<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
DAIN RAUSCHER CORPORATION
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(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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
Dain Rauscher
2000 Proxy Statement
March 24, 2000
To Our Stockholders,
You are cordially invited to attend the Annual Meeting of Stockholders of
Dain Rauscher Corporation. The meeting will be held in the first floor
Auditorium of the Lutheran Brotherhood Building, 625 Fourth Avenue South,
Minneapolis, Minnesota, on Thursday, April 27, 2000, at 3:30 p.m. (CT). At the
meeting, you will hear a report on our operations and have a chance to meet your
directors and executives.
This booklet includes the formal notice of the meeting and the proxy
statement. The proxy statement tells you more about the agenda and procedures
for the meeting. It also briefly describes how the Board of Directors operates
and gives background information about our director candidates.
Irrespective of the number of shares you own, we hope your shares will be
represented at the meeting. This year you may vote your shares by using a
toll-free telephone number or via the Internet. Your proxy card contains
instructions for using these convenient services. Of course, you may still vote
your shares by marking your votes on the proxy card, signing and dating it, and
mailing it in the enclosed envelope.
Sincerely,
Irving Weiser
Chairman, President and Chief Executive Officer
<PAGE> 3
Notice of 2000 Annual Meeting of Stockholders
Time: 3:30 p.m. (CT)
Date: Thursday, April 27, 2000
Place: First Floor Auditorium
Lutheran Brotherhood Building
625 Fourth Avenue South, Minneapolis, Minnesota
Purposes:
- To elect ten directors to hold office for one year
- To approve the new Employee Stock Purchase Plan
- To ratify the selection of KPMG LLP as Dain Rauscher's independent
auditors for the fiscal year ending December 31, 2000
- To transact other business if properly raised
Only stockholders of record on March 2, 2000, may vote at the meeting. A list
of stockholders will be available at Dain Rauscher's Minneapolis headquarters
beginning on April 14, 2000, for examination by any stockholder for any purpose
relevant to the meeting.
Your vote is important. Please vote your proxy by telephone or via the
Internet, as described in the instructions on the enclosed proxy card, or
complete, sign, date and promptly return your proxy card in the enclosed
envelope.
By Order of the Board of Directors
Carla J. Smith
Secretary
Minneapolis, Minnesota
March 24, 2000
<PAGE> 4
Proxy Statement
ANNUAL MEETING OF STOCKHOLDERS, THURSDAY, APRIL 27, 2000
The Board of Directors of Dain Rauscher Corporation is soliciting proxies to
be voted at the Annual Meeting of Stockholders. The following provides general
information relating to voting your shares. This proxy statement was first
mailed to stockholders on or about March 24, 2000.
Who can vote:
Record holders of Dain Rauscher common stock as of March 2, 2000, may vote at
the Annual Meeting.
How proxies work, and how to vote:
Dain Rauscher's Board of Directors is asking for your proxy. Giving us your
proxy means that you authorize us to vote your shares at the meeting in the
manner you direct. You may vote your shares in person at the meeting, but we
recommend that you vote by proxy even if you plan to attend the meeting. You can
always change your vote at the meeting.
If you vote your proxy by telephone or via the Internet, or return your
signed proxy card before the Annual Meeting, we will vote your shares as you
direct. You have three choices on each matter to be voted upon. For Proposal 1,
the election of directors, you may vote for (a) all of the nominees, (b) none of
the nominees, or (c) all of the nominees except those whom you designate. For
the other proposals, you may vote "FOR," "AGAINST," or "ABSTAIN" from voting.
If you vote by telephone or via the Internet, or if you sign and return the
enclosed proxy card, without specifying how to vote, we will vote your shares
"FOR" the election of all nominees for director; "FOR" approval of the Employee
Stock Purchase Plan; "FOR" ratification of independent auditors; and as
otherwise recommended by the individuals named as proxies on the proxy card on
any other matter properly raised at the meeting. Your proxy may not be voted for
more than ten directors.
If you vote your proxy but withhold authority to vote for certain specified
director nominees or abstain from voting on any or all of the other proposals,
your shares will be considered present for purposes of determining a quorum and
for purposes of calculating the vote total with respect to such director
nominees or proposal, but will not be counted as a vote for that director or
proposal.
If your shares are held in the name of your broker, a bank, or other nominee
("street name" shares), and you do not tell the nominee how to vote your shares,
the nominee can vote them as it sees fit only on matters that the New York Stock
Exchange determines to be routine. For non-routine matters, these "broker
nonvotes" will be counted as present to determine if a quorum exists but will
not be counted as having been voted.
How to revoke or change your vote:
You may revoke your proxy before it is voted by (a) submitting a new proxy by
telephone or via the Internet, or by signing and returning a written proxy with
a later date, (b) voting in person at the meeting, or (c) notifying Dain
Rauscher's Secretary in writing at the company's Minneapolis headquarters. (The
address is listed on page 20.)
Quorum:
In order to carry on the business of the meeting, we must have a quorum. This
means that at least a majority of the outstanding shares eligible to vote must
be represented at the meeting, either by proxy or in person.
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Votes needed:
Each share of Dain Rauscher common stock is entitled to one vote. The
affirmative vote of a majority of the shares of stock represented at the meeting
and entitled to vote is required for the election of each director. Cumulative
voting is not permitted. The affirmative vote of a majority of the outstanding
shares of stock present and entitled to vote is required to approve each other
proposal.
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 executive officers
(designated under the rules of the Securities and Exchange Commission) named in
the Summary Compensation Table and all directors and executive officers as a
group (16 persons). We are not aware that any person or group beneficially owned
5 percent or more of our common stock as of March 2, 2000. Unless we have
indicated otherwise, the information below is current as of March 2, 2000, and
each named beneficial owner possesses sole voting and investment power with
respect to all shares. On March 2, 2000, Dain Rauscher had 12,798,598 shares of
common stock outstanding.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of Beneficial Owner Title of Class of Beneficial Ownership of Class
<S> <C> <C>
John C. Appel.............................. Common 194,079 (1) (2) (3) 1.5%
J. Evans Attwell........................... Common 14,134 (1) (4) *
Susan S. Boren............................. Common 19,827 (1) (4) *
F. Gregory Fitz-Gerald..................... Common 25,979 (1) (4) *
Peter M. Grant............................. Common 69,323 (1) (2) (3) (6) *
Walter F. Mondale.......................... Common 6,436 (1) (4) *
C.A. Rundell, Jr........................... Common 11,791 (1) (4) *
Robert L. Ryan............................. Common 13,791 (1) (4) *
Arthur R. Schulze, Jr...................... Common 33,480 (1) (4) *
Ronald A. Tschetter........................ Common 168,390 (1) (2) (3) 1.3%
Irving Weiser.............................. Common 418,646 (1) (2) (3) (5) 3.3%
Kenneth J. Wessels......................... Common 49,980 (1) (2) (3) *
All directors and executive
officers as a group (16 persons)......... Common 1,141,306 (1) (2) (3) (4) (5) (6)8.9%
</TABLE>
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* Less than 1%
(1) This number includes the following number of shares which could be issued
upon exercise of currently exercisable options: Mr. Appel, 96,150; Mr. Attwell,
8,000; Ms. Boren, 11,000; Mr. Fitz-Gerald, 11,000; Mr. Grant, 2,334; Mr.
Mondale, 6,000; Mr. Rundell, 11,000; Mr. Ryan, 11,000; Mr. Schulze, 11,000; Mr.
Tschetter, 65,850; Mr. Weiser, 258,467; Mr. Wessels, 21,600; and all directors
and executive officers as a group, 559,014.
(2) This number includes the following number of shares allocated to accounts
under Dain Rauscher's Retirement Plan as of March 2, 2000: Mr. Appel, 14,916;
Mr. Grant, 77; Mr. Tschetter, 26,808; Mr. Weiser, 18,506; Mr. Wessels, 120; and
all directors and executive officers as a group, 64,296. As of March 2, 2000, a
total of 3,172,647 shares of Dain Rauscher common stock, or 24 percent of the
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outstanding, were held in the Retirement Plan. Voting of shares held in the
Retirement Plan is passed through to the participating employees. An overview of
the Retirement Plan is provided on page 14.
(3) This number includes the following number of deemed shares credited to
accounts under the Management Deferred Stock Plan (formerly called the Executive
Deferred Compensation Plan): Mr. Appel, 60,230; Mr. Grant, 22,417; Mr.
Tschetter, 59,830; Mr. Weiser, 87,392; Mr. Wessels, 18,260; and all directors
and executive officers as a group, 267,599. Prior to January 1999, shares
purchased with participant contributions to the Management Deferred Stock Plan
were held in a separate trust. After January 1999, share amounts are deemed to
be credited to the respective participant accounts. As of March 2, 2000, a total
of 431,879 shares or deemed shares of Dain Rauscher common stock were credited
to the accounts of participants in the Management Deferred Stock Plan and
305,975 shares, or 2.3 percent of the outstanding, were held in the related
trust that had been funded prior to January 1999. Shares held in the trust will
be voted by the trustee in its sole discretion. Deemed shares credited under the
Management Deferred Stock Plan, other than those held in the trust, are not
issued and outstanding and therefore do not have voting rights. An overview of
the Management Deferred Stock Plan is provided on page 14. This number also
includes the following number of deemed shares credited to accounts under the
Wealth Accumulation Plan as of December 31, 1999: all directors and executive
officers as a group, 1,072. As of December 31, 1999, 660,713 deemed shares of
Dain Rauscher common stock were credited to the accounts of participants under
the Wealth Accumulation Plan. Because these are deemed shares and there is no
related trust, no voting rights are associated with these shares. The Wealth
Accumulation Plan is a deferred compensation plan in which certain executive
officers, other than those named in this proxy statement, formerly were eligible
to participate. Executive officers are no longer eligible to participate in the
Wealth Accumulation Plan.
(4) This number includes the following number of unvested restricted shares
received in lieu of cash compensation under a former program available to
directors: Ms. Boren, 241; and Mr. Schulze, 481; and all directors and executive
officers as a group, 722. Participating directors may vote and receive
distributions on restricted shares, but may not dispose of or pledge them until
the shares are fully vested. Unvested shares are subject to forfeiture incertain
circumstances. All of these unvested shares vest no later than May 2001. This
number also includes the following number of deferred shares of Dain Rauscher
common stock credited to each non-employee director's account under the
Directors' Deferred Compensation Plan upon the termination, in April 1999, of
the company's retirement agreement program for directors: Mr. Attwell, 300; Ms.
Boren, 1,111; Mr. Fitz-Gerald, 2,795; Mr. Mondale, 136; Mr. Rundell, 791; Mr.
Ryan, 791; and Mr. Schulze, 2,795. The number of shares credited to each
director's account was equivalent to the present value of his or her accrued
benefit for service through April 1999. Finally, the amounts shown also include
the following number of deferred shares of Dain Rauscher common stock credited
to the directors' accounts under the Directors' Deferred Compensation Plan in
lieu of receiving cash or options for the annual retainer, special retainer
and/or meeting and other fees: Mr. Attwell, 86; Ms. Boren, 184; Mr. Fitz-Gerald,
184; and Mr. Schulze, 551. Deferred shares are deemed to be credited to each
director's account, and may not be voted, pledged or transferred by the
participant. All deferred shares credited under the plan will be paid out in
shares of Dain Rauscher common stock after termination of the director's service
with the Board. An overview of the directors' compensation program is provided
on page 8.
(5) This number includes 3,445 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. This number excludes 420 shares beneficially owned by Mr.
Weiser's spouse and disclaimed by Mr. Weiser.
(6) This number includes an aggregate of 81,205 shares of unvested restricted
stock granted to Mr. Grant and certain unnamed executive officers under the 1996
Stock Incentive Plan. These restricted shares become fully vested no later than
January 28, 2005. Holders of restricted shares may vote and receive
distributions on these shares, but may not dispose of or pledge them. Restricted
shares are also subject to forfeiture under certain circumstances until they are
fully vested.
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<PAGE> 7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that Dain
Rauscher's directors and executive officers file reports of their ownership, and
any changes in their ownership, of Dain Rauscher's common stock. Dain Rauscher
is also required by this rule to identify any late reporting of this information
by Dain Rauscher directors and executive officers. Dain Rauscher believes that
during 1999 all directors and executive officers complied with their Section
16(a) filing requirements.
Proposal 1 -- Election of Directors
NOMINEES
The Board of Directors has nominated the ten director candidates named below
to hold office until the next annual meeting of stockholders, or until their
successors are elected (except where a director has died, resigned, or been
removed). In the event that any nominee becomes unable or unwilling to serve as
a director for any reason, your proxy will be voted by the named persons in
their best judgment.
Two of the nominees for election, Mr. Weiser and Mr. Appel, are executive
officers of Dain Rauscher and its wholly owned subsidiary, Dain Rauscher
Incorporated ("DRI"). Additionally, Mr. Weiser and Mr. Appel held executive
officer positions at DRI's two predecessor firms, Dain Bosworth Incorporated
("DBI") and Rauscher Pierce Refsnes, Inc. ("RPR"), which were merged in January
1998 to form DRI. Mr. Wessels, although no longer an executive officer,
continues to be employed by DRI.
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 the nominees
is withheld as specified in the proxy card.
Each director nominee has furnished the following information regarding his
or her principal occupations or employment during the last five years, and his
or her directorships of other reporting companies.
JOHN C. APPEL
Vice Chairman
Dain Rauscher Corporation
President, Fixed Income Capital Markets
Dain Rauscher Incorporated
51
Director since 1995
Mr. Appel was named President, Fixed Income Capital Markets in January 2000.
He was named Vice Chairman and Chief Financial Officer of Dain Rauscher in
October 1997 and of DRI in January 1998. He was Chief Executive Officer of DBI
from February 1997 through December 1997, President and Chief Operating Officer
of DBI from 1994 through December 1997, and an Executive Vice President of Dain
Rauscher from 1990 until October 1997. Mr. Appel served as Chief Financial
Officer of Dain Rauscher from 1986 to 1994 and as Chief Financial Officer of DBI
from 1990 to 1994. Mr. Appel also serves as a director of Smith Breeden
Associates, a registered investment adviser.
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<PAGE> 8
J. Evans Attwell
Of Counsel
Vinson & Elkins LLP
68
Director since 1996
Mr. Attwell 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 also serves as a director
of American General Corporation and Ocean Energy, Inc.
Susan S. Boren
Director
Spencer Stuart
52
Director since 1993
Ms. Boren has been a Director of Spencer Stuart, a senior executive search
consulting firm, since May 1998. Previously, Ms. Boren was President of Trillium
Advisors, Inc., a governance consulting firm. From 1981 through 1995, Ms. Boren
was an executive with Dayton Hudson Corporation in financial, human resources
and operating roles. Ms. Boren also serves as a director of Valspar Corporation.
F. Gregory Fitz-Gerald
President
The ANSR Company, LLC
58
Director since 1987
Mr. Fitz-Gerald is President of The ANSR Company, LLC, a private company
engaged in investment research using genetic algorithms and evolutionary
computation. Previously, he held senior executive positions with Commercial
Credit Company and Primerica Corporation, American Express Company, and Merrill
Lynch & Co., Inc.
Walter F. Mondale
Partner
Dorsey & Whitney, LLP
72
Director since 1997
Mr. Mondale 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. Prior to that he was the Democratic Party's nominee for President, Vice
President of the United States, a U.S. Senator, and Attorney General for the
State of Minnesota. 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.; St. Jude
Medical, Inc.; and UnitedHealth Group Incorporated.
5
<PAGE> 9
C. A. Rundell, Jr.
Former President and
Chief Executive Officer
Tyler Corporation
68
Director since 1994
Mr. Rundell has 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. From
October 1997 to December 1998, he also served as President and Chief Executive
Officer of Tyler Corporation. Mr. Rundell remains a director and member of the
Executive Committee of Tyler Corporation and a director of Tandy Brands
Accessories, Inc.; Renaissance U.S. Growth and Income Trust, P.L.C.; and
Renaissance Capital Growth and Income Fund III, Inc. He also serves as chairman
of NCI Building Systems, Inc. and chairman of the board of Integrated Security
Systems, Inc.
Robert L. Ryan
Senior Vice President
Chief Financial Officer
Medtronic, Inc.
56
Director since 1994
Mr. Ryan 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 also is a director of UnitedHealth Group Incorporated and
Brunswick Corporation.
Arthur R. Schulze, Jr.
Former Vice Chairman of the Board
General Mills, Inc.
69
Director since 1987
Mr. Schulze 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.
Irving Weiser
Chairman, President and
Chief Executive Officer,
Dain Rauscher Corporation
Dain Rauscher Incorporated
52
Director since 1985
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Mr. Weiser has been Dain Rauscher'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
DBI since 1990. From 1990 to February 1997, Mr. Weiser held various other
executive positions with DBI and its predecessors, including serving as DBI's
Chief Executive Officer.
Kenneth J. Wessels
Chairman, Dain Rauscher Wessels Division,
Dain Rauscher Incorporated
57
Director since 1998
Mr. Wessels is Chairman of Dain Rauscher Wessels, the equity capital markets
division of DRI. From April 1998 to January 2000, Mr. Wessels was Senior
Executive Vice President of Dain Rauscher and President, Dain Rauscher Wessels.
From 1986 until their acquisition by Dain Rauscher in March 1998, Mr. Wessels
was the Chief Executive Officer and a Managing Director of each of Wessels,
Arnold & Henderson, LLC, an institutional equity sales, trading and investment
banking firm based in Minneapolis; and Wessels, Arnold & Henderson Group, LLC.
Mr. Wessels is currently serving on the Board of Governors of the National
Association of Security Dealers, Inc. (NASD). He also served as Chairman of its
Board of Governors in 1990 and has also served on various NASD committees and
task forces.
Information Regarding Dain Rauscher's Board of Directors
BOARD COMMITTEES
The Board of Directors appoints committees to help carry out its duties.
Board committees work on key issues in greater detail than would be possible at
full Board meetings. Each Committee reviews the results of its meetings with the
full Board. Dain Rauscher has the following Board Committees:
Audit Committee
Members: Messrs. Fitz-Gerald (chairperson), Attwell and Rundell
Number of Meetings in 1999: 6
Functions:
- Assists the Board of Directors in fulfilling its responsibility relative to
the integrity of financial information reported by Dain Rauscher by:
[ ] monitoring Dain Rauscher's financial reporting process;
[ ] monitoring Dain Rauscher's systems and processes for assessing risk
and maintaining an adequate system of internal controls; and
[ ] overseeing, supporting and evaluating the independent external and
internal audit processes.
- Evaluates and nominates the independent auditors to be selected by the
Board of Directors and recommended for ratification by the shareholders.
- Provides functional supervision of the internal audit department.
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Compensation and Organization Committee
Members: Ms. Boren (chairperson), Messrs. Mondale, Ryan and Schulze
Number of meetings in 1999: 7
Functions:
- Approves the compensation philosophy and structure for Dain Rauscher's
senior management;
- Determines the amount of compensation for Dain Rauscher's Chief Executive
Officer and approves the amounts for the members of the company's Executive
Committee;
- Reviews and evaluates the performance of Dain Rauscher's Chief Executive
Officer and Board of Directors;
- Consults with Dain Rauscher's Chief Executive Officer and Board of
Directors concerning organizational matters;
- Administers Dain Rauscher's stock-based benefit and deferred compensation
plans; and
- 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 Compensation and Organization Committee will consider your suggestions
for possible director candidates if you submit in writing the name, biographical
information and a summary of the person's qualifications to the Secretary at the
address listed on page 20. You must submit this information to the Secretary at
least 120 days prior to the date of the stockholder meeting at which your
candidate would be considered.
MEETINGS OF THE BOARD AND BOARD COMMITTEES
The Board of Directors met five times in 1999. During 1999, no director,
other than Mr. Mondale, attended fewer than 75 percent of the meetings of the
Board and Committees upon which such director served. Mr. Mondale attended eight
of twelve total meetings (67 percent) for the year.
DIRECTOR COMPENSATION
Retainers and Fees. Dain Rauscher employees receive no additional
compensation for serving as directors. In February 1999, the Board of Directors
approved certain changes to the Board compensation program to make the
compensation paid to non-employee directors more competitive and to better align
the interests of such directors with the interests of Dain Rauscher's
stockholders. The amount of the annual retainer was increased from $15,000 to
$18,000 and is paid at the start of each board year in Dain Rauscher's common
stock rather than in cash, subject to a one-year vesting requirement. The number
of shares to be issued is determined based on the average price of Dain Rauscher
common stock on the New York Stock Exchange over the five trading days preceding
the date of the annual meeting. Directors also may elect to receive their annual
retainer in five-year options rather than in stock. The number of options
granted is four times the number of shares of common stock the director would
otherwise receive, and the exercise price is equal to the closing price per
share of Dain Rauscher common stock as reported on the New York Stock Exchange
on the day prior to the date of grant. These options vest one year from the date
of the grant. The amount of the special retainer for the chairpersons of the
Audit Committee and Compensation and Organization Committee was increased from
$1,800 to $5,000 annually in recognition of the increased amount of
responsibility and time commitment being required of the chairpersons. This
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special retainer is paid quarterly in cash. The meeting fees of $1,000 per Board
or committee meeting attended and per diem compensation rates of $1,000 per
whole day and $500 per half day for substantial additional time spent on company
matters remained the same. These fees are also paid quarterly in cash.
Directors' Deferred Compensation Plan. Effective April 27, 1999, Dain
Rauscher put into place a new Directors' Deferred Compensation Plan. Under this
plan, each director may defer up to 100% of his or her annual retainer stock
payment, and up to 100% of his or her quarterly cash payments for any special
retainer and meeting and other fees, in Dain Rauscher common stock. The value of
the annual retainer deferral is based on the average price of Dain Rauscher
common stock on the New York Stock Exchange over the five trading days preceding
the date of the annual meeting, and the value of the quarterly special retainer
and fees deferral is based on the average of the closing prices of Dain Rauscher
common stock on the New York Stock Exchange over the last five trading days of
the quarter in which the retainer and fees were earned. All payments deferred by
a director under this plan are payable, at the election of the director, in a
lump sum payout or in annual installments over a period of up to three years
after termination of his or her Board service.
Termination of Retirement Agreement Program. Dain Rauscher terminated its
prior directors' retirement agreement program, effective April 27, 1999. Under
this program, Dain Rauscher had entered into a retirement agreement with each
non-employee director which provided that, upon retirement from the Board after
at least five years of service as a director, he or she would receive an annual
retainer fee for the number of years served (up to a maximum of ten years). As a
result of the termination of this program, no additional benefits were earned
after April 1999 and each director received a deferred stock award for his or
her then-accrued benefit under the plan. For each director, the deferred stock
award was equivalent to the present value of his or her accrued benefit for
service through April 1999. These deferred shares were credited to each
director's account under the new Directors' Deferred Compensation Plan described
above, and will be paid out after termination of his or her Board service in
accordance with the terms of the new plan.
Options to Purchase Dain Rauscher Common Stock. Under Dain Rauscher's 1996
Stock Incentive Plan, each non-employee director is automatically granted, upon
each election or reelection to the Board, a five-year, non-qualified option to
purchase 2,000 shares of Dain Rauscher's common stock. This option vests in full
six months after the date of grant, and its exercise price is equal to the
closing price per share of Dain Rauscher common stock as reported on the New
York Stock Exchange on the day prior to the date of grant.
COMPENSATION
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report was prepared at the direction of the Compensation and
Organization Committee of the Board of Directors (the "Committee"), which is
composed entirely of non-employee directors. The Committee establishes the
compensation philosophy and program of Dain Rauscher on behalf of the Board of
Directors, determines the compensation of Dain Rauscher's Chief Executive
Officer, and approves the compensation of the company's executive committee
members. These officers are collectively referred to in this section as the
"Executive Officers."
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Compensation Philosophy
Dain Rauscher's compensation philosophy and program support and reinforce
growth in shareholder value. Dain Rauscher's Executive Officer compensation
program is designed to reward a combination of company, business unit, and
individual results. Specifically, the Committee seeks to achieve the following
objectives:
- To attract, motivate and retain highly qualified Executive Officers through
a competitive total compensation program.
- To encourage Executive Officers to purchase and hold significant amounts of
Dain Rauscher stock.
- To require that a substantial portion of Executive Officer compensation be
tied to the achievement of financial and strategic objectives for Dain
Rauscher and individual business units.
COMPONENTS OF THE EXECUTIVE OFFICER COMPENSATION PROGRAM
The main components of Dain Rauscher's Executive Officer compensation program
are base salary, annual bonus, deferred compensation, and long-term incentive
compensation.
Base Salary
The first component of Dain Rauscher's Executive Officer compensation program
is cash compensation in the form of base salary. Base salary generally
represents a small portion of the Executive Officers' cash compensation and is
set close to the median relative to comparable firms in the securities industry.
Annual Bonus
The second component of Dain Rauscher's Executive Officer compensation
program consists of the annual performance-based bonus. The annual bonus
typically makes up over 80% of the Executive Officers' total cash compensation,
and is determined on the basis of several factors, including Dain Rauscher's
performance, the performance of the individual executive, and the performance of
his or her operating unit during the year. The annual bonus is awarded early in
the following year. In evaluating performance, achievement of both financial and
strategic objectives are considered. The Committee believes that basing a
substantial portion of an Executive Officer's compensation on performance
motivates the executive to perform at the highest possible level.
Deferred Compensation
An integral part of Dain Rauscher's annual cash compensation program is the
Dain Rauscher Management Deferred Stock Plan (formerly known as the Executive
Deferred Compensation Plan). This plan, which is described in more detail on
page 14, was created in order to increase stock ownership among Executive
Officers and senior management of the company. The plan requires that a certain
portion of each Executive Officer's total cash compensation (salary plus bonus)
be deferred and invested in Dain Rauscher stock, subject to a two-year vesting
requirement. The plan also permits an additional portion of each Executive
Officer's total cash compensation to be deferred and invested in Dain Rauscher
common stock at the discretion of the employee. Deferred amounts are matched by
Dain Rauscher at a rate that varies depending on the company's net return on
average equity. The Committee believes that programs such as the Management
Deferred Stock Plan will further align the Executive Officers' long-term
financial and strategic interests with those of Dain Rauscher's stockholders.
Long-Term Incentive Compensation
The last component of Dain Rauscher's Executive Officer compensation program
is long-term incentive compensation. The Committee annually grants options, on a
targeted long-term value basis, to
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<PAGE> 14
acquire shares of Dain Rauscher's common stock. These annual option grants have
a ten-year term, have an exercise price 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 the grant, and generally vest ratably over three years.
Prior to 1999, the size of the annual option grants was based in large part on a
formula tied to each Executive Officer's total cash compensation for the
preceding year. Beginning with the February 1999 grants, the Committee shifted
to a targeted value approach for its option grant guidelines which allows other
factors in addition to individual performance to be considered. The Committee
believes that stock options provide an incentive to achieve Dain Rauscher's
longer-term strategic goals by aligning the financial interests of the Executive
Officers with those of Dain Rauscher's stockholders.
Targeted long-term values are based on competitive guidelines established
with the assistance of an independent third party. The size of the individual
grant to each Executive Officer may vary from the guidelines, however, to take
into consideration the performance of the individual and his or her operating
unit and other factors. The grant guidelines are reviewed periodically by the
Chief Executive Officer and the Committee for appropriateness and
competitiveness.
In addition to regular annual option grants, the Committee has made special
grants from time to time to selected Executive Officers. These special grants,
which are typically in a combination of restricted shares and options, have been
awarded in the past to recognize newly elected members of the Executive
Committee or to increase the stock ownership of an Executive Officer to a level
commensurate with his or her responsibilities. These special grants help build
stock incentives and retention value among key executives.
Determination of 1999 Executive Officer Compensation
The Committee met three times in early 2000 to review and approve annual
bonuses and long-term incentive grants for the Executive Officers and to
determine the annual bonus of the Chief Executive Officer. In preparation for
these meetings, the Committee reviewed the overall profitability, growth and
financial performance of Dain Rauscher and its various business lines, as well
as the established compensation ranges and targets for the Executive Officers.
Chief Executive Officer Compensation
The Committee considered several factors in establishing Mr. Weiser's total
compensation for 1999. First, at the beginning of 1999, the Committee
established a targeted cash compensation figure for Mr. Weiser based on the
competitive compensation levels of other chief executive officers in the
securities industry. The targeted compensation was designed to vary according to
both Dain Rauscher's earnings per share for the year on a fully diluted basis,
and the accomplishment of certain strategic, performance and budgetary
objectives identified in Mr. Weiser's 1999 workplan. After considering all of
these factors, the Committee concluded that a bonus of $2,450,000 accurately
reflected both Dain Rauscher's overall financial performance in 1999, and Mr.
Weiser's achievement of certain strategic objectives identified in his 1999
workplan.
As part of Dain Rauscher's annual long-term incentive compensation package
for Executive Officers, in February 1999 the Committee authorized an annual
grant to Mr. Weiser of options to purchase 35,000 shares of Dain Rauscher common
stock. Subsequent to authorizing this grant, the Committee completed its review
of the significant changes in the securities industry occurring in the past
several years, the expected continuance of severe competitive pressures
affecting Dain Rauscher in the near term, and the leadership that would be
required to implement Dain Rauscher's new five-year strategic plan. On the basis
of these factors, and acknowledging the need to retain and recognize Mr.
Weiser's services, the Committee concluded in April 1999 that it was appropriate
to provide Mr. Weiser with an additional special, one-time grant of options at
an above-market exercise price in lieu of multiple competitive annual option
grants over the next three to five years. The Committee therefore authorized a
grant to Mr. Weiser
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<PAGE> 15
of options to acquire a total of 265,000 shares at an above-market exercise
price of $50.00 per share (representing a premium of 42% over the then-fair
market value of $35.125 per share).
This total consisted of a grant of options under the Dain Rauscher 1996 Stock
Incentive Plan (the "'96 Plan") to purchase 115,000 shares of Dain Rauscher
common stock, and a grant of options to purchase 150,000 shares of common stock
under a special option agreement outside of the '96 Plan. The latter grant was
made subject to the provision that if the closing price of Dain Rauscher common
stock on the New York Stock Exchange were less than $50.00 per share at any time
duringcalendar year 2000, the non-plan grant would be cancelled and Dain
Rauscher would issue a replacement grant under the '96 Plan on the same terms
and conditions as the non-plan grant (including an above-market exercise price
of $50.00 per share). On January 3, 2000, the closing price of Dain Rauscher
common stock was $46.025 per share; accordingly, on January 4, 2000, the
non-plan grant was cancelled in accordance with its terms, and Dain Rauscher
re-granted options to Mr. Weiser to acquire 150,000 shares under the '96 Plan.
These special options vest one-third on each of April 5, 2002, 2003 and 2004.
Section 4999 of the Internal Revenue Code (the "IRC") imposes a special
excise tax on "parachute payments," as defined in Section 280G of the IRC. The
special, one-time grant of non-qualified options discussed above that were
awarded to Mr. Weiser, together with other payments that may be due to Mr.
Weiser in the event of a "change in control" of Dain Rauscher, may cause Mr.
Weiser to be liable for the payment of these special excise taxes under Section
4999. In order to avoid undermining the incentives behind granting Mr. Weiser
these options, in July 1999 Dain Rauscher entered into an agreement intended to
provide Mr. Weiser with the right to receive a special payment to cover any
special excise taxes imposed on him under the IRC as the result of a "change in
control" of Dain Rauscher, as defined in the agreement.
Compensation of Certain Other Executive Officers
In April 1999, the committee also concluded, based in part on the
recommendation of the Chief Executive Officer, that two other Executive
Officers, one of whom was a new member of the Executive Committee, should also
receive special grants of restricted shares of Dain Rauscher common stock, and
options to purchase shares of common stock, as a means to retain their services
in an increasingly competitive industry, and to build their stock ownership and
long-term performance incentives. The restricted shares vest in whole on April
5, 2004, the fifth anniversary of the date of grant. The options were granted at
an exercise price equal to the closing price per share of Dain Rauscher common
stock as reported on the New York Stock Exchange on the day prior to the date of
grant, and vest in full on April 5, 2004, the fifth anniversary of the date of
grant.
Deductibility of Executive Compensation
Section 162(m) of the IRC generally limits Dain Rauscher's ability to deduct,
for corporate income tax purposes, certain compensation in excess of $1 million
per year paid to persons named in the Summary Compensation Table. Through the
Dain Rauscher Annual Cash Bonus Plan for Designated Corporate Officers, which
was approved by stockholders in 1998, Dain Rauscher has endeavored to ensure
that bonuses paid under that plan to the Executive Officers named in the Summary
Compensation Table will continue to meet the deductibility requirements of
Section 162(m). In 1999 the Committee delegated its administrative and oversight
authority regarding the '96 Plan and the Annual Cash Bonus Plan for Designated
Corporate Officers to a Section 162(m) Sub-committee, which is comprised only of
directors from the Committee who qualify as "outside directors" under the IRC.
The one-time option grants in 1999 to Mr. Weiser were approved by this
Sub-committee and were designed to comply with the deductibility requirements of
Section 162(m). Dain Rauscher reserves the flexibility to design effective
compensation plans that meet the executive compensation objectives described
above, which may result in Dain Rauscher's inability to deduct compensation
under Section 162(m).
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<PAGE> 16
Summary
The Committee believes that the compensation plans for Dain Rauscher's
Executive Officers have been designed so as to focus their efforts on the
achievement of Dain Rauscher's business strategy and corporate objectives, and
to align the Executive Officers' interests with those of Dain Rauscher's
stockholders. The Committee will continue to evaluate these programs to ensure
that they do so.
Susan S. Boren, Chairperson
Walter F. Mondale
Robert L. Ryan
Arthur R. Schulze Jr.
Members of the Compensation and Organization Committee
SUMMARY COMPENSATION TABLE
The following table summarizes, for each of the last three fiscal years, the
compensation of the Chief Executive Officer and each of the four other most
highly compensated Executive Officers of Dain Rauscher. The principal position
indicated for each individual represents the position held on December 31, 1999.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
Restricted Securities Underlying All Other
Name & Principal Position Year Salary Bonus (1) Stock (2) Options / SARs (3) Compensation (4)
<S> <C> <C> <C> <C> <C> <C>
Irving Weiser, 1999 $300,000 $2,450,000 -- 300,000 $181,368
Chairman, President & CEO 1998 $250,000 $ 175,000 -- 50,000 $ 34,050
1997 $250,000 $1,200,000 -- 23,000 $194,165
John C. Appel, 1999 $200,000 $1,100,000 -- 12,000 $ 80,118
Vice Chairman & CFO 1998 $200,000 $ 300,000 -- 24,000 $ 52,800
1997 $197,916 $ 675,000 -- 11,100 $115,415
Peter M. Grant, (5) 1999 $173,750 $3,500,000 28,470 27,000 $239,368
Executive Vice President 1998 $98,403 $1,051,597 25 12,000 $ --
Co-President, Dain Rauscher Wessels
Ronald A. Tschetter, 1999 $200,000 $1,200,000 -- 12,000 $ 87,618
Senior Executive Vice President 1998 $175,000 $ 625,000 -- 24,000 $101,550
President, Private Client Group 1997 $150,000 $ 900,000 -- 6,300 $149,165
Kenneth J. Wessels, (5) 1999 $300,000 $1,200,000 -- 35,000 $103,243
Senior Executive Vice President 1998 $225,000 $ 650,000 -- 73,669 $102,300
Co-President, Dain Rauscher Wessels
</TABLE>
(1) For 1999, 1998 and 1997, respectively, this number includes the following
amounts deferred under the Management Deferred Stock Plan (formerly the
Executive Deferred Compensation Plan): Mr. Weiser, $672,000, $52,500 and
$360,000; Mr. Appel, $267,500, $90,000 and $202,500; Mr. Grant, $987,500 (1999
only); Mr. Tschetter, $297,500, $170,000 and $270,000; and Mr. Wessels, $360,000
and $195,000 (1999 and 1998 only). A summary of the terms of the Management
Deferred Compensation Plan is provided on page 14.
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<PAGE> 17
(2) Restricted shares granted in 1999 which vest 100% on April 5, 2004, the
fifth anniversary of the date of grant. Mr. Grant also received 25 shares of
vested Dain Rauscher common stock in 1998 for participating on the company's
strategic planning task force.
(3) For 1999, this number includes option grants previously disclosed in Dain
Rauscher's 1999 Proxy Statement as follows: Mr. Weiser, 35,000; Mr. Appel,
12,000; Mr. Tschetter, 12,000; and Mr. Wessels, 35,000. Consistent with the
shift in Dain Rauscher's compensation program for Executive Officers that
occurred in February 1999 (discussed on page 10), these numbers reflect all
options granted during 1999 but do not include any grants to these Executive
Officers made after December 31, 1999. All options are ten-year options having
an exercise price 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, except for: (a) a special grant of 265,000 options to Mr. Weiser which
were granted at a premium price (see page 10), and (b) options that had a
five-year term to purchase 49,669 shares granted to Mr. Wessels in 1998 in
connection with the purchase of his ownership interest in Wessels, Arnold &
Henderson, LLC ("WAH"). Options granted in 1998 and prior years vest over four
years. Options granted in 1999 vest over three years, except for Mr. Weiser's
special grant of 265,000 shares which vests over five years, and a grant of
20,000 shares to Mr. Grant which vests 100% on the fifth anniversary of the date
of grant.
(4) This number includes for each of 1999, 1998 and 1997, respectively: (a)
Dain Rauscher's contributions under the Dain Rauscher Retirement Plan in the
following amounts: Mr. Weiser, $13,243, $7,800 and $14,165; Mr. Appel, $13,243,
$7,800 and $14,165; Mr. Grant, $6,803 (1999 only); Mr. Tschetter, $13,243,
$7,800 and $14,165; and Mr. Wessels, $13,243 and $4,800 (1999 and 1998 only);
and (b) Dain Rauscher's matching contributions in the following amounts under
the Management Deferred Stock Plan on bonus amounts earned by Executive
Officers, but deferred: Mr. Weiser, $168,125, $26,250 and $180,000; Mr. Appel,
$66,875, $45,000 and $101,250; Mr. Grant, $246,875 (1999 only); Mr. Tschetter,
$74,375, $85,000 and $135,000; and Mr. Wessels, $90,000 and $97,500 (1999 and
1998 only). Summaries of the terms of the Retirement Plan and Management
Deferred Stock Plan are provided on page 14.
(5) Mr. Grant became a member of the Dain Rauscher Executive Committee in
April 1999, upon becoming Co-President, with Mr. Wessels, of Dain Rauscher
Wessels. Mr. Wessels joined Dain Rauscher upon its acquisition of WAH in March
1998. Mr. Wessels' option totals include a grant in February 1999 of options to
purchase 10,000 shares of common stock, based in part on Mr. Wessels' 1998
performance; a special one-time grant of options to purchase 25,000 shares of
common stock made in February 1999; a grant in March 1998 of options to purchase
24,000 shares of common stock pursuant to Mr. Wessels' employment agreement; and
a grant in March 1998 of options to purchase 49,669 shares of common stock made
in connection with the acquisition of Mr. Wessels' ownership interest in WAH. A
summary of the terms of Mr. Wessels' employment agreements with Dain Rauscher
begins on page 15.
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<PAGE> 18
Options and Stock Appreciation Rights
The following tables summarize option grants made to the Executive Officers
named in the Summary Compensation Table during the year ended December 31, 1999;
option exercises, if any, made by those persons in that year; and the potential
realizable value of the options owned by these officers as of December 31, 1999.
Consistent with the changes made in February 1999 to Dain Rauscher's
compensation program for Executive Officers, which is described on pages 9 and
10, options granted to these Executive Officers after December 31, 1999, are not
reflected. No stock appreciation rights ("SARs") have been granted to any of the
named Executive Officers.
Option/SAR Grants Awarded During the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Individual Grants
% of Total Potential Realizable Value At Assumed
Number of Options / SARs Exercise Annual Rates of Stock Price
Securities Underlying Granted to Employees or Base Price Expiration Appreciation for Option Term (4)
Name Options / SARs Granted in 1999 (per share)(3) Date 5%($47.95) 10%($76.36)
<S> <C> <C> <C> <C> <C> <C>
Irving Weiser 35,000(1) 4.3 % $29.440 2/3/2009 $ 648,013 $1,642,192
115,000(2) 14.2 % $50.000 4/5/2009 $ 829,716 $4,727,098
150,000(2) 18.5 % $50.000 4/5/2009 $1,082,239 $6,165,781
John C. Appel 12,000(1) 1.5 % $29.440 2/3/2009 $ 222,176 $ 563,037
Peter M. Grant 7,000(1) 0.9 % $29.440 2/3/2009 $ 129,603 $ 328,438
20,000(2) 2.5 % $35.125 4/5/2009 $ 441,798 $1,119,604
Ronald A. Tschetter 12,000(1) 1.5 % $29.440 2/3/2009 $ 222,176 $ 563,037
Kenneth J. Wessels 35,000(1) 4.3 % $29.440 2/3/2009 $ 648,013 $1,642,192
</TABLE>
(1) Options granted on February 3, 1999, and, other than in Mr. Grant's case,
disclosed in Dain Rauscher's 1999 Proxy Statement. These options become
exercisable as follows: one-third on each of February 3, 2000, 2001 and 2002.
(2) Options granted on April 5, 1999, which, for Mr. Weiser, become
exercisable as follows: one-third on each of April 5, 2002, 2003 and 2004. Mr.
Grant's options vest 100% on April 5, 2004.
(3) Other than the grants of 115,000 and 150,000 shares made to Mr. Weiser in
April 1999, the exercise price is equal to the closing price per share of Dain
Rauscher common stock on the New York Stock Exchange on the day prior to the
date of grant. Mr. Weiser's options were granted at an exercise price of $50.00,
which reflects a premium of 42% over the then-market price of $35.125.
(4) These numbers represent the potential gains based on annual compound
stock price appreciation of five percent and ten percent from the date of the
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 those rates of appreciation for the grants made on February 3, 1999. The
price for one share of stock on the date of expiration for the option grants
made to Mr. Weiser and Mr. Grant on April 5, 1999, would be $57.21 and $91.11,
assuming a five percent and ten percent annual rate of appreciation,
respectively. The amounts given represent assumed rates of appreciation only.
The actual gains, if any, on option exercises will depend on the future
performance of Dain Rauscher common stock.
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<PAGE> 19
Aggregate Option/SAR Exercises During Year Ended December 31, 1999 and
Value of Options/SARs Held at December 31, 1999
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Shares Options / SARs Held at In-the-Money Options /SARs at
Acquired Value December 31, 1999 December 31, 1999
Name on Exercise Realized (1) (Exercisable/Unexercisable) (Exercisable/Unexercisable) (1) (2)
<S> <C> <C> <C> <C>
Irving Weiser 200 $ 8,366 226,100 /380,550 $ 6,833,544 / $ 959,219
John C. Appel 20,000 $744,375 77,070 /51,830 $ 2,119,904 / $ 405,689
Peter M. Grant 0 $ 0 0 /39,000 $ 0 / $ 346,920
Ronald A. Tschetter 3,300 $116,876 50,810 /45,390 $ 1,484,096 / $ 328,564
Kenneth J. Wessels 0 $ 0 9,993 /98,676 $ 0 / $ 597,100
</TABLE>
(1) "Value" is the difference between the per-share option exercise price and
the closing price of Dain Rauscher common stock on the New York Stock Exchange
on the date of exercise or December 31, 1999.
(2) "In-the-money" means the market price of the common stock is greater than
the exercise price of the option on the date specified.
DESCRIPTION OF EXECUTIVE OFFICER COMPENSATION PLANS
Dain Rauscher has two compensation plans in which its Executive Officers
participate: the Management Deferred Stock Plan (formerly known as the Executive
Deferred Compensation Plan), and the Dain Rauscher Retirement Plan.
Management Deferred Stock Plan
The Management Deferred Stock Plan, in which the Executive Officers and the
next level of the company's senior management participate, requires each
Executive Officer (or other participating officer) to invest a portion of his or
her bonus compensation in Dain Rauscher's common stock. For 1999, the mandatory
deferral varied from 10 percent to 20 percent of bonus compensation earned for
the year, depending upon the level of bonus compensation earned. Each officer
was also entitled to voluntarily defer up to an additional 10 percent of his or
her total bonus compensation earned for the same period. All deferred amounts,
both mandatory and voluntary, are credited to accounts which are deemed to have
been invested in shares of Dain Rauscher's common stock. Shares of common stock
are credited each year to the accounts of the participating officers following
payment of bonuses for the preceding year, and each participating officer
receives a matching contribution from Dain Rauscher, based on the company's net
return on average equity. The match varies with return on average equity from a
minimum of 15 percent to a maximum of 50 percent of the amount deferred. Subject
to acceleration in certain circumstances, participating officers do not become
immediately vested in the mandatory deferred amounts; instead, one-third becomes
vested upon crediting of the mandatory deferral to the officer's account; a
further one-third becomes vested on the January 1st immediately following the
crediting of that deferral; and the final one-third becomes vested on the second
January 1st following the crediting of the deferral. Participating officers are
always 100 percent vested in the voluntary deferrals they make. Each
participating officer becomes vested in the matching contributions made by Dain
Rauscher on the fourth January 1st following the date that the match was
credited to the officer's account. Distributions of
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<PAGE> 20
account balances credited to participants under the plan generally are paid over
two years in shares of Dain Rauscher common stock after the participant retires.
Retirement Plan
All Dain Rauscher employees may participate in the Retirement Plan after
satisfaction of certain basic eligibility criteria. Under this plan, Dain
Rauscher 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,
during 1999, participating employees received a company-matching contribution 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
the employees to their accounts under the Plan up to $3,000 annually.
Participants generally vest in company contributions after five years of
employment with Dain Rauscher. 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 (such as separation from
service, or the employee's death or disability).
COMPENSATION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
Mr. Kenneth J. Wessels. Dain Rauscher entered into a written employment
agreement (the "'98 Agreement") with Kenneth J. Wessels upon the acquisition of
Wessels, Arnold & Henderson, LLC ("WAH") in March 1998. The initial term of Mr.
Wessels' employment agreement ran until December 31, 1999, and governed his
compensation for 1999. The `98 Agreement was amended in February 1999 and
terminated in December 1999. A new agreement (the "'99 Agreement") was entered
into as described on the next page.
`98 Agreement. The '98 Agreement had the following basic provisions.
Cash Compensation. The '98 Agreement provided that Mr. Wessels would receive
an annual base salary of $300,000, annualized guaranteed total cash compensation
(including base salary) of $1.5 million and an additional bonus based on a
formula tied to the performance of the Equity Capital Markets division which Mr.
Wessels headed. In February 1999, Mr. Wessels agreed to an amendment of these
terms which reduced his guaranteed total cash compensation for 1998 to $875,000.
This amendment did not affect any future year's compensation. In general, the
performance bonus formula was based on the compound annual growth rate and fully
allocated profit margin of the Equity Capital Markets division, multiplied by
specific targets for 1998 and 1999. No bonus was paid under the formula for
either year.
Options to Purchase Dain Rauscher Common Stock. Under the terms of the '98
Agreement, Dain Rauscher granted Mr. Wessels ten-year non-qualified stock
options to purchase 24,000 shares of Dain Rauscher common stock at a price equal
to $58.875 per share. These options vest 20 percent on March 31, 2000, an
additional 30 percent on March 31, 2001, and the final 50 percent on March 31,
2002. Dain Rauscher also granted Mr. Wessels five-year non-qualified stock
options to purchase 49,669 shares of common stock at a price of $58.875 per
share in connection with the acquisition of Mr. Wessels' ownership interest in
WAH. These options vested 20 percent on March 31, 1999, the next 30 percent
vests on March 31, 2000, and the remaining 50 percent on March 31, 2001. For
both grants, the vesting of the options is subject to acceleration upon any
"change in control" of Dain Rauscher (as defined in the
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<PAGE> 21
agreement), if Dain Rauscher terminates Mr. Wessels' employment without cause
(as defined in the agreement), or if Mr. Wessels voluntarily terminates his
employment for good reason (as defined in the agreement).
Death, Disability, Termination or Resignation. If Mr. Wessels had died or
become permanently disabled during the term of his contract, the '98 Agreement
provided that he (or his estate) would 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 Dain Rauscher's benefit
plans. If Mr. Wessels' employment had been terminated for cause (as defined in
the agreement) during the term of the agreement, or he had voluntarily
terminated his employment without good reason (as defined in the agreement), he
would have been paid only his accrued but unpaid base salary and any vested
benefits. Alternatively, if Dain Rauscher had terminated Mr. Wessels without
cause (as defined in the agreement), or Mr. Wessels had voluntarily terminated
his employment for good reason (as defined in the agreement), Dain Rauscher
would have paid him his guaranteed minimum total cash compensation for each year
through December 31, 2000.
Non-Competition and Non-Solicitation. The '98 Agreement also prohibited Mr.
Wessels from competing with Dain Rauscher in the equity capital markets
business, and from soliciting any Dain Rauscher employee, or any customer of the
Equity Capital Markets division of Dain Rauscher, for a period of two years from
the date the agreement was terminated.
`99 Agreement. Mr. Wessels and Dain Rauscher entered into a new employment
agreement in December 1999. The '99 Agreement, which will be filed with the
Securities and Exchange Commission, has the following basic terms.
Basic Terms. Under the '99 Agreement, Mr. Wessels became Chairman of the
Equity Capital Markets division, but will no longer be on the Dain Rauscher
Executive Committee. Both Mr. Wessels and Dain Rauscher have the right to
terminate the '99 Agreement on thirty days' notice to the other party. Mr.
Wessels will continue to be a member of Dain Rauscher's Board of Directors, and
agreed to stand for reelection for an additional one-year term at the 2000
Annual Meeting if nominated by the Board.
Compensation. Beginning on January 1, 2000, Mr. Wessels will receive an
annualized salary of $150,000 per year. In addition, as long as Mr. Wessels is
not terminated for "cause," as defined in the agreement, and is employed through
at least March 31, 2000, he will be eligible for an incentive bonus. The bonus
will be equal to a pro rata portion of the "Annualized Calculation," as defined
in the `99 Agreement, less a ten percentage point reduction, if Mr. Wessels'
employment terminates between March 31 and June 30, 2000. The amount of the
"Annualized Calculation" will range from $300,000 to $1 million, with a target
of $600,000, depending on whether the Equity Capital Markets division meets or
exceeds specific net revenue benchmarks. Also beginning January 1, 2000, Mr.
Wessels will no longer be eligible to receive stock options or to participate in
deferred compensation programs, but will remain eligible for the Retirement Plan
and other benefit programs. On February 10, 2000, Dain Rauscher also entered
into a supplemental agreement with Mr. Wessels providing for the payment of an
additional $500,000 for consulting and other services to be rendered by him.
Non-Competition and Non-Solicitation. The non-competition and
non-solicitation provisions of the '98 Agreement with Dain Rauscher will
continue in force. As a result, Mr. Wessels is prohibited from
18
<PAGE> 22
competing with Dain Rauscher in the equity capital markets business, and is
prohibited from soliciting any Dain Rauscher employee, or any customer of the
Equity Capital Markets division of Dain Rauscher, for a period of two years from
the date the '99 Agreement is terminated.
Mr. Irving Weiser. Dain Rauscher and Mr. Weiser entered into a "Section 280G
Change in Control Gross-Up Agreement" (the "Section 280G Agreement") on July 10,
1999. The Section 280G Agreement will be filed with the Securities and Exchange
Commission. Under the terms of this contract, Dain Rauscher will provide Mr.
Weiser with a payment necessary to cover any special excise taxes imposed on Mr.
Weiser under Sections 280G and 4999 of the Internal Revenue Code as a result of
a "change in control" of Dain Rauscher, as defined in the Section 280G
Agreement.
CERTAIN TRANSACTIONS
As a broker-dealer, DRI occasionally extends credit under Federal Reserve
Regulation T to Dain Rauscher's directors, Executive Officers, and members of
their immediate families. These loans, which may, on occasion, exceed $60,000,
are made in the ordinary course of business and on substantially the same terms,
including interest rates and collateral, as those governing the extension of
credit to other persons, and do not involve more than normal risk of
collectability, or have other unfavorable features.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total 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 Regional Index") over the same period
(assuming the investment of $100 in each on December 31, 1994, and the
reinvestment of all dividends).
<TABLE>
<CAPTION>
S&P 500 FSA Regional Index DRC
<S> <C> <C>
100 100 100
138 154 172
169 221 245
225 457 487
290 384 212
351 402 341
</TABLE>
(1) The total return calculations on the FSA Regional Index were performed by
Financial Service Analytics, Inc. The FSA Regional Index is composed of seven
publicly held regional securities firms, including Dain Rauscher, and has been
weighted based upon their market capitalizations.
(2) The total return calculations on the S&P 500 Index were performed by
Standard & Poor's Compustat Services, Inc.
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<PAGE> 23
Proposal 2 -- Approval of the Employee Stock Purchase Plan
Dain Rauscher seeks stockholder approval of the 2000 Employee Stock Purchase
Plan (the "Purchase Plan"). The Purchase Plan was adopted by Dain Rauscher's
Board of Directors on October 27, 1999, subject to stockholder approval. The
Purchase Plan provides for the purchase of shares of Dain Rauscher common stock
by employees at the end of certain "purchase periods," as described below.
The purpose of the Purchase Plan is to give Dain Rauscher employees an
opportunity to share in the ownership of the company by providing them with a
convenient means for regular and systematic purchases of Dain Rauscher common
stock, and, consequently, to develop a stronger incentive to work for Dain
Rauscher's continued success. The Purchase Plan permits participating employees
to purchase common stock on the last business day of any purchase period (a
"Purchase Period") at a price equal to 85% of the fair market value of the
common stock on that date. Subject to approval of the Plan by stockholders, the
first Purchase Period will begin on July 3, 2000, and end on the last business
day of September 2000. Thereafter, a Purchase Period will begin on the first
business day in January, April, July and October of each year, and end on the
last business day in March, June, September and December of each year. A current
Purchase Period will also end upon the approval by Dain Rauscher's stockholders
or Board of Directors of a consolidation or merger, any transfer of
substantially all of the company's assets, any plan of liquidation or
dissolution, or similar occurrence.
Any person who is a full-time or part-time Dain Rauscher employee as of the
first day of a Purchase Period, including a director who is also an employee, is
eligible to participate in the Purchase Plan. As of December 31, 1999, there
were approximately 3,921 persons who were eligible as a class to participate in
the Purchase Plan. Under Internal Revenue Code ("IRC") requirements, no
participant may purchase (a) more than 500 shares under the Purchase Plan for a
given Purchase Period, or (b) shares having a fair market value (determined at
the beginning of each Purchase Period) exceeding $25,000 under the Purchase Plan
and all other employee stock purchase plans for any calendar year.
Initially, participating employees may direct Dain Rauscher to make monthly
payroll deductions of at least $10 but no more than $250 from their current,
regular compensation. This amount may be increased from time to time by the
committee that will administer the Plan. Participating employees may withdraw
from the Purchase Plan at any time; however, no employee may enroll again after
a withdrawal until commencement of the next Purchase Period. Upon a
participant's termination of employment with Dain Rauscher for any reason,
participation in the Purchase Plan will cease, and amounts previously credited
to the participant's stock purchase account will be used to purchase shares at
the end of the Purchase Period, unless the participant elects to have the
account balance paid in cash. In the event of termination due to death, the
participant's estate may elect to have the balance of the participant's stock
purchase account paid in cash to the participant's estate or a designated
beneficiary.
All shares purchased under the Purchase Plan will initially be held by the
outside administrators of the plan. Any cash dividends paid by Dain Rauscher on
the common stock will be automatically reinvested in additional shares of stock.
Shares purchased by a Dain Rauscher employee under the Purchase Plan will be
delivered upon request at any time after the first anniversary of the beginning
of the Purchase Period in which the shares were acquired.
A committee designated by the Board of Directors will administer the Purchase
Plan. The committee will have full authority to interpret the Purchase Plan and
establish rules and regulations for the administration of the Purchase Plan. The
Board of Directors may exercise the committee's powers and duties under the
Purchase Plan. Unless earlier discontinued or terminated by the Board of
Directors, the Purchase Plan will automatically terminate when all of the common
stock available for purchase under the Purchase Plan has been sold. The Purchase
Plan permits the Board of Directors to amend or discontinue the Purchase Plan at
any time, except that prior stockholder approval will be required for any
20
<PAGE> 24
amendment to the Purchase Plan that requires stockholder approval under the
rules or regulations of the Securities and Exchange Commission, the New York
Stock Exchange, or any other securities exchange that are applicable to Dain
Rauscher.
The Purchase Plan provides for the issuance of up to 500,000 shares of Dain
Rauscher common stock, subject to adjustment in the event of a recapitalization,
the issuance of one or more stock dividends, or other similar changes to Dain
Rauscher's corporate structure or stock. The common stock to be sold under the
Purchase Plan may be authorized but unissued shares, shares acquired in the open
market, shares held in treasury, or shares acquired from other sources.
The Purchase Plan, and the right of participants to make purchases under the
plan, is intended to qualify under the provisions of Sections 421 and 423 of the
IRC. As a result, payroll deductions under the Purchase Plan will be taxable to
a participant as compensation for the year in which these amounts would
otherwise have been paid to the participant. Dain Rauscher ordinarily will be
allowed a tax deduction at the time and in the amount of the ordinary income
recognized by the participant from the grant of shares.
The Board of Directors unanimously recommends a vote "FOR" the proposal to
approve the 2000 Employee Stock Purchase Plan. The affirmative vote of a
majority of the shares of Dain Rauscher common stock present and entitled to
vote at the 2000 Annual Meeting is necessary to approve Proposal 2. Proxies will
be voted in favor of Proposal 2 unless otherwise specified.
Proposal 3 -- Ratification of Appointment of Auditors
The Board of Directors, based upon the recommendation of its Audit Committee,
has appointed KPMG LLP as independent auditors to audit the consolidated
financial statements of Dain Rauscher and its subsidiaries for the current
fiscal year ending December 31, 2000, and to perform other appropriate
accounting services, and recommends that the stockholders of Dain Rauscher
ratify that appointment. KPMG LLP has audited Dain Rauscher's financial
statements since 1989. A representative of KPMG LLP will be present at the 2000
Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions from
stockholders.
The Board of Directors unanimously recommends a vote "FOR" the proposal to
ratify the appointment of KPMG LLP as Dain Rauscher's auditors. The affirmative
vote of a majority of the shares of Dain Rauscher common stock present and
entitled to vote at the 2000 Annual Meeting is necessary to approve Proposal 3.
Proxies will be voted in favor of Proposal 3 unless otherwise specified.
21
<PAGE> 25
General
OTHER BUSINESS
The Board of Directors does not know of any other business to come before the
2000 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 in accordance with their best judgment.
HOW DAIN RAUSCHER SOLICITS PROXIES
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. Dain Rauscher may
also retain, at its expense, an independent proxy solicitation firm to assist in
the solicitation of proxies. The cost of retaining a proxy solicitation firm in
this regard would likely 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. The entire cost of
soliciting proxies for the 2000 Annual Meeting will be borne by Dain Rauscher.
STOCKHOLDER PROPOSALS FOR NEXT YEAR
In order either to be included in the proxy statement for presentation at the
next Annual Meeting of Dain Rauscher's stockholders or otherwise not be
considered "untimely," any stockholder proposal must be received by the
Secretary 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 28, 2000. If no notice with respect to the proposal is
received by Dain Rauscher's Secretary by that date, the company intends to use
its discretionary authority to vote on any such matter that may come before the
2001 Annual Meeting.
QUESTIONS?
If you have questions or need more information about the Annual Meeting,
write to:
Carla J. Smith, Secretary
Dain Rauscher Corporation
Dain Rauscher Plaza
60 South Sixth Street
P.O. Box 1160
Minneapolis, Minnesota 55402-1160
or call Dain Rauscher at 612-371-2711.
Upon written request sent to the address above, Dain Rauscher will furnish,
without charge, to persons solicited by this proxy statement, a copy of its 1999
Annual Report on Form 10-K (excluding exhibits).
22
<PAGE> 26
Date
______________________________________________
Signature(s) in Box
Please sign exactly as your name(s) appear on proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc. should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
DAIN RAUSCHER CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
Thursday, April 27, 2000
3:30 p.m. (CT)
First Floor Auditorium
Lutheran Brotherhood Building
625 Fourth Avenue South
Minneapolis, Minnesota
DAIN RAUSCHER
60 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402-4422
proxy
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on April 27, 2000.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify below.
If no choice is specified, the proxy will be voted "FOR" Items 1, 2, and 3.
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 April 27, 2000, 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.
See reverse for voting instructions
<PAGE> 27
Company #
Control #
There are three ways to vote your Proxy:
Your telephone or Internet vote authorizes the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
Vote by telephone - toll free - 1-800-240-6326 - Quick *** Easy *** Immediate
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number located above.
- - Follow the simple instructions as prompted.
Vote by Internet - http://www.eproxy.com/drc/ - Quick *** Easy *** Immediate
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number located above to obtain your records and create an
electronic ballot.
Vote by mail
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it
to
DAIN RAUSCHER, c/o Shareholder Services(TM), P.O. Box 64873, St. Paul,
MN 55164-0873.
Electronic votes are accepted until Wednesday, April 26, at noon (CT). Proxy
cards are accepted until the Annual Meeting starts, Thursday, April 27, 3:30
p.m. CT.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
[ ]Please detach here [ ]
The Board of Directors Recommends a Vote FOR Items 1, 2, and 3.
<TABLE>
<S> <C> <C> <C>
1. Election of directors: 01 John C. Appel 05 Walter F. Mondale 08 Arthur R. Schulze, Jr. [ ]Vote
FOR [ ] Vote WITHHELD
02 J. Evans Attwell 06 C. A. Rundell, Jr. 09 Irving Weiser all
nominees from all nominees
03 Susan S. Boren 07 Robert L. Ryan 10 Kenneth J. Wessels (except as marked)
04 F. Gregory Fitz-Gerald
</TABLE>
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
2. Approval of the Employee Stock Purchase Plan [ ] For [ ] Against [ ] Abstain
3. Ratification of Appointment of Auditors [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM 1 AND EACH OTHER
PROPOSAL.
Address change? Mark box. [ ]
Indicate changes below:
