<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
JEFFERIES GROUP, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
JEFFERIES GROUP, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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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:
----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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
JEFFERIES GROUP, INC.
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 5, 1994
------------------------
To the Stockholders of Jefferies Group, Inc.:
The Annual Meeting of Stockholders of Jefferies Group, Inc. will be held at
the offices of the Company, located at 11100 Santa Monica Boulevard, Second
Floor, Los Angeles, California 90025, on Thursday, May 5, 1994, at 1:30 p.m.,
local time, to consider and act upon:
1. Election of seven Directors to serve until the next Annual
Meeting and until their successors have been duly elected and
qualified.
2. Adoption of the Pay-For-Performance Incentive Plan.
3. Adoption of the Non-Employee Directors' Stock Option Plan.
4. Any other business which may properly come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on March 25, 1994, are
entitled to notice of and to vote at the meeting or any adjournment thereof. A
list of such stockholders will be open to examination by any stockholder at the
Annual Meeting and for a period of ten days prior to the meeting during ordinary
business hours at the offices of the Company located at 11100 Santa Monica
Boulevard, Tenth Floor, Los Angeles, California 90025.
You are cordially invited to attend the Annual Meeting. If you do not
expect to attend, we urge you to return your proxy promptly in the enclosed
envelope. The return of the proxy does not affect your right to vote in person
should you decide to attend the meeting.
For the Board of Directors,
(SIG)
Jerry M. Gluck, Secretary
April 4, 1994
<PAGE> 3
JEFFERIES GROUP, INC.
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
April 4, 1994
PROXY STATEMENT
The proxy of each stockholder of Jefferies Group, Inc. (the "Company") is
being solicited by the Board of Directors of the Company for use at the Annual
Meeting of Stockholders to be held at the offices of the Company, located at
11100 Santa Monica Boulevard, Second Floor, Los Angeles, California 90025, on
Thursday, May 5, 1994, at 1:30 p.m., local time, and at any adjournment thereof.
All stockholders of record at the close of business on March 25, 1994, are
entitled to notice of and to vote at the meeting. The notice of meeting, Proxy
Statement, and form of proxy are being mailed to stockholders on or about April
4, 1994.
The enclosed form of proxy is for use by the Board of Directors at the
meeting and any adjournment thereof. Any stockholder who signs and returns the
proxy may revoke it at any time before it has been voted by (i) delivering
written notice of its revocation to the Secretary of the Company, (ii)
delivering to the Secretary of the Company a duly executed proxy bearing a later
date, or (iii) attending the meeting and voting in person.
In the absence of contrary direction, all shares represented by valid
proxies received pursuant to this solicitation will be voted (i) for the
election of the seven nominees for Director whose names are listed herein, (ii)
for the adoption of the Pay-For-Performance Incentive Plan, (iii) for the
adoption of the Non-Employee Directors' Stock Option Plan, and (iv) as to other
matters which may properly come before the meeting, in accordance with the best
judgment of the proxy holders named in the accompanying proxy.
Each nominee has consented to being a nominee and, if elected, intends to
serve as a Director. In the event that any nominee shall be unable to serve as a
Director (which is not now anticipated), proxies will be voted for substitute
nominees recommended by the Board of Directors of the Company.
All costs of solicitation of proxies will be borne by the Company. Although
there are no formal agreements to do so, the Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials and annual reports to the
beneficial owners of the Company's Common Stock. In addition to solicitation by
mail, proxies may be solicited in person, or by telephone, telegraph or
facsimile transmission, by Directors and Officers of the Company, who will not
receive special compensation for such solicitations.
The outstanding voting securities of the Company consisted of 5,745,043
shares of Common Stock, par value of $.01 per share, on March 25, 1994, which is
the record date for determining stockholders entitled to notice of and to vote
at the meeting. Each share is entitled to one non-cumulative vote for each
Director to be elected and one such vote on each separate matter of business
properly brought before the meeting.
The election of Directors will be determined by a plurality of the votes of
the shares present in person or represented by proxy and entitled to vote at the
meeting, while approval of other items at the meeting will require the
affirmative vote of holders of a majority of the shares present in person or
represented by proxy and entitled to vote on such items at the meeting.
Accordingly, in the case of shares that are present or represented at the
meeting for quorum purposes, not voting such shares for a particular nominee for
Director, including by withholding authority on the proxy, will not operate to
prevent the election of such nominee if he otherwise receives affirmative votes;
an abstention on any other item will operate to prevent approval of the item to
the same extent as a vote against approval of such item; and a broker "non-vote"
on any other item (which results when a broker holding shares for a beneficial
owner has not received timely voting instructions on certain matters from such
beneficial owner) will have no effect on the outcome of the vote on such item.
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The votes of all stockholders will be held in confidence from the Company,
its Directors, Officers and employees except (i) as necessary to meet applicable
legal requirements and to assert or defend claims for or against the Company;
(ii) in case of a contested proxy solicitation; (iii) in the event that a
stockholder makes a written comment on the proxy card or otherwise communicates
his/her vote to management; or (iv) to allow the independent inspector of
election to certify the results of the vote. The Company has retained First
Chicago Trust Company of New York, its transfer agent, as an independent
inspector of election to receive and tabulate the proxies, to certify the
results, and to perform any other acts required by the Delaware General
Corporation Law.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock (i) as of February 28, 1994, by each
Director, the four most highly compensated Executive Officers, and all Directors
and Executive Officers as a group, and (ii) as of December 31, 1993 (unless
another date is set forth in the footnote), by a former Executive Officer, and
for each person, other than Mr. Baxter (who is listed under Directors), known by
the Company to own beneficially more than 5% of such outstanding Common Stock.
Unless otherwise indicated in the footnote, the information set forth below
regarding the beneficial owners of more than 5% of the Company's Common Stock is
based upon information contained in Schedules 13D and 13G filed with the
Securities and Exchange Commission ("SEC") and furnished to the Company by such
owners:
<TABLE>
<CAPTION>
NUMBER OF
DIRECTORS SHARES(1)(2)(3)(4)(5) PERCENT
-------------------------------------------------- ------------------------ -------
<S> <C> <C>
Frank E. Baxter................................... 432,795(6)(7) 7.48%
Richard G. Dooley................................. 9,000 0.16
Tracy G. Herrick.................................. 8,262 0.14
Michael L. Klowden................................ 6,000 0.11
Frank J. Macchiarola.............................. 8,000 0.14
Barry M. Taylor................................... 185,748 3.24
Mark A. Wolfson................................... 7,000 0.12
OTHER NAMED EXECUTIVE OFFICERS
Louis V. Bellucci, Sr............................. 96,936 1.68
Raymond L. Killian, Jr............................ 139,847(8) 2.43
Jeremiah P. O'Grady............................... 104,844 1.83
Marc H. Rapaport.................................. 26,507 0.47
David A. Sydorick................................. 42,652 0.75
All Directors and current Executive Officers
as a Group (16 persons)......................... 1,265,548 22.20
</TABLE>
<TABLE>
<CAPTION>
5% STOCKHOLDERS NUMBER OF SHARES(1) PERCENT
-------------------------------------------------- ------------------------ -------
<S> <C> <C>
Jefferies Group, Inc.
Employee Stock Ownership Plan................... 722,508(6)(7) 12.67%
Tweedy, Browne Company L.P. ...................... 662,159(9) 10.53
Ronald R. Mostero................................. 374,104(6)(10) 6.56
</TABLE>
- ---------------
(1) Unless otherwise indicated in a footnote and subject to applicable
community property and similar statutes, each person listed as the
beneficial owner of the shares possesses sole voting and dispositive power
with respect to such shares.
(2) Includes shares subject to options exercisable within sixty days of
February 28, 1994, by the following: Mr. Baxter: 81,250 shares; Mr. Dooley:
5,000 shares; Mr. Macchiarola: 5,000 shares; Mr. Taylor: 34,500 shares; Mr.
Wolfson: 5,000 shares; Mr. Bellucci: 65,000 shares; Mr. Killian: 41,094
shares;
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<PAGE> 5
Mr. O'Grady: 15,000 shares; Mr. Sydorick: 7,500 shares; and all Directors
and Executive Officers as a group: 381,648 shares.
(3) Includes shares allocated to the accounts of the following persons under
the Jefferies Group, Inc. Capital Accumulation Plan for Key Employees (the
"CAP"): Mr. Baxter: 4,417 shares; Mr. Taylor: 1,300 shares; Mr. Bellucci:
3,523 shares; Mr. Killian: 2,845 shares; Mr. Sydorick: 7,574 shares; Mr.
O'Grady: 2,828 shares; Mr. Rapaport: 3,429 shares; and all Directors and
Executive Officers as a group: 32,546 shares. Participants in the CAP have
no voting power and they are subject to certain restrictions on
disposition.
(4) Includes shares held by the Jefferies Group, Inc. Employees' Profit Sharing
Plan allocated to the accounts of the following persons as of November 30,
1993: Mr. Baxter: 34,343 shares; Mr. Taylor: 207 shares; Mr. Bellucci: 207
shares; Mr. Killian: 7,403 shares; Mr. O'Grady: 7 shares; Mr. Rapaport: -0-
shares; Mr. Sydorick: -0-shares; and all Directors and Executive Officers
as a group: 42,729 shares.
(5) Includes shares held pursuant to the Jefferies Group, Inc. Employee Stock
Ownership Plan (the "ESOP") allocated to the accounts of the following
persons as of November 30, 1993: Mr. Baxter: 8,666 shares; Mr. Taylor:
6,343 shares; Mr. Bellucci: 8,666 shares; Mr. Killian: 8,666 shares; Mr.
O'Grady: 8,666 shares; Mr. Rapaport: 2,579 shares; Mr. Sydorick: 2,579
shares; and all Directors and Executive Officers as a group: 67,815 shares.
These individuals have sole voting power and may be deemed to share
dispositive power over shares held by the ESOP. (See also Footnote (7)
below.)
(6) The business address of the person listed is 11100 Santa Monica Boulevard,
Tenth Floor, Los Angeles, California 90025.
(7) The terms of the ESOP provide for the voting rights associated with the
shares held by the ESOP to be passed through and exercised exclusively by
the participants in the ESOP to the extent that such securities are
allocated to a participant's account. Any shares held in the suspense
account maintained by the Trustee of the ESOP (First Interstate Bank of
California) prior to the allocation to the accounts of ESOP participants
are voted by the Trustee at the direction of the Plan Administrator. As of
November 30, 1992, all shares were allocated to the accounts of ESOP
participants. Those shares allocated to the accounts of the Directors and
Executive Officers are discussed in Footnote (5) above. The ESOP and the
Trustee may be deemed to have shared dispositive power over the shares held
by the ESOP. The Board of Directors of the Company appoints the members of
the Committee which serves as the Plan Administrator of the ESOP. Messrs.
Frank E. Baxter, a Director of the Company, Alan D. Browning, an Executive
Vice President and Chief Financial Officer of the Company, and Melvin W.
Locke, Jr., Director of Human Resources of the Company, presently serve on
the Committee. These individuals each disclaim beneficial ownership of the
shares held by the ESOP except that each such individual does not disclaim
beneficial ownership of those shares in which he has beneficial ownership
as a participant in the ESOP.
(8) Includes 20,230 shares held by Mr. Killian's wife, as to which he disclaims
beneficial ownership. In addition, Mr. Killian has a presently exercisable
option to purchase from the Company 700,000 shares of the Common Stock of
the Company's wholly owned subsidiary, Investment Technology Group, Inc.,
representing 7% of the outstanding class of such Common Stock.
(9) Tweedy, Browne Company L.P., a Delaware limited partnership ("TBC"),
together with TBK Partners, L.P., a Delaware limited partnership ("TBK"),
and Vanderbilt Partners L.P., a Delaware limited partnership
("Vanderbilt"), filed a combined statement on Schedule 13D dated and
reporting beneficial ownership at January 18, 1994. TBC reported beneficial
ownership of 578,688 shares, with sole voting power over 506,056 shares and
shared dispositive power over all 578,688 shares. TBK reported beneficial
ownership of 56,510 shares over which it has sole voting and dispositive
power. Vanderbilt reported beneficial ownership of 26,961 shares over which
it has sole voting and dispositive power. The aggregate number of shares of
common stock with respect to which TBC, TBK and Vanderbilt could be deemed
to be the beneficial owner is 662,159 shares. The four general partners in
Vanderbilt (Christopher H. Browne, William H. Browne, James M. Clark, Jr.,
and John D. Spears) are
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<PAGE> 6
the four general partners of TBC and are also four of the five general
partners of TBK (Thomas P. Knapp is also a general partner of TBK, but is
not a general partner of TBC or Vanderbilt). The general partners in each
of TBC, TBK and Vanderbilt, as the case may be, solely by reason of their
positions as such, may be deemed to have shared power to vote and dispose
of the shares held by TBC, TBK and Vanderbilt, respectively. The business
address for TBC, TBK, Vanderbilt and each of their general partners is 52
Vanderbilt Avenue, New York, New York 10017.
(10) Includes 1,000 shares subject to options exercisable within sixty days of
February 28, 1994, by Mr. Mostero, 42,233 shares held by the Jefferies
Group, Inc. Employees' Profit Sharing Plan allocated to the account of Mr.
Mostero as of November 30, 1993, and 4,132 shares held by the ESOP
allocated to the account of Mr. Mostero as of November 30, 1993. Also
includes 1,087 shares held by Mr. Mostero's wife as to which Mr. Mostero
disclaims beneficial ownership.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Executive Officers and Directors, and persons who beneficially own
more than 10% of the Company's outstanding Common Stock, to file with the SEC
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock and other equity securities of the Company on Forms 3,
4 and 5. Executive Officers, Directors and greater-than-10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. During and with respect to 1993, the initial Form 3
required to be filed by Mr. Dooley upon his election as a Director was filed
approximately one week late.
ELECTION OF DIRECTORS
Under the Company's By-Laws, the Board of Directors is authorized to
determine the number of Directors of the Company, which may not be less than
five nor more than twelve Directors. The number of authorized Directors to be
elected at the Annual Meeting has been fixed at seven. Such Directors will be
elected to serve until the next Annual Meeting and until their successors shall
be elected and qualify.
All of the nominees for election as a Director are present members of the
Board of Directors. Messrs. Baxter, Herrick, Klowden, Macchiarola, Taylor and
Wolfson were elected to their positions by a vote of stockholders at the 1993
Annual Meeting. Mr. Dooley was elected to his position by a vote of the Board of
Directors on November 17, 1993.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS
NOMINEES
The following information is submitted concerning the nominees for election
as Directors:
FRANK E. BAXTER, 57, a nominee, has been Chairman since September 26, 1990,
Chief Executive Officer since March 19, 1987, President since January 1986, a
Director of the Company and of Jefferies & Company, Inc. ("Jefferies"), the
Company's wholly owned subsidiary, since 1975 and, between January 1985 and
December 1985, was Managing Director of the Company's U.K. subsidiary. Mr.
Baxter has previously served as Executive Vice President, National Sales Manager
and New York Branch Manager of Jefferies.
RICHARD G. DOOLEY, 64, a nominee, has been a Director of the Company since
November 1993. From 1978 until his retirement in June 1993, Mr. Dooley was
Executive Vice President and Chief Investment Officer of Massachusetts Mutual
Life Insurance Company ("Mass Mutual"); Mr. Dooley is currently a consultant to
Mass Mutual. Mr. Dooley is also a director of Advest Group, Inc. (since 1983),
Hartford Steam Boiler Inspection and Insurance Company (since 1984), Kimco
Realty Corporation (since 1990), and of various Mass Mutual sponsored investment
companies. Mr. Dooley is also a trustee of Saint Anselm College
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<PAGE> 7
and Chairman of the Board of The New England Education Loan Marketing
Corporation. Mr. Dooley is a member of the Company's Audit and Compensation
Committees.
TRACY G. HERRICK, 60, a nominee, has been a Director of the Company since
1983 and of Jefferies since 1981. He is also President of Tracy G. Herrick,
Inc., an economic consulting firm, and a Director of Anderson Capital
Management, a registered investment adviser, and of The Committee for Monetary
Research and Education. Mr. Herrick is Chairman of the Company's Audit Committee
and a member of the Compensation Committee.
MICHAEL L. KLOWDEN, 49, a nominee, has been a Director of the Company since
May 1987. He has been, for more than the past five years, a senior partner of
Morgan, Lewis & Bockius, a law firm which has rendered legal services to the
Company. Mr. Klowden is a member of the Company's Audit and Compensation
Committees.
FRANK J. MACCHIAROLA, 53, a nominee, has been a Director of the Company
since August 1991. He is currently Dean at the Benjamin N. Cardozo School of Law
at Yeshiva University in New York City (1991-present). Previously, he was a
Professor of Business in the Graduate School of Business at Columbia University
(1987-1991), and President and Chief Executive Officer of the New York City
Partnership, Inc. (1983-1987). Prior to 1985, he was a faculty member at the
City University of New York and Chancellor of the New York City Public School
System. Mr. Macchiarola is Chairman of the Company's Compensation Committee and
a member of the Audit Committee.
BARRY M. TAYLOR, 53, a nominee, has been an Executive Vice President and
Director of the Company since 1983 and a Director of Jefferies since 1981. Mr.
Taylor has been a sales executive of Jefferies since 1974 and was Los Angeles
Branch Manager from February 1983 through June 1984.
MARK A. WOLFSON, 41, a nominee, has been a Director of the Company since
July 1991. He is the Dean Witter Professor at the Graduate School of Business,
Stanford University, where he has been a faculty member since 1977. From 1990
through 1993, Mr. Wolfson served as Associate Dean at the Graduate School of
Business, Stanford University. He has taught at the University of Chicago
(1981-1982) and Harvard University (1988-1989). He was a Director of the Academy
of Financial Services (1989-1991), has been a Research Associate at the National
Bureau of Economic Research since 1988, has been a Visiting Scholar at M.I.T.'s
Sloan School of Management (1988-1989), was Vice President of the American
Accounting Association (1990-1992), and has been a Director of New American
Holdings, Inc. since 1992. Mr. Wolfson is a member of the Company's Audit and
Compensation Committees.
OTHER EXECUTIVE OFFICERS
The Executive Officers of the Company are appointed by the Board of
Directors and serve at the discretion of the Board. Other than Messrs. Baxter
and Taylor, for whom information is provided above, the following sets forth
information as to the Executive Officers:
LOUIS V. BELLUCCI, SR., 57, has been National Equity Sales Manager of
Jefferies since January 1991 and Executive Vice President, New York Regional
Sales Manager and a Director of Jefferies since 1985. Prior to 1985, Mr.
Bellucci was Co-Manager of Jefferies' New York branch office.
ALAN D. BROWNING, 53, was a Director of the Company from May 1985 to May
1992, and has been an Executive Vice President, Chief Financial Officer and
Chief Administrative Officer of the Company since 1986, and a Director,
Executive Vice President and Chief Administrative Officer of Jefferies since
March 1984.
DAVID F. EISNER, 36, has been an Executive Vice President of the Company
and Executive Vice President and a Director of Jefferies since August 1992.
Prior to August 1992, Mr. Eisner was Chairman of Madison Capital Advisors, Inc.,
a consulting and financial advisory firm (April 1992 to August 1992), Senior
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<PAGE> 8
Vice President of Providence Capital, Inc., a securities broker-dealer (January
1991 to March 1992), and a Vice President of Jefferies (March 1988 to December
1990).
JERRY M. GLUCK, 46, has been Secretary and General Counsel of the Company
and Jefferies since May 1985 and a Director of Jefferies since November 1984.
RAYMOND L. KILLIAN, JR., 56, has been an Executive Vice President of the
Company since January 1985. Mr. Killian was a Director of the Company from May
1985 to May 1992, an Executive Vice President and Director of Jefferies from
January 1985 to December 1991, and National Sales Manager of Jefferies for the
period 1985 through 1990. In 1991, Mr. Killian was responsible for the
activities of Jefferies' Investment Technology Group, including Jefferies'
POSIT(R) and QuantEX(R) products. On December 30, 1991, the Company incorporated
a new wholly owned broker-dealer subsidiary, Investment Technology Group, Inc.,
to assume all the business activities of its Investment Technology Group. Mr.
Killian was elected President and Chief Executive Officer of the new subsidiary.
Prior to 1985, Mr. Killian was a Vice President of Goldman Sachs & Co., a
registered securities broker-dealer.
JEREMIAH P. O'GRADY, 53, has been an Executive Vice President of Jefferies
since May 1992 and a Director and Manager of the Convertible Securities
Department of Jefferies since 1986. From 1986 to May 1992, Mr. O'Grady was a
Senior Vice President of Jefferies. Prior to 1986, Mr. O'Grady was a Vice
President of Goldman Sachs & Co., a registered securities broker-dealer.
CLIFFORD A. SIEGEL, 37, has been an Executive Vice President of Jefferies
since May 1992, and a Director of Jefferies since May 1991. From June 1990 until
May 1992, Mr. Siegel was a Senior Vice President of Jefferies. Prior to June
1990, Mr. Siegel was President of Cresvale International Inc., a registered
securities broker-dealer.
DAVID A. SYDORICK, 47, has been an Executive Vice President and Director of
Jefferies since May 1991, National Sales Manager of the Taxable Fixed Income
Sales Division of Jefferies from March 1990 to March 1994 and is presently
Manager of Jefferies' Capital Markets. Prior to March 1990, Mr. Sydorick was a
Senior Vice President of Drexel Burnham Lambert, Inc., a registered securities
broker-dealer.
MAXINE SYRJAMAKI, 49, has been Controller of the Company since May 1987, an
Executive Vice President of Jefferies since November 1986 and Chief Financial
Officer of Jefferies since September 1984. Prior to September 1984, Ms.
Syrjamaki was First Vice President and Controller of Jefferies.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors of the Company held twelve meetings during 1993.
Each incumbent member of the Board of Directors attended, during his term of
office, at least 75% of the total number of meetings of the Board of Directors
and Committees thereof of which such Director was a member.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board does not have an Executive Committee or a Nominating Committee.
The current Audit Committee members are Tracy G. Herrick, Chairman, Richard
G. Dooley, Michael L. Klowden, Frank J. Macchiarola and Mark A. Wolfson. The
Audit Committee is responsible for reviewing with the independent auditors of
the Company the independent auditors' audit and review programs and procedures,
the financial statements and the adequacy of the Company's system of internal
accounting controls. The Committee also reviews the professional services
provided by the independent auditors and makes recommendations to the Board as
to the auditors' engagement or discharge. During 1993, there were three meetings
of the Audit Committee.
The current Compensation Committee members are Frank J. Macchiarola,
Chairman, Richard G. Dooley, Tracy G. Herrick, Michael L. Klowden and Mark A.
Wolfson. The Compensation Committee
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<PAGE> 9
administers the Company's discretionary bonus plans for key Executive Officers,
and, since May 1992, has assumed the responsibilities of the former Stock Option
Committee. During 1993, there were five meetings of the Compensation Committee.
DIRECTOR COMPENSATION
Messrs. Dooley, Herrick, Klowden, Macchiarola and Wolfson are each paid a
Director's fee of $30,000 per annum for a total of six regularly scheduled
meetings of the Board of Directors, $2,000 for each special meeting of the Board
attended and $500 for each Committee meeting attended. The Chairmen of the Audit
and Compensation Committees are also paid an annual fee of $1,000. Directors who
are also employees of the Company are not paid Directors' fees.
The Board of Directors has proposed a change in Directors' compensation
which is scheduled to become effective in May 1994. As proposed, each
non-employee Director would receive a Director's fee of $25,000 per annum and an
option to purchase 1,000 shares of the Company's Common Stock at the market
price on the day the option is awarded. In addition, as proposed, the Chairmen
of the Audit and Compensation Committees would be paid an annual fee of $3,000,
and Directors would receive $750 for each Committee meeting attended. (See
"Proposal to Approve the Non-Employee Directors' Stock Option Plan" and the copy
of the proposed Non-Employee Directors' Stock Option Plan set forth in Appendix
C to this Proxy Statement.)
During fiscal year 1993, Tracy G. Herrick and Mark A. Wolfson, Directors of
the Company, provided the Company with certain financial and other consulting
services. Mr. Herrick was paid $114,000 and Mr. Wolfson was paid $27,625 for
their respective services. (See also "Compensation Committee Interlocks and
Insider Participation.")
Each Director may participate in the Company's Charitable Gifts Matching
Program pursuant to which the Company will match 50% of charitable contributions
made by such Directors up to a maximum dollar amount of $1,500 per person per
year.
The children of Directors may also participate (along with the children of
all employees of the Company) in the Stephen A. Jefferies Educational Grant
Program which provides scholarship awards for secondary and post-secondary
education based on factors such as financial need, academic merit and personal
statements. The grants are made by an independent scholarship committee, none of
whose members are affiliated with the Company.
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EXECUTIVE COMPENSATION
Shown below is information concerning the annual and long-term compensation
for services in all capacities to the Company for the fiscal years ended
December 31, 1993, 1992, and 1991, of those persons who were, at December 31,
1993, the Chief Executive Officer and the other four most highly compensated
Executive Officers of the Company, and of an Executive Officer of the Company
who resigned as such prior to December 31, 1993 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION(2) AWARDS PAYOUTS
------------------------------------- ---------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
OTHER RESTRICTED UNDERLYING ALL
ANNUAL STOCK OPTIONS/ LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION(1) YEAR ($) ($) ($) ($) (#) ($) ($)
--------------------- ----- ------- --------- ---------- ------- ---------- ------- --------
Frank E. Baxter, Chairman, 1993 400,000 571,862(3) 703,704(4) 39,549(5)
Chief Executive Officer 1992 400,000 425,016(3) 10,984
and President 1991 400,000 395,000
David A. Sydorick 1993 500,000 4,720,462 7,500(6) 50,584(5)
Executive Vice President and 1992 500,000 3,598,641 437,500(7) 7,602
Manager of Capital Markets 1991
of Jefferies & Company,
Inc., the Company's wholly
owned subsidiary
("Jefferies")
Jeremiah P. O'Grady 1993 683,803 774,250 15,000(6) 29,701(5)
Executive Vice President 1992 634,651 816,612 7,602
and Manager, Convertible 1991
Securities Department
of Jefferies
Raymond L. Killian, Jr. 1993 425,000 1,430,017 15,000(6) 32,416(5)
Executive Vice President of 1992 425,000 710,393 50,000
the Company and President 700,000(9)
and Chief Executive Officer 1991 300,000 400,897
of Investment Technology
Group, Inc., the Company's
wholly owned subsidiary
Louis V. Bellucci, Sr. 1993 408,333 1,727,138 15,000(6) 296,000(10) 33,567(5)
Executive Vice President 1992 500,000(10) 700,000(10) 50,000 9,784
and National Equity Sales 1991 500,000 250,000
Manager of Jefferies
Marc H. Rapaport 1993 500,000 2,761,135 (8) 7,500(6) 33,223(5)
former Executive Vice 1992
President and Manager, 1991
Corporate Finance Department
of Jefferies
</TABLE>
- ---------------
(1) Messrs. Sydorick and O'Grady did not become Executive Officers of the
Company until December 1992. Mr. Rapaport became an Executive Officer of
the Company in July 1993, and resigned as an Executive Officer in December
1993.
(2) The amounts shown include cash and non-cash compensation earned by
Executive Officers as well as amounts earned but deferred at the election
of those Executive Officers.
(3) The amount shown is that portion of the incentive compensation which Mr.
Baxter was actually paid with respect to 1993 and 1992. In addition to the
amount actually paid, Mr. Baxter will, as a result of a mandatory deferral
feature of his incentive compensation plan, receive additional amounts of
incentive compensation which will be payable in 1994 and 1995 (with respect
to the incentive compensation deferred in 1993) and in 1993 and 1994 (with
respect to the incentive compensation deferred in 1992), such payments
being subject to certain performance conditions. (See "Long-Term Incentive
Plan Awards Table.")
8
<PAGE> 11
(4) The amount shown is a payment of incentive compensation which was deferred
in 1992 in the form of phantom shares and subject to certain performance
conditions which were met in 1993, and includes a payment of $4,304 for
dividends attributed to such phantom shares. (See "Long-Term Incentive Plan
Awards Table.")
(5) The total amount shown in the "All Other Compensation" column includes
amounts for the following:
(a) The Company's matching contributions under the Company's Section 401(k)
Plan. During the plan year ended November 30, 1993, Messrs. Baxter,
Bellucci, Killian, O'Grady and Rapaport each received $4,227, as the
Company's matching contributions.
(b) Allocations and forfeitures made under the Company's Employee Stock
Ownership Plan ("ESOP"). During the plan year ended November 30, 1993,
Messrs. Baxter, Sydorick, Rapaport, O'Grady, Bellucci and Killian each
received 130 shares at an original cost of $10.51 per share, for a
total of $1,367, as a result of such allocations and forfeitures.
(c) Contributions by the Company to the Employee Stock Purchase Plan
("ESPP"). During the year ended December 31, 1993, Mr. Baxter and Mr.
Killian each received 114 shares at prices ranging from $23.75 to
$38.50, for a total matching contribution of $3,400, and Mr. Bellucci
received 70 shares at prices ranging from $25.50 to $32.75, for a total
matching contribution of $2,100. The remaining Named Executive Officers
did not participate in the ESPP during 1993.
(d) Contributions of $8,515 and forfeiture allocations of $108 for each of
the Named Executive Officers under the Company's Profit Sharing Plan.
(e) Dividends and interest payments to the cash accounts of the Named
Executive Officers under the Jefferies Group, Inc. Capital Accumulation
Plan for Key Employees (the "CAP"), paid at a rate equal to the average
percentage the Company paid on its margin accounts carrying credit
balances. During fiscal year 1993, Mr. Baxter received $118, Mr.
Sydorick received $597, Mr. O'Grady received $249, Mr. Killian received
$170, Mr. Bellucci received $57, and Mr. Rapaport received $336.
(f) Each Named Executive Officer participating in the CAP was credited with
units representing shares of the Company's Common Stock ("CSUs") at a
price equal to eighty-five percent (85%) of the Company's average cost
per share of the shares available for distribution in the CAP. The
Company's average cost per share is based upon the average cost of
shares repurchased specifically for purposes of the CAP and held as
treasury shares pending distribution upon settlement of CSUs. The cash
account of the CAP participant was debited an amount equal to the
number of CSUs multiplied by 85% of the average cost per share. During
1993, the amount of the 15% discount on the CSUs with respect to each
Named Executive Officer was as follows: Mr. Baxter: $20,951; Mr.
Sydorick: $35,160; Mr. O'Grady: $12,625; Mr. Killian: $13,445; Mr.
Bellucci: $16,659; and Mr. Rapaport: $15,399.
(g) Each CAP participant also received an amount of "deemed interest,"
determined by multiplying (i) the fully-diluted earnings per share of
the Common Stock for the fiscal year by (ii) the daily weighted average
amount in the CAP participant's Profit-Based Deferred Compensation
Account. In 1993, the Named Executive Officers received the following
amounts of such "deemed interest": Mr. Baxter: $863; Mr. Sydorick:
$4,837; Mr. O'Grady: $2,612; Mr. Killian: $1,184; Mr. Bellucci: $534;
and Mr. Rapaport: $3,271.
(6) On January 21, 1993, the Compensation Committee granted to certain
employees of the Company's subsidiaries options to purchase Jefferies
Group, Inc. Common Stock at a price of $17.00 per share, pursuant to the
Jefferies Group, Inc. 1985 Non-Qualified Stock Option Plan. To receive the
option grant, each such employee was required to forgo part of the
employee's compensation for 1993. Of the Named Executive Officers, Messrs.
Bellucci, Killian, and O'Grady each received an option to purchase 15,000
shares in exchange for forgoing $100,000 of his 1993 compensation, while
Messrs. Sydorick and Rapaport each received an option to purchase 7,500
shares in exchange for forgoing $50,000 of his 1993 compensation. (See
"Option/SAR Grants Table.")
(7) On November 9, 1992, Mr. Sydorick was granted 25,000 shares of restricted
stock, at which date the closing price of the Company's Common Stock was
$17.50 per share. As of the end of 1993, the aggregate restricted stock
holdings of Mr. Sydorick consisted of 25,000 shares worth $812,500 at the
then-current market value, without giving effect to the diminution of value
attributable to the restrictions on such stock. The amount reported in the
table represents the market value of the shares at the date of grant
($17.50 per share), determined in the same manner. As of February 1, 1994,
the
9
<PAGE> 12
terms of the restricted stock grant to Mr. Sydorick were amended. As
amended, as of February 1, 1994, 12,500 shares of restricted stock were
vested and thus no longer subject to forfeiture if Mr. Sydorick's
employment terminates in specified circumstances. The remaining shares
shall vest at the rate of 1,136.36 shares per month from February 1, 1994
through December 31, 1994. Mr. Sydorick is entitled to receive dividends on
the restricted shares.
(8) On November 9, 1992, Mr. Rapaport was granted 25,000 shares of restricted
stock, at which date the closing price of the Company's Common Stock was
$17.50 per share. On June 9, 1993, Mr. Rapaport and the Company agreed that
the number of shares Mr. Rapaport received would be reduced to 13,000
shares. As of the end of 1993, the aggregate restricted stock holdings of
Mr. Rapaport consisted of 13,000 shares worth $422,500 at the then-current
market value, without giving effect to the diminution of value attributable
to the restrictions on such stock. None of the restricted shares granted to
Mr. Rapaport would have been vested until March 31, 1995. However, when Mr.
Rapaport's employment with Jefferies terminated on January 3, 1994, Mr.
Rapaport forfeited all of the shares of restricted stock.
(9) Represents options to purchase from the Company 700,000 shares of the
Common Stock of Investment Technology Group, Inc., the Company's wholly
owned subsidiary.
(10) In 1992, Mr. Bellucci's salary, draws and bonus totaled $1,496,000 of which
he was actually paid a total of $1,200,000 in 1992. The remaining $296,000
of such 1992 compensation was mandatorily deferred, and subject to certain
performance conditions based on the profitability of the Equity Sales
Division of Jefferies during the period January 1, 1993 through June 30,
1993, which conditions were met.
OPTION/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ---------------------------------------------------------------------------------------------- -------------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE MARKET
UNDERLYING EMPLOYEES OR BASE PRICE ON
OPTIONS/SARS IN PRICE DATE OF EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) GRANT($) DATE 0%($) 5%($) 10%($)
- ------------------------- ------------- ----------- --------- -------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank E. Baxter.......... 0 0%
David A. Sydorick........ 7,500 6.47% 17.00 21.75(2) 1/20/98 35,625 80,694 135,215
Jeremiah P. O'Grady...... 15,000 12.93% 17.00 21.75(2) 1/20/98 71,250 161,387 270,429
Raymond L. Killian,
Jr..................... 15,000 12.93% 17.00 21.75(2) 1/20/98 71,250 161,387 270,429
Louis V. Bellucci, Sr.... 15,000 12.93% 17.00 21.75(2) 1/20/98 71,250 161,387 270,429
Marc H. Rapaport......... 7,500 6.47% 17.00 21.75(2) 1/20/98 35,625 80,694 135,215
</TABLE>
- ---------------
(1) The exercise price may be paid by delivery of already-owned shares and tax
withholding obligations related to exercise may be paid by delivery of
already-owned shares or by withholding of the underlying shares upon
exercise, subject to certain conditions.
(2) On January 21, 1993, the Compensation Committee granted to certain employees
of the Company's subsidiaries options to purchase the Company's Common Stock
at a price of $17.00 per share, pursuant to the Company's 1985 Non-Qualified
Stock Option Plan. To receive the option grant, each such employee was
required to forgo part of the employee's compensation for 1993. Of the Named
Executive Officers, Messrs. Bellucci, Killian, and O'Grady each received an
option to purchase 15,000 shares in exchange for forgoing $100,000 of his
1993 compensation, while Messrs. Sydorick and Rapaport each received an
option to purchase 7,500 shares in exchange for forgoing $50,000 of his 1993
compensation.
10
<PAGE> 13
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
(#) ($)(1)
SHARES ACQUIRED VALUE ---------------- ----------------
ON EXERCISE REALIZED EXERCISABLE(E)/ EXERCISABLE(E)/
NAME (#) ($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- ----------------------------- --------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C>
Frank E. Baxter.............. 0 0 81,250(E) 1,746,875(E)(2)
David A. Sydorick............ 0 0 7,500(E) 116,250(3)
Jeremiah P. O'Grady.......... 0 0 15,000(E) 232,500(4)
Raymond L. Killian, Jr....... 0 0 41,094(E) 793,521(5)
700,000(E)(6) (7)
Louis V. Bellucci, Sr........ 1,950 46,922(8) 48,334(E) 874,180(E)(9)
16,666(U) 320,821(U)(10)
Marc H. Rapaport............. 0 0 7,500(E) 116,250(3)
</TABLE>
- ---------------
(1) At year-end 1993, the closing price of the Company's Common Stock was
$32.50, which was the price used to determine the year-end values in Column
(e).
(2) Mr. Baxter's options are exercisable at $11.00 per share. Thus, the value
of the unexercised options at year-end was determined as follows: 81,250
shares X ($32.50 - $11.00) = $1,746,875.
(3) Mr. Sydorick's and Mr. Rapaport's options are exercisable at $17.00 per
share. Thus, the value of the unexercised options at year-end was
determined as follows: 7,500 shares X ($32.50 - $17.00) = $116,250.
(4) Mr. O'Grady's options are exercisable at $17.00 per share. Thus, the value
of the unexercised options at year-end was determined as follows: 15,000
shares X ($32.50 - $17.00) = $232,500.
(5) Mr. Killian has an option for 26,094 shares exercisable at $11.00 per
share, and for 15,000 shares exercisable at $17.00 per share. Thus, the
value of the unexercised options at year-end was determined as follows:
26,094 shares X ($32.50 - $11.00) = $561,021 and 15,000 shares X ($32.50 -
$17.00) = $232,500, for a total of $793,521.
(6) Represents options to purchase from the Company 700,000 shares of the
Common Stock of Investment Technology, Group, Inc. ("ITG"), the Company's
wholly owned subsidiary.
(7) The indicated option is exercisable for the purchase of up to 700,000
shares of common stock of ITG from the Company at an exercise price of
$2.00 per share. At December 31, 1993, there was no market for ITG common
stock; the book value per share at such date was approximately $1.38 per
share. In connection with a proposed initial public offering of a newly
formed subsidiary of the Company that is to hold 100% of the stock of ITG,
Mr. Killian has agreed to the termination of this stock option and a
related employment agreement upon consummation of such initial public
offering, in exchange for cash and Common Stock of the Company. See
"Employment Contracts and Termination of Employment and Change in Control
Arrangements."
(8) The option was exercisable at $11.00 per share. Mr. Bellucci exercised the
option when the Common Stock was trading at $35.0625. Thus, the value
realized was determined as follows: 1,950 shares X ($35.0625 - $11.00) =
$46,922.
(9) Mr. Bellucci has an option for 15,000 shares exercisable at $17.00 per
share, and for 33,334 shares exercisable at $13.25 per share. Thus, the
value of the exercisable portion of Mr. Bellucci's unexercised options at
year-end was determined as follows: 15,000
shares X ($32.50 - $17.00) = $232,500 and 33,334
shares X ($32.50 - $13.25) = $641,680, for a total of $874,180.
(10) Mr. Bellucci has an option for 16,666 shares, which was unexercisable at
year-end 1993, but which will be exercisable upon vesting at $13.25 per
share. The value of the unexercisable options at year-end was determined as
follows: 16,666 shares X ($32.50 - $13.25) = $320,821.
11
<PAGE> 14
LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PAYOUTS UNDER NON-STOCK
PRICE BASED PLANS
------------------------------------------------
<S> <C> <C> <C> <C> <C>
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE OR
SHARES, UNITS OR OTHER PERIOD
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT (# OF UNITS) (# OF UNITS) (# OF UNITS)
- ------------------- ---------------- ---------------- ------------ ------------ ------------
17,622(1) 12/31/94(1) (2) 17,622(3) 17,622(4)
Frank E. Baxter...... 17,622(1) 12/31/95(1) (2) 17,622(3) 17,622(4)
David A. Sydorick.... 0 -- -- -- --
Jeremiah P.
O'Grady............ 0 -- -- -- --
Louis V. Bellucci,
Sr................. 0 -- -- -- --
Raymond L. Killian,
Jr................. 0 -- -- -- --
Marc H. Rapaport..... 0 -- -- -- --
</TABLE>
- ---------------
(1) In addition to the salary and bonus which were actually paid to Mr. Baxter
with respect to 1993 as reflected in the Summary Compensation Table, Mr.
Baxter will receive an additional amount of incentive compensation payable
in two installments at the end of 1994 and 1995 (the "deferred incentive
compensation") pursuant to the terms of the Incentive Compensation Plan for
Frank E. Baxter, a copy of which is attached hereto as Appendix A. The
deferred incentive compensation will be calculated by dividing that portion
of the 1993 incentive compensation which has been deferred ($1,145,442) by
the closing price of the Company's Common Stock on December 31, 1993
($32.50) and designating the result (35,244) as "phantom" shares of the
Company's Common Stock. The number of phantom shares, one-half of which is
payable in each of 1994 and 1995, will be reduced prior to payment if
profits in either of these years are below the target profits for those
years. The amount by which the number of phantom shares will be reduced is
determined by dividing (a) the product of (1) the amount by which profits
are below target (up to the amount by which profits in 1993 exceeded
target) and (2) the difference between the rate applied to such excess and
the rate at which Mr. Baxter's target compensation is reduced for profits
below target by (b) an amount equal to the sum of (1) the closing price of
the Company's Common Stock on the first trading day following or coincident
with the close of the Company's fiscal year for which such adjustment is
being determined and (2) the amount of dividends, if any, declared on
shares of the Company's Common Stock during the years of deferral. The
amount of the deferred payment which is actually made to Mr. Baxter will be
determined at the time it is to be paid by multiplying (a) the adjusted
number of phantom shares by (b) the sum of (1) the closing price of the
Company's Common Stock on the first trading day following or coincident
with the close of the Company's fiscal year for which such adjustment is
being determined and (2) the amount of dividends, if any, declared on
shares of the Company's Common Stock during the years of deferral.
(2) Because the threshold number (i.e., the minimum amount payable to Mr.
Baxter) is dependent upon both the profitability of the Company in 1994 and
1995 and the closing price of the Company's Common Stock on the first
trading day following or coincident with the close of the Company's fiscal
year for which the adjustment is being determined, it is not possible to
determine the threshold number for purposes of this table.
(3) If the Company meets its target profit levels for 1994 and 1995 and if the
Company's Common Stock is trading at or above $32.50 at the close of each
of those years, Mr. Baxter will receive the indicated number of units for
his 1993 performance without reduction in 1994 and 1995. The exact amount
of Mr. Baxter's compensation is not currently calculable, as it is
dependent upon the price at which the Company's Common Stock is trading at
the close of 1994 and 1995.
12
<PAGE> 15
(4) The maximum number of phantom shares is not subject to adjustment. However,
the maximum amount which may be paid to Mr. Baxter in 1994 or 1995 is not
currently calculable, as it is dependent upon the price at which the
Company's Common Stock is trading at the close of each of those fiscal
years.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION AND THE PERFORMANCE GRAPH ON
PAGE 17 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, the members of which are
Messrs. Macchiarola, Dooley, Herrick, Klowden and Wolfson, has furnished the
following report on executive compensation:
To: The Board of Directors and Stockholders of Jefferies Group, Inc.
Under the supervision of the five members of the Compensation Committee
(the "Committee"), each of whom is a non-employee Director, the Company has
developed and implemented compensation policies, plans and programs which seek
to enhance the profitability of the Company and thus stockholder value. The
Committee has established compensation policies, plans and programs for the
Company's Executive Officers which are designed to provide competitive levels of
compensation, reward productivity and profitability, and encourage long-term
service to the Company.
The Committee also administers the Company's various stock-based incentive
plans, including the 1993 Stock Ownership and Long-Term Incentive Plan (the
"1993 Plan"). Decisions about awards to Executive Officers under these
stock-based incentive plans must be made solely by the Committee in order for
grants or awards under such Plans to satisfy Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. The Committee believes that stock ownership by
Executive Officers and stock-based performance compensation arrangements are
beneficial in aligning the interests of Executive Officers with the interests of
stockholders, and therefore the Committee has used stock option grants and other
stock-related awards and arrangements to provide a portion of the incentive
compensation of Executive Officers.
The Committee has retained the services of Martin Wertlieb Associates, a
compensation consulting firm, to assist the Committee in connection with the
performance of its various duties.
The Committee's compensation policies, plans, and programs for 1993
generally were unaffected by the adoption of new Section 162(m) of the Internal
Revenue Code, contained in the Omnibus Budget Reconciliation Act of 1993.
Section 162(m) generally disallows a public company's tax deduction for
compensation to the chief executive officer and the four other most highly
compensated executive officers in excess of $1 million in any tax year beginning
on or after January 1, 1994. Under Section 162(m), compensation that qualifies
as "performance-based compensation" is excluded from the $1 million
deductibility cap, and therefore remains fully deductible even though such
compensation may (together with other compensation) exceed $1 million in a given
year. The Committee intends to seek to preserve the tax deductibility of
compensation to Executive Officers to the greatest extent possible without
substantially impairing the operation and effectiveness of the Company's
compensation policies, plans, and programs. To this end, the Committee has
established and the Board of Directors has adopted the Jefferies Group, Inc.
Pay-For-Performance Plan in order that compensation thereunder will qualify as
"performance-based compensation," and the Board is recommending that
stockholders approve such plan at the Annual Meeting. The Committee also intends
to grant options under the 1993 Plan with an exercise price at least equal to
100% of fair market value of the underlying stock at the date of grant under the
1993 Plan, and the Committee has likewise been advised that such options should
qualify as "performance-based compensation." Since final
13
<PAGE> 16
regulations have not been adopted and other guidance has not been provided by
the Internal Revenue Service, however, there can be no assurance that any
particular compensation in excess of $1 million will qualify as
"performance-based compensation" that is fully deductible by the Company under
Section 162(m).
COMPENSATION PAID TO EXECUTIVE OFFICERS IN 1993 (OTHER THAN THE CHIEF EXECUTIVE
OFFICER)
Compensation paid to those Executive Officers having responsibility for
revenue-producing departments or divisions of the Company's subsidiaries,
including the four highest paid Executive Officers of the Company reflected in
the foregoing tables, consisted of a base salary and/or draw and an annual bonus
which was determined primarily by reference to departmental or divisional
profitability, and, in some cases, revenues. The amount of base salary or
non-forfeitable draw is intended by the Committee to provide a level of income
that is predictable and not at risk, so that Executive Officers will be able to
meet living expenses and financial commitments. Although the Committee considers
competitive practices in this regard, its determination of the level of base
salary or non-forfeitable draw generally is a subjective one. The Committee
determined formulas for payment of an annual bonus to each Executive Officer in
early 1993 with a view to providing overall compensation which would provide
Executive Officers with a competitive compensation package and align the
interests of the Executive Officers with those of the Company's stockholders.
The Committee also received significant input from the Chief Executive Officer
in determining the formulas for Executive Officers' compensation. The Committee
assessed the contribution such department or division could make to the
Company's overall financial performance and sought to provide a substantial
incentive to the Executive Officer to maximize such contribution. As noted
above, the Committee has sought to formalize its policies with respect to
linking annual bonuses for Executive Officers to departmental and divisional
operating results by establishment of the Pay-For-Performance Plan.
Compensation paid to the remaining Executive Officers who perform
predominantly administrative functions were paid in the form of a base salary
and an annual bonus, the amount of which was based upon the same considerations
as those for the Named Executive Officers, except that the Committee also
considered, in determining the amount of annual bonus payable, both Company
profitability and individual initiative and performance.
Certain of the Executive Officers received stock options under the
Company's 1985 Non-Qualified Stock Option Plan and under the 1993 Plan. The
options were granted to further the Committee's desire for Executive Officers to
own securities of the Company to more effectively align their interests with
those of the stockholders. The Committee considered recommendations made by the
Chief Executive Officer, and determined to award options in lieu of a specific
amount of cash compensation which would otherwise have been received by the
Executive Officer in 1993, in some cases, at an exercise price which was less
than the market price on the date of grant, but which discount was less than the
amount of cash compensation which was forgone.
Finally, the Company's Capital Accumulation Plan for Key Employees (the
"CAP"), which was adopted by the Board of Directors and approved by stockholders
during 1993, is designed to allow Executive Officers to defer receipt of (and
thus defer taxation on) a substantial portion of their income. Under the CAP,
part of such deferred amounts are deemed invested in Common Stock of the Company
at a 15% discount from the average cost of shares repurchased by the Company for
purposes of the CAP, and part of such deferred amounts are deemed invested in a
hypothetical instrument that pays interest based on the rate represented by the
earnings per share (if any) of Common Stock for a given year divided by the fair
market value of such Common Stock on the last day of the Company's fiscal year.
However, if the Company's earnings per share are negative, the CAP participant
will not receive interest, but will instead be charged by an amount equal to the
fully-diluted loss per share of the Company's Common Stock divided by the fair
market value of the Common Stock on the last day of the fiscal year. In the
Committee's view, the CAP's method of valuing deferred compensation adds an
additional incentive for participants therein to maximize the value of the
Company's Common Stock and the Company's profitability.
14
<PAGE> 17
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER IN 1993
As members of the Compensation Committee, it is our responsibility to
evaluate the performance and establish the compensation level of the Company's
CEO, Mr. Frank E. Baxter.
Mr. Baxter's compensation package for 1993 was intended to motivate and
reward Mr. Baxter for achieving profit levels that were in the best interests of
the Company's stockholders and to encourage him to remain with the Company to
continue to serve those interests. In setting Mr. Baxter's compensation for
1993, the Committee intended that Mr. Baxter's compensation would be competitive
with other companies of comparable size in the securities industry, but that a
large percentage of his target compensation would be based upon objective
performance criteria, specifically, the profitability of the Company.
For the year 1993, Mr. Baxter's compensation consisted of a base salary of
$400,000 (which was one-third of Mr. Baxter's total target compensation for
1993), and an incentive award determined pursuant to an Incentive Compensation
Plan (the "ICP," a copy of which is set forth in Appendix A to this Proxy
Statement), adopted during 1992 specifically for Mr. Baxter. Mr. Baxter's base
salary was set at a level deemed most appropriate by the Committee when taking
into consideration the Committee's desire to provide Mr. Baxter some certainty
in the level of his compensation through this non-performance based element of
compensation. In making this subjective determination, the Committee recognized
that by providing a non-performance based element to the CEO's compensation,
some trade-off exists between a desire to avoid exposing the CEO to excessive
amounts of risk (given the requirement that the compensation package must be a
competitive one) and the desire to align the interests of the CEO as closely as
possible with those of the stockholders.
During the first quarter of 1993, the Committee also established the terms
of Mr. Baxter's incentive award under the ICP. The ICP authorizes the Committee
to set a rate, stated as a percentage of after-tax profits, at which Mr.
Baxter's target compensation would be (a) increased, if the Company's net
profits exceeded the target profit level or (b) reduced (but not below the
amount of his base salary) if the Company's net profits did not equal or exceed
the target profit level. For 1993, the Committee determined that Mr. Baxter's
compensation would be increased above the target compensation level at the rate
of 8% of profits in excess of the targeted profit level, and reduced from the
target compensation level at the rate of 5% of the amount by which profits fell
short of the targeted profit level.
The Committee considered 1992 compensation for chief executive officers at
investment management and securities industry companies and, based on its
considerations, determined that Mr. Baxter's 1993 target base salary and bonus
should be $1,200,000.
The Committee factored into its determination of Mr. Baxter's actual
compensation for 1993 the amount of the Company's profits after tax and after
incentives but retained the right to make specific adjustments to the
profitability measure for purposes of determining Mr. Baxter's incentive
compensation. The Committee reduced the after-tax Company profit used for
purposes of calculating Mr. Baxter's incentive compensation under the ICP for
1993 by $142,100 to reflect the Committee's estimate of the after-tax cost of
issuing employee stock options, which cost is not reflected in reported
profitability under generally accepted accounting principles. The Committee also
reduced the after-tax Company profit used for purposes of calculating Mr.
Baxter's incentive compensation for 1993 by $1,358,000 to remove the positive
effect on income of a change in accounting principle (SFAS No. 109).
The 1993 target level for Company profits was set at $16,000,000. This was
arrived at by multiplying the target after-tax rate of return on investment for
stockholders of 16% by the aggregate adjusted book value of the Company's Common
Stock as of January 1, 1993 (including adjustments made for the right of holders
of the Company's 8 1/2% Convertible Subordinated Debentures and 7% Convertible
Subordinated Notes to convert their indebtedness and the right of holders of
outstanding options to exercise those options and receive Common Stock of the
Company), which aggregate adjusted book value was estimated to be approximately
$100 million.
15
<PAGE> 18
Mr. Baxter has not yet been paid the entire amount of his 1993 incentive
award. In addition to Mr. Baxter's base salary of $400,000, Mr. Baxter was paid
one-third of his incentive compensation for 1993, which was determined in
accordance with the factors discussed above. Half of the remaining two-thirds of
Mr. Baxter's incentive compensation for 1993 will be paid at the end of each of
fiscal years 1994 and 1995. However, the actual amount which the Company will be
required to pay Mr. Baxter for the remainder of his 1993 incentive compensation
will depend on both the Company's profitability in fiscal years 1994 and 1995
and the price at which the Company's Common Stock is trading at the end of each
of those fiscal years. The amounts of deferred compensation are deemed to be
invested in "phantom shares" of the Company's Common Stock at the closing price
of such stock on the last day of 1993, with amounts equal to dividends
thereafter credited to Mr. Baxter as well. In the event that the Company does
not meet the target levels of profits set by the Committee for 1994 and 1995,
the 1993 incentive compensation that became payable because 1993 profits
exceeded the target level of profits and which was deferred will be reduced
under a formula set forth in the ICP. Accordingly, the Bonus column of the
Summary Compensation Table for Mr. Baxter reflects only the amount of the
compensation (above the amount of his base salary) which Mr. Baxter was paid for
1993 and which was not dependent on the results of the Company's Common Stock
and profitability performance in 1994 or 1995. Payouts of deferred incentive
compensation under the ICP (including deferrals in prior years) are and will be
reported in future years under the caption "LTIP Payouts" in the Summary
Compensation Table.
Mr. Baxter also participates in the CAP, the terms of which are described
above. Amounts deferred by Mr. Baxter during and with respect to 1993 under the
CAP include both salary and incentive compensation.
The foregoing report has been furnished by:
Frank J. Macchiarola, Chairman
Richard G. Dooley
Tracy G. Herrick
Michael L. Klowden
Mark A. Wolfson
16
<PAGE> 19
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Tracy G. Herrick, a Director of the Company who also serves on the
Compensation Committee, provides financial consulting services to the Company
for which he was paid $114,000 in 1993.
During 1993, Morgan Lewis & Bockius, of which Michael L. Klowden, a
Director and a member of the Compensation Committee, is a senior partner, acted
as legal counsel to the Company.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Russell 2000 and Lipper Analytical Brokerage
Composite Indices for the period of five fiscal years commencing January 1,
1989, and ending December 31, 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
JEFFERIES GROUP, INC.'S COMMON, RUSSELL 2000 & LIPPER ANALYTICAL
BROKERAGE COMPOSITE INDICES
<TABLE>
<CAPTION>
LIPPER
ANALYTICAL
BROKERAGE
MEASUREMENT PERIOD JEFFERIES COMPOSITE
(FISCAL YEAR COVERED) GROUP, INC. RUSSELL 2000 INDEX
- -------------------------- ------------- ------------ ----------
<S> <C> <C> <C>
1988 100 100 100
1989 104 116 112
1990 106 94 96
1991 105 137 219
1992 186 162 230
1993 309 192 307
</TABLE>
- ---------------
* Normalized so that the value of Jefferies Group, Inc.'s Common Stock and each
index was $100 on December 31, 1988, and that all dividends were reinvested.
17
<PAGE> 20
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Baxter does not have an employment contract with the Company. However,
his Incentive Compensation Plan (a copy of which is attached as Appendix A)
provides that if Mr. Baxter's employment is terminated for cause, he will
forfeit any deferred amounts not yet payable as of the date of termination. In
the event of Mr. Baxter's approved retirement, termination for other than cause,
death or permanent disability, any deferred amounts not yet payable as of the
date of such event shall be paid on their regularly scheduled payment date, or
earlier at the sole discretion of the Compensation Committee.
Mr. Sydorick does not have an employment agreement with the Company. The
agreement pursuant to which the Company granted to Mr. Sydorick 25,000
restricted shares (referenced in the Summary Compensation Table), as amended,
provides that 12,500 restricted shares were vested as of February 1, 1994, and
the remaining 12,500 restricted shares shall vest at the rate of 1,136.36
restricted shares per month from February 1, 1994 through December 31, 1994.
Upon the termination of Mr. Sydorick's employment following a change in control
of the Company, the restricted shares will immediately become fully vested.
Mr. Killian has an employment agreement with the Company's wholly owned
subsidiary, Investment Technology Group, Inc. ("ITG"), to which the Company is
also a party. The term of the agreement, which has been amended, is from April
1, 1992 to March 31, 1995. Under the agreement, Mr. Killian is entitled to a
base salary at an annual rate of $425,000 and a bonus of 10% of the "profits" of
ITG, as defined therein. The agreement further provides that if Mr. Killian's
employment is terminated because of involuntary termination by ITG without cause
or because of resignation for good reason, Mr. Killian (or his heirs or legal
representatives) would be paid the base salary, net of employment taxes, for the
period from the termination date through March 31, 1995, plus the full amount of
the bonus for the year in which such termination occurred. As amended, the
agreement granted Mr. Killian an option to purchase 700,000 shares of ITG's
common stock at a price of $2.00 per share, which option would expire on the
earlier of the 60th day following the termination of Mr. Killian's employment
with ITG (unless the termination was (a) for cause, in which event the option
would expire on the date of termination or (b) due to death or disability, in
which event the option would expire one year after such termination), or on
March 31, 1995.
The Company formed a new subsidiary (the "ITG Holding Company") in March
1994 for the purpose of eventually holding 100% of the stock of ITG. On March
15, 1994, the ITG Holding Company filed with the Securities and Exchange
Commission a Registration Statement for the offer of 3,700,000 shares of its
common stock (which includes 450,000 shares subject to an overallotment option
granted to the underwriters) in an initial public offering (the "IPO"). The
filing indicated an anticipated offering price of between $12 and $14 per share.
Immediately prior to the consummation of the offering, the ITG Holding Company
will issue 15,000,000 shares of its common stock in exchange for all 10,000,000
shares of issued and outstanding ITG common stock held by the Company. Following
the offering, the Company will own 80.2% of the outstanding common stock of the
ITG Holding Company. If the IPO is consummated, immediately prior to such
consummation, Mr. Killian's employment agreement, described above, will
terminate and a new employment agreement will become effective, for a term
ending March 31, 1997, under which Mr. Killian will be employed as the President
and Chief Executive Officer of the ITG Holding Company. Mr. Killian will receive
an annual salary of $300,000, subject to increase at the discretion of the Board
of Directors of the ITG Holding Company, and an annual bonus of $450,000 based
upon the ITG Holding Company's net after-tax profits. Prior to the beginning of
each year, the Compensation Committee of the ITG Holding Company will establish
a target net after-tax profit that is reasonable and appropriate based upon an
analysis of peer companies and is commensurate with a target level of profits
set by the ITG Holding Company. The annual bonus will be increased or decreased
if the ITG Holding Company's net after-tax profits exceed or are less than the
target net after-tax profits. The agreement also provides for the grant by the
ITG Holding Company to Mr. Killian of nonqualified stock options to purchase
750,000 shares of common stock of the ITG Holding Company at a price per share,
payable in cash, equal to the IPO price of the ITG Holding Company common stock.
The options will be fully vested on the date of grant, will expire on March 31,
1999 and may be exercised in whole
18
<PAGE> 21
or in part at any time at the earlier of April 1, 1997, or upon a change in
control of the ITG Holding Company. The agreement may be terminated with or
without cause or if Mr. Killian becomes permanently disabled. Mr. Killian may
terminate his agreement for "good reason," consisting of a material reduction in
title, duties, or responsibilities. Upon termination for cause or by reason of
death, disability or resignation for other than good reason, Mr. Killian will
not be entitled to any compensation or, except as required under applicable
laws, benefits. Upon termination without cause or upon resignation for good
reason, the ITG Holding Company is required to pay base salary in effect at the
time of termination or resignation until March 31, 1997, to pay the bonus in the
year that termination occurs and to provide benefits required by applicable
laws. The agreement further provides that upon termination of employment, Mr.
Killian will not compete with the ITG Holding Company for a period of six months
following such termination provided that the ITG Holding Company continues to
pay base salary during such period. The non-competition period may be extended
until any date on or prior to December 31, 1997, if the ITG Holding Company
agrees to continue to pay during that period base salary and, in the case of
termination without cause or resignation for good reason, the bonus in effect at
the time of termination.
In connection with the termination of Mr. Killian's existing employment
agreement and stock options, Mr. Killian will receive cash and Common Stock of
the Company with a value of approximately $10.7 million, based upon an assumed
offering price of $13.00 per share of ITG Holding Company common stock. Any
increase or decrease in the net proceeds of the IPO upon determination of the
actual offering price will result in an increase or decrease in the amount
received by Mr. Killian.
19
<PAGE> 22
PENSION PLAN
All employees of the Company who are citizens or residents of the United
States, who are 21 years of age, and who have completed one year of service with
the Company are covered by the Company's Employees' Pension Plan (the "Pension
Plan"), a defined benefit plan, which was originally adopted in 1964 and amended
in January 1987. The Pension Plan is funded through contributions by the Company
and earnings on the existing assets in conformance with annual actuarial
evaluations. The Pension Plan provides for annual benefits following normal
retirement at age 65 equal to 1% of the employee's covered remuneration from
January 1, 1987, until termination of employment plus 20% of the first $4,800
and 50% of amounts exceeding $4,800 of annual average covered remuneration for
1985 and 1986, reduced proportionately for service of less than fifteen years
(as of December 31, 1986). Benefits payable under the Pension Plan are not
subject to deduction for Social Security benefits or other offsets.
Covered remuneration for purposes of the Pension Plan includes the
employee's total annual compensation (salaries, bonuses and commissions) not to
exceed $100,000 for 1985 and 1986 and $200,000 for 1987. Thereafter, this latter
dollar limitation will be adjusted automatically for each plan year to the
amount prescribed by the Secretary of the Treasury, or his delegate, for such
plan year; for 1993, this amount was $235,840. An employee who retires upon
normal retirement at age 65 with at least seven years of service will receive a
full vested benefit. An employee who retires at age 55 with at least seven years
of service will receive the normal retirement benefit reduced by 1/2% for each
month benefit payments commence before age 65. Employees who terminate
employment with the Company for reasons other than death or retirement will be
entitled to the vested portion of their benefits at their normal or early
retirement age. Benefits vest at the rate of 10% for each of the first four
years of service and 20% for each of the next three years of service. The
retirement benefits payable at age 65 for those employees with service prior to
January 1, 1987, will be composed of two items: (1) a benefit for service up to
December 31, 1986, in accordance with the original Pension Plan formula
recognizing pay as the average of 1985 and 1986 remuneration up to $100,000, and
(2) a benefit for service commencing on January 1, 1987, equal to 1% of covered
remuneration through the date of termination. Total years of credited service
apply to both the original and amended Pension Plans for purposes of determining
vesting and eligibilities.
As of December 31, 1993, the credited years of service for the Named
Executive Officers of the Company named in the Summary Compensation Tables were:
Mr. Baxter, 20 years; Mr. Bellucci, 11 years; Mr. Sydorick, 4 years; Mr.
O'Grady, 8 years; Mr. Killian, 10 years; and Mr. Rapaport, 4 years.
CERTAIN RELATED TRANSACTIONS
Jefferies has extended credit to certain of its Directors, Officers,
employees and stockholders in connection with their purchase of securities on
margin. Receivables from its Officers and Directors were $1,357,000 at December
31, 1993. Such extensions of credit were made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.
For information concerning Certain Related Transactions with respect to
Messrs. Herrick, Klowden and Wolfson, Directors of the Company, see
"Compensation Committee Interlocks and Insider Participation" and "Director
Compensation."
During 1993, in the ordinary course of business, Jefferies executed
securities transactions on behalf of Tweedy, Browne Company L.P., a stockholder
of the Company beneficially owning in excess of 5% of the Company's Common
Stock, and received commissions of approximately $227,741.
The Company believes the foregoing transactions were on terms no less
favorable to the Company than could have been obtained from unaffiliated
parties. The Board of Directors has adopted a policy which provides that the
Company will not enter into any transactions with its Directors, Officers or
affiliates (not
20
<PAGE> 23
including companies consolidated with it for financial reporting purposes),
other than those related to employee compensation or expense reimbursement and
other than those having terms no less favorable to the Company than could be
obtained from unaffiliated parties, unless approved by the Company's
disinterested and independent Directors.
PROPOSAL TO APPROVE THE PAY-FOR-PERFORMANCE INCENTIVE PLAN
The Compensation Committee (the "Committee") has established and the Board
of Directors of the Company has adopted the Jefferies Group, Inc.
Pay-For-Performance Incentive Plan (the "Plan"), subject to approval by the
stockholders of the Company. The purpose of the Plan is to assist the Company in
attracting, retaining, and rewarding employees who serve in key positions with
respect to business units of the Company and, in such positions, contribute to
the growth and annual profitability of the Company, while enabling the Company
to deduct compensation paid under the Plan without limitation under a recently
enacted tax law.
The Company has traditionally followed the securities industry practice of
compensating its key producers and other key employees with cash, the payment of
which is directly related to such employee's production and generation of income
for the Company, paid on an annual or more frequent basis. As discussed above in
the "Report of the Compensation Committee on Executive Compensation," new
Section 162(m) of the Internal Revenue Code would generally disallow the
Company's tax deduction for compensation to the chief executive officer and the
four other most highly compensated executive officers (referred to as "named
executives") in excess of $1 million beginning in the Company's 1994 tax year.
Under new Section 162(m), however, compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible. The Company believes that the
design and implementation of the Plan will permit compensation thereunder to
qualify as "performance-based compensation" and therefore remain fully
deductible under new Section 162(m), even though payments under the Plan may
represent compensation to a named executive in excess of $1 million. In this
regard, the Company is seeking stockholder approval of the Plan in order that
compensation under the Plan will meet the requirements of new Section 162(m).
The Plan is similar in its approach to annual incentive compensation to the
prior, less formal practices of the Committee. The following is a brief
description of the material terms of the Plan. Such description is qualified in
its entirety by reference to the full text of the Plan, a copy of which is
attached as Appendix B to this Proxy Statement.
Under the Plan, the Committee will select for participation those key
employees who are in charge of a business unit or whose performance can be
expected to have a substantial effect on the results of a business unit. A
"business unit" is defined to mean the Company as a whole or any department,
division, subsidiary, or other business unit or function of the Company for
which operational financial results are available. Approximately seven persons
are currently eligible to be selected to participate in the Plan.
For each participant, the Committee will specify an award and performance
objectives upon which payment of the award will be conditioned. The performance
objectives will be based on (i) "business unit income," meaning the pre-tax net
income of the participant's business unit (before payment of bonuses under the
Plan or otherwise, capital charges, and general and administrative expenses),
(ii) the revenues of the participant's business unit, or (iii) the participant's
business unit's "EVA" (economic value added), a measure of the amount of the
business unit's after-tax income that exceeds the cost of the capital used by
the business unit during the performance period. In establishing a performance
objective based on EVA, the Committee will determine the average cost of capital
(stated as a percentage); this cost of capital will be multiplied by the amount
of capital actually used by the business unit. Generally, awards and performance
objectives will relate to a specified year, although shorter performance periods
may be specified for a participant who becomes employed in a new position.
An award generally will provide for payment of a specified percentage or
percentages of business unit income, revenues, and/or EVA, provided that the
Committee may require a target amount of such income,
21
<PAGE> 24
revenues, or return on capital to be achieved before any portion of an award
will become payable. The maximum percentage of business unit income, revenues
and EVA that may be potentially payable under an award in any performance year
to a single participant, and to all participants granted awards with respect to
a single business unit, is 30% of business unit income, 10% of business unit
revenues, and 25% of EVA. At the end of each performance year, the Committee
must determine the extent to which awards have been earned and performance
objectives achieved, and the amounts therefore payable to each participant,
setting forth these determinations in writing. Awards are non-transferable.
In administering the Plan, the Committee has the power and authority to
construe and interpret the Plan, define terms, implement rules and regulations,
and make all determinations relating to the Plan. Although the Committee's
discretion to increase the amounts of previously established awards is limited,
the Committee retains discretion to reduce the amount of or cancel final awards,
including in view of business strategy, performance of comparable organizations,
economic and business conditions, personal performance of the participant, or
other performance considerations. The Committee may also provide that income of
a business unit may be adjusted downward to reflect specified charges, expenses,
and other amounts, adjust or modify awards and performance objectives in
recognition of unusual or nonrecurring events, in response to changes in
applicable laws, regulations, accounting principles, or other circumstances,
with respect to a participant whose position or duties change and, in the case
of new participants, during a performance year. The Committee may also defer the
timing of interim payments or final payments under the Plan.
The Plan permits interim payments, but requires that the participant repay
the Company to the extent that such interim payments exceed the amount of the
final award payment for a performance year. Payment of an award may be deferred
by the participant under the Company's Capital Accumulation Plan for Key
Employees or another deferral plan, if and to the extent permitted by the
Committee. If a participant ceases to be employed due to death, disability, or
retirement (including early retirement with the approval of the Committee), the
Committee will determine the amount payable as a final award achieved or
resulting from the portion of the performance year completed at the date
employment ceased. If a participant's employment terminates during a performance
year for any other reason, no final award will be paid to the participant.
The Board of Directors may amend, modify, suspend, or terminate the Plan.
Such changes will be subject to initial approval of the Committee and to
stockholder approval if and to the extent required by law, regulation, stock
exchange or NASDAQ National Market System rule, or to comply with Code Section
162(m). Such provisions may not necessarily require stockholder approval for all
Plan amendments that might increase the cost of the Plan or broaden eligibility.
If compensation under the Plan qualifies as "performance-based
compensation" under Section 162(m), as the Company believes will be the case,
payments under the Plan will constitute ordinary income to participants, for
federal income tax purposes, at the time of payment and the Company will then be
entitled to a corresponding tax deduction equal to the amount of such payments,
whether or not such payments exceed $1 million.
Subject to stockholder approval of the Plan, the Committee has granted
awards to five Executive Officers under the Plan for 1994. The following table
sets forth the name of each Named Executive Officer granted such an award and
shows the amount estimated by the Committee to be payable for 1994 performance
at targeted levels. The performance objectives for each such award are specific
to each Named Executive Officer, but are based upon one or more of the
performance criteria (i.e., business unit income, revenues, or EVA) set forth in
the Plan, subject in some cases to downward adjustments. The final amounts of
payouts under the Plan for 1994 may be greater or less than the amounts set
forth below if the actual performance exceeds or falls short of the specified
performance objectives:
22
<PAGE> 25
PLAN BENEFITS
PAY-FOR-PERFORMANCE INCENTIVE PLAN
<TABLE>
<CAPTION>
PAYOUT UNDER 1994 AWARD
FOR ACHIEVEMENT OF
NAME(1) TARGETED PERFORMANCE LEVELS
-------------------------------------- ---------------------------
<S> <C>
David A. Sydorick..................... $ 1,041,000
Jeremiah P. O'Grady................... $ 1,500,000
Louis V. Bellucci, Sr................. $ 1,935,000
Executive Officers as a Group......... $ 5,791,000
</TABLE>
- ---------------
(1) The positions of the Named Executive Officers are set forth in the Summary
Compensation Table.
In the event that stockholders of the Company do not approve the Plan, the
initial awards will be cancelled.
VOTE REQUIRED. Adoption of the proposal to approve the Plan requires the
affirmative vote of holders of a majority of the shares present in person or by
proxy and entitled to vote on the subject matter at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
JEFFERIES GROUP, INC.
PAY-FOR-PERFORMANCE INCENTIVE PLAN.
PROPOSAL TO APPROVE THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
On March 24, 1994, the Board of Directors of the Company adopted, subject
to stockholder approval, the Non-Employee Directors' Stock Option Plan (the
"Plan"). The Plan is intended to promote ownership by non-employee Directors of
a greater proprietary interest in the Company, thereby aligning such Directors'
interests more closely with the interests of stockholders of the Company, and to
assist the Company in attracting and retaining highly qualified persons to serve
as non-employee Directors.
The Board of Directors adopted the Plan in connection with its
determination of the amount of fees for non-employee Directors. As discussed
above under the caption "Director Compensation," the Board determined to lower
the cash amount of each non-employee Director's annual retainer beginning in May
1994 and provide instead for the annual grant of an option to purchase 1,000
shares under the Plan. The Plan also incorporates and restates the Company's
long-standing policy of automatically granting options to purchase 5,000 shares
to each non-employee Director at the time he or she is first elected or
appointed.
The following summary of the material features of the Plan is qualified in
its entirety by reference to the full text of the Plan, attached hereto as
Appendix C.
The Plan generally provides for an annual grant to each non-employee
Director of an option to purchase 1,000 shares of Common Stock. Such grants will
be made automatically on the date Directors are elected or reelected at the
Company's annual meeting, beginning in 1994. In addition, the Plan provides for
the automatic grant to a non-employee Director, at the time he or she is first
elected or appointed, of an option to purchase 5,000 shares of Common Stock.
Only one option may be granted to a non-employee Director in any calendar year,
so that a Director who is initially elected or appointed in January and receives
a 5,000-share option grant at that time could not receive an additional option
grant on the date of the annual meeting that year, but a Director initially
elected or appointed in December would receive the 5,000-share option grant at
that time and could receive a 1,000-share option grant on the date of the annual
meeting (assuming reelection) during the following year.
23
<PAGE> 26
A non-employee Director means a person who, on an option grant date, is not
and has not been during the preceding three months an employee of the Company or
any parent or subsidiary of the Company. Currently, five Directors would qualify
as non-employee Directors under the Plan.
Stock options granted under the Plan are non-qualified stock options having
an exercise price equal to 100% of the fair market value of the Common Stock at
the date of grant. Directors are not required to pay any cash consideration at
the time of grant of options. A Director may pay the exercise price of an option
in cash or by surrendering previously acquired shares of Common Stock. On March
25, 1994, the reported closing price of the Company's Common Stock on the NASDAQ
National Market System was $43.375 per share.
All options become exercisable three months after the date of grant,
although certain restrictions may apply under the federal securities laws to
transfers of shares acquired upon exercise of an option within six months after
the grant of the option. Options granted under the Plan expire at the earlier of
five years after the date of grant, twelve months after the optionee ceases to
serve as a Director due to death, disability, or retirement at or after age 65,
or sixty days after the optionee ceases to serve as a Director of the Company
for any other reason. If a Director ceases to serve as such for any reason other
than death, disability, or retirement at or after age 65, the option may be
exercised only if it was exercisable at the date of such cessation of service. A
Director will not be treated as having ceased to serve as such if he or she
continues as an employee of the Company or any subsidiary. Options are not
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or to a designated beneficiary in the event of death, and are
exercisable during the Director's lifetime only by the Director.
A total of 75,000 shares of Common Stock are reserved and available for
issuance and delivery under the Plan. Such shares may be authorized and unissued
shares or treasury shares. If any option expires or terminates without having
been exercised in full, the shares remaining subject to such option will again
be available for option grants under the Plan. The number and kind of shares
issuable under the Plan will be appropriately adjusted by the Board in the event
of a recapitalization, reorganization, merger, consolidation, spin-off,
combination, repurchase, exchange of shares or other securities of the Company,
stock split or reverse split, liquidation, dissolution, certain extraordinary
dividends, or other similar corporate transaction or event in order to prevent
dilution or enlargement of Directors' rights under the Plan.
The Plan will be administered by the Board of Directors, provided that any
action by the Board shall be taken only if approved by vote of a majority of the
Directors who are not then eligible to participate in the Plan. The Plan may be
amended, altered, suspended, discontinued, or terminated by the Board without
further stockholder approval, unless such approval is required by law or
regulation or under the rules of any automated quotation system (such as the
NASDAQ National Market System) or stock exchange on which the Common Stock is
then quoted or listed. Thus, stockholder approval will not necessarily be
required for amendments which might increase the cost of the Plan or broaden
eligibility. Stockholder approval will not be deemed to be required under laws
or regulations that condition favorable treatment of optionees on such approval,
although the Board may, in its discretion, seek stockholder approval in any
circumstance in which it deems such approval advisable.
The Plan will become effective upon its approval by stockholders. Unless
earlier terminated by the Board, the Plan will terminate when no shares remain
available for further option grants and no previously granted options remain
outstanding.
The following table sets forth the number of options that would have been
automatically granted to non-employee Directors as a group under the Plan in
1993 had the Plan been in effect during that year:
NEW PLAN BENEFITS
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
---------------------------------------------------- -----------------
<S> <C>
Non-employee Directors
(5 in number)..................................... 9,000
</TABLE>
24
<PAGE> 27
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of
the federal income tax consequences generally arising with respect to options
that may be granted under the Plan. This discussion is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to optionees. The grant of an option will create no tax
consequences for the optionee or the Company. Upon exercise of an option, the
optionee must generally recognize ordinary income equal to the fair market value
of the Common Stock acquired on the date of exercise minus the exercise price,
and the Company will be entitled to a deduction equal to the amount recognized
as ordinary income by the optionee. A disposition of shares acquired upon the
exercise of an option generally will result in short-term or long-term capital
gain or loss measured by the difference between the sale price and the
participant's tax basis (i.e., the exercise price plus the amount recognized as
ordinary income) in such shares. Generally, there will be no tax consequences to
the Company in connection with a disposition of option shares. Different rules
may apply to an option exercised by a Director less than six months after the
date of grant.
VOTE REQUIRED. Adoption of the proposal to approve the Plan requires the
affirmative vote of holders of a majority of the shares present in person or by
proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
JEFFERIES GROUP, INC. NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN.
OTHER MATTERS
Management does not know of any other matters to come before the Annual
Meeting. However, if any additional matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment on such matters.
ANNUAL REPORT AND INDEPENDENT PUBLIC ACCOUNTANTS
The Annual Report, including financial statements, for the Company's fiscal
year ended December 31, 1993, accompanies this Proxy Statement, but is not
deemed a part of the proxy soliciting material. KPMG Peat Marwick was the
Company's certified public accountants for the year ended December 31, 1993. The
appointment of auditors is approved annually by the Board of Directors, which
approval is based, in part, on the recommendations of the Audit Committee. In
making its recommendations, the Audit Committee reviews both the audit scope and
estimated audit fees for the coming year. Stockholder approval is not sought in
connection with this selection.
A representative of KPMG Peat Marwick, the independent auditors who
examined the consolidated financial statements of the Company for 1993, is
expected to be present at the meeting to respond to appropriate questions of
stockholders and will have the opportunity to make a statement if he so desires.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 (including financial statements and schedules thereto), as
filed with the Securities and Exchange Commission, will be furnished without
charge to any stockholder solicited hereby upon written request to Jerry M.
Gluck, Secretary of the Company, at 11100 Santa Monica Boulevard, 12th Floor,
Los Angeles, California 90025.
25
<PAGE> 28
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy material relating to the
1995 Annual Meeting of Stockholders must be received by the Company at its
principal executive offices in Los Angeles, California, at the address set forth
on the first page hereof, no later than December 7, 1994. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
materials relating to the 1995 Annual Meeting of Stockholders, any stockholder
proposal which does not meet all of the requirements for inclusion established
by the Securities and Exchange Commission and the Company's By-Laws at that time
in effect.
For the Board of Directors,
[SIG]
Jerry M. Gluck, Secretary
April 4, 1994
26
<PAGE> 29
APPENDIX A
INCENTIVE COMPENSATION PLAN
FOR
FRANK E. BAXTER,
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
JEFFERIES GROUP, INC.
1. Purpose
The purpose of this Plan is to motivate and reward Mr. Baxter for achieving
profit levels that are in the best interests of the Company's shareholders and
to encourage him to remain with the Company to continue to serve those
interests.
2. Administration
The Plan shall be administered by the Compensation Committee of the Board
of Directors (the "Committee"), who shall have sole discretion in interpreting
the terms of this Plan, in setting goals and objectives as provided for herein,
in defining those items that should or should not be included in the definition
of "profits" for Plan purposes, and in approving any exceptions hereto.
No member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith pursuant to this Plan, and the
members shall be entitled to indemnification and reimbursement in the manner
provided in the Company's charter or by-laws, and under any directors and
officers liability insurance coverage which may be in effect from time to time.
3. Operation of the Plan
(a) At or as close to the start of the Company's fiscal year, as may be
practical, the Committee shall establish the following:
(i) A "target" level of Company profits after tax and all incentive
payments, including payments under this Plan, that must be achieved during
the fiscal year in order for Mr. Baxter to earn his targeted level of
compensation and that is deemed to be a reasonable, desired and competitive
level of return to the Company's shareholders.
(ii) A "target" level of compensation for Mr. Baxter in his capacity
as Chairman, President and Chief Executive Officer of the Company that is
deemed to be reasonable and appropriate based on an analysis of peer
companies and is commensurate with the target level of profits set by the
Committee.
(iii) The amount of the target level of compensation that will be paid
to Mr. Baxter at regular intervals as salary during the Company's fiscal
year.
(iv) The rate, stated as a percentage of after-tax profits, at which
Mr. Baxter's compensation will be reduced from the target compensation
level if such profits do not equal or exceed the target level.
(v) The rate or rates, stated as percentages of after-tax profits, by
which Mr. Baxter's compensation will be increased from the target
compensation level if such profits exceed the target level.
(b) At the end of the Company's fiscal year and subsequent to adjustments
to the Company's financial results, if any, determined by the Company's outside
auditors, the Committee shall:
(i) Determine the amount of the Company's profits after tax and after
incentives from this or any other plan or arrangement and may make
adjustments to such profits as it deems appropriate to reflect gains or
losses on the sale of assets, repurchase or sale of Company stock, issuance
and/or exercise of
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<PAGE> 30
stock options or any other similar transaction that it deems appropriate
and consistent with serving the best interests of the Company's
shareholders.
(ii) Based on such determination of profits, the Committee shall
determine the amount of reduction or increase from Mr. Baxter's target
compensation and shall authorize payment, in accordance with paragraph 4,
below, of the amount, if any, over and above his salary that reflects
compensation earned under this Plan.
4. Payment of Amount Earned Under the Plan
Amounts earned under this Plan, pursuant to paragraph 3(b)(ii), above,
shall be paid as follows:
(a) Thirty-three and one-third percent (33 1/3%) of the amount earned will
be paid as soon after it is determined as may be practical.
(b) Thirty-three and one-third percent (33 1/3%) of the amount earned will
be paid at the end of the next succeeding fiscal year, subject to the provisions
of paragraph 5, below.
(c) Thirty-three and one-third percent (33 1/3%) of the amount earned will
be paid at the end of the second succeeding fiscal year, subject to the
provisions of paragraph 5, below.
5. Adjustments to Deferred Payments
(a) Amounts deferred for payment, pursuant to paragraphs 4(b) and 4(c),
above, will be converted, at the time of their initial determination, into
"phantom" shares of Jefferies Group, Inc. stock. The number of such phantom
shares will be determined by dividing (i) the sum of the amounts deferred by
(ii) the closing price per share as of the first trading day of the Company's
stock following or coincident with the end of the Company's fiscal year for
which the incentive payments were earned.
(b) In the event any portion of the amount deferred for payment, pursuant
to paragraphs 4(b) and 4(c) above, is attributable to profits that are in excess
of "target," as determined pursuant to paragraph 3(a)(i) of this Plan, the
number of phantom shares determined pursuant to paragraph 5(a) will be reduced
prior to payment if profits in either of the two fiscal years during deferral
are below "target."
The amount by which such phantom shares will be reduced is determined by
dividing (i) the product of the amount by which profits are below target (up to
the amount by which profits in the year or years in which the deferred payments
were earned exceeded target), and the difference between the rate applied to
such excess and the rate at which Mr. Baxter's target compensation is reduced
for profits below target, by (ii) an amount equal to the sum of the closing
price of the Company's stock on the first trading day following or coincident
with the close of the Company's fiscal year for which such adjustment is being
determined, and the amount of dividends, if any, declared on shares of the
Company's Common Stock during the years of deferral.
For purposes of the above paragraph, the adjustment will be determined
first using the highest rate paid to Mr. Baxter during a fiscal year for which
there was an "excess" over target and then to the next highest rate, until the
amount of the compensation reduction attributable to the shortfall of profits,
or the amount of the excess profits, whichever is lesser, is offset against the
deferred payments attributable to "excess" profits.
(c) The amount of a deferred payment to be made to Mr. Baxter will be
determined at the time it is to be paid by multiplying the number of phantom
shares, adjusted pursuant to paragraph 5(a), to be paid, by the sum of (i) the
closing price of the Company's stock on the first trading day following or
coincident with the close of the Company's fiscal year for which such adjustment
is being determined, and (ii) the amount of dividends declared on shares of the
Company's Common Stock during the years of deferral.
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<PAGE> 31
6. Forfeiture of Deferred Payments
In the event Mr. Baxter is terminated for cause, he will forfeit any
deferred amounts not yet payable as of the date of such termination. In the
event of Mr. Baxter's approved retirement, termination for other than cause,
death or permanent disability, any deferred amounts not yet payable as of the
date of such event shall be paid on their regularly scheduled payment date, or
earlier at the sole discretion of the Committee, without regard to the
adjustment described in paragraph 5(b), above.
7. Discretionary Payments
Notwithstanding any of the preceding, the Committee, in its sole
discretion, may authorize payments to Mr. Baxter when it deems such payments are
consistent with the purpose of this Plan and are in the best interests of the
Company's shareholders.
8. Withholding of Payroll Taxes
Prior to payment, the Company may withhold such amounts as may be
appropriate to pay payroll taxes on amounts earned under this Plan.
9. Participation in Other Compensation or Benefit Plans
Nothing in this Plan shall preclude Mr. Baxter's participation in any other
Company compensation or benefit plans.
10. No Guarantee of Continued Employment
Nothing in the Plan shall constitute a guarantee of Mr. Baxter's continued
employment with the Company.
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<PAGE> 32
APPENDIX B
JEFFERIES GROUP, INC.
PAY-FOR-PERFORMANCE INCENTIVE PLAN
1. PURPOSE. The purpose of this Pay-For-Performance Incentive Plan (the
"Plan") is to assist Jefferies Group, Inc. (the "Company") and its subsidiaries
in attracting, retaining, motivating, and rewarding employees who occupy key
positions relating to specified Business Units (as hereinafter defined), and
contribute to the growth and annual profitability of the Company and its
subsidiaries through the award of annual incentives.
2. DEFINITIONS. In addition to the terms defined in Section 1 hereof, the
following terms used in the Plan shall have the meanings set forth below:
(a) "Award" means the amount potentially payable to a Participant, as
provided in Section 4.
(b) "Business Unit" means the Company or any department, division,
subsidiary, or other business unit or function of the Company for which separate
operational financial results are available to the Committee, including the
Convertible Securities Department, Corporate Finance Department, Equity
Division, International Convertible Securities Department, Taxable Fixed Income
Division, International Department, Investment Technology Group, Inc., and such
successor or other business units as may be added from time to time.
(c) "Business Unit Income" means the pre-tax net income, before
payment of bonuses (including amounts payable under the Plan), capital charges
and general and administrative expenses of a specified Business Unit for the
Performance Year.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation (including a proposed
regulation) thereunder shall be deemed to include successor provisions or
regulations.
(e) "Committee" means the Compensation Committee of the Board of
Directors, or such subcommittee thereof as may be designated by the Board of
Directors to administer the Plan. Each member of the Committee shall be an
"outside director" for purposes of Section 162(m) of the Code and regulations
thereunder (including Proposed Regulation 1.162-27(e)(3) and (h)(2)).
(f) "Eligible Employee" means each key employee who is in charge of a
Business Unit or whose performance can be expected to have a substantial effect
on the results of a Business Unit, as determined by the Committee.
(g) "Participant" means an Eligible Employee granted an Award by the
Committee for a designated Performance Year.
(h) "Performance Objectives" means the measures of performance
specified by the Committee in accordance with Section 4, the achievement of
which is a condition of payment of final Awards.
(i) "Performance Year" means the fiscal year to which an Award
relates; provided, however, that, with respect to a Participant who becomes
employed in a new position such that the Committee determines to grant an Award
after the start of a fiscal year, the Performance Year shall be the portion of
the fiscal year during which such Participant is so employed.
(j) "Revenues" means all revenues generated by a specified Business
Unit for the Performance Year.
(k) "EVA" (economic value added) means the amount by which a Business
Unit's after-tax income exceeds the cost of the capital used by the Business
Unit during the Performance Year. To determine such cost of the capital used,
the Committee will, when it establishes a Performance Objective based on EVA,
B-1
<PAGE> 33
determine the average cost of capital for the Company (stated as a percentage)
for the Performance Year, which cost of capital will be multiplied by the amount
of capital actually used by the Business Unit during the Performance Year.
3. ADMINISTRATION.
(a) Generally. The Committee shall administer the Plan in accordance with
its terms, and shall have all powers necessary to accomplish such purpose,
including the power to specify rules, Election Forms and other forms, and
instructions for such forms. Any actions of the Committee with respect to the
Plan shall be conclusive and binding upon all persons interested in the Plan.
The Committee shall have the power and authority to construe and interpret the
Plan, to define the terms used herein, to prescribe, amend, and rescind rules
and regulations relating to the administration of the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
(b) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants, or any
executive compensation consultant, legal counsel, or other professional retained
by the Company to assist in the administration of the Plan. Neither a member of
the Committee nor any officer or employee of the Company or a subsidiary acting
on behalf of the Committee shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and such persons shall, to the extent permitted by law, be fully
indemnified, reimbursed, and protected by the Company, as provided in the
Company's Certificate of Incorporation and By-Laws, with respect to any such
action, determination, or interpretation.
4. AWARDS.
(a) Granting of Awards. Prior to the date on which Performance Objectives
must be established in order to comply with Section 162(m) of the Code with
respect to each Performance Year, the Committee, in its sole discretion, shall
select the Eligible Employees to whom Awards will be granted for such
Performance Year and will establish the Performance Objectives and other terms
of such Awards. An Eligible Employee may be granted an Award for more than one
Business Unit.
(b) Performance Objectives. The Performance Objectives for an Award shall
consist of a specified percentage or percentages of the Business Unit Income,
Revenues and/or EVA of a Business Unit, the results of which the Committee
believes will be substantially affected by the performance of the Participant,
and a target amount of Business Unit Income, Revenues and/or return on capital
of such Business Unit required before any portion of the Award will become
payable. The Committee shall, in its sole discretion, establish such percentage
or percentages and targets, subject to Section 4(c). Performance Objectives
shall be objective and shall otherwise meet the requirements of Section
162(m)(4)(C) of the Code and regulations thereunder (including Proposed
Regulation 1.162-27(e)(2)). Performance Objectives may differ for Awards to
different Participants, except that no business criteria other than as specified
in this Section 4(b) may be used in establishing the Performance Objective for
an Award. To the extent consistent with Section 162(m)(4)(C) of the Code and
regulations thereunder (including Proposed Regulation 1.162-27(e)(2)), the
Committee may do the following:
(i) provide that the annual income or EVA of the Business Unit
considered as the Performance Objective shall be adjusted downward to
reflect specified charges, expenses, and other amounts (including amounts
that would otherwise constitute bonuses, capital charges or general and
administrative expenses);
(ii) adjust or modify Awards or terms of Awards and Performance
Objectives (x) in recognition of unusual or nonrecurring events affecting
the Company or any Business Unit, or the financial statements or results
thereof, or in response to changes in applicable laws (including tax,
disclosure, and other laws), regulations, accounting principles, or other
circumstances deemed relevant by the Committee, (y) with respect to any
Participant whose position or duties with the Company or any subsidiary
changes during a
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<PAGE> 34
Performance Year, or (z) with respect to any person who first becomes a
Participant after the first day of the Performance Year;
(iii) defer all or any part of interim payments until certification of
the final Award for the Performance Year;
(iv) defer all or any part of final Award payments until the earliest
time such payments may be made without causing them to fail to be
deductible by the Company under Section 162(m) of the Code; and
(v) consider other performance criteria in exercising discretion under
Section 4(d) hereof.
(c) Maximum Award. The maximum percentage of Business Unit Income,
Revenues and EVA of a Business Unit that may be specified as the Performance
Objectives and therefore potentially payable under an Award to any Participant
for any Performance Year shall be 30%, 10% and 25%, respectively. In addition,
the maximum combined percentage of the Business Unit Income, Revenues and EVA of
a Business Unit that may be specified as the Performance Objectives for Awards
to all Participants with respect to any one Business Unit shall be 30%, 10% and
25%, respectively.
(d) Determination of Amounts Payable; Limits on Discretion. As promptly as
practicable following the end of each Performance Year, the Committee shall
determine whether and the extent to which the terms of Awards have been
satisfied, including the extent to which Performance Objectives have been
achieved and other material terms of Awards have been satisfied, and the amounts
payable to each Participant with respect to his or her Award. Such
determinations shall be set forth in a written certification (including for this
purpose approved minutes of the meeting at which such determinations were made).
The Committee may, in its sole discretion, in view of its assessment of the
business strategy of the Company and Business Units thereof, performance of
comparable organizations, economic and business conditions, personal performance
of the Participant, and any other circumstances deemed relevant, decrease the
amount determined to be payable as a final Award or cancel such Award. Other
provisions of the Plan notwithstanding, the Committee shall have no discretion
to increase the amounts payable with respect to an Award.
(e) Termination. If a Participant ceases to be employed by the Company or
a participating subsidiary prior to the end of a Performance Year for any reason
other than death, disability (as determined by the Committee), normal
retirement, or early retirement with the approval of the Committee, no final
Award for such Performance Year shall be payable to such Participant. If such
cessation of employment results from such Participant's death, disability (as
determined by the Committee), normal retirement, or early retirement with the
approval of the Committee, the Committee shall determine, in its sole discretion
and in such manner as it may deem reasonable, the amount payable as a final
Award under Section 4(d) achieved or resulting from the portion of such
Performance Year completed at the date of cessation of employment, and the
amount of the final Award payable based on such determinations. Such
determinations shall be set forth in a written certification, as specified in
Section 4(d). Such Participant or his or her beneficiary shall be entitled to
receive payment of such final Award, reduced by any payments previously
received, at the earliest time such payment may be made without causing the
payment to fail to be deductible by the Company under Code Section 162(m) and
provided that, in the event the final Award is less than the payments previously
made to the Participant, the Participant shall repay such amounts to the Company
forthwith.
(f) Payment of Awards. Except as provided in Section 4(e) and this Section
4(f) and subject to Section 4(b) and 4(h), each Participant may receive interim
payments as frequently as semimonthly, at the Committee's discretion, provided,
however, that any such payments made exceeding the final Award as certified by
the Committee shall be repaid to the Company forthwith. If and to the extent
specified by the Committee, each Participant shall have the right to defer his
or her receipt of part or all of any payment due with respect to an Award under
and in accordance with the terms and conditions of the Company's Capital
Accumulation Plan for Key Employees or other specified deferred compensation
plan. If a Participant dies prior to payment or deferral of payment of a final
Award hereunder, any remaining payments due to such
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<PAGE> 35
Participant shall be paid to person(s) designated as beneficiary(ies) in an
election form filed with the Company's Secretary and specifically applicable to
amounts payable under the Plan, without regard to any deferral election.
(g) Tax Withholding. The Company and any participating subsidiary shall
have the right to deduct from any amount payable hereunder any amounts that
federal, state, local, or foreign tax law requires to be withheld with respect
to such payment.
(h) Conformity of Plan to Code Section 162(m). It is the intent of the
Company that compensation under the Plan shall constitute "performance-based
compensation" within the meaning of Code Section 162(m)(4)(C) and regulations
thereunder (including Proposed Regulation 1.162-27(e), and subject to the
transition rules under Proposed Regulation 1.162-27(h)(2)). Accordingly, terms
used in the Plan shall be interpreted in a manner consistent with Section 162(m)
of the Code and regulations thereunder (including Proposed Regulation 1.162-27).
If any provision of the Plan or any agreement evidencing an Award hereunder does
not comply or is inconsistent with the requirements of Code Section 162(m)(4)(C)
or regulations thereunder (including Proposed Regulations 1.162-27(e) and
(h)(2)), such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
5. GENERAL PROVISIONS.
(a) No Rights to Final Award or Rights to Participate. Until the Committee
has determined to make a final Award to a Participant under Section 4(d) or (e),
a Participant's selection to participate, grant of an Award, and other events
under the Plan shall not be construed as a commitment that any Award shall
become a final Award or that payment will be made with respect to an Award under
the Plan. Nothing in the Plan shall be deemed to give any Eligible Employee any
right to participate in the Plan except upon determination of the Committee
under Section 4.
(b) No Rights to Employment. Nothing contained in the Plan or in any
documents related to the Plan or any Award shall confer upon any Eligible
Employee or Participant any right to continue as an Eligible Employee,
Participant, or in the employ of the Company or a subsidiary or constitute any
contract or agreement of employment, or interfere in any way with the right of
the Company or a subsidiary to reduce such person's compensation, to change the
position held by such person, or to terminate the employment of such person,
with or without cause.
(c) Non-Transferability. No benefit payable under, or interest in, this
Plan shall be transferable by a Participant except upon a Participant's death by
will or the laws of descent and distribution or to a designated beneficiary, or
otherwise be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any such attempted action shall
be void.
(d) Unfunded Plan. The Plan is intended to constitute an "unfunded" plan
for incentive and deferred compensation. With respect to any amounts payable to
a Participant pursuant to an Award, nothing contained in the Plan (or in any
documents related thereto), nor the creation or adoption of the Plan, the grant
of any Award, or the taking of any other action taken pursuant to the provisions
of the Plan shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
(e) Participation in Other Compensation or Benefit Plans. Nothing in the
Plan shall preclude any Participant from participation in any other compensation
or benefit plan of the Company.
(f) Governing Law. The Plan and all related documents shall be governed
by, and construed in accordance with, the laws of the State of New York (except
to the extent the Delaware General Corporation Law and provisions of federal law
may be applicable). If any provision hereof shall be held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
of the Plan shall continue to be fully effective.
(g) Amendment and Termination of Plan and Awards. The Board of Directors
may, at any time, terminate or, from time to time, amend, modify, or suspend the
Plan, provided that any such action shall be
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<PAGE> 36
subject to initial approval by the Committee and to stockholder approval if and
to the extent required by law, regulation, or the rules of any stock exchange or
automated quotation system upon which the Company's Common Stock may be listed
or quoted, or to comply with Code Section 162(m). Except as provided in Section
4 (including the limitation under Section 4(h)), the Committee may modify the
terms and provisions of any Awards theretofore awarded to any Participants which
have not become final Awards and been settled by payment (or would have been
settled by payment but for an election to defer payment pursuant to Section
4(f)).
(h) Effective Date. The Plan shall become effective as of January 1, 1994,
for Performance Years beginning on or after such date, and shall remain in
effect until such time as it may be terminated pursuant to Section 5(g).
(i) Stockholder Approval. Prior to completion of the initial Performance
Year under the Plan, the Plan shall be submitted to, and must be approved in a
separate vote by, the affirmative votes of the holders of a majority of voting
securities present in person or represented by proxy and entitled to vote on the
subject matter, at a meeting of Company stockholders duly held in accordance
with the Delaware General Corporation Law, or any adjournment thereof, or by the
written consent of the holders of a majority of voting securities entitled to
vote, in accordance with applicable provisions of the Delaware General
Corporation Law and Section 162(m) of the Code. Any Awards granted under the
Plan prior to such approval of stockholders shall be effective when granted, but
if stockholders fail to approve the Plan as specified hereunder, any previously
granted Award shall be forfeited and cancelled and any payments previously made
with respect to such Awards shall be repaid to the Company forthwith. In
addition, the Plan shall be submitted to stockholders for reapproval at such
times, if any, required in order that compensation under the Plan shall qualify
as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder.
As approved by the Compensation Committee and adopted by the Board of
Directors on March 24, 1994.
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APPENDIX C
JEFFERIES GROUP, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purpose. The purpose of this Non-Employee Directors' Stock Option Plan
(the "Plan") of Jefferies Group, Inc. (the "Company") is to promote ownership by
non-employee Directors of a greater proprietary interest in the Company, thereby
aligning such Directors' interests more closely with the interests of
stockholders of the Company, and to assist the Company in attracting and
retaining highly qualified persons to serve as non-employee Directors.
2. Definitions. In addition to terms defined elsewhere in the Plan, the
following are defined terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986, as amended.
References to any provision of the Code include regulations thereunder and
successor provisions and regulations.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act include rules
thereunder and successor provisions and rules.
(c) "Fair Market Value" of Stock means the closing price of the Stock
on the date on which such value is to be determined, as reported for such
day on the NASDAQ National Market System.
(d) "Option" means the right, granted to a Participant under Section
6, to purchase Stock at the specified exercise price for a specified period
of time under the Plan.
(e) "Participant" means a Director who is eligible to receive and is
granted Options under the Plan.
(f) "Stock" means the Common Stock, $.01 par value, of the Company and
such other securities as may be substituted for Stock or such other
securities pursuant to Section 7.
3. Shares Available Under the Plan. The total number of shares of Stock
reserved and available for delivery under the Plan is 75,000, subject to
adjustment as provided in Section 7 below. Such shares may be authorized but
unissued shares or treasury shares. If any Option expires or terminates for any
reason without having been exercised in full, the shares remaining subject to
such Option will again be available for delivery under the Plan.
4. Administration of the Plan. The Plan will be administered by the Board
of Directors of the Company, provided that any action by the Board of Directors
relating to the Plan will be taken only if, in addition to any other required
vote, approved by the affirmative vote of a majority of the Directors who are
not then eligible to participate under the Plan.
5. Eligibility. Each Director of the Company who, on any date on which an
Option is to be granted hereunder, is not, and has not been during the preceding
three months, an employee of the Company or any parent or subsidiary of the
Company will be eligible to receive a grant of an Option at such date. No person
other than those specified in this Section 5 will participate in the Plan.
6. Stock Options. An Option to purchase 5,000 shares of Stock will be
granted under the Plan to each person who, after the effective date of the Plan,
is first elected or appointed to serve as a Director of the Company, such grant
to be effective at the date of such first election or appointment, if such
Director is then eligible to receive an Option grant. In addition, an Option to
purchase 1,000 shares of Stock will be granted each year to each Director of the
Company who is then eligible to receive an Option grant at the close of business
on the day of the Company's annual meeting of stockholders at which Directors
(or a class of Directors if the Company then has a classified Board of
Directors) are elected or reelected by the Company's stockholders. The foregoing
notwithstanding, no Director may be granted an Option more than once during
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any one calendar year under the Plan. Options granted under the Plan will be
non-qualified stock options which will be subject to the following terms and
conditions:
(a) Exercise Price. The exercise price per share of Stock purchasable
under an Option will be equal to 100% of the Fair Market Value of Stock on
the date of grant of the Option.
(b) Option Term. Each Option will expire at the earlier of (i) five
years after the date of grant, (ii) twelve months after the Participant
ceases to serve as a Director of the Company due to death, disability, or
retirement at or after age 65, or (iii) sixty days after the Participant
ceases to serve as a Director of the Company for any reason other than
death, disability, or retirement at or after age 65.
(c) Exercisability. Each Option will become fully exercisable
beginning three months after the date of grant, and will thereafter remain
exercisable until the Option expires; provided, however, that an Option
previously granted to a Participant will be exercisable after the
Participant ceases to serve as a Director of the Company for any reason
other than death, disability, or retirement at or after age 65 only if the
Option was exercisable at the date of such cessation of service.
(d) Method of Exercise. Each Option may be exercised, in whole or in
part, at such time as it is exercisable and prior to its expiration by
giving written notice of exercise to the Company specifying the Option to
be exercised and the number of shares to be purchased, and accompanied by
payment in full of the exercise price in cash (including by check) or by
surrender of shares of Stock of the Company acquired by the Participant at
least six months prior to the exercise date and having a Fair Market Value
at the time of exercise equal to the exercise price, or a combination of a
cash payment and surrender of such Stock.
7. Adjustment Provisions. In the event any recapitalization,
reorganization, merger, consolidation, spin-off, combination, repurchase,
exchange of shares or other securities of the Company, stock split or reverse
split, extraordinary dividend having a value in excess of 150% of the quarterly
dividends paid during the preceding twelve-month period, liquidation,
dissolution, or other similar corporate transaction or event affects Stock such
that an adjustment is determined by the Board of Directors to be appropriate in
order to prevent dilution or enlargement of Participants' rights under the Plan,
then the Board of Directors will, in a manner that is proportionate to the
change to the Stock and is otherwise equitable, adjust (i) any or all of the
number or kind of shares of Stock reserved for issuance and delivery under the
Plan, (ii) the number or kind of shares of Stock to be subject to each automatic
grant of Options under Section 6, and (iii) the number and kind of shares of
Stock issuable or deliverable upon exercise of outstanding Options, and/or the
exercise price per share thereof (provided that no fractional shares will be
issued upon exercise of any Option). The foregoing notwithstanding, no
adjustment may be made hereunder except as shall be necessary to preserve,
without exceeding, the value of outstanding Options and potential grants of
Options. If at any date an insufficient number of shares are available for the
automatic grant of Options at that date, Options will be automatically granted
under Section 6 proportionately to Participants to the extent shares are
available.
8. Changes to the Plan. The Board of Directors may amend, alter, suspend,
discontinue, or terminate the Plan or authority to grant Options under the Plan
without the consent of stockholders or Participants, except that any such action
will be subject to the approval of the Company's stockholders at the next annual
meeting of stockholders having a record date after the date such action was
taken if such stockholder approval is required by any federal or state law or
regulation or the rules of any automated quotation system or stock exchange on
which the Stock may then be quoted or listed, or if the Board of Directors
determines in its discretion to seek such stockholder approval; provided,
however, that, without the consent of an affected Participant, no such action
may materially impair the rights of such Participant with respect to any
previously granted Option; and provided further, that any Plan provision that
specifies the Directors who may receive grants of Options, the amount and price
of securities to be granted to such Directors, and the timing of grants to such
Directors, or is otherwise a "plan provision" referred to in Rule
16b-3(c)(2)(ii)(B) under the Exchange Act, shall not be amended more than once
every six months, other than to comport with changes in the Code or the rules
thereunder.
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<PAGE> 39
9. General Provisions.
(a) Consideration for Grants; Agreements. Options will be granted under the
Plan in consideration of the services of Participants and, except for the
payment of the Option exercise price, no other consideration shall be required
therefor. Grants of Options will be evidenced by agreements executed by the
Company and the Participant containing the terms and conditions set forth in the
Plan together with such other terms and conditions not inconsistent with the
Plan as the Board of Directors may from time to time approve.
(b) Compliance with Laws and Obligations. The Company will not be obligated
to issue or deliver Stock in connection with any Option in a transaction subject
to the registration requirements of the Securities Act of 1933, as amended, or
any state securities law, any requirement under any listing agreement between
the Company and any automated quotation system or national securities exchange,
or any other law, regulation, or contractual obligation, until the Company is
satisfied that such laws, regulations, and other obligations of the Company have
been complied with in full. Certificates representing shares of Stock delivered
under the Plan will be subject to such stop-transfer orders and other
restrictions as may be applicable under such laws, regulations, and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.
(c) Non-transferability. Options and any other right under the Plan that
may constitute a "derivative security" as generally defined in Rule 16a-1(c)
under the Exchange Act will not be transferable by a Participant except by will
or the laws of descent and distribution (or to a designated beneficiary in the
event of a Participant's death), and will be exercisable during the lifetime of
a Participant only by such Participant or his or her guardian or legal
representative.
(d) Compliance with Rule 16b-3. It is the intent of the Company that this
Plan comply in all respects with applicable provisions of Rule 16b-3 under the
Exchange Act in connection with any grant of Options to a Participant.
Accordingly, if any provision of this Plan or any agreement hereunder does not
comply with the requirements of Rule 16b-3 as then applicable to any such grant
to a Participant, or would cause any Participant no longer to be deemed a
"disinterested person" within the meaning of Rule 16b-3, such provision will be
construed or deemed amended to the extent necessary to conform to such
requirements with respect to such Participant. In addition, the Board of
Directors shall have no authority to make any amendment, alteration, suspension,
discontinuation, or termination of the Plan or any agreement hereunder, to make
any adjustment under Section 9, or take other action if and to the extent such
authority would cause a Participant's transactions under the Plan not to be
exempt, or would cause Participants no longer to be deemed "disinterested
persons," under Rule 16b-3 under the Exchange Act.
(e) Continued Service as an Employee. If a Participant ceases serving as a
Director and, immediately thereafter, he or she is employed by the Company or
any subsidiary, then, solely for purposes of Sections 6(b) and (c) of the Plan,
such Participant will not be deemed to have ceased service as a Director at that
time, and his or her continued employment by the Company or any subsidiary will
be deemed to be continued service as a Director; provided, however, that such
former Director will not be eligible for additional grants of Options under the
Plan.
(f) No Right to Continue as a Director. Nothing contained in the Plan or
any agreement hereunder will confer upon any Participant any right to continue
to serve as a Director of the Company.
(g) No Stockholder Rights Conferred. Nothing contained in the Plan or any
agreement hereunder will confer upon any Participant any rights of a stockholder
of the Company unless and until an Option is duly exercised hereunder.
(h) Governing Law. The validity, construction, and effect of the Plan and
any agreement hereunder will be determined in accordance with the laws of the
State of Delaware and applicable federal law.
10. Effective Date and Duration of Plan. The Plan will be effective at the
time stockholders of the Company have approved it by the affirmative votes of
the holders of a majority of the shares of Stock present
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<PAGE> 40
in person, or represented by proxy, and entitled to vote at a meeting of the
Company's stockholders duly held in accordance with the Delaware General
Corporation Law or any adjournment thereof. Unless earlier terminated by action
of the Board of Directors, the Plan will remain in effect until such time as no
Stock remains available for issuance or delivery under the Plan and the Company
has no further rights or obligations with respect to outstanding Options under
the Plan.
Adopted by the Board of Directors: March 24, 1994
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<PAGE> 41
JEFFERIES GROUP, INC.
Proxy/Voting Direction Card for
Annual Meeting of Stockholders on May 5, 1994
This Proxy/Voting Direction is solicited by Management of the Company.
The undersigned hereby appoints Frank E. Baxter, Tracy G. Herrick and Barry M.
Taylor, and each of them, as proxies, with full power of substitution, to
represent the undersigned and to vote all shares of Common Stock of Jefferies
Group, Inc., held of record by the undersigned on March 25, 1994 or which the
undersigned would be otherwise entitled to vote at the Annual Meeting of
Stockholders to be held on May 5, 1994 and any adjournment thereof, upon all
matters that may properly come before the meeting. All shares votable by the
undersigned, including shares held of record by agents or trustees for the
undersigned as participants in the Jefferies Group, Inc. Employee Stock
Ownership Plan, Employee Profit Sharing Plan and Employee Stock Purchase Plan,
will be voted by the proxies named above in the manner specified on the reverse
side of this card, and such proxies are authorized to vote in their discretion
on such other matters as may properly come before the meeting.
Management recommends a vote FOR the election of Directors and FOR adoption of
the proposed plans.
1. Election of Directors:
Frank E. Baxter, Richard G. Dooley, Tracy G. Herrick, Michael L. Klowden,
Frank J. Macchiarola, Barry M. Taylor, Mark A. Wolfson.
2. Adoption of the Pay-for-Performance Incentive Plan.
3. Adoption of the Non-Employee Directors' Stock Option Plan.
(continued and to be signed on the reverse side)
Please mark your
[X] votes as in this
example.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
-----------------------------------------------------
election of Directors and FOR the adoption of the proposed Plans.
- ----------------------------------------------------------------
FOR WITHHELD
1. Election of Directors. [ ] [ ]
(see reverse)
For, except vote withheld from
the following Nominee(s):
----------------------------------
FOR AGAINST ABSTAIN
2. Adoption of the Pay-for-Performance [ ] [ ] [ ]
Incentive Plan.
3. Adoption of the Non-Employee [ ] [ ] [ ]
Directors' Stock Option Plan
The undersigned acknowledges receipt of the Annual Report, the Notice of Annual
Meeting of Stockholders and the Proxy Statement, and hereby revokes all
previously granted proxies.
(Please sign exactly as name appears. Joint owners should each sign personally.
Trustees and others signing in a representative capacity should indicate the
capacity in which they sign.)
----------------------------------
----------------------------------
SIGNATURE(S) DATE
