
under the Compensation Plan. The Compensation Committee may condition any
payment relating to an Award on the withholding of taxes. Awards granted under
the Compensation Plan generally may not be pledged or otherwise encumbered and
are not transferable except by will or by the laws of descent and distribution
although the Compensation Committee has authority to permit Awards to be
transferred in limited circumstances.
Awards under the Compensation Plan are generally granted without a
requirement that the participant pay consideration in the form of cash or
property for the grant (as distinguished from the exercise), except to the
extent required by law. The Compensation Committee may, however, grant Awards
in exchange for other Awards under the Compensation Plan or other awards
granted by Donaldson, Lufkin & Jenrette, Inc., and may grant Awards in addition
to and in tandem with such other Awards, awards, or rights as well.
Loan Provisions. With the Compensation Committee's consent, and subject to
applicable law, Donaldson, Lufkin & Jenrette, Inc. may make, guarantee or
arrange for a loan to a participant with respect to the exercise of any option,
purchase of shares or other payment in connection with any Award, including the
payment by a participant of any or all federal, state or local income or other
taxes due in connection with any Award.
Amendment and Termination of the Compensation Plan. The board of directors
may amend or discontinue the Compensation Plan or the Compensation Committee's
authority to grant Awards without further stockholder approval, except for
amendments required to be approved by stockholders by
17
<PAGE>
applicable law or any stock exchange or automated quotation system on which the
shares are then listed or quoted. Stockholder approval will not be deemed to be
required under laws or regulations, such as those relating to incentive stock
options, that condition favorable treatment of participants on such approval,
although the board of directors may, in its discretion, seek stockholder
approval in any circumstance in which it deems such approval advisable. Thus,
stockholder approval will not necessarily be required for amendments that might
increase the cost of the Compensation Plan or broaden eligibility. Unless
earlier terminated by the board of directors, the Compensation Plan will
terminate at such time as no shares remain available for issuance under the
Compensation Plan and Donaldson, Lufkin & Jenrette, Inc. or DLJdirect has no
further rights or obligations with respect to outstanding Awards under the
Compensation Plan.
Initial Awards. Assuming the offering of DLJdirect Common Stock referred
to above takes place, it is anticipated that the Compensation Committee will
make grants of stock options to the executive officers, certain directors and
other eligible persons under the Compensation Plan but it is not possible at
this time to determine the size of these grants. It is expected that such
options will have an exercise price equal to the initial public offering price
of the DLJdirect Common Stock. It is also expected that these options will
generally become exercisable in four equal installments based on continued
service with Donaldson, Lufkin & Jenrette, Inc. or DLJdirect during the
four-year period following the grant date.
Federal Income Tax Implications of the Compensation Plan. The following is
a brief description of the federal income tax consequences generally arising
with respect to Awards under the Compensation Plan.
The grant of an option or stock appreciation right will create no tax
consequences for the participant or Donaldson, Lufkin & Jenrette, Inc. or
DLJdirect. A participant will not recognize taxable income upon exercising an
incentive stock option (except that the alternative minimum tax may apply).
Upon exercising an option other than an incentive stock option, the participant
must generally recognize ordinary income equal to the difference between the
exercise price and fair market value of the freely transferable and
nonforfeitable shares acquired on the date of exercise. Upon exercising a stock
appreciation right, the participant must generally recognize ordinary income
equal to the cash or the fair market value of the freely transferable and
nonforfeitable shares received.
Upon a disposition of shares acquired upon exercise of an incentive stock
option before the end of the applicable incentive stock options holding
periods, the participant must generally recognize ordinary income equal to the
lesser of (i) the fair market value of the shares at the date of exercise of
the incentive stock options minus the exercise price, or (ii) the amount
realized upon the disposition of the incentive stock options shares minus the
exercise price. Otherwise, a participant's disposition of shares acquired upon
the exercise of an option (including an incentive stock option for which the
incentive stock options holding periods are met) or stock appreciation right
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in
such shares (the tax basis generally being the exercise price plus any amount
previously recognized as ordinary income in connection with the exercise of the
option or stock appreciation right).
DLJdirect generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option or stock appreciation right. Pursuant to the Tax Sharing Agreement, the
tax benefit may be paid to DLJ if the stock associated with such deduction is
18
<PAGE>
attributed to DLJ. DLJ may also, pursuant to the Tax Sharing Agreement, be
required to pay DLJdirect for tax benefits arising out of the issuance of
DLJdirect Common Stock to a DLJ employee in connection with an option or stock
appreciation right. DLJdirect generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant.
Accordingly, if the participant holds the shares of an incentive stock option
grant for the required holding period, DLJdirect will not receive any tax
deduction for that grant.
With respect to Awards granted under the Compensation Plan that result in
the payment or issuance of cash or shares or other property that is either not
restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of shares or other property received. Thus,
deferral of the time of payment or issuance will generally result in the
deferral of the time the participant will be liable for income taxes with
respect to such payment or issuance. DLJdirect generally will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant. Pursuant to the Tax Sharing Agreement, the tax benefit may be paid
to DLJ if the stock associated with such deduction is attributed to DLJ. DLJ
may also, pursuant to the Tax Sharing Agreement, be required to pay DLJdirect
for tax benefits arising out of the issuance of DLJdirect Common Stock to a DLJ
employee in connection with an option or stock appreciation right.
With respect to Awards involving the issuance of shares or other property
that is restricted as to transferability and subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the fair market value of the shares or other property received at the first
time the shares or other property becomes transferable or is not subject to a
substantial risk of forfeiture, whichever occurs earlier. A participant may
elect to be taxed at the time of receipt of shares or other property rather
than upon lapse of restrictions on transferability or substantial risk of
forfeiture, but if the participant subsequently forfeits such shares or
property, the participant would not be entitled to any tax deduction, including
as a capital loss, for the value of the shares or property on which he
previously paid tax. The participant must file such election with the Internal
Revenue Service within 30 days of the receipt of the shares or other property.
DLJdirect generally will be entitled to a deduction in an amount equal to the
ordinary income recognized by the participant. Pursuant to the Tax Sharing
Agreement, the tax benefit may be paid to DLJ if the stock associated with such
deduction is attributed to DLJ. DLJ may also, pursuant to the Tax Sharing
Agreement, be required to pay DLJdirect for tax benefits arising out of the
issuance of DLJdirect Common Stock to a DLJ employee in connection with an
option or stock appreciation right.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE COMPANY'S DLJDIRECT 1999 INCENTIVE COMPENSATION PLAN.
19
<PAGE>
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 2000 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 2000 must be received by Marjorie S.
White, Secretary, Donaldson, Lufkin & Jenrette, Inc., 277 Park Avenue, New
York, New York 10172, no later than January 1, 2000.
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.
ADDITIONAL INFORMATION
THE COMPANY WILL MAKE AVAILABLE A COPY OF ITS ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998, 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 (APRIL 16, 1999), 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 Special
Meeting. However, if any such matters properly come before the Special 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
Marjorie S. White
Secretary
May 3, 1999
20
<PAGE>
EXHIBIT A
DLJDIRECT
- -------------------------------------------------------------------------------
1999 INCENTIVE COMPENSATION PLAN
- -------------------------------------------------------------------------------
A-1
<PAGE>
DLJDIRECT
- -------------------------------------------------------------------------------
1999 INCENTIVE COMPENSATION PLAN
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purposes ..................................................... A-4
2. Definitions .................................................. A-4
3. Administration ............................................... A-6
(a) Authority of the Committee ............................... A-6
(b) Manner of Exercise of Committee Authority ................ A-6
(c) Limitation of Liability .................................. A-7
4. Shares Subject to Plan ....................................... A-7
(a) Overall Number of Shares Available for Delivery .......... A-7
(b) Application of Limitation to Grants of Awards ............ A-7
(c) Availability of Shares Not Delivered under Awards ........ A-7
5. Eligibility; Per-Person Award Limitations .................... A-7
6. Specific Terms of Awards ..................................... A-8
(a) General .................................................. A-8
(b) Options .................................................. A-8
(c) Share Appreciation Rights ................................ A-8
(d) Restricted Shares ........................................ A-9
(e) RSUs ..................................................... A-10
(f) Bonus Shares and Awards in Lieu of Obligations ........... A-10
(g) Dividend Equivalents ..................................... A-10
(h) Annual Incentive and Performance Awards. ................. A-10
(i) Other Share-Based Awards ................................. A-11
7. Certain Provisions Applicable to Awards ...................... A-11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards ... A-11
(b) Term of Awards ........................................... A-11
(c) Form and Timing of Payment under Awards; Deferrals ....... A-11
(d) Exemptions from Section 16(b) Liability .................. A-12
(e) Loan Provisions .......................................... A-12
</TABLE>
A-2
<PAGE>
DLJDIRECT
- -------------------------------------------------------------------------------
1999 INCENTIVE COMPENSATION PLAN
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8. Performance and Annual Incentive Awards ...................... A-12
(a) Performance Conditions ................................... A-12
(b) Performance Awards Granted to Designated Covered
Employees ............................................. A-12
(c) Annual Incentive Awards Granted to Designated Covered
Employees ............................................. A-14
(d) Written Determinations ................................... A-15
(e) Status of Section 8(b) and Section 8(c) Awards under
Code Section 162(m) ................................... A-15
9. General Provisions ........................................... A-15
(a) Compliance with Legal and Other Requirements ............. A-15
(b) Limits on Transferability; Beneficiaries ................. A-15
(c) Adjustments .............................................. A-16
(d) Taxes .................................................... A-16
(e) Changes to the Plan and Awards ........................... A-17
(f) Limitation on Rights Conferred under Plan ................ A-17
(g) Unfunded Status of Awards; Creation of Trusts ............ A-17
(h) Nonexclusivity of the Plan ............................... A-18
(i) Payments in the Event of Forfeitures; Fractional Shares .. A-18
(j) Governing Law ............................................ A-18
(k) Awards to Participants Outside the United States ......... A-18
(l) Plan Effective Date and Shareholder Approval ............. A-18
</TABLE>
A-3
<PAGE>
DLJDIRECT
1999 INCENTIVE COMPENSATION PLAN
1. PURPOSES. The purposes of the DLJdirect 1999 Incentive Compensation
Plan (the "Plan") are to provide incentives to executive officers and other
selected key employees and service providers of Donaldson, Lufkin & Jenrette,
Inc. and its Affiliates to contribute to the growth and profitability of the
Company, to encourage such persons to remain in the employ or service of the
Company, and to endeavor to qualify the compensation paid under the Plan for
tax deductibility under Section 162(m) of the Code to the extent deemed
appropriate by the Compensation and Management Committee of the Company's Board
of Directors. Adoption of the Plan and the grant of Awards in accordance with
the terms of the Plan has been determined by the Board to be in the best
interest of the Company and its shareholders.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Affiliate" means (i) any entity that, directly or indirectly, 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 Committee.
(b) "Annual Incentive Award" means an Award granted to a Participant
which is conditioned upon satisfaction, during a period not in excess of
one year, of performance criteria established by the Committee.
(c) "Award" means any Option, SAR (including Limited SAR), Restricted
Share, RSU, Share granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Share-Based Award, Performance Award or Annual Incentive
Award, together with any other right or interest granted to a Participant
under the Plan.
(d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death. If, upon a
Participant's death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the Participant's
estate.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, including regulations thereunder and successor provisions and
regulations thereto.
(g) "Committee" means the Compensation and Management Committee of the
Board.
(h) "Company" means Donaldson, Lufkin & Jenrette, Inc. together with any
successor thereto.
(i) "Covered Employee" means an Eligible Employee who is a Covered
Employee as specified in Section 8(e) of the Plan.
(j) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g), to receive cash, Shares, or other Awards equal in value to
dividends paid with respect to a specified number of Shares, or other
periodic payments.
A-4
<PAGE>
(k) "Effective Date" means March 16, 1999.
(l) "Eligible Employee" means each Executive Officer or director of the
Company, other officers, employees or directors of the Company or any of
its Affiliates, and other persons who provide services to the Company or
any of its Affiliates. An employee on leave of absence may be considered as
still in the employ of the Company or an Affiliate for purposes of
eligibility for participation in the Plan. In addition, a person who has
been offered employment by the Company or any of its Affiliates or agreed
to become a director of the Company or any of its Affiliates is eligible to
be granted an Award under the Plan; provided, however, that such Award
shall be canceled if such person fails to commence such employment or
service as a director, and no payment of value may be made in connection
with such Award until such person has commenced such employment or service.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.
(n) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(o) "Fair Market Value" means the fair market value of the Shares, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Shares shall be equal to the closing price per
share reported on a consolidated basis on the principal stock exchange upon
which the Shares are traded on the date on which the value is to be
determined (or the last immediately preceding date on which the Shares were
traded).
(p) "Incentive Stock Option" or "ISO" means any Option intended to be and
designated as an incentive stock option within the meaning of Code Section
422 or any successor provision thereto.
(q) "Option" means a right, granted to a Participant under Section 6(b)
hereof, to purchase Shares or other Awards at a specified price during
specified time periods.
(r) "Other Share-Based Awards" means Awards granted to a Participant
under Section 6(i) hereof.
(s) "Participant" means a person who has been granted an Award under the
Plan which remains outstanding, including a person who is no longer an
Eligible Employee.
(t) "Performance Award" means an Award granted to a Participant which is
conditioned upon satisfaction, during a period in excess of one year but in
no event more than ten years, of performance criteria established by the
Committee.
(u) "Qualified Member" means a member of the Committee who is a "non
employee director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Code Section 162(m).
(v) "Restricted Shares" means Shares granted to a Participant under
Section 6(d) hereof that are subject to certain restrictions and to a risk
of forfeiture.
(w) "Restricted Share Units" or "RSUs" means a right, granted to a
Participant under Section 6(e) hereof, to receive Shares, cash or a
combination thereof at the end of a specified deferral period.
A-5
<PAGE>
(x) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(y) "Shares" means the Company's DLJdirect Common Stock, par value $0.10
per share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 9(c) hereof.
(z) "Share Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) Authority of the Committee. The Plan shall be administered by the
Committee except to the extent the Board elects to administer the Plan, in
which case references herein to the "Committee" shall be deemed to include
references to the "Board". The Committee is authorized, subject to the
provisions of the Plan, in its discretion, from time to time to select Eligible
Employees and Participants; to grant Awards under the Plan; to establish,
modify, or rescind such rules and regulations as it deems necessary for the
proper administration of the Plan; and to make determinations and
interpretations and to take such steps in connection with the Plan or the
Awards granted thereunder as it deems necessary and advisable. All such actions
by the Committee under the Plan or with respect to the Awards granted
thereunder shall be final and binding on all persons. No member of the
Committee shall be liable for any action taken, or determination made, in good
faith.
(b) Manner of Exercise of Committee Authority. At any time that a member
of the Committee is not a Qualified Member, any action of the Committee
relating to an Award granted or to be granted to a Participant who is then
subject to Section 16 of the Exchange Act in respect of the Company, or
relating to an Award intended by the Committee to qualify as "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder, may be taken either (i) by a subcommittee, designated by the
Committee, composed solely of two or more Qualified Members, or (ii) by the
Committee but with each such member who is not a Qualified Member abstaining or
recusing himself or herself from such action; provided, however, that, upon
such abstention or recusal, the Committee remains composed solely of two or
more Qualified Members. Such action, authorized by such a subcommittee or by
the Committee upon the abstention or recusal of such non-Qualified Member(s),
shall be the action of the Committee for purposes of the Plan. Any action of
the Committee shall be final, conclusive and binding on all persons, including
the Company, its Affiliates, Participants, Beneficiaries, transferees under
Section 9(b) hereof or other persons claiming rights from or through a
Participant, and stockholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee
may delegate to officers or managers of the Company or any Affiliate, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative functions, as
the Committee may determine, to the extent that such delegation will not result
in the loss of an exemption under Rule 16b-3 for Awards granted to Participants
subject to Section 16 of the Exchange Act in respect of the Company and will
not cause Awards intended to qualify as "performance-based compensation" under
Code Section 162(m) to fail to so qualify. The Committee may appoint agents to
assist it in administering the Plan.
A-6
<PAGE>
(c) Limitation of Liability. The Committee and each member thereof 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 an Affiliate, the Company's independent auditors, consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and any officer or employee of the Company or an Affiliate acting at
the direction or on behalf of the Committee 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.
4. SHARES SUBJECT TO PLAN.
(a) Overall Number of Shares Available for Delivery. Subject to adjustment
as provided in Section 9(c) hereof, the total number of Shares reserved and
available for delivery in connection with Awards under the Plan shall be (i)
10,000,000, plus (ii) 7.5% of the number of Shares issued or delivered during
the term of the Plan (excluding any issuance or delivery in connection with
Awards, or any other compensation or benefit plan of the Company, or in
connection with the initial public offering of Shares); provided, however, that
the total number of Shares with respect to which ISOs may be granted shall not
exceed 10,000,000. Any Shares delivered under the Plan shall consist of
authorized and unissued shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be granted
if the number of Shares to be delivered in connection with such Award or, in
the case of an Award relating to Shares but settleable only in cash (such as
cash-only SARs), the number of shares to which such Award relates, exceeds the
number of Shares remaining available under the Plan minus the number of Shares
issuable in settlement of or relating to then-outstanding Awards. The Committee
may adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or substitute awards)
and make adjustments if the number of Shares actually delivered differs from
the number of shares previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares subject to
an Award under the Plan that is canceled, expired, forfeited, settled in cash
or otherwise terminated without a delivery of Shares to the Participant,
including (i) the number of Shares withheld in payment of any exercise or
purchase price of an Award or taxes relating to Awards, and (ii) the number of
Shares surrendered in payment of any exercise or purchase price of an Award or
taxes relating to any Award, will again be available for Awards under the Plan.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted under
the Plan only to Eligible Employees. In each fiscal year during any part of
which the Plan is in effect, an Eligible Employee may not be granted Awards
relating to more than 2,000,000 Shares, subject to adjustment as provided in
Section 9(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h),
and 6(i). For purposes of applying the foregoing limitation to Sections 6(b)
and 6(c), any Option or SAR that is canceled shall be treated as remaining
outstanding, and any amendment to an Option or SAR that reduces the exercise or
grant price (other than customary anti-dilution adjustments) shall be treated
as the cancellation of the original Option or SAR and the issuance of a new
Option or SAR. In addition, the maximum cash Award that may be earned under the
Plan pursuant to Section 6(h) in respect of any fiscal year shall be
$5,000,000, determined on an annualized basis in the case of a Performance
Award.
A-7
<PAGE>
6. SPECIFIC TERMS OF AWARDS.
(a) General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 9(e)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms requiring
forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to
his or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award
that is not mandatory under the Plan. Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must by paid to satisfy the requirements of
applicable state law, no consideration other than services may be required for
the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Shares purchasable
under an Option shall be determined by the Committee, provided that such
exercise price shall be not less than the Fair Market Value of Shares on
the date of grant of such Option except as provided under Section 7(a)
hereof.
(ii) Time and Method of Exercise. The Committee shall determine the time
or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Shares, other Awards, or
other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by or
forms in which Shares will be delivered or deemed to be delivered to
Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply in
all respects with the provisions of Code Section 422. Anything in the Plan
to the contrary notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify either the Plan or any ISO under Code
Section 422, unless the Participant has first requested the change that
will result in such disqualification.
(c) Share Appreciation Rights. The Committee is authorized to grant SARs
to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one Share on the date of exercise over (B) the grant
price of the SAR as determined by the Committee, provided that such grant
price shall not be less than the Fair Market Value of a Share on the date
of grant of such SAR except as provided under Section 7(a) hereof.
(ii) Other Terms. The Committee shall determine at the date of grant or
thereafter, the time or times at which and the circumstances under which a
SAR may be exercised in whole or in part
A-8
<PAGE>
(including based on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Shares
will be delivered or deemed to be delivered to Participants, whether or not
a SAR shall be in tandem or in combination with any other Award, and any
other terms and conditions of any SAR. Limited SARs that may only be
exercised in connection with a Change in Control or other event as
specified by the Committee may be granted on such terms, not inconsistent
with this Section 6(c), as the Committee may determine. SARs and Limited
SARs may be either freestanding or in tandem with other Awards.
(d) Restricted Shares. The Committee is authorized to grant Restricted
Shares to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Shares shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement relating to
the Restricted Shares, a Participant granted Restricted Shares shall have
all of the rights of a shareholder, including the right to vote the
Restricted Shares and the right to receive dividends thereon (subject to
any mandatory reinvestment or other requirement imposed by the Committee).
During the restricted period applicable to the Restricted Shares, subject
to Section 9(b) below, the Restricted Shares may not be sold, transferred,
pledged, hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period,
Restricted Shares that are at that time subject to restrictions shall be
forfeited and reacquired by the issuing company; provided that the
Committee may provide, by rule or regulation or in any Award agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to the Restricted Shares shall be waived in whole or in
part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
the Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Shares are registered in the name of
the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Shares, that the issuing company retain
physical possession of the certificates, and that the Participant deliver a
stock power to the issuing company, endorsed in blank, relating to the
Restricted Shares.
(iv) Dividends and Splits. As a condition to the grant of an Award of
Restricted Shares, the Committee may require that any cash dividends paid
on Restricted Shares be automatically reinvested in additional shares of
Restricted Shares or applied to the purchase of additional Awards under the
Plan. Unless otherwise determined by the Committee, Shares distributed in
connection with a stock split or stock dividend, and other property
distributed as a dividend shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Shares with respect to
which such Shares or other property have been distributed.
A-9
<PAGE>
(e) RSUs. The Committee is authorized to grant RSUs to Participants, which
are rights to receive Shares, cash, or a combination thereof at the end of a
specified deferral period, subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of RSUs shall occur
upon expiration of the deferral period specified for such RSUs by the
Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, RSUs shall be subject to such restrictions
(which may include a risk of forfeiture) as the Committee may impose, if
any, which restrictions may lapse at the expiration of the deferral period
or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee may determine.
RSUs may be satisfied by delivery of Shares, cash equal to the Fair Market
Value of the specified number of Shares covered by the RSUs, or a
combination thereof, as determined by the Committee at the date of grant or
thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award
agreement evidencing the RSUs), all RSUs that are at that time subject to
deferral (other than a deferral at the election of the Participant) shall
be forfeited; provided that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to RSUs shall be
waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in
part the forfeiture of RSUs.
(iii) Dividend Equivalents. Unless otherwise determined by the Committee
at the date of grant, Dividend Equivalents on the specified number of
Shares covered by an Award of RSUs shall be either (A) paid with respect to
such RSUs at the dividend payment date in cash or unrestricted Shares
having a Fair Market Value equal to the amount of such dividends, or (B)
deferred with respect to such RSUs and the amount or value thereof
automatically deemed reinvested in additional RSUs, other Awards or other
investment vehicles, as the Committee shall determine or permit the
Participant to elect.
(f) Bonus Shares and Awards in Lieu of Obligations. The Committee is
authorized to grant Shares as a bonus, or to grant Shares or other Awards in
lieu of obligations to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements. Shares or Awards granted
hereunder shall be subject to such other terms as shall be determined by the
Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash,
Shares, or other Awards equal in value to dividends paid with respect to a
specified number of Shares, or other periodic payments. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award.
The Committee may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Shares, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) Annual Incentive and Performance Awards. The Committee is authorized
to make Annual Incentive Awards and Performance Awards payable in cash, Shares,
or other Awards, on terms and conditions established by the Committee, subject
to Section 8 in the event of Annual Incentive Awards or Performance Awards
intended to qualify as "performance-based compensation" for purposes of Code
Section 162(m).
A-10
<PAGE>
(i) Other Share-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants 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 Committee 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 Committee, and Awards valued by reference to the book value
of Shares or the value of securities of or the performance of specified
Affiliates. The Committee 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 6(i) 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 Committee
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 6(i).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, 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, any
subsidiary, or any business entity to be acquired by the Company or any
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. 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 Committee 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
subsidiary, in which the value of Shares subject to the Award is equivalent in
value to the cash compensation (for example, RSUs or Restricted Shares), 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, Options granted with an exercise price "discounted" by the amount of
the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee; provided that in no event shall the term of any
Option or SAR exceed a period of ten years (or such shorter term as may be
required in respect of an ISO under Code Section 422).
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by
the Company or any subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Shares, or other Awards, and
may be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may be accelerated, and cash paid in lieu of
Shares in connection with such settlement, in the discretion of the Committee
or upon the occurrence of one or more specified events. Installment or deferred
payments may be required by the Committee to the extent necessary to qualify
payments for deductibility under Code Section 162(m), or permitted at the
election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the payment
or
A-11
<PAGE>
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Shares. Any payments
mandatorily deferred by the Committee to qualify such payments for
deductibility under Code Section 162(m) shall include a reasonable rate of
interest.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company and its subsidiaries that the grant of any Awards to or other
transaction by a Participant who is subject to Section 16 of the Exchange Act
shall be exempt under Rule 16b-3 (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if any provision of
this Plan or any Award agreement does not comply with the requirements of Rule
16b-3 as then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 so that such Participant shall avoid
liability under Section 16(b).
(e) Loan Provisions. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company and/or any subsidiary, the Company and/or any
subsidiary may make, guarantee or arrange for a loan or loans to a Participant
with respect to the exercise of any Option, purchase of Shares or other payment
in connection with any Award, including the payment by a Participant of any or
all federal, state or local income or other taxes due in connection with any
Award. Subject to such limitations, the Committee shall have full authority to
decide whether to make a loan or loans hereunder and to determine the amount,
terms and provisions of any such loan or loans, including the interest rate to
be charged in respect of any such loan or loans, the terms on which the loan is
to be repaid and conditions, if any, under which the loan or loans may be
forgiven.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee.
The Committee may use such business criteria and other measures of performance
as it may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions; provided, however, that all
Performance Awards and Annual Incentive Awards shall comply with the
requirements of Sections 8(b) and 8(c) hereof unless the Committee specifically
determines at the time of grant that such Award is not intended to qualify as
"performance-based compensation" under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. Unless the
Committee determines that a Performance Award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m), the
grant, exercise and/or settlement of such Performance Award shall be contingent
upon achievement of pre-established performance goals and other terms set forth
in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder (including
Regulation 1.162-27 and successor regulations thereto), including the
requirement that the level or levels of performance targeted by the
Committee result in the
A-12
<PAGE>
achievement of performance goals being "substantially uncertain." The
Committee may determine that such Performance Awards shall be granted,
exercised and/or settled upon achievement of any one performance goal or
that two or more of the performance goals must be achieved as a condition
to grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) Business Criteria. One or more of the following business criteria
for the Company, on a consolidated basis, and/or for specified subsidiaries
or business units of the Company or any of its Affiliates (except with
respect to the total shareholder return and earnings per share criteria),
shall be used by the Committee in establishing performance goals for such
Performance Awards: (1) earnings per share; (2) revenues; increase in
revenues; the excess of all or a portion of revenues over operating
expenses (excluding expenses determined by the Committee at the time
performance goals are established); (3) cash flow; (4) cash flow return on
investment; (5) return on net assets, return on assets, return on
investment, return on capital, return on equity; (6) management value
added; (7) operating margin; (8) net income; pretax earnings; pretax
earnings before interest, depreciation, amortization and/or incentive
compensation; pretax operating earnings; operating earnings (with or
without investment gains or losses); (9) total shareholder return; (10)
reduction in costs; (11) increase in the Fair Market Value of the Shares;
and (12) any of the above goals as compared to the performance of a
published or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poor's 500 Stock Index or a group of
comparator companies. One or more of the foregoing business criteria shall
also be exclusively used in establishing performance goals for Annual
Incentive Awards granted to a Covered Employee under Section 8(c) hereof.
(iii) Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years, as
specified by the Committee Performance goals shall be established not later
than 90 days after the beginning of any performance period applicable to
such Performance Awards, or at such other date as may be required or
permitted for "performance-based compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring
performance of the Company, any subsidiary and/or any business unit of the
Company and/or any of its subsidiaries in connection with Performance
Awards. The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business criteria, a
percentage thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to such business
criteria, provided that the amount of the Performance Award pool can be
determined by an independent third party in possession of all the relevant
facts.
(v) Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, Shares or other Awards, in the
discretion of the Committee. The Committee may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with such
Performance Awards, but may not exercise discretion to increase any such
amount payable to a
A-13
<PAGE>
Covered Employee in respect of a Performance Award subject to this Section
8(b). The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of termination
of employment by the Participant prior to the end of a performance period
or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. Unless the Committee determines that an Annual Incentive Award is
not intended to qualify as "performance-based compensation" for purposes of
Code Section 162(m), the grant, exercise and/or settlement of such Annual
Incentive Award shall be contingent upon achievement of pre-established
performance goals and other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may establish an Annual
Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Company, any subsidiary and/or any business
unit of the Company and/or any of its subsidiaries in connection with
Annual Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii) hereof
during the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may specify the
amount of the Annual Incentive Award pool as a percentage of any of such
business criteria a percentage thereof in excess of a threshold amount, or
as another amount which need not bear a strictly mathematical relationship
to such business criteria, provided that the amount of the Annual Incentive
Award pool can be determined by an independent third party in possession of
all the relevant facts.
(ii) Potential Annual Incentive Awards. Not later than the end of the
90th day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be "performance-based
compensation" under Code Section 162(m), the Committee shall determine the
Eligible Employees who will potentially receive Annual Incentive Awards,
and the amounts potentially payable thereunder, for that fiscal year,
either out of an Annual Incentive Award pool established by such date under
Section 8(c)(i) hereof or as individual Annual Incentive Awards. In the
case of individual Annual Incentive Awards intended to qualify under Code
Section 162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof in the given
performance year, as specified by the Committee; in other cases, such
amount shall be based on such criteria as shall be established by the
Committee.
(iii) Payout of Annual Incentive Awards. After the end of each fiscal
year, the Committee shall determine the amount, if any, of (A) the Annual
Incentive Award pool, and the maximum amount of potential Annual Incentive
Award payable to each Participant in the Annual Incentive Award pool, or
(B) the amount of potential Annual Incentive Award otherwise payable to
each Participant. The Committee may, in its discretion, determine that the
amount payable to any Participant as a final Annual Incentive Award shall
be increased or reduced from the amount of his or her potential Annual
Incentive Award, including a determination to make no final Award
whatsoever, but may not exercise discretion to increase any such amount in
the case of an Annual Incentive Award intended to qualify under Code
Section 162(m). The Committee shall specify the circumstances in which an
Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a fiscal
year or settlement of such Annual Incentive Award. Settlement of Annual
Incentive Awards shall be in cash, Shares or other Awards, in the
discretion of the Committee.
A-14
<PAGE>
(d) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or
potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). No Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m) shall be paid until the Committee
has certified in writing that the applicable performance goals have been
achieved. The Committee may not delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m). It is the intent of the Company and its subsidiaries that Performance
Awards and Annual Incentive Awards under Sections 8(b) and 8(c) hereof granted
to persons who are likely to be Covered Employees within the meaning of Code
Section 162(m) and regulations thereunder (including Regulation 1.162-27 and
successor regulations thereto) shall, if so designated by the Committee,
constitute "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b),
(c), (d) and (e), including the definitions of Covered Employee and other terms
used therein, shall be interpreted in a manner consistent with Code Section
162(m) and regulations thereunder. The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet been completed,
the term Covered Employee as used herein shall mean any Eligible Employee who
receives a Performance Award or an Annual Incentive Award unless the Committee
determines, at the time of grant, that such Award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m). If any
provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards or Annual Incentive Awards that are designated
as intended to comply with Code Section 162(m) does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
9. GENERAL PROVISIONS.
(a) Compliance with Legal and Other Requirements. The Company may, to the
extent deemed necessary or advisable by the Committee, postpone the issuance or
delivery of Shares or payment of other benefits under any Award until
completion of such registration or qualification of such Shares or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to any stock exchange or automated quotation
system upon which the Shares or other securities of the Company are listed or
quoted, or compliance with any other obligation of the Company, as the
Committee may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Shares or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary), or assigned
or transferred by such Participant otherwise than by will or the laws of
descent and distribution or to a
A-15
<PAGE>
Beneficiary upon the death of a Participant, and such Awards or rights that may
be exercisable shall be exercised during the lifetime of the Participant only
by the Participant or his or her guardian or legal representative, except that
Awards and other rights (other than ISOs and SARs in tandem therewith) may be
transferred to one or more transferees during the lifetime of the Participant,
and may be exercised by such transferees in accordance with the terms of such
Award, but only if and to the extent such transfers are permitted by the
Committee pursuant to the express terms of an Award agreement (subject to any
terms and conditions which the Committee may impose thereon). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of the Plan and
any Award agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions deemed
necessary or appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any
or all of (i) the number and kind of Shares which may be delivered in
connection with Awards granted thereafter, (ii) the number and kind of Shares
by which annual per-person Award limitations are measured under Section 5
hereof, (iii) the number and kind of Shares subject to or deliverable in
respect of outstanding Awards and (iv) the exercise price, grant price or
purchase price relating to any Award and/or make provision for payment of cash
or other property in respect of any outstanding Award. In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (including Performance Awards and performance
goals, and Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the preceding
sentence, as well as acquisitions and dispositions of businesses and assets)
affecting the Company, any subsidiary or any business unit, or the financial
statements of the Company or any subsidiary or business unit, or in response to
changes in applicable laws, regulations, accounting principles, tax rates and
regulations or business conditions or in view of the Committee's assessment of
the business strategy of the Company, any subsidiary or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if and
to the extent that such authority or the making of such adjustment would cause
Options, SARs, Performance Awards granted under Section 8(b) hereof or Annual
Incentive Awards granted under Section 8(c) hereof to Participants designated
by the Committee as Covered Employees and intended to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
thereunder to otherwise fail to qualify as "performance-based compensation"
under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and/or any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Shares, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and/or any
subsidiary and Participants to satisfy obligations for
A-16
<PAGE>
the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Shares or
other property and to make cash payments in respect thereof in satisfaction of
a Participant's tax obligations, either on a mandatory or elective basis in the
discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any amendment or alteration to the Plan shall be subject to the approval of the
Company's stockholders not later than the annual meeting next following such
Board action if such stockholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated quotation
system on which the Shares may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes to the
Plan to stockholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely affect
the rights of such Participant under any previously granted and outstanding
Award. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue or terminate any Award theretofore granted and any Award
agreement relating thereto, except as otherwise provided in the Plan; provided
that, without the consent of an affected Participant, no such Committee action
may materially and adversely affect the rights of such Participant under such
Award. Notwithstanding anything in the Plan to the contrary, if any right under
this Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution
of Shares having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Employee
or Participant the right to continue as an Eligible Employee or Participant or
in the employ or service of the Company or a subsidiary, (ii) interfering in
any way with the right of the Company or a subsidiary to terminate any Eligible
Employee's or Participant's employment or service at any time, (iii) giving an
Eligible Employee or Participant any claim to be granted any Award under the
Plan or to be treated uniformly with other Participants and employees, or (iv)
conferring on a Participant any of the rights of a shareholder of the Company
unless and until the Participant is duly issued or transferred Shares in
accordance with the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Shares pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Shares, other Awards or other property, or
make other arrangements to meet the Company's obligations under the Plan. Such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be authorized to dispose
of trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify and in accordance
with applicable law.
A-17
<PAGE>
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify
under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the New York Business Corporation Law, without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan made to or held by a Participant
who is then resident or primarily employed outside of the United States in any
manner deemed by the Committee to be necessary or appropriate in order that
such Award shall conform to laws, regulations, and customs of the country in
which the Participant is then resident or primarily employed, or so that the
value and other benefits of the Award to the Participant, as affected by
foreign tax laws and other restrictions applicable as a result of such an Award
to a Participant who is resident of or primarily employed in the United States.
An Award may be modified under this Section 9(k) in a manner that is consistent
with the express terms of the Plan, so long as such modifications will not
contravene any applicable law or regulation or result in actual liability under
Section 16(b) for the Participant whose Award is modified.
(l) Plan Effective Date and Stockholder Approval. The Plan has been
adopted by the Board, effective March 16, 1999, subject to approval by the
stockholders of the Company.
A-18
<PAGE>
STOCKHOLDER'S PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
P
DONALDSON, LUFKIN & JENRETTE, INC.
R
To: Donaldson, Lufkin & Jenrette, Inc.
O
I appoint Marjorie S. White and Michael A. Boyd, individually and
Y together, as my proxies, with power of substitution, to vote all of my
DONALDSON, LUFKIN & JENRETTE, INC. common stock at the Special X
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 Tuesday, May 25, 1999, 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 APPROVAL OF THE DLJDIRECT 1999
INCENTIVE COMPENSATIVE PLAN. 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.
PLEASE SIGN AND DATE THE OTHER SIDE OF THIS CARD.
(Please fill in the appropriate box on the other side.)
<PAGE>
|
|
| 4 6 3 8
|___
[X] PLEASE MARK YOUR
CHOICES LIKE THIS IN
BLUE OR BLACK INK.
ITEM 1. APPROVAL OF DLJDIRECT 1999 FOR AGAINST ABSTAIN
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
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.
----------------------------------
SIGNATURE(S) DATE
----------------------------------
SIGNATURE(S) DATE
<PAGE>
401 (K) RETIREMENT SAVINGS PLAN DIRECTION SOLICITED BY THE
BOARD OF DIRECTORS OF
P DONALDSON, LUFKIN & JENRETTE, INC.
R
To: Fidelity Management Trust Company, Trustee
O
I direct Fidelity Management Trust Company, Trustee under the 401 (k)
Y Retirement Savings Plan for Employees of Donaldson Lufkin and Jenrette,
Inc., to vote in person or by proxy all of the shares of X
DONALDSON, LUFKIN & JENRETTE, INC. common stock allocated to the account
of the undersigned under such Plan at the Special 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 Tuesday, May 25 1999, at 10:00 a.m., New York City time, and at any
adjournment or postponement of the meeting.
THE SHARES REPRESENTED BY THIS DIRECTION WILL BE VOTED AS DIRECTED ON
THE OTHER SIDE OF THIS CARD, BUT IN THE ABSENCE OF ANY INSTRUCTIONS FROM
ME, WILL BE VOTED "FOR" THE APPROVAL OF THE DLJDIRECT 1999 INCENTIVE
COMPENSATION PLAN. THE TRUSTEE MAY VOTE ACCORDING TO ITS DISCRETION ON
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN AND DATE THE OTHER SIDE OF THIS CARD.
(Please fill in the appropriate box on the other side.)
<PAGE>
|
|
|
| 4 6 4 8
|____
[X] PLEASE MARK YOUR
CHOICES LIKE THIS IN
BLUE OR BLACK INK.
ITEM 1. APPROVAL OF DLJDIRECT 1999 FOR AGAINST ABSTAIN
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
Note: Please sign exactly as
name(s) appear(s) above.
--------------------------------
SIGNATURE(S) DATE
--------------------------------
SIGNATURE(S) DATE
