[Dain Rauscher Logo]
DAIN RAUSCHER CORPORATION
1998 Proxy Statement
NOTICE OF ANNUAL MEETING
[Dain Rauscher Logo]
March 30, 1998
To Our Stockholders,
You are cordially invited to attend the Annual Meeting of
Stockholders of Dain Rauscher Corporation (formerly Interra
Financial Incorporated.) The meeting will be held in the
Scandinavian Ballroom of the Radisson Plaza Hotel, 35 South
Seventh Street, Minneapolis, Minnesota, on Wednesday, May 6,
1998, at 3:30 p.m.
This booklet contains your official notice of the 1998 Annual
Meeting and a Proxy Statement describing the matters to be acted
upon. Whether or not you plan to attend the Annual Meeting in
person, we urge you to participate by reading the Proxy Statement
and promptly returning your signed proxy card.
Sincerely,
Irving Weiser
Chairman, President and Chief Executive Officer
Official Notice of 1998 Annual Meeting of Stockholders
The 1998 Annual Meeting of Stockholders of Dain Rauscher
Corporation ("Dain Rauscher" or the "Company") will be held in
the Scandinavian Ballroom of the Radisson Plaza Hotel, 35 South
Seventh Street, Minneapolis, Minnesota, on Wednesday, May 6,
1998, at 3:30 p.m. for the following purposes:
1. To elect ten directors to hold office for the ensuing year;
2. To amend Dain Rauscher's Restated Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock from 30,000,000 to 60,000,000;
3. To approve the Annual Cash Bonus Plan for Designated
Corporate Officers to enable bonuses paid thereunder to qualify
as deductible, performance-based compensation under Section
162(m) of the Internal Revenue Code;
4. To approve the Wealth Accumulation Plan in order to enable
the Company to issue new shares to fund distributions from the
plan;
5. To ratify the selection of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1998; and
6. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only holders of record of Dain Rauscher's Common Stock at the
close of business on March 10, 1998, will be entitled to receive
notice of and to vote at the meeting. A list of such holders is
available at the Company's Minneapolis headquarters, for
examination by any stockholder for any purpose germane to the
meeting.
By Order of the Board of Directors
Carla J. Smith
Secretary
Minneapolis, Minnesota
March 30, 1998
Proxy Statement
ANNUAL MEETING OF STOCKHOLDERS Wednesday, May 6, 1998
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Dain
Rauscher Corporation ("Dain Rauscher" or the "Company") for use
at the 1998 Annual Meeting of Stockholders and any adjournment
thereof. This Proxy Statement and the accompanying proxy card
are being mailed on or about March 30, 1998, to holders of record
of shares of Dain Rauscher's common stock, par value $.125 per
share (the "Common Stock"), as of the close of business on March
10, 1998. If the enclosed proxy card is completed, signed and
returned prior to the meeting, it will be voted as specified.
Any stockholder who signs and returns a proxy may revoke it at
any time before it is voted by giving written notice to the
Secretary of Dain Rauscher at its Minneapolis headquarters.
On March 10, 1998, Dain Rauscher had outstanding 12,332,322
shares of Common Stock. Each holder of record of such shares as
of the close of business on March 10, 1998, will be entitled to
one vote for each share held on such date on all matters being
presented at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the
beneficial ownership of Dain Rauscher's Common Stock by directors
and director nominees named herein, by the executive officers of
Dain Rauscher named in the Summary Compensation Table, by all
directors and executive officers of Dain Rauscher as a group and
by all persons or groups know by the Company to own beneficially
5 percent or more of its Common Stock. Except as otherwise
indicated, such information is provided as of March 10, 1998, and
the named beneficial owner possesses sole voting and investment
power with respect to all shares.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent
Name of Beneficial Owner Title of Class Ownership of Class
- ------------------------ -------------- ----------------- --------
<S> <C> <C> <C>
Wellington Management
Company, LLP Common 807,300 (1) 6.5%
John C. Appel Common 171,402 (2)(3)(4) 1.4%
J. Evans Attwell Common 9,468 (2)(5) *
Susan S. Boren Common 14,392 (2)(5) *
Nelson D. Civello Common 78,678 (2)(3)(4) *
F. Gregory Fitz-Gerald Common 20,500 (2) *
William A. Johnstone Common 26,867 (2)(3)(4)(6) *
Walter F. Mondale Common 2,300 (2) *
C.A. Rundell, Jr. Common 11,500 (2) *
Robert L. Ryan Common 13,000 (2) *
Arthur R. Schulze, Jr. Common 25,433 (2)(5) *
Ronald A. Tschetter Common 127,563 (2)(3)(4) 1.0%
Irving Weiser Common 332,988 (2)(3)(4)(7) 2.7%
Kenneth J. Wessels Common -- --
All directors and executive
officers as a group
16 persons) Common 870,495 (2)(3)(4)(5)(6)(7) 7.1%
<FN>
* Less than 1%
(1) Information is based solely on a Schedule 13G filed with the
Securities and Exchange Commission by Wellington Management
Company, LLP ("Wellington"), 75 State Street, Boston,
Massachusetts, 02109, a registered investment adviser with
respect to shares owned as of January 14, 1998. Wellington
states that: (a) the total numbers of shares listed are owned of
record by clients of Wellington; (b) Wellington shares the power
to vote, or direct the vote, of 539,295 of such shares; and (c)
Wellington shares the power to dispose, or direct the
disposition, of all the shares.
(2) Includes the following number of shares issuable upon
exercise of currently exercisable options granted pursuant to the
Company's 1986 Stock Option Plan or 1996 Stock Incentive Plan:
Mr. Appel, 74,180; Mr. Attwell, 4,000; Ms. Boren, 11,500; Mr.
Civello, 36,270; Mr. Fitz-Gerald, 11,500; Mr. Johnstone, 0; Mr.
Mondale, 2,000; Mr. Rundell, 11,500; Mr. Ryan, 11,500; Mr.
Schulze, 11,500; Mr. Tschetter, 48,615; Mr. Weiser, 195,360; and
all directors and executive officers as a group (16 persons),
429,860.
(3) Includes the following number of shares held under the
Company's Retirement Plan and allocated to the following
individuals' accounts as of February 27, 1998: Mr. Appel,
14,676; Mr. Civello, 4,689; Mr. Johnstone, 49; Mr. Tschetter,
26,498; Mr. Weiser, 17,829; and all directors and executive
officers as a group (16 persons), 69,494. As of February 27,
1998, a total of 3,529,539 shares of Common Stock, or 29 percent
of the outstanding, were held in the Retirement Plan. Voting of
shares held in the Retirement Plan is passed through to the
participating employees. Participating employees are also
entitled to determine, on a confidential basis, whether shares
held in the Plan for their benefit will be tendered in a tender
or exchange offer. Vested shares held in the Retirement Plan for
participating employees may be distributed subject to in-service
loan and distribution rules or after certain events of maturity
(separation from service, death or disability).
(4) Includes the following number of shares credited to the
account of such executive officer pursuant to the Company's
Executive Deferred Compensation Plan: Mr. Appel, 47,112; Mr.
Civello, 22,919; Mr. Johnstone, 3,658; Mr. Tschetter, 42,148; Mr.
Weiser, 66,064; and all directors and executive officers as a
group (16 persons), 193,034. As of March 10, 1998, 394,938 shares
of Common Stock, or 3 percent of the outstanding shares, were
credited to the accounts of participants in the Executive
Deferred Compensation Plan. Shares are credited to the accounts
of executives participating in the Executive Deferred
Compensation Plan annually following payment of bonuses for the
preceding year. All shares held in the Executive Deferred
Compensation Plan will be voted by the trustee of the related
trust in its sole discretion on all matters. Participants are
not entitled to encumber or borrow against shares credited to
their accounts under the Executive Deferred Compensation Plan.
All shares held in the Executive Deferred Compensation Plan are
subject to the claims of Dain Rauscher's general unsecured
creditors in the event of its insolvency or bankruptcy. Each
participating senior executive must elect prior to the beginning
of each year in which a bonus is earned whether the shares
purchased with the deferred portion of such bonus and the vested
portion of any related employer-matching contributions will be
distributed during employment or following retirement.
(5) Includes the following number of restricted shares received
in lieu of cash compensation pursuant to the Company's 1996 Stock
Incentive Plan or 1994 Restricted Stock Plan for Non-Employee
Directors: Mr. Attwell, 468; Ms. Boren 234; Mr. Schulze, 468.
Voting of restricted shares is passed through to the
participating directors. Participants are not entitled to dispose
of or pledge shares held pursuant to the plan until such shares
are fully vested, and unvested shares are subject to forfeiture
in certain circumstances. Shares granted to non-employee
directors under the 1996 Stock Incentive Plan become fully vested
on the first anniversary of the date of grant. Shares granted
under the 1994 Restricted Stock Plan for Non-Employee Directors
become fully vested over a four-year period with 20 percent, an
additional 30 percent and the remaining 50 percent becoming
vested on each of the second, third and fourth anniversaries,
respectively, of the grant date.
(6) Includes 25,000 shares of restricted stock issued to Mr.
Johnstone upon commencement of his employment pursuant to the
1996 Stock Incentive Plan and 4,200 shares of restricted stock
granted to other unnamed executive officers also under such Plan.
Seventy-five percent of the shares issued to Mr. Johnstone were
vested as of December 31, 1997, and the remaining 25 percent
vest on December 31, 1998. Restricted shares granted to other
unnamed executive officers vest 20 percent on October 10, 1999,
30% on October 10, 2000 and 50% on October 10, 2001. Holders of
restricted shares are not entitled to dispose of or pledge
unvested shares, and such shares are subject to forfeiture in
certain circumstances until fully vested. Holders of restricted
shares are, however, entitled to vote and receive distributions
on all such restricted shares.
(7) Includes 4,200 shares held in trust accounts for the benefit
of Mr. Weiser's children for which Mr. Weiser has sole voting and
dispositive power and 4,000 shares held in the estate of Mr.
Weiser's deceased father for which Mr. Weiser, as co-executor and
co-trustee, has shared voting and dispositive power. Excludes 420
shares beneficially owned by Mr. Weiser's spouse and disclaimed
by Mr. Weiser.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires directors and executive officers
and all persons who beneficially own more than 10 percent of the
outstanding shares of the Company's Common Stock to file with the
Securities and Exchange Commission and the New York Stock
Exchange initial reports of ownership and reports of changes in
ownership of such Common Stock. Executive officers, directors
and greater-than-10-percent beneficial owners are also required
to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based upon a review of
the copies of such reports and written representations that no
other reports were required, all Section 16(a) filing
requirements applicable to directors, executive officers and
greater-than-10-percent beneficial owners during the fiscal year
ended December 31, 1997 have been satisfied.
Proposal 1 - Election of Directors
Nominees
Ten individuals have been nominated for election to the Company's
Board of Directors at the 1998 Annual Meeting of Stockholders to
hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualified (except in
the case of earlier death, resignation or removal). Two of the
nominees for election, Mr. Weiser and Mr. Appel, are officers of
the Company and its wholly owned subsidiary, Dain Rauscher
Incorporated ("DRI"), the surviving entity following the first-
quarter 1998 consolidation of the Company's three wholly owned
subsidiaries, Dain Bosworth Incorporated ("Dain Bosworth"),
Rauscher Pierce Refsnes, Inc. ("Rauscher Pierce") and Interra
Clearing Services Inc. One of the nominees, Mr. Wessels, will
become an employee of DRI and a Director of the Company upon
consummation of the acquisition of Wessels, Arnold & Henderson,
LLC, on March 31, 1998 (subject to regulatory approval). Mr.
Wessels' nomination for re-election to the Company's Board of
Directors is also contingent upon the closing of such
acquisition.
The accompanying proxy is intended to be voted FOR the election
of the nominees named below, unless authority to vote for one or
more of such nominees is withheld as specified in the proxy card.
If an executed proxy card is returned and no instruction is
given, the shares of Common Stock represented by that proxy will
be voted in favor of such election. If an executed proxy card is
returned and authority to vote with respect to any or all of the
nominees is withheld as specified in the proxy card, the shares
of Common Stock represented by that proxy will be considered
present at the meeting for purposes of determining a quorum and
for purposes of calculating the total number of shares voted with
respect to such nominee or nominees, but will not be considered
to have been voted in favor of such nominee or nominees.
The accompanying proxy may not be voted for more than eleven
directors. The affirmative vote of a majority of the shares of
Common Stock represented at the meeting and entitled to vote is
required for the election of each director. Cumulative voting is
not permitted. In the event that any nominee becomes unable or
unwilling to serve as a director for any reason, the accompanying
proxy will be voted by the named persons in their best judgment.
In the event the acquisition of Wessels, Arnold & Henderson, LLC
is not consummated prior to the date of the Annual Meeting, Mr.
Wessels' nomination will be withdrawn and the accompanying proxy
will be voted by the named persons for ten directors only. The
Board of Directors has no reason to believe that any nominee will
be unable or unwilling to serve as a director if elected.
Each nominee has furnished the following information with respect
to his or her principal occupations or employment during the last
five years and his or her directorships of other companies
subject to the reporting requirements of the Exchange Act or the
Investment Company Act of 1940, as amended.
[PICTURE]
JOHN C. APPEL
Vice Chairman and Chief Financial Officer
Dain Rauscher Corporation
Dain Rauscher Incorporated
John C. Appel, 49, was named Vice Chairman and Chief Financial
Officer of the Company in October 1997 and of DRI in January
1998. Mr. Appel was Chief Executive Officer of Dain Bosworth from
February 1997 through December 1997, President and Chief
Operating Officer of Dain Bosworth from 1994 through December
1997, and an Executive Vice President of the Company from 1990
until October 1997. Mr. Appel served as Chief Financial Officer
of the Company from 1986 to 1994 and as Chief Financial Officer
of Dain Bosworth from 1990 to 1994. Prior to joining the Company
as its Chief Financial Officer in 1986, Mr. Appel was a partner
with the accounting firm of Deloitte Haskins & Sells (now
Deloitte & Touche). Mr. Appel has been a director of the Company
since 1995. Mr. Appel also serves as a director of Smith Breeden
Associates, a registered investment adviser.
[PICTURE]
J. EVANS ATTWELL
Of Counsel
Vinson & Elkins LLP
J. Evans Attwell, 67, is Of Counsel to the Houston-based law firm
of Vinson & Elkins LLP. He was a partner in the firm from 1965
through 1995 and served as its Managing Partner from 1981 through
1991. Mr. Attwell has been a director of the Company since 1996.
Mr. Attwell also serves as a director of American General
Corporation and Seagull Energy Corporation.
[PICTURE]
SUSAN S. BOREN
President
Trillium Advisors, Inc.
Susan S. Boren, 51, is President of Trillium Advisors, Inc. a
firm she founded in 1996 to advise executives and boards on
issues of leadership and governance. From 1981 through 1995, Ms.
Boren was an executive with Dayton Hudson Corporation in
financial, human resources and operating roles. Ms. Boren has
been a director of the Company since 1993. Ms. Boren also
serves as a director of Valspar Corporation.
[PICTURE]
F. GREGORY FITZ-GERALD
President
The ANSR Company, LLC
F. Gregory Fitz-Gerald, 56, is President of The ANSR Company,
LLC, a private company engaged in investment research using
genetic algorithms and evolutionary computation. From 1991 to
1995, Mr. Fitz-Gerald was a private investor and financial
consultant. Previously, he held senior executive positions with
Commercial Credit Company and Primerica Corporation, American
Express Company, American Express Credit Corporation, and Merrill
Lynch & Co., Inc. Mr. Fitz-Gerald has been a director of the
Company since 1987.
[PICTURE]
WALTER F. MONDALE
Partner
Dorsey & Whitney, LLP
Walter F. Mondale, 70, is a partner with the Minneapolis-based
law firm of Dorsey & Whitney, LLP. From 1993 through 1996, Mr.
Mondale was the U.S. Ambassador to Japan. He was the Democratic
Party's nominee for President in 1984, Vice President of the
United States from 1976 to 1980, a U.S. Senator from 1964 to
1976, and Attorney General for the State of Minnesota from 1960
to 1964. Mr. Mondale has been a director of the Company since
April 1997. Mr. Mondale also serves as a director of several
Black Rock mutual funds managed by Black Rock Financial
Management, Inc., Northwest Airlines Corporation, the Mayo
Foundation, CNA Financial Corp., and United HealthCare
Corporation.
[PICTURE]
C. A. RUNDELL, JR.
President and Chief Executive Officer
Tyler Corporation
C. A. Rundell, Jr., 66, has been President and Chief Executive
Officer of Tyler Corporation since October 1997. He has also
been a private investor and financial consultant, doing business
as Rundell Enterprises, since he retired as Chairman of the
Board, President and Chief Executive Officer of Cronus
Industries, Inc. in 1988, positions that he had held since 1977.
Mr. Rundell has been a Director of the Company since 1994. Mr.
Rundell also serves as chairman of NCI Building Systems, Inc. and
as chairman and a director of Tandy Brands Accessories, Inc.
[PICTURE]
ROBERT L. RYAN
Senior Vice President
Chief Financial Officer
Medtronic, Inc.
Robert L. Ryan, 54, has been Senior Vice President and Chief
Financial Officer of Medtronic, Inc. since 1993. Prior to
joining Medtronic, he had been Vice President, Finance, and Chief
Financial Officer of Union Texas Petroleum Corp. since 1984. Mr.
Ryan has been a director of the Company since 1994. Mr. Ryan
also is a director of United HealthCare Corporation, TECO Energy,
Inc. and Tampa Electric Company.
[PICTURE]
ARTHUR R. SCHULZE, JR.
Former Vice Chairman of the Board
General Mills, Inc.
Arthur R. Schulze, Jr., 67, retired from his position as Vice
Chairman of the Board of General Mills, Inc. in 1993, a position
he had held since 1989. He previously served as Executive Vice
President of General Mills, Inc. and President of its Grocery
Products Food Group. Mr. Schulze has been a director of the
Company since 1987. Mr. Schulze is also a director of Sealright
Co., Inc.
[PICTURE]
IRVING WEISER
Chairman, President and Chief Executive Officer,
Dain Rauscher Corporation
Dain Rauscher Incorporated
Irving Weiser, 50, has been the Company's Chairman since 1995,
its Chief Executive Officer since 1990 and its President since
1985. Mr. Weiser has been President and Chief Executive Officer
of DRI since January 1998, and Chairman of DRI and its
predecessor, Dain Bosworth, since 1990. Mr. Weiser was also
Chairman of Rauscher Pierce from 1995 until it merged into DRI in
January 1998. From 1990 to February 1997, Mr. Weiser held various
other executive positions with each of Dain Bosworth and Rauscher
Pierce, including serving as Dain Bosworth's Chief Executive
Officer and Acting Chief Executive Officer of Rauscher Pierce.
Mr. Weiser currently serves as Chairman of the Securities
Industry Association. Prior to 1985, Mr. Weiser was a partner in
the law firm of Dorsey & Whitney, LLP. Mr. Weiser has been a
director of Dain Rauscher since 1985.
[PICTURE]
KENNETH J. WESSELS
Senior Executive Vice President
Dain Rauscher Incorporated(Effective upon consummation of
acquisition)
Chairman, President and Chief Executive Officer,
Wessels, Arnold & Henderson, LLC
Kenneth J. Wessels, 55, has been named Senior Executive Vice
President of the Company and DRI, and a Director of the Company
contingent upon the closing of the acquisition of Wessels, Arnold
& Henderson, LLC ("WAH"), and Wessels, Arnold & Henderson Group
LLC ("WAH Group") scheduled for March 31, 1998 (subject to
regulatory approval). Mr. Wessels has been the Chief Executive
Officer and a Managing Director of WAH, an institutional equity
sales, trading and investment banking firm based in Minneapolis,
Minnesota, of which Mr. Wessels was also a founder, since 1986,
and Chief Executive Officer and a Managing Director of WAH Group
since its formation in 1995. From 1977 to 1986, Mr. Wessels was
Executive Vice President and a Director of Piper, Jaffray &
Hopwood Incorporated. Mr. Wessels served as the Chairman of the
Board of Governors of the National Association of Security
Dealers, Inc. (NASD) in 1990, and has also served on various NASD
committees and task forces. Mr. Wessels is a nominee for re-
election to the Board of Directors at the 1998 Annual Meeting of
Shareholders, contingent upon the closing of the WAH and WAH
Group acquisition.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Company's Board of Directors has an Audit Committee and a
Compensation and Organization Committee. The Audit Committee
reviews and monitors the Company's accounting policies and
control procedures, recommends the engagement of the independent
auditors, reviews the scope of the audit, and generally assists
the Board in fulfilling its fiduciary responsibilities relating
to accounting, financial and reporting policies and practices.
The Compensation and Organization Committee approves the policies
for and structure and amount of compensation of the Company's
senior executives, and consults with the Company's Chief
Executive Officer and Board of Directors concerning
organizational matters. The Compensation and Organization
Committee also administers the Company's 1986 Stock Option Plan,
1996 Stock Incentive Plan, Executive Deferred Compensation Plan,
Wealth Accumulation Plan and, if approved by the Company's
stockholders, the Dain Rauscher Annual Cash Bonus Plan for
Designated Officers. During 1997, the Compensation and
Organization Committee instituted a bi-annual self-evaluation
process by the Board of Directors, soliciting information from
each member concerning the Board's composition, committee
structure, processes, meetings and compensation policies.
The Compensation and Organization Committee also acts as the
Board's nominating committee by reviewing new Board candidates
and recommending annually the slate of directors for approval by
the Board of Directors and stockholders. The Committee will
consider qualified Board nominees recommended by stockholders.
Any stockholder wishing to recommend a nominee must submit such
person's name and a summary of his or her qualifications in
writing to the Secretary of the Company at least 30 days prior to
the stockholder meeting at which such nomination would be
considered and acted upon.
The Audit Committee, on which Messrs. Fitz-Gerald (chairman),
Rundell and Attwell served, held six meetings in 1997. The
Compensation and Organization Committee, on which Messrs. Schulze
(chairman), Mondale and Ryan and Ms. Boren served, held five
meetings in 1997. The Board of Directors met seven times in
1997. During 1997, no director attended fewer than 75 percent of
the meetings of the Board and Committees upon which such
director served.
Compensation
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Compensation and Organization Committee of the Board of
Directors (the "Committee") approves the policies for and
structure and amount of compensation of the Senior Executives,
including the Chief Executive Officer and the other executive
officers of the Company named in the accompanying Summary
Compensation Table. The Committee's goal is to establish
compensation programs that will attract and retain highly
qualified executives and provide an incentive to such executives
to focus their efforts on the Company's long-term strategic
goals by aligning their financial interests closely with long-
term stockholder interests. The Committee is composed entirely
of independent directors.
A significant component of the Company's Senior Executive
compensation program is cash remuneration in the form of base
salaries and annual discretionary bonuses. Bonuses are
determined based upon the performance of the Company, the
individual executive, and his or her operating unit (including,
prior to January 1, 1998, his or her employing company) during
the fiscal year. Bonuses are awarded early in the following
year. In evaluating performance, financial, non-financial and
long-term strategic objectives are considered. Base salaries
generally represent a relatively small portion of the Senior
Executives' total cash compensation and are average relative to
comparable firms in the industry. Bonuses make up a significant
portion of the Senior Executives' total cash compensation (as
much as 83 percent for 1997). The Committee believes that basing
a substantial portion of a Senior Executive's compensation on
performance motivates the executive to perform at the highest
possible level.
As a central component of the Company's Senior Executive
compensation program, the Committee annually awards Senior
Executives options to acquire shares of the Company's Common
Stock. The Committee believes that stock options provide a
highly efficient form of compensation from both a cost and an
accounting perspective, and that such awards provide an incentive
to achieve the Company's longer-term strategic goals by aligning
the long-term financial interests of the Senior Executives with
those of the Company's stockholders.
The level of options awarded to each Senior Executive is linked
to performance in that the award is generally determined by
applying an assigned Long-Term Incentive Percentage to the amount
of total cash compensation approved by the Committee for such
Executive. The range of Long-Term Incentive Percentages
(currently 15 to 20 percent of a Senior Executive's total cash
compensation) was established with a goal of providing long-term
compensation opportunities to the Senior Executives that are
competitive with those of the executives of other well-performing
regional brokerage firms. The percentages were initially
approved by the Committee based upon the recommendation of an
independent firm of management compensation consultants. They
are reviewed periodically by management and the Committee for
appropriateness and competitiveness. Additional option grants
above the level generated by the Long-Term Incentive Percentages
are also awarded from time to time as determined by the
Committee.
An additional component of the Company's Senior Executive
compensation program is the Executive Deferred Compensation Plan
(the "Deferred Plan"). The Deferred Plan is a voluntary, non-
tax-qualified, deferred compensation plan that encourages Senior
Executives to invest their own capital in the Company's Common
Stock. Under the Deferred Plan, each Senior Executive may elect,
prior to the beginning of a fiscal year, to defer up to 30
percent of his or her discretionary bonus compensation earned for
that year. The deferred amount may be invested either in shares
of the Company's Common Stock or in an alternate fixed income
investment, but the participating Senior Executive will receive a
matching contribution from the Company only on amounts invested
in Company Common Stock. For 1997, such matching contribution
was set at a level equal to 50 percent of the deferred bonus
amount. Participating Senior Executives vest in matching
contributions after four years of continued service, subject to
acceleration upon death, permanent disability, retirement under
certain conditions or a change in control of the Company.
The Committee believes that the stock option and Deferred Plan
components of the Company's Senior Executive compensation program
have increased and will continue to increase over time the levels
of stock ownership of the Company's Senior Executives. This
aligns the interests of those persons who have the greatest
ability to affect the Company's financial results closely with
the interests of the Company's stockholders. The Committee also
believes that significant levels of stock ownership and ownership
potential will assist the Company in retaining the services of
the Senior Executives.
Determination of 1997 Senior Executive Compensation
The Committee met three times to determine annual discretionary
bonuses and long-term incentive compensation for the Senior
Executives for 1997. In preparation for these meetings, the
Committee reviewed the overall profitability, growth and
financial performance of the Company, its subsidiaries and their
various business lines.
Chief Executive Officer Compensation.
In determining Mr. Weiser's bonus, the Committee considered
equally four key factors it had identified to measure
profitability and growth. With respect to profitability, the
Committee reviewed the Company's 1997 net earnings and return on
average equity; and with respect to growth, it reviewed the
three-year compounded growth rates in the Company's revenues and
stock price. The Company's 1997 net earnings considered by the
Committee in determining Mr. Weiser's 1997 bonus included the
effect of the $15 million restructuring charge incurred by the
Company during the 1997 third quarter. The Committee also
reviewed similar information for the most recently available
periods for a selected group of comparable publicly held regional
brokerage firms. All of such firms are included in the Regional
Sub-Index of the Financial Service Analytics Brokerage Stock
Price Index used in the accompanying Comparative Stock
Performance graph.
The Committee also reviewed data from the most recent publicly
available proxy statements for certain of such firms in order to
determine competitive compensation levels for other chief
executive and chief operating officers within the industry, and
compared such information to the performance of such firms based
on the above profitability and growth factors. The Committee
also compared the Company's financial performance during 1997
against the objectives set by management and the Board of
Directors at the beginning of the year. Based on this
information, the Committee determined a compensation range that
it believed fairly reflected the Company's overall and relative
financial performance and was reasonably competitive with other
comparable firms in the industry. The Committee then reviewed
the specific non-financial objectives established for Mr. Weiser
by the Board of Directors at the beginning of the year and
evaluated Mr. Weiser's performance with respect to such
objectives.
After consideration of all of the above financial and non-
financial performance factors, the Committee, in its discretion,
determined the amount of Mr. Weiser's annual bonus. After
approval of the bonus, the Committee determined Mr. Weiser's
stock option award. For 1997, Mr. Weiser was awarded options for
approximately four times the number of shares the application of
his Long-Term Incentive Percentage to his total cash compensation
would have generated as additional potential compensation for the
restructuring of the Company.
Compensation of Other Senior Executives.
The Committee approved individual bonus amounts for each Senior
Executive other than Mr. Weiser following a presentation by Mr.
Weiser of his evaluation of the Senior Executive's individual and
business unit performance and his bonus recommendation for such
Senior Executive. As a result of the Company's consolidation of
its three brokerage subsidiaries announced in October 1997, the
total number of Senior Executives of the Company was reduced from
13 to six by December 31, 1997. The Committee consulted with Mr.
Weiser concerning the selection of and changes in the roles and
responsibilities of such remaining Senior Executives. In
determining the compensation of such Senior Executives, Mr.
Weiser reviewed with the Committee information concerning the
revenues, contributions and profit margins of the business lines
each Senior Executive had been responsible for over the prior
three years, and similar information available to the Company for
a select group of regional firms. Mr. Weiser also summarized for
the Committee the performance of each Senior Executive relative
to the financial and non-financial objectives established for
such Senior Executive at the beginning of the year. The
Committee was also provided historical compensation information
prepared by a third-party organization for a group of 15 to 20
regional brokerage firms, including the group of comparable
publicly held regional firms referred to above, for background on
competitive salary levels within the industry.
After the Committee approved the Senior Executive bonus amounts,
stock option award levels were determined. As with Mr. Weiser,
the other five remaining Senior Executives were granted options
for 1997 for approximately four times the number of shares that
would have been generated by application of the Long-Term
Incentive Percentages to total cash compensation as described
above as potential compensation for their efforts in connection
with the consolidation and to reflect their new responsibilities
in the reorganized enterprise.
The Committee also reviewed and approved the terms of specific
compensation arrangements entered into by the Company with
certain Senior Executives or former Senior Executives during
1997, as it does from time to time. The Committee believes that
such arrangements were evaluated and approved on a basis
consistent with the Company's overall compensation philosophy.
Application of Section 162(m). Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), generally limits
corporate deductions to $1,000,000 for compensation paid to each
named Senior Executive during a calendar year. Regulations under
Section 162(m) permit stock options to be excluded from
compensation if certain conditions are met. In determining
bonus amounts for 1997 to be paid during calendar 1998, the
Committee determined it was appropriate in order to achieve the
goals of the Company's compensation program as described in this
report to authorize a bonus payment to Mr. Weiser which, when
combined with his 1997 base salary, will result in compensation
above the deductibility limitation of Section 162(m). The
Company will relinquish the corporate compensation deduction for
all amounts that exceed the Section 162(m) limit. As discussed
in Proposal 3 below, the principal purpose of the Dain Rauscher
Annual Cash Bonus Plan for Designated Corporate Officers is to
maximize the deductibility, where possible, of compensation to
Senior Executives above $1,000,000.
Arthur R. Schulze, Jr., Chairman
Susan S. Boren
Robert L. Ryan
Walter F. Mondale
Members of the Compensation and Organization Committee
SUMMARY COMPENSATION TABLE
The following table summarizes, for each of the last three
fiscal years, the compensation paid to or earned by and awarded
to the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company ("DRC"),
and/or its subsidiaries, Dain Bosworth Incorporated ("Dain
Bosworth" or "DBI") or Rauscher Pierce Refsnes, Inc. ("Rauscher
Pierce" or "RPR"), serving at December 31, 1997. The principal
positions indicated for each named officer represent the
positions held at December 31, 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ----------------
Sec-
urities All
Under- Other
Re- lying Comp-
Name & Principal stricted Options/ ensa-
Positions Year Salary Bonus(1)(2) Stock SARs(1) tion(3)
- ----------------- ---- -------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Irving Weiser,(4) 1997 $250,000 $1,200,000 - 50,000 $194,165
Chairman,
Pres. & CEO, DRC; 1996 $250,000 $1,500,000 - 23,000 $248,882
Chairman, DBI &
RPR 1995 $250,000 $800,000 - 24,300 $167,338
John C. Appel,(4) 1997 $200,000 $675,000 - 24,000 $115,415
Vice Chairman &
CFO, DRC; 1996 $175,000 $950,000 - 11,100 $167,806
Pres. & CEO, DBI 1995 $175,000 $625,000 - 13,900 $132,688
William A.
Johnstone,(4) 1997 $175,000 $625,000 - 24,000 $87,915
Vice Chairman,DRC; 1996 $175,000 $260,000 25,000 25,000 -
Pres. & CEO, RPR
Ronald A.
Tschetter, 1997 $150,000 $900,000 - 24,000 $149,165
Sr. Exec. Vice
President, DRC; 1996 $150,000 $800,000 - 6,300 $135,806
Exec. Vice
President, DBI 1995 $150,000 $600,000 - 8,700 $93,948
Nelson D. Civello, 1997 $150,000 $600,000 - 24,000 $104,165
Sr. Exec. Vice
President, DRC; 1996 $150,000 $500,000 - 4,300 $65,806
Exec. Vice
President, DBI 1995 $150,000 $290,000 - 5,100 $35,698
<FN>
(1) Awarded with respect to such year in January or February of
the following year. See "Report of Compensation Committee on
Executive Compensation - Compensation Philosophy." All options
are 10-year options, vesting over four years, having an exercise
price equal to the fair market value per share of Common Stock on
the date of grant.
(2) For 1997, 1996 and 1995, respectively, includes the
following amounts voluntarily deferred pursuant to the Executive
Deferred Compensation Plan: Mr. Weiser, $360,000, $450,000 and
$240,000; Mr. Appel, $202,500, $285,000 and $187,500; Mr.
Johnstone, $147,500 (1997 only); Mr. Civello, $180,000, $100,000
and $43,500; and Mr. Tschetter, $270,000, $240,000 and $160,000.
The Executive Deferred Compensation Plan is a voluntary, non-tax-
qualified, deferred compensation plan in which the Senior
Executives of the Company may participate. Under the Plan, each
participating Senior Executive may elect, prior to the beginning
of a fiscal year, to defer up to 30 percent of his or her
discretionary bonus for that year. The deferred amounts may be
invested either in shares of the Company's Common Stock or in an
alternate fixed income investment, but the participating Senior
Executive will only receive a matching contribution on amounts
invested in shares of the Company's Common Stock. The employer-
matching contribution was equal to 50 percent of the deferred
amount for 1997, 1996 and 1995. Senior Executives vest in
employer-matching contributions after four years (subject to
acceleration in certain events) and are immediately vested with
respect to deferred bonus amounts.
(3) Represents for each of 1997, 1996 and 1995, respectively:
(a) contributions in the following aggregate amounts made by the
Company during the fiscal year ended December 31 pursuant to its
Profit Sharing and Stock Bonus Plans (which were merged to create
the Company's Retirement Plan effective January 1, 1997) and
Deferred Compensation Plan for Excess Contributions (which was
terminated for compensation earned after December 31, 1994): Mr.
Weiser, $14,165, $14,382 and $47,338; Mr. Appel, $14,165, $15,806
and $38,938; Mr. Johnstone, $5,365 (1997 only); Mr. Civello,
$14,165, $15,806 and $24,658; and Mr. Tschetter, $14,165, $15,806
and $38,308; (b) matching contributions in the following amounts
made by the Company pursuant to the Executive Deferred
Compensation Plan on bonus amounts earned by such executives for
the fiscal year ended December 31, but voluntarily deferred: Mr.
Weiser, $180,000, $225,000 and $120,000; Mr. Appel, $101,250,
$142,500 and $93,750; Mr. Johnstone, $73,750 (1997 only); Mr.
Civello, $90,000, $50,000 and $21,750; and Mr. Tschetter,
$135,000, $120,000 and $80,000. The Retirement Plan is a broad-
based plan in which all employees of the Company may participate
(subject to certain eligibility requirements). Under the
Retirement Plan, the Company annually contributes a percentage
of all participants' eligible compensation. The board of
directors determines the level of contribution to the Retirement
Plan, subject to a 3-percent minimum contribution. In addition,
participating employees receive employer-matching contributions
at a rate of 40 percent on voluntary, before-tax contributions of
up to 5 percent of their eligible compensation (subject to
federal tax law limitations) made by such employees to their
accounts under the Plan up to $3,000 annually. Participants vest
in employer contributions after five years of continuous
employment with the Company.
(4) Mr. Weiser served as Chief Executive Officer of Dain
Bosworth until February 1997, when Mr. Appel was named to such
position. Mr. Weiser also served as Acting Chief Executive
Officer of Rauscher Pierce until June 1996, when Mr. Johnstone
became Chief Executive Officer.
</TABLE>
Options and Stock Appreciation Rights
The following tables summarize option grants made to the
executive officers named in the Summary Compensation Table with
respect to the year ended December 31, 1997, option exercises by
such persons during the year ended December 31, 1997, and the
potential realizable value of the options held by such persons at
December 31, 1997. No stock appreciation rights ("SARs") have
been granted to any of the named persons.
<TABLE>
Option/SAR Grants With Respect to Year Ended December 31, 1997
<CAPTION>
Individual Grants
- --------------------------------------------------------- Potential Realizable
Number of % of Total Value at Assumed
Securities Options/Sars Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation
Options Employees or Base Expira- for Option Term (2)
/SARs With Respect Price(per tion ----------------------
Name Granted(1) to 1997 share)(1) Date 5%($69.64) 10%($110.88)
- ------------- --------- ------------ --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Irving Weiser 50,000 10.3% $56.69 2/5/2008 $1,782,602 $4,517,463
John C. Appel 24,000 5.0% $56.69 2/5/2008 $855,649 $2,168,382
William A.
Johnstone 24,000 5.0% $56.69 2/5/2008 $855,649 $2,168,382
Nelson D.
Civello 24,000 5.0% $56.69 2/5/2008 $855,649 $2,168,382
Ronald A.
Tschetter 24,000 5.0% $56.69 2/5/2008 $855,649 $2,168,382
<FN>
(1) Options granted February 5, 1998, based upon 1997 total cash
compensation. See "Report of Compensation Committee on Executive
Compensation - Compensation Philosophy." All such options become
exercisable as follows: 20 percent on February 5, 2000; an
additional 30 percent on February 5, 2001; and the remaining 50
percent on February 5, 2002. Exercise price is equal to the
closing price per share of Dain Rauscher's Common Stock as
reported on the New York Stock Exchange on the day prior to the
date of grant.
(2) Represents potential gains based on annual compound stock
price appreciation of 5 percent and 10 percent from the date of
grant until the expiration date. The amount in parentheses
indicates what the price would be for one share of Dain Rauscher
Common Stock on the expiration date at such rates of
appreciation. The amounts given represent assumed rates of
appreciation only. Actual gains, if any, on option exercises
will depend on future performance of the Dain Rauscher Common
Stock and overall stock market conditions.
</TABLE>
<TABLE>
Aggregate Option/SAR Exercises During Year Ended December 31, 1997
and Value of Options/SARs Held at December 31, 1997
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Options/SARs Held at In-the-Money Options/
Shares December 31, 1997 SARs at December 31,
Acquired Value (Exercisable/ 1997 (Exercisable/
Name on Exercise Realized(1) Unexercisable)(2) Unexercisable)(1)(2)
- ------------- ----------- ---------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Irving Weiser 8,750 $316,820 145,650/116,900 $8,062,362/$5,287,161
John C. Appel 4,750 $177,001 49,250/66,400 $2,612,795/$3,065,576
William A.
Johnstone -/37,500 -/$1,821,863
Nelson D.
Civello 27,450/20,200 $1,483,240/$894,866
Ronald A.
Tschetter 36,735/30,165 $2,027,171/$1,341,665
<FN>
(1) "Value" has been determined based upon the difference
between the per-share option exercise price and closing price of
Dain Rauscher Common Stock on the New York Stock Exchange on the
date of exercise or December 31, 1997.
(2) Does not include the number or value of unexercisable
options granted subsequent to December 31, 1997, included in the
Option Grant table above.
</TABLE>
COMPENSATION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
Mr. William A. Johnstone. The Company has entered into written
compensation arrangements with Mr. William A. Johnstone, one of
the executive officers named in the Summary Compensation Table.
Mr. Johnstone was named President and Chief Executive Officer of
Rauscher Pierce and a Director of the Company effective June 24,
1996. In connection with the consolidation of Dain Bosworth and
Rauscher Pierce, Mr. Johnstone was named Vice Chairman of the
Company in October 1997 and Vice Chairman, Equity Capital Markets
of Dain Rauscher in January 1998. In connection with the
acquisition of Wessels, Arnold & Henderson, LLC ("WAH") on March
31, 1998 (subject to regulatory approval), the Company has
announced that Mr. Johnstone will resign as director of the
Equity Capital Markets Group of Dain Rauscher effective March 31,
1998, resign as Vice Chairman of Dain Rauscher and the Company
effective May 31, 1998 and not stand for re-election to the
Company's Board of Directors at the Annual Meeting of
Shareholders on May 6, 1998.
Under the terms of Mr. Johnstone's original offer of employment
in May 1996, his annualized base salary for 1996 was set at
$175,000, and he was guaranteed annualized total cash
compensation (salary and bonus) at the rate of $600,000 for 1996,
and a minimum annualized total cash compensation of $600,000 for
1997 and $500,000 for 1998. In addition, upon commencement of
his employment, Mr. Johnstone was granted 10-year non-qualified
options to purchase 25,000 shares of the Company's Common Stock
at a price of $25.125 per share and was issued 25,000 restricted
shares of the Company's Common Stock. The options would have
become vested 20 percent on June 24, 1998, an additional 30
percent on June 24, 1999, and the remaining 50 percent on June
24, 2000, assuming Mr. Johnstone were still employed on such
dates. Fifty percent of Mr. Johnstone's restricted shares became
vested on December 31, 1997, and the balance would have become
vested on December 31, 1998. Under the terms of the applicable
Restricted Stock agreement, Mr. Johnstone's unvested restricted
shares were subject to forfeiture in the event that Mr. Johnstone
resigned from or abandoned his position with the Company or was
terminated for misconduct. Mr. Johnstone's vesting with respect
to such unvested shares was also subject to acceleration in the
event that Mr. Johnstone died or became disabled, his employment
was terminated by the Company for reasons other than misconduct,
or there was a change in control of the Company.
In October 1997, in connection with the consolidation of Dain
Bosworth and Rauscher Pierce and the change in Mr. Johnstone's
role from President and Chief Executive Officer of Rauscher
Pierce to Vice Chairman, Equity Capital Markets for Dain
Rauscher, the Company entered into an amendment of Mr.
Johnstone's original letter agreement. For 1998, Mr. Johnstone
was guaranteed annualized base salary of $200,000 and a bonus
determined by the Company's financial performance, including
return on equity and other appropriate financial measurements,
for total cash compensation of between $750,000 (assuming a
return on equity of 12 percent) and $1,200,000 (assuming a return
on equity of 24 percent), as long as Mr. Johnstone remained
employed by the Company and performed in a satisfactory and
ethical manner. Upon any change in control, Mr. Johnstone would
have been entitled to receive $600,000 for 1997 or $750,000 for
1998. It was also agreed that if Mr. Johnstone's employment were
to be terminated on or before December 31, 1998, for any reason
other than gross and willful misconduct, he would be paid a pro
rata portion of his bonus for the year and his unvested options
and restricted stock would be bought out at a per-share price
equal to the then-fair market value less the exercise price of
the options. Such buyout was made contingent upon his execution
of a general release and a one-year non-competition and no-
solicitation agreement.
In accordance with the terms of such October 1997 amendment, upon
termination of his employment with the Company effective May 31,
1998, the Company will pay Mr. Johnstone a lump sum of $500,000
in severance (less year-to-date base salary previously paid),
which represents a five-month pro rata share of his guaranteed
annualized total compensation at the $1,200,000 rate, and will
buy out the value of his 25,000 unvested option shares and 12,500
unvested restricted shares at a per share price equal to the fair
market value thereof either on his termination date or any
earlier date selected by him and as of which he so notifies the
Company.
Mr. Kenneth J. Wessels. The Company has also entered into a
written employment agreement with Mr. Kenneth J. Wessels, who
will become a director and executive officer of the Company and
Dain Rauscher effective upon the consummation of the acquisition
of WAH on March 31, 1998 (subject to regulatory approval). Mr.
Wessels is currently the Chief Executive Officer of WAH and will
become the Senior Executive Vice President responsible for the
Dain Rauscher Wessels equity capital markets division following
the consummation of such acquisition.
The initial term of Mr. Wessels' employment agreement extends
until December 31, 1999. The agreement will automatically renew
until December 31, 2000, unless either party notifies the other
in writing prior to October 31, 1999 of its desire to terminate
the agreement. The agreement provides that during its term, Mr.
Wessels will be paid a base salary of $300,000 and a guaranteed
minimum total cash compensation (including base salary) of
$1,500,000 on an annualized basis. In addition, Mr. Wessels will
be paid a performance bonus based on a formula tied to the
performance of the Dain Rauscher Wessels equity capital markets
division. So long as the fully allocated profit margin (the
"Margin") of the division equals or exceeds 12 percent and the
compound annual growth rate ("CAGR") of the division and the
Margin added together exceed 36 percent, Mr. Wessels' additional
performance bonus will be equal to (i) ten times the number of
percentage points by which the sum of the CAGR and the Margin
exceeds 36 percent, multiplied by (ii) $1,125,000 for 1998 or
$1,500,000 for each of 1999 and 2000. This amount may be
increased or decreased by up to 20 percent based upon objectives
to be agreed to in advance of each year. If the Margin is less
than 12 percent, any additional performance bonus paid to Mr.
Wessels will be determined in the discretion of the Company's
Board of Directors.
If, during the term of the agreement, Mr. Wessels dies or becomes
permanently disabled, he will receive his accrued but unpaid base
salary together with a pro rata share of his guaranteed minimum
total cash compensation for the year and any vested benefits
under the Company's benefit plans. If during the term of the
agreement his employment is terminated by the Company for cause
(as defined in the agreement), or he voluntarily terminates his
employment without good reason (as defined in the agreement), he
will be paid his accrued but unpaid base salary and any vested
benefits only. If during the term of the agreement Mr. Wessels'
employment is terminated by the Company without cause or Mr.
Wessels voluntarily terminates his employment for good reason,
then he will be paid his guaranteed minimum total cash
compensation for each year through December 31, 2000.
In addition to the above compensation and conditioned upon
commencement of his employment, Mr. Wessels was granted a 10-year
non-qualified option to purchase 24,000 shares of the Company's
Common Stock at a price equal to $58.875 per share. The options
vest 20 percent on the second anniversary of the effective date
of the consummation of the acquisition, 30 percent on the third
anniversary of such date and the remaining 50 percent on the
fourth anniversary of such date. The vesting of such options
will be subject to acceleration upon any change in control of the
Company or the termination of Mr. Wessels' employment by the
Company without cause, or if Mr. Wessels voluntarily terminates
his employment for good reason. Mr. Wessels has also agreed, in
general, to refrain from competing with the Company in the equity
capital markets business and to refrain from soliciting any
employee or any customer of the equity capital markets division
of the Company for a period of two years after termination of the
agreement.
COMPENSATION OF DIRECTORS
Dain Rauscher's non-employee director compensation currently
consists of (a) base compensation in the amount of $15,000 per
year; (b) $1,000 for attendance at each Board of Directors or
Committee meeting; (c) an additional $1,800 per year for each of
the chairman of the Audit Committee and the chairman of the
Compensation and Organization Committee; and (iv) per diem
compensation of $500 per half day or $1,000 per whole day for
significant additional time spent on Company matters beyond the
scope of normal preparation for and attendance at Board and
Committee meetings. In addition, in order to provide additional
incentive for its non-employee directors to serve for significant
periods, Dain Rauscher has entered into retirement agreements
with each of such directors. Such agreements provide that, upon
retirement from the Board after at least five years of service as
a director, a non-employee director will be paid an annual
retainer fee for the number of years served (up to a maximum of
ten years). The amount of the retainer is determined by
multiplying the annual base compensation rate in effect at the
time of retirement by a percentage equal to 10 percent for each
fiscal year served (up to a maximum of ten years).
Pursuant to the 1986 Stock Option Plan and 1996 Stock Incentive
Plan, each non-employee director of Dain Rauscher has also been
automatically granted, upon each election or reelection to the
Board of Directors, a five-year, non-qualified option to purchase
2,000 shares of Dain Rauscher's Common Stock which vests in full
six months after the date of grant. Such options are granted
with an exercise price equal to the closing price per share of
Dain Rauscher Common Stock as reported on the New York Stock
Exchange.
Additionally, pursuant to the 1996 Stock Incentive Plan, non-
employee directors have been offered the opportunity to elect to
receive restricted shares of Dain Rauscher Common Stock in lieu
of all or 50 percent of the $15,000 annual base compensation
referred to above. Directors who have elected to participate in
the Plan received restricted shares of Dain Rauscher Common Stock
having a market value, based on the closing sale price per share
of Dain Rauscher Common Stock on the New York Stock Exchange,
equal to 110 percent of the base compensation foregone. The
restricted shares become fully vested on the first anniversary of
the date of grant. Such vesting is accelerated in the event the
participating director dies, becomes disabled or retires in
accordance with Dain Rauscher's then-current Board retirement
policy or upon a change in control of Dain Rauscher.
CERTAIN TRANSACTIONS
DRI is (and each of its predecessors, Dain Bosworth and Rauscher
Pierce, was) a broker-dealer extending credit from time to time
under Federal Reserve Regulation T to certain of the Company's
directors and executive officers and members of their immediate
families. All such loans are made in the ordinary course of
business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve
more than normal risk of collectability or present other
unfavorable features.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return
on Dain Rauscher's Common Stock for the last five fiscal years
with the cumulative total return on the S&P 500 Stock Index and
the Regional Sub-Index of the Financial Service Analytics Stock
Price Index (the "FSA Index") over the same period (assuming the
investment of $100 in each on December 31, 1992, and the
reinvestment of all dividends).
<TABLE>
<CAPTION>
S&P 500 FSA Regional Index Dain Rauscher
------- ------------------ -------------
<S> <C> <C> <C>
1992 100 100 100
1993 110.06 131.12 157.72
1994 111.5 111.85 130.31
1995 153.36 165.3 224.13
1996 188.55 257.06 319.14
1997 251.43 560.89 634.54
<FN>
(1) Total return calculations on the FSA Index were performed by
Financial Service Analytics, Inc. The FSA Index is composed of
15 publicly held regional securities firms, including Dain
Rauscher, and has been weighted based upon the market
capitalizations of such firms in accordance with Securities and
Exchange Commission rules.
(2) Total return calculations on the S&P 500 Index were performed
by Standard & Poor's Compustat Services, Inc.
</TABLE>
Proposal 2 - Approval of Amendment to Restated Certificate of
Incorporation to Increase Authorized Common Stock
The Dain Rauscher Board of Directors has determined that Article
Fourth of Dain Rauscher's Restated Articles of Incorporation
should be amended and has voted to submit an amendment to Dain
Rauscher stockholders for adoption. The proposed amendment to
Article Fourth would increase the number of authorized share of
Common Stock, par value $.125, from 30,000,000 to 60,000,000, and
the total number of shares of stock which Dain Rauscher has the
authority to issue from 32,501,940 to 62,501,940.
As of March 10, 1998, there were 12,332,322 shares of Common
Stock outstanding, 1,659,000 shares reserved for future issuance
pursuant to the Dain Rauscher Retirement Plan, 1,871,552 shares
reserved for future issuance upon exercise of options granted
under the Dain Rauscher 1986 Stock Option Plan and 2,926,400
shares reserved for future issuance pursuant to the 1996 Stock
Incentive Plan. As of March 10, 1998, there were no shares of
any class of Preferred Stock outstanding.
The additional shares of Common Stock for which authorization is
sought would be a part of the existing class of Common Stock and,
if and when issued, would have the same rights and privileges as
the shares of Common Stock presently outstanding. Such
additional shares would not (and the shares of Common Stock
presently outstanding do not) entitle the holders thereof to
preemptive or cumulative voting rights.
Purposes and Effects of the Amendment The Board of Directors
believes that additional authorized shares of Common Stock will
enable Dain Rauscher to issue additional shares of Common Stock
pursuant to the Dain Rauscher 1996 Stock Incentive Plan and to
take timely advantage of market conditions and the availability
of favorable financing and acquisition opportunities without the
delay and expense associated with convening a special
stockholders' meeting (unless otherwise required by the rules of
any stock exchange on which Dain Rauscher Common Stock may then
be listed). The additional shares of Common Stock would also
permit the Company increased flexibility with respect to stock
dividends and other general corporate purposes.
Unless required by law or by the rules of any stock exchange on
which Dain Rauscher's Common Stock may in the future be listed,
no further authorized vote by the stockholders will be sought for
any issuance of shares of Common Stock. Under existing New York
Stock Exchange, Inc. regulations, approval by a majority of the
holders of Common Stock would nevertheless be required in
connection with any transaction or series of related transactions
that would result in the original issuance of additional shares
of Common Stock, other than in a public offering for cash, (a) if
such additional shares of Common Stock (including securities
convertible into or exercisable for Common Stock) has, or will
have upon issuance, voting power equal to or in excess of 20
percent of the voting power outstanding before the issuance of
the Common Stock; (b) if the number of such additional shares of
Common Stock is or will be equal to or in excess of 20 percent of
the number of shares of Common Stock outstanding before the
issuance of such additional shares; or (c) if the issuance would
result in a change in control of Dain Rauscher.
Although the increase in authorized but unissued shares of Common
Stock is designated for general corporate purposes, the increase
in the authorized but unissued shares of Common Stock could make
a change in control of Dain Rauscher more difficult to achieve.
Under certain circumstances, such shares of Common Stock could be
used to create voting impediments to frustrate persons seeking to
effect a takeover or otherwise gain control of Dain Rauscher.
Such shares could be sold privately to purchasers who might side
with the Board of Directors in opposing a takeover bid that the
Board determines is not in the best interests of Dain Rauscher
and its stockholders.
The amendment also may have the effect of discouraging an attempt
by another person or entity, through acquisition of a substantial
number of shares of Common Stock, to acquire control of the
Company with a view to effecting a merger, sale of assets or a
similar transaction, since the issuance of new shares could be
used to dilute the stock ownership of such person or entity.
Dain Rauscher's Restated Certificate of Incorporation currently
requires a two-thirds vote in order to approve certain business
combinations involving Dain Rauscher and an interested
stockholder of Dain Rauscher. Although the Board of Directors
presently has no intention of doing so, shares of authorized but
unissued Common Stock could be issued to a holder who would
thereby have sufficient voting power to assure that any such
business combination or amendment to the Restated Certificate of
Incorporation would not receive a two-thirds stockholder vote
required for approval thereof. See "Security Ownership of
Certain Beneficial Owners and Management." The issuance of
additional shares of Common Stock may be used to discourage
takeovers that are not approved by the Board but in which
stockholders may receive a substantial premium above market value
for some or all of their shares at the time a tender offer is
made. Thus, stockholders who may wish to participate in such a
tender offer may be restricted in their opportunity to do so. In
addition, because the proposed amendment may enable Dain Rauscher
to discourage tender offers, the amendment may make removal of
the Board of Directors or management more difficult. To the
extent that the adoption of the proposed amendment renders less
likely a merger or other transaction opposed by Dain Rauscher's
incumbent Board of Directors, the effect of such adoption may be
to assist the Board of Directors and management in retaining
their current positions.
Board Recommendation The Board of Directors recommends a vote FOR
Proposal 2 to amend the Dain Rauscher Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock. The affirmative vote of a majority of the shares
of Dain Rauscher Common Stock present and entitled to vote at the
1998 Annual Meeting is necessary to approve Proposal 2. Proxies
will be voted in favor of Proposal 2 unless otherwise specified.
If an executed proxy card is returned and no instruction is
given, the shares of Dain Rauscher Common Stock represented by
such proxy will be voted in favor of Proposal 2. If an executed
proxy card is returned and the stockholder has abstained from
voting on Proposal 2, the shares of Dain Rauscher Common Stock
represented by such proxy will be considered present at the
meeting for the purposes of determining a quorum and for purposes
of calculating a vote with respect to Proposal 2, but will not be
considered to have been voted in favor of Proposal 2. If an
executed proxy is returned by a broker holding shares in street
name and the broker does not vote with respect to Proposal 2
because the beneficial owner of the shares represented by such
proxy has not given the broker authority to do so, such shares
will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be
represented at the meeting for purposes of calculating the vote
with respect to Proposal 2.
Proposal 3 - Approval of the Annual Cash Bonus Plan for
Designated Corporate Officers
The Company seeks stockholder approval of the Annual Cash Bonus
Plan for Designated Corporate Officers (the "Plan"). The Plan
will be administered by the Compensation and Organization
Committee of the Board of Directors (the "Committee"). The Plan
is intended to qualify compensation paid thereunder as "qualified
performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code (the "Code"). It is not
expected that the plan will change the method or amount of
compensation paid to any executive, but stockholder approval of
the Plan is necessary for the Company to claim federal income tax
deductions for any payments under the Plan to a "covered
employee" (as defined under the Code) having compensation in
excess of $1,000,000 for any fiscal year.
The Plan provides that eligible participants may share in an
annual cash bonus pool. The pool will be equal to fifteen
percent (15%) of the Company's earnings before income taxes for
the Company's fiscal year. Eligibility under this Plan will be
limited to the Chief Executive Officer plus any five other key
employees designated by the Committee. This bonus pool is the
mechanism for funding the Company's annual cash bonuses for the
covered executives. The Chief Executive Officer may receive no
more than twenty-five percent (25%) of the bonus pool, one other
participant may receive no more than twenty-five percent (25%) of
the bonus pool, and the other four participants no more than
twelve and one-half percent (12.5%) each of the bonus pool.
The Committee will have the authority to reduce the share of the
bonus pool available to any or all plan participants below the
maximum amount set forth in the Plan. In determining whether the
share of any participant in the bonus pool will be reduced, the
Committee will consider those financial and individual
performance factors that it determines to be appropriate. While
the nature of these factors and size of the bonus pool in the
future cannot be predicted, if the Plan had been in place in
1997, the Committee would have named the members of the Dain
Rauscher executive committee as participants in the Plan, in
addition to the Chief Executive Officer, and would have awarded
the individual named executive officers under the Plan the same
bonus amounts as are set forth opposite their names in the
Summary Compensation Table on page 8. If the Plan had been in
place and approved by the stockholders in 1997 and 1996, the
Company would have been able to deduct $96,200 and $296,884,
respectively, for the amount by which Mr. Weiser's compensation
exceeded $1,000,000.
The Committee may amend prospectively or terminate the Plan at
any time.
The Board of Directors unanimously recommends a vote "FOR" the
proposal to approve the Annual Cash Bonus Plan for Designated
Corporate Officers. The affirmative vote of a majority of the
shares of Dain Rauscher Common Stock present and entitled to vote
at the 1998 Annual Meeting is necessary to approve Proposal 3.
Proxies will be voted in favor of Proposal 3 unless otherwise
specified. If an executed proxy card is returned and no
instruction is given, the shares of Dain Rauscher Common Stock
represented by such proxy will be voted in favor of Proposal 3.
If an executed proxy card is returned and the stockholder has
abstained from voting on Proposal 3, the shares of Dain Rauscher
Common Stock represented by such proxy will be considered present
at the meeting for the purposes of determining a quorum and for
purposes of calculating a vote with respect to Proposal 3, but
will not be considered to have been voted in favor of Proposal 3.
If an executed proxy is returned by a broker holding shares in
street name and the broker does not vote with respect to Proposal
3 because the beneficial owner of the shares represented by such
proxy has not given the broker authority to do so, such shares
will be considered present at the meeting for purposed of
determining a quorum, but will not be considered to be
represented at the meeting for purposes of calculating the vote
with respect to Proposal 3.
Proposal 4 - Approval of the Wealth Accumulation Plan
The Company seeks stockholder approval to be able to use up to
500,000 newly issued shares of Dain Rauscher common stock to fund
distribution from the Wealth Accumulation Plan (the "Plan").
Previously, the Plan was funded, and all distributions from the
Plan were made, with cash. The Plan was adopted by the Board of
Directors of the Company on February 1, 1995, for the purpose of
providing a non-tax-qualified, deferred compensation benefit plan
to managers and other highly compensated employees of the Company
and its subsidiaries. The Plan is available to all employees
whose gross cash compensation (as defined in the Plan) is in
excess of $160,000 (which constitutes the federal tax code income
limit under a tax-qualified plan), and is administered by the
Compensation and Organizing Committee of the Board of Directors.
The Plan is designed to provide additional deferred compensation
opportunities based solely on income, and not on policy-making
positions within the Company (or any of its subsidiaries).
Moreover, the Plan excludes all directors and senior executive
officers who serve on the Dain Rauscher or DRI Executive
Committees.
The Plan is an unfunded, "book-entry" plan. Eligible employees
may elect to defer a percentage of their deferrable compensation
(i.e., any amount in excess of $160,000) no later than December
31 of the year preceding the year in which such compensation is
expected to be earned (employees who are first eligible to
participate in the Plan during a given year must make an election
within 30 days of initial employment). The election involves
three decisions: (1) the percentage to be deferred; (2) the
account option or options into which the deferred amounts will be
deemed deposited; and (3) the distribution term (either after a
defined number of years in the future, or at retirement, at the
election of the employee). Currently, the Plan provides for four
account options, of which one is the Dain Rauscher Stock Account.
Participants electing deferrals into the Dain Rauscher Stock
Account will also be deemed to receive a matching contribution
from Dain Rauscher; the employer match for contribution made in
1997 with respect to elections made in 1996 is 30% of the
deferred amount. The vesting period for matching contributions
is determined annually by the Committee. For 1997 deferrals, the
matching contributions will become vested in 2003. Distributions
from the accounts may be made in cash or securities, as
determined by the Committee.
Since the adoption of the Plan in 1995, only annual cash
distributions, in nominal amounts, have occurred. However, the
Company anticipates that future distributions will increase in
number and in amount under the Plan, and that it may be in the
best interest of the Company to pay such distributions in shares
of the Company's Common Stock rather than cash. Although the
Company may use shares rather than cash held in treasury for such
purpose, it may not have sufficient shares held in treasury to
fund future distributions. As a result approval of the Plan and
the issuance of up to 500,000 shares of Common Stock is proposed.
Stockholder approval is required under the rules of the New York
Stock Exchange as a precondition for the listing of such shares.
The Committee may amend prospectively or terminate the Plan at
any time.
The Board of Directors unanimously recommends a vote "FOR" the
proposal to approve the Wealth Accumulation Plan. The
affirmative vote of a majority of the shares of Dain Rauscher
Common Stock present and entitled to vote at the 1998 Annual
Meeting is necessary to approve Proposal 4. Proxies will be
voted in favor of Proposal 4 unless otherwise specified. If an
executed proxy card is returned and no instruction is given, the
shares of Dain Rauscher Common Stock represented by such proxy
will be voted in favor of Proposal 4. If an executed proxy card
is returned and the stockholder has abstained from voting on
Proposal 4, the shares of Dain Rauscher Common Stock represented
by such proxy will be considered present at the meeting for the
purposes of determining a quorum and for purposes of calculating
a vote with respect to Proposal 4, but will not be considered to
have been voted in favor of Proposal 4. If an executed proxy is
returned by a broker holding shares in street name and the broker
does not vote with respect to Proposal 4 because the beneficial
owner of the shares represented by such proxy has not given the
broker authority to do so, such shares will be considered present
at the meeting for purposed of determining a quorum, but will not
be considered to be represented at the meeting for purposes of
calculating the vote with respect to Proposal 4.
Proposal 5 - Ratification of Appointment of Auditors
The Board of Directors, based upon the recommendation of its
Audit Committee, has appointed KPMG Peat Marwick LLP as
independent auditors to audit the consolidated financial
statements of Dain Rauscher and its subsidiaries for the current
fiscal year ending December 31, 1998, and to perform other
appropriate accounting services and recommends that the
stockholders of Dain Rauscher ratify that appointment. KPMG Peat
Marwick LLP has audited Dain Rauscher's financial statements for
the fiscal years ended December 31, 1989 through 1997.
Representatives of KPMG Peat Marwick LLP will be present at the
1998 Annual Meeting, will have an opportunity to make a statement
if they desire to do so, and will be available to respond to
appropriate questions from stockholders.
The affirmative vote of a majority of the outstanding shares of
Dain Rauscher Common Stock present and entitled to vote at the
1998 Annual Meeting is required to approve Proposal 5 ratifying
the appointment of KPMG Peat Marwick LLP. Proxies will be voted
in favor of Proposal 5 unless otherwise specified. If an
executed proxy card is returned and no instruction is given, the
shares of Common Stock represented by such proxy will be voted in
favor of Proposal 5. If an executed proxy card is returned and
the stockholder has abstained from voting on Proposal 5, the
shares of Dain Rauscher Common Stock represented by such proxy
will be considered present at the meeting for purposes of
determining a quorum and for purposes of calculating the total
vote with respect to Proposal 5, but will not be considered to
have been voted in favor of Proposal 5.
Deadline for Submission of Stockholder Proposals
Any proposal by a stockholder which may properly be presented at
the next annual meeting of Dain Rauscher's stockholders must be
received at Dain Rauscher's principal executive offices, Dain
Rauscher Plaza, 60 South Sixth Street, P.O. Box 1160,
Minneapolis, Minnesota 55440-1160, not later than December 1,
1998.
General
The Board of Directors does not know of any other business to
come before the 1998 Annual Meeting of Stockholders. If any
other matters are properly brought before the meeting, however,
the persons named in the accompanying form of proxy will vote
such proxy in accordance with their best judgment.
The entire cost of soliciting proxies for the 1998 Annual Meeting
will be borne by Dain Rauscher. In addition to soliciting
proxies by mail, officers, directors and other regular employees
of Dain Rauscher or its subsidiaries may solicit proxies on
behalf of the Board of Directors in person or by telephone. The
Company may also retain, at its expense, an independent proxy
solicitation firm to assist the Company in the solicitation of
proxies. The cost of such proxy solicitation services is
expected to be less than $10,000. Dain Rauscher will also
request that brokers or other nominees who hold shares of Common
Stock in their names for the benefit of other persons forward
proxy materials to, and obtain voting instructions from, the
beneficial owners of such stock at Dain Rauscher's expense.
Your cooperation in giving this matter your immediate attention
and in returning your proxy promptly will be appreciated.
By Order of the Board of Directors
Carla J. Smith
Secretary
March 30, 1998
Dain Rauscher Plaza
60 South Sixth Street
P.O. Box 1160
Minneapolis, Minnesota 55402-1160
612 371-7750
Upon written request, Dain Rauscher Corporation will furnish,
without charge, to persons solicited by this Proxy Statement a
copy of its Annual Report on Form 10-K (excluding exhibits) filed
with the Securities and Exchange Commission for its fiscal year
ended December 31, 1997. Requests should be addressed to Dain
Rauscher Corporation, P.O. Box 1160, Minneapolis, Minnesota
55440-1160, Attention: Carla J. Smith, Secretary.
APPENDIX A
PROXY P.O. Box 1160, Minneapolis, MN 55440-1160
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Irving Weiser and John C. Appel,
and each of them, with power to appoint a substitute, to vote all
shares the undersigned is entitled to vote at the Annual Meeting
of Stockholders of Dain Rauscher Corporation to be held on May 6,
1998, and at all adjournments thereof, as specified below on the
matters referred to an in their discretion upon any other
matters which may be brought before the meeting.
1. Election of Directors _ For all nominees listed below _ Withhold Authority
(except as marked to the to vote for all
contrary)* nominees listed
below
J.C. Appel, J.E. Attwell, S.S. Boren, F.G. Fitz-Gerald, W.F. Mondale,
C.A. Rundell, Jr., R.L. Ryan, A.R. Schulze, Jr., I. Weiser and K.J. Wessels
*(Instruction: To withhold authority to vote for any individual nominee,
draw a line through that nominee's name.)
- -----------------------------------------------------------------------------
2. Amend Dain Rauscher's Restated Certificate of
Incorporation to increase the number of
authorized shares _ For _ Against _ Abstain
- -----------------------------------------------------------------------------
3. Approve the Annual Cash Bonus Plan for Designated
Corporate Officers _ For _ Against _ Abstain
- -----------------------------------------------------------------------------
4. Approve the Wealth Accumulation Plan _ For _ Against _ Abstain
- -----------------------------------------------------------------------------
5. Ratification of appointment of auditors _ For _ Against _ Abstain
- -----------------------------------------------------------------------------
6. Discretionary authority to vote on any other
business that may properly come before the meeting
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction
is made, this proxy will be voted FOR all nominees named in Item 1 and FOR
Proposals 2, 3, 4 and 5.
Please sign exactly as name appears below: When shares are held
by joint tenants, both must sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature ___________________________
Signature (if held jointly) ___________________________
Date: ___________, 1998
