SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 31, 1999 Commission file number 1-8527
A.G. EDWARDS, INC.
State of Incorporation: DELAWAREI.R.S. Employer Identification No: 43-1288229
ONE NORTH JEFFERSON AVENUE
ST. LOUIS, MISSOURI 63103
Registrant's telephone number, including area code: (314) 955-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At September 30, 1999, there were 92,092,328 shares of A.G. Edwards, Inc. common
stock, par value $1, issued and outstanding.
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A.G. EDWARDS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Consolidated balance sheets 1
Consolidated statements of earnings 2
Consolidated statements of cash flows 3
Notes to consolidated financial statements 4-6
Management's financial discussion 7-9
PART II.OTHER INFORMATION 10
SIGNATURES 11
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<S> August 31, February 28,
ASSETS 1999 1999
<C> <C>
Cash and cash equivalents $ 139,488 $ 99,499
Cash and government securities, segregated under
federal and other regulations 59,226 57,959
Securities purchased under agreements to resell 7,064 14,838
Securities borrowed 250,249 243,507
Receivables:
Customers 2,959,891 2,626,316
Brokers, dealers and clearing organizations 18,387 27,855
Fees, dividends and interest 77,512 52,077
Securities inventory, at fair value:
State and municipal 206,496 144,180
Government and agencies 75,148 50,618
Corporate 116,589 72,297
Property and equipment, at cost, net of accumulated depreciation
and amortization of $297,833 and $276,229 257,796 240,367
Deferred income taxes 80,252 88,312
Other assets 103,650 85,307
$ 4,351,748 $3,803,132
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans $ 535,000 $ --
Checks payable 214,294 226,516
Securities loaned 393,243 229,542
Payables:
Customers 693,687 949,076
Brokers, dealers and clearing organizations 132,009 68,419
Securities sold but not yet purchased, at fair value 30,219 45,659
Employee compensation and related taxes 527,995 578,073
Income taxes 54,917 24,645
Other liabilities 66,254 53,465
Total Liabilities 2,647,618 2,175,395
Stockholders' Equity:
Preferred stock, $25 par value:
Authorized, 4,000,000 shares, none issued
Common stock, $1 par value:
Authorized, 550,000,000 shares
Issued, 96,463,114 shares 96,463 96,463
Additional paid-in capital 250,538 239,998
Retained earnings 1,478,642 1,348,094
1,825,643 1,684,555
Less - Treasury stock, at cost (3,777,845 and 1,625,042 shares) 121,513 56,818
Total Stockholders' Equity 1,704,130 1,627,737
$ 4,351,748 $3,803,132
<FN>
See Notes to Consolidated Financial Statements.
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
August 31 August 31
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES:
Commissions $317,887 $292,802 $ 675,026 $ 603,050
Principal transactions 72,440 48,242 130,303 100,245
Investment banking 57,063 55,986 116,087 115,306
Asset management and service fees 126,826 99,659 248,813 195,073
Interest 57,780 51,640 111,090 102,427
Other 4,106 2,867 5,919 5,284
636,102 551,196 1,287,238 1,121,385
EXPENSES:
Compensation and benefits 407,001 352,546 822,865 718,392
Communications 26,527 25,670 53,857 51,573
Occupancy and equipment 33,879 29,811 65,740 56,517
Floor brokerage and clearance 5,210 4,928 10,711 10,022
Interest 5,743 1,688 8,180 3,112
Other 24,981 19,766 56,251 41,086
503,341 434,409 1,017,604 880,702
EARNINGS BEFORE INCOME TAXES 132,761 116,787 269,634 240,683
INCOME TAXES 50,450 44,530 102,780 92,420
NET EARNINGS $ 82,311 $ 72,257 $ 166,854 $ 148,263
Earnings per share:
Diluted $ 0.86 $ 0.74 $ 1.74 $ 1.52
Basic $ 0.88 $ 0.76 $ 1.77 $ 1.55
Dividends per share $ 0.15 $ 0.14 $ 0.30 $ 0.28
Average common and common equivalent
shares outstanding (000's omitted):
Diluted 95,245 97,232 95,690 97,654
Basic 93,515 95,004 94,085 95,444
<FN>
See Notes to Consolidated Financial Statements.
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended August 31,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 166,854 $ 148,263
Noncash items included in earnings 48,424 39,464
Change in:
Segregated cash and government securities (1,267) (4,483)
Net securities borrowed and loaned 156,959 6,006
Net payable to brokers, dealers
and clearing organizations 73,058 407,518
Net receivable from customers (588,964) (532,936)
Fees, dividends and interest receivable (25,435) (13,808)
Net securities inventory (146,578) 194,223
Other assets and liabilities (44,901) (121,511)
Net cash from operating activities (361,850) 122,736
Cash Flows from Investing Activities:
Securities purchased under agreements to resell 7,774 24,363
Capital expenditures and other investments (51,234) (32,098)
Net cash from investing activities (43,460) (7,735)
Cash Flows from Financing Activities:
Bank loans 535,000 --
Employee stock transactions 15,513 24,003
Cash dividends paid (28,232) (25,785)
Purchase of treasury stock (76,982) (91,336)
Net cash from financing activities 445,299 (93,118)
Net change in Cash and Cash Equivalents 39,989 21,883
Cash and Cash Equivalents, Beginning of Period 99,499 84,764
Cash and Cash Equivalents, End of Period $ 139,488 $ 106,647
Income tax payments totaled $54,657 and $71,616 during the six month periods
ended August 31, 1999, and 1998, respectively.
Interest payments totaled $6,229 and $2,748 during the six month periods ended
August 31, 1999, and 1998, respectively.
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1999
(In thousands, except per share amounts)
(Unaudited)
FINANCIAL STATEMENTS:
The consolidated financial statements include the accounts of A.G. Edwards,
Inc., and its wholly owned subsidiaries (collectively referred to as the
"Company"), including its principal subsidiary, A.G. Edwards & Sons, Inc.
("Edwards"), and have been prepared in conformity with generally accepted
accounting principles. These financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year
ended February 28, 1999. All adjustments that, in the opinion of management,
are necessary for a fair presentation of the results of operations for the
interim periods have been reflected. All such adjustments consist of normal
recurring accruals unless otherwise disclosed in these interim financial
statements. The results of operations for the six months ended
August 31, 1999, are not necessarily indicative of the results for the year
ending February 29, 2000. Where appropriate, prior year's financial
information has been reclassified to conform with the current year presentation.
Comprehensive earnings for the six month periods ended August 31, 1999 and 1998
were equal to the Company's net earnings.
STOCKHOLDERS' EQUITY:
Under the stock repurchase program, the Company purchased 2,484 shares at an
aggregate cost of $76,982 during the six month period ended August 31, 1999.
For the six month period ended August 31, 1998, the Company purchased 2,164
shares at an aggregate cost of $91,336.
NET CAPITAL REQUIREMENTS:
Edwards is subject to the net capital rule administered by the Securities and
Exchange Commission ("SEC"). This rule requires Edwards to maintain a minimum
net capital, as defined, and to notify and sometimes obtain the approval of the
SEC and other regulatory organizations for substantial withdrawals of capital
and loans to affiliates. At August 31, 1999, Edwards' net capital of $1,186,235
was $1,127,218 in excess of the minimum required.
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1999
(In thousands, except per share amounts)
(Unaudited)
EARNINGS PER SHARE:
The following table presents the computations of basic and diluted earnings per
share:
Three Months Ended Six Months Ended
August 31 August 31
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net earnings available to common stockholders $82,311 $72,257 $166,854 $148,263
Weighted average basic shares outstanding 93,515 95,004 94,085 95,444
Dilutive effect of employee stock plans 1,730 2,228 1,605 2,210
Total weighted average diluted shares 95,245 97,232 95,690 97,654
Diluted earnings per share $ 0.86 $ 0.74 $ 1.74 $ 1.52
Basic earnings per share $ 0.88 $ 0.76 $ 1.77 $ 1.55
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ENTERPRISE WIDE DISCLOSURE:
The Company operates and is managed as a single business segment, that of
providing investment services to its clients through its financial consultants
in more than 650 branch offices. Transaction services include commissions and
sales credits earned by executing or facilitating the execution of security and
commodity trades. Asset management fees are earned by providing portfolio
advisory services through third-party managers, including mutual funds, and the
Company's in-house portfolio managers. The Company earns interest revenue
principally from financing its clients' margin accounts, debt securities carried
for resale and short-term investments.
The following table presents the Company's revenue by type of service for the
six month periods ended August 31:
1999 1998
Transaction services $ 937,324 $ 829,388
Asset management services 214,689 168,679
Interest 111,090 102,427
Other 24,135 20,891
$1,287,238 $1,121,385
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A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1999
(In thousands, except per share amounts)
(Unaudited)
RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." As issued, SFAS No. 133 was
effective for fiscal periods beginning after June 15, 1999. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS
No. 137 defers the effective date of SFAS No. 133 for one year to fiscal years
beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to
have a material effect on the Company's financial statements.
* * * * *
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A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
SIX MONTHS ENDED AUGUST 31, 1999 COMPARED TO
SIX MONTHS ENDED AUGUST 31, 1998
Results of Operations
Retail investor activity continued to increase during the six months ended
August 31, 1999. The Dow Jones Industrial Average (the Dow) began this fiscal
year at 9,307 and rose dramatically to a peak of 11,326 in August, only to
decline to 10,829 by August 31, 1999. The New York Stock Exchange and Nasdaq
overall trading volumes increased 25% and 29%, respectively, over the same
period last year which contributed to a 22% increase in equity related customer
trades for the Company. During the period the Federal Reserve raised the
federal funds interest rate from 4.75% to 5.25% which contributed to a rise in
yields on debt products. The number of branches increased 38 to 654 and the
number of financial consultants increased 281 to 6,669 since the end of the same
period last year.
Total revenues increased $166 million (15%) to $1.3 billion from $1.1 billion
last year. Expenses were $1 billion, an increase of $137 million (16%). Net
Profit margins declined to 13.0% this year from 13.2% last year.
Total commission revenue increased $72 million (12%). Equity related commission
revenue rose $62 million (17%) as a result of the increase in customer trades,
reflecting increased exchange volume and, to a lesser extent, continued
expansion of the Company's distribution system. Insurance revenue increased $15
million (20%) primarily due to the continued strong demand for variable
annuities as a reflection of the strong equity markets. Mutual fund revenue
decreased $6 million (4%) due to an increasing number of customers investing in
fee-based mutual fund advisory programs provided by the Company as opposed to
commissionable transactions.
Principal transaction revenue increased $30 million (30%) primarily as a result
of a $24 million (33%) rise in revenue from debt products. Sales of debt
products rose primarily due to higher yields this year which fueled an increase
in investor demand for fixed income products. Corporate equity revenue
increased $6 million (22%) due to higher customer trades reflecting higher
NASDAQ volume.
Investment banking revenue increased slightly. Underwriting fees and
concessions rose $8 million (9%) primarily due to increased customer demand for
certificates of deposit resulting from higher yields. Management fees declined
$7 million (24%) due to participation as manager or co-manager in a smaller
number of corporate offerings coupled with decreased activity in mergers and
acquisitions this year.
Asset management and service fees increased $54 million (28%). Fees from third-
party mutual funds rose $29 million (25%) reflecting the strong industry-wide
cash flows into funds and higher market valuations of existing assets. Fee-
based revenue resulting from the administration of client assets under third-
party management and from the Company's management services improved $17 million
(33%) due to an increase in the number of accounts and assets under management.
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Interest revenue increased $9 million (8%). Interest revenue from margin
accounts rose $13 million (15%) due to a 26% increase in average margin debits,
partially offset by a drop in the average interest rate charged on margin
accounts when compared to the same period of the prior year. Interest revenues
from securities owned decreased $2 million (16%) as a result of a 15% decrease
in average inventory. Interest earned on short-term investments fell $3 million
(63%) as a result of a 69% drop in average short-term investments as funds were
utilized to finance the rise in margin debits.
Compensation and benefits increased $104 million (15%). Commission expense
increased $55 million (14%) due to the rise in commissionable revenue. General
and administrative salaries and related benefits increased primarily as a result
of general increases and higher employment. Incentive-related compensation rose
primarily as a result of higher earnings.
All other expenses increased $32 million (20%) primarily as a result of branch
and home office expansion, technology related expenses, and increased interest
expense on bank loans associated with the financing of customer margin balances.
THREE MONTHS ENDED AUGUST 31, 1999 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 1998
Net earnings for the quarter ended August 31, 1999 were $82 million on revenues
of $636 million compared to net earnings of $72 million on revenues of $551
million for the same period a year ago. The explanation of revenue and expense
fluctuations presented for the six month period are generally applicable to the
three months of operations.
LIQUIDITY AND CAPITAL RESOURCES
Bank loans consist of short-term borrowings and are primarily used to finance
customer receivables. At August 31, 1999 bank loans outstanding were
$535 million. Average bank loans outstanding for the six month period ended
August 31, 1999, were $204 million at an average effective interest rate of
5.25%.
No other material changes have taken place since February 28, 1999 regarding the
Company's liquidity, capital resources and overall financial condition.
YEAR 2000
This section is a Year 2000 readiness disclosure pursuant to the provisions of
the Year 2000 Information Readiness and Disclosure Act.
The "Year 2000" issue arose because many computer hardware and software systems
use only two digits to represent the year. As a result, these systems and
programs may not accurately calculate dates beyond December 31, 1999, causing
system failures or miscalculations. The Company, along with the entire
financial industry, is heavily reliant on computer technology. As such, any
unresolved Year 2000 issues of the Company, other industry members, or entities
that support the industry, may result in a material and negative impact on the
Company's operations or financial condition. While the Company has contacted
significant third parties concerning their Year 2000 progress, there can be no
assurance that these other parties have provided accurate and complete
information concerning their Year 2000 efforts.
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With respect to its internal systems, the Company's efforts to remediate its
Year 2000 issues are complete. Mission critical systems, as well as non-
critical and non-information technology systems, have been assessed, modified,
tested and placed in production. The Company will continue testing both
internally and with significant counterparties throughout the remainder of
calendar 1999.
Management estimates the total cost of the Company's Year 2000 efforts will not
exceed $15 million. Most of these costs have already been incurred and
expensed. Actual costs may differ materially from this estimate.
The Company has incorporated various Year 2000 issues into its corporate
contingency plans. The plans include steps to address internal system
processing errors that may occur after December 31, 1999. The Company's
corporate contingency plan is a continually evolving document and is subject to
modification. Management continues to assess potential Year 2000 scenarios and
will update the contingency plan as necessary. Consideration was given to
alternatives for mission critical third parties. However, management believes
that the Company's primary mission critical third parties are securities and
commodities exchanges, clearing associations, and utilities, and that the
industry currently has no available alternatives for most or all of these
entities.
RISK MANAGEMENT
No material changes have occurred to the Company's policies, procedures and
controls. A discussion of the Company's primary risks is included in the
Company's Annual Report on Form 10-K for the fiscal year ended February 28,
1999. Such information is hereby incorporated by reference.
FORWARD-LOOKING STATEMENTS
The Management's Financial Discussion, including the discussion under "Year
2000," contains forward-looking statements within the meaning of federal
securities laws. Actual results are subject to risks and uncertainties,
including both those specific to the Company and those specific to the industry,
which could cause results to differ materially from those contemplated. The
risks and uncertainties include, but are not limited to, third-party or Company
failures to achieve timely, effective remediation of the Year 2000 issues, risk
management, general economic conditions, actions of competitors, regulatory
actions, changes in legislation and technology changes. Undue reliance should
not be placed on the forward-looking statements, which speak only as of the date
of this Quarterly Report on Form 10-Q. The Company does not undertake any
obligation to publicly update any forward-looking statements.
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PART II. OTHER INFORMATION
Item 1:Legal Proceedings
There have been no material changes in the legal proceedings previously
reported in the Company's Annual Report on Form 10-K for the year ended
February 28, 1999.
Item 6:Exhibits and Reports on 8-K
Exhibit 10 1999 restatement of A.G. Edwards, Inc. 1988 Incentive Stock
Plan
Exhibit 27 Financial Data Schedule. (This financial data schedule is
only required to be submitted with the registrant's
Quarterly Report on Form 10-Q as filed electronically to the
SEC's EDGAR database.)
Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
August 31, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
A.G. EDWARDS, INC.
(Registrant)
Date: October 14, 1999 /s/Benjamin F. Edwards, III
BENJAMIN F. EDWARDS, III
Principal Executive Officer
Date: October 14, 1999 /s/Robert L. Proost
ROBERT L. PROOST
Principal Financial Officer
EXHIBIT 10
A.G. EDWARDS, INC.
1988 INCENTIVE STOCK PLAN
SEPTEMBER 1999 RESTATEMENT
RECITALS
This Plan originally became effective in April 1988. It was amended in (1)
June 1990 by the stockholders of the Company to increase the number of shares of
Common Stock available under the Plan to 4,060,000 shares (which number has
since been adjusted to 7,612,500 shares to reflect a 50% and a 25% stock
dividend, treated as a stock split), (2) April 1992 by the Board of Directors to
comply with changes under Section 16(b) of the Exchange Act; (3) June 1992 by
the stockholders of the Company to increase the number of shares of Common Stock
available under the Plan to 13,862,500 shares (which number has since been
adjusted to 17,328,125 to reflect a 25% stock dividend, treated as a stock
split); (4) June 1995 by the stockholders of the Company to increase the number
of shares of Common Stock available under the Plan to 26,328,125 shares (which
number has since been adjusted to 39,492,188 to reflect a 50% stock dividend,
treated as a stock split); and (5) June 1999 by the stockholders of the Company
to increase the number of shares of Common Stock available under the Plan to
54,492,188 shares.
The Company now wishes to amend the Plan to modify the eligibility
requirements under the Plan.
NOW, THEREFORE, effective September 21, 1999, the Plan is hereby amended
and restated in its entirety as follows:
1. PURPOSE.
The purpose of the A.G. Edwards, Inc. 1988 Incentive Stock Plan (the
"Plan") is to motivate employees of A.G. Edwards, Inc. (the "Company") and its
subsidiaries through added incentives to make a maximum contribution to Company
objectives.
2. DEFINITIONS.
As used in the Plan, the following words shall have the following meanings:
"Administrator" has the meaning ascribed to it in Section 3(a) of the Plan.
"Award Amount" has the meaning ascribed to it in Section 5(b) of the Plan.
"Benefits" means the benefits awarded to Participants as described in
Sections 5 through 9 of the Plan. Benefits may be awarded separately or in any
combination.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day on which the New York Stock Exchange is open
for business.
"Change in Control" means the occurrence of any of the following events
without the prior approval of the Board of Directors: (a) a merger,
consolidation or reorganization of the Company in which the Company does not
survive as an independent entity; (b) a sale of all or substantially all of the
assets of the Company; (c) the first purchase of shares of Common Stock of the
Company pursuant to a tender or exchange offer for more than 20% of the
Company's outstanding shares of Common Stock; or (d) any change in control of a
nature that, in the opinion of the Board of Directors, would be required to be
reported under the federal securities laws; provided that such a change in
control shall be deemed to have occurred if (i) any person is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute a majority thereof
unless the election of any director, who was not a director at the beginning of
the period, was approved by a vote of at least 70% of the directors then still
in office who were directors at the beginning of the period.
"Code" means the Internal Revenue Code of 1986, as amended. Reference to a
section of the Code shall include: (i) that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section, and (ii) any rules or regulations promulgated under such section.
"Common Stock" means the $1.00 par value common stock of the Company,
together with the Common Stock Purchase Rights (as described in the Rights
Agreement dated December 30, 1988 by and between the Company and Boatmen's Trust
Company, as Rights Agent) associated with such common stock.
"Company" has the meaning ascribed to it in Section 1 of the Plan.
"Competition with the Company" means, with respect to any individual,
owning, managing, controlling, participating in or becoming connected with, as
an officer, employee, partner, stockholder, consultant or otherwise, any
business, individual, partnership or corporation that is engaged significantly,
or is planning to become engaged significantly, in a business which, directly or
indirectly, competes with a business of the Company or a Subsidiary; provided,
merely acquiring or holding shares of any business entity that has its
securities listed on a national securities exchange or quoted in the daily
listing of over-the-counter market securities shall not constitute such
competition so long as such individual and members of such individual's family
do not own more than 1% of the voting securities of such an entity.
"Corporate Executive Bonus" has the meaning ascribed to it in Section 4 of
the Plan.
"Corporate Executive Bonus Plan" has the meaning ascribed to it in Section
4 of the Plan.
"Date of Grant" has the meaning ascribed to it in Section 7(b) of the Plan.
"Deferred Award Date" has the meaning ascribed to it in Section 6(e) of the
Plan.
"Disability" means a total and permanent disability that renders a
Participant unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than three years.
"Disinterested Administrator" means an Administrator composed of the Board
of Directors, if each member is a disinterested person, or a committee of two or
more directors of the Company, each of whom is a disinterested person.
"Disinterested Person" shall have the meaning set forth in Rule 16b-
3(c)(2)(i) promulgated under Section 16 of the Exchange Act, or any successor
rule thereto.
"Eligible Employee" has the meaning ascribed to it in Section 4 of the
Plan.
"Employee" means any individual who is employed by the Company or a
Subsidiary.
"Employee Stock Purchase Plan" has the meaning ascribed to it in Section 7
of the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
Reference to a section of the Exchange Act shall include: (i) that section and
any comparable section or sections of any future legislation that amends,
supplements or supersedes that section, and (ii) any rules or regulations
promulgated under such section.
"Exercise Price" has the meaning ascribed to it in Section 5(d) of the
Plan.
"Incentive Stock Options" has the meaning ascribed to it in Section 8 of
the Plan.
"Market Value" means, with respect to a share of Common Stock on a
particular date, the average of the highest and lowest quoted selling prices on
the particular date. If there are no sales on that date, the Market Value shall
be the weighted average of the mean between the highest and lowest quoted
selling prices on the nearest date before and the nearest date after that date.
Such average shall be weighted inversely by the respective number of trading
days between the selling dates and the valuation date.
"Offered Shares" has the meaning ascribed to it in Section 7(b) of the
Plan.
"Offering" has the meaning ascribed to it in Section 7 of the Plan.
"Offering Period" has the meaning ascribed to it in Section 7(e) of the
Plan.
"Option Award Date" has the meaning ascribed to it in Section 5(a) of the
Plan.
"Option Award Amount" has the meaning ascribed to it in Section 5(c) of the
Plan.
"Option Awards" has the meaning ascribed to it in Section 5(a) of the Plan.
"Option Determination Date" has the meaning ascribed to it in Section 5(a)
of the Plan.
"Options" has the meaning ascribed to it in Section 5(a) of the Plan.
"Over 60 Participant" has the meaning ascribed to it in Section 6(e) of the
Plan.
"Participant" means each eligible Employee who receives a Benefit or an
award of Benefits under the Plan.
"Phantom Stock Credits" has the meaning ascribed to it in Section 6(e) of
the Plan.
"Plan" has the meaning ascribed to it in Section 1 of the Plan.
"Purchase Price" has the meaning ascribed to it in Section 7(d) of the
Plan.
"Reporting Person" means any person who is an officer or director, within
the meaning of the Exchange Act, and the rules and regulations promulgated
thereunder, of the Company.
"Restricted Period" has the meaning ascribed to it in Section 6(c)(1) of
the Plan.
"Restricted Share Award Amount" has the meaning ascribed to it in Section
6(b) of the Plan.
"Restricted Share Award Date" has the meaning ascribed to it in Section
6(a) of the Plan.
"Restricted Share Awards" has the meaning ascribed to it in Section 6(a) of
the Plan.
"Restricted Share Determination Date" has the meaning ascribed to it in
Section 6(a) of the Plan.
"Restricted Shares" has the meaning ascribed to it in Section 6(a) of the
Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under Section 16 of the Exchange
Act, or any successor rule thereto.
"Section 423 Options" has the meaning ascribed to it in Section 7(a) of the
Plan.
"Senior Participant" has the meaning ascribed to it in Section 5(f) of the
Plan.
"Stock Purchase Plan Eligible Employee" has the meaning ascribed to it in
Section 7(a) of the Plan.
"Subsidiary" means any corporation, partnership, joint venture or business
trust, control of which is owned, directly or indirectly, by the Company;
provided, for the purpose of any Incentive Stock Options and options granted
pursuant to the Employee Stock Purchase Plan, "Subsidiary" shall have the same
meaning as the term "subsidiary corporation" as defined in Section 424 of the
Code.
"Termination of Employment," whether or not capitalized when used herein,
or any other similar phrase used herein to refer to the employment of an
Employee with the Company being terminated means the Employee ceases to be
employed by the Company whether the cessation of employment is voluntary or
involuntary and regardless of whether the employment of the Employee with the
Company ceases because the Employee quits, is discharged, retires, is disabled
or dies.
"Termination for Aggravated Cause" means a Termination of Employment
(whether voluntary or involuntary) because any of the following acts or events
have occurred: any action or failure to act by a Participant that results in or
is likely to result in detriment to the Company or any of its Subsidiaries,
employees or customers; violation of any securities law; dishonesty whether or
not resulting in a direct or indirect monetary loss; insubordination;
drunkenness; use of harmful drugs; willful destruction of property; provocation
or continuous agitation of the Company's or any Subsidiary's customers or
employees; or conviction of a felony or a misdemeanor.
"Vesting Period" has the meaning ascribed to it in Section 5(d) of the
Plan.
3. ADMINISTRATION.
(a) Appointment. The Plan shall be administered by the Board of Directors
of the Company or by one or more committees the members of which need not be
members of the Board of Directors (collectively, the "Administrator") appointed
by the Board of Directors. Such a committee may be appointed by designating
another committee, such as the Compensation Committee of A.G. Edwards & Sons,
Inc., to serve as Administrator. All of the duties of the Administrator may be
assigned to one committee or, if the Board of Directors appoints more than one
committee to serve as Administrator, the Board of Directors may allocate the
specific duties of the Administrator among such committees. A particular
committee to whom a specific duty is so allocated shall have the sole
responsibility and authority for carrying out such duty. A committee shall
continue to serve in its appointed role until its role is terminated or changed
by the Board of Directors.
(b) Duties. Subject to the provisions of the Plan, the Administrator
shall have exclusive authority to interpret and administer the Plan (including,
without limitation, developing or approving forms to implement all or any part
of the Plan), to delegate its authority and duties under the Plan, and to take
all such steps and make all such rules or determinations in connection with the
Plan and any of the Benefits provided by the Plan as it may deem necessary or
advisable (including, without limitation, rules relating to any tax withholding
requirements, designation of beneficiaries, ownership of shares in joint names
and restoration of awards for rehired Participants); provided, however, the
Administrator shall not have the authority to change the amount, price or timing
of any Benefits awarded by the terms of any formula contained in the Plan;
provided, further, with respect to the forfeiture of any Benefits, only a
Disinterested Administrator may make a determination that a Reporting Person has
incurred a Termination for Aggravated Cause.
4. ELIGIBILITY.
"Eligible Employee" shall include any individual who is an Employee of the
Company or a Subsidiary at the time Benefits under the Plan are awarded and who
(i) is a non-Reporting Person who satisfies the eligibility requirements
established by the Administrator, from time to time, taking into account such
factors as the Administrator may consider relevant (which may include, but need
not include, the nature of services rendered by the Employee or the capacity of
the Employee to contribute to the success of the Company), or (ii) is a
Reporting Person who is a participant in the "Corporate Executive Bonus Plan" as
of October 1, and as of the last day, of the fiscal year of the Company for
which the Benefits are awarded.
For the purposes of this Section 4 and Section 5: (i) "Corporate Executive
Bonus Plan" means the compensation plan by such name together with the
Performance Plan for Executives each as adopted by the Company or a subsidiary
of the Company, and shall continue to refer to such plans even if the name or
terms of such plans are changed in the future, whereby officers of the Company
and Subsidiaries who are not otherwise eligible for or who do not otherwise
receive variable compensation or bonuses participate in a defined bonus pool,
and (ii) "Corporate Executive Bonus" means a bonus received by an Eligible
Employee from the Corporate Executive Bonus Plan. The terms and conditions
relating to the Corporate Executive Bonus Plan with respect to Reporting
Persons, including, without limitation, the requisite qualifications for
Employees who are Reporting Persons, shall not be changed more frequently than
is permitted for a change in the amount, price or timing of any Benefits awarded
by the terms of any formula contained in the Plan, and any such change shall be
deemed to be a change and amendment to the Plan.
5. STOCK OPTIONS.
(a) Grant and Time of Award. Subject to each Eligible Employee's election
under Section 5(c), options ("Options") shall be granted to Eligible Employees
to purchase shares of Common Stock from the Company on the terms specified
herein. Options shall be in the form of "Nonqualified Stock Options," which are
not intended to qualify as incentive stock options within the meaning of Section
422 of the Code. Awards of Options ("Option Awards") shall be made for each
fiscal year of the Company during the term of the Plan as of the last day of
each such fiscal year (an "Option Award Date"). The amount of the Option Awards
on a specific Option Award Date shall be determined in accordance with Sections
5(b) and (c) as soon as administratively practical after the end of each such
fiscal year (an "Option Determination Date").
(b) Amount of Award. The total amount of the award (the "Award Amount")
for both Options and Restricted Shares (as hereinafter defined) to which an
Eligible Employee is entitled for any specific fiscal year of the Company shall
be equal to: (i) 25% of such Eligible Employee's Corporate Executive Bonus for
such fiscal year if such Eligible Employee is a Reporting Person or (ii) such
amount as may be determined by the Administrator if such Eligible Employee is a
non-Reporting Person. The Award Amount hereunder to an Eligible Employee is for
services rendered by the Eligible Employee during the fiscal year of the Company
on which such Award Amount is based. In no event shall the Award Amount for any
specific Eligible Employee in any given fiscal year of the Company beginning on
or after March 1, 1995 exceed $100,000. If an Eligible Employee (who is a
Reporting Person) does not receive a Corporate Executive Bonus for any specific
fiscal year of the Company for which awards of Benefits are to be made, he will
not be entitled to an award of Options or Restricted Shares for that fiscal
year.
(c) Election of Awards. An Eligible Employee may elect to receive his
Award Amount in any specific fiscal year of the Company as (i) 100% Restricted
Shares; (ii) 50% Restricted Shares and 50% Options, or (iii) 100% Options. An
Eligible Employee's Award Amount in any specific fiscal year of the Company will
automatically be divided 50% Restricted Shares and 50% Options if his election
form is not received within the time period specified by the Administrator. The
portion of any Award Amount elected, or deemed elected, by an Eligible Employee
to be received as Options is hereafter referred to as an "Option Award Amount."
The number of shares of Common Stock subject to Options awarded to a
Participant for a specific fiscal year of the Company shall be determined by
dividing such Participant's Option Award Amount for such fiscal year by the
greater of (a) the Market Value of a share of Common Stock on the applicable
Option Determination Date, or (b) $16 (subject to adjustment as referred to in
Section 10), and multiplying such number by 2.5. All calculations shall be
rounded down to the nearest whole share.
(d) Exercise. Options shall entitle a Participant to purchase shares of
Common Stock at a price (an "Exercise Price") per share equal to the Market
Value of the Common Stock on the applicable Option Determination Date. Options
shall become exercisable three (3) years after the applicable Option Award Date
(a "Vesting Period"), and must be exercised no later than eight (8) years,
unless extended, after the applicable Option Award Date. Any Vesting Period
shall be extended by the length of any leave of absence, except a leave of
absence for medical reasons approved in writing by the Administrator. Options
that are not exercised within eight (8) years (unless extended) after the
applicable Option Award Date will lapse. A Participant may exercise all of his
vested Options in any order and at one time or at different times for less than
the total amount until all of his vested Options have been exercised. A
Participant may exercise his Options only by giving the Administrator written
notice of his intent to exercise his Options. The written notice must be in a
form acceptable by the Administrator. When a Participant exercises an Option,
the applicable Exercise Price is payable to the Company in full in cash;
provided, the Administrator may permit a Participant to pay for all or any part
of the Common Stock purchased on exercise of an Option with shares of Common
Stock (valued at their Market Value on the date of the exercise) already owned
by the Participant or acquired pursuant to the exercise of his Options.
(e) Restrictions.
(1) Assignment. During a Participant's lifetime, Options shall be
exercisable only by the Participant. A Participant cannot transfer or
assign his Options awarded under the Plan other than by will or by the laws
of descent and distribution.
(2) Forfeiture. A Participant will forfeit his unvested Options if
his employment with the Company is terminated for any reason other than
death or Disability on or before the end of any applicable Vesting Period.
A Termination of Employment shall not be deemed to occur if a Participant
merely transfers from the Company to a Subsidiary, from one Subsidiary to
another Subsidiary or from a Subsidiary to the Company.
(3) Termination of Restrictions.
(A) If a Participant's employment is terminated before the end
of any applicable Vesting Period because of death or Disability, his
unvested Options may be exercised by him (or his beneficiary, personal
representative or distributee, as applicable) during a five-year
exercise period beginning as of the date of such Termination of
Employment, but in no event later than the expiration of the
applicable original exercise period.
(B) Any Vesting Period shall end and all unvested Options shall
become exercisable immediately upon a Change in Control.
(4) No Rights as a Stockholder. No person entitled to exercise any
Option granted under the Plan shall have any of the rights or privileges of
a stockholder of the Company with respect to shares issuable upon exercise
of such Option until certificates representing such shares shall have been
issued and delivered to such person.
(f) Awards for Senior Participants. The terms of this Section 5(f) shall
apply to any unvested Options held by a Participant age 57 or older (a "Senior
Participant"). The following percentage of shares subject to any unvested
Option held by a Senior Participant shall not be forfeited (but shall remain
subject to any applicable Vesting Period) merely because such Senior
Participant's employment with the Company is terminated (other than a
Termination for Aggravated Cause):
ATTAINED AGE AT PERCENT
TERMINATION OF EMPLOYMENT NOT FORFEITED
57 but less than 58 25%
58 but less than 59 50%
59 but less than 60 75%
60 and over 100%
Upon a Termination for Aggravated Cause, a Senior Participant shall forfeit
all unvested Options. A Senior Participant who engages in Competition with the
Company within any Vesting Period shall forfeit his unvested Options at the time
such Competition with the Company commences. All of the Options of a Senior
Participant shall become fully vested immediately upon a Change in Control. Any
restrictions, terms or conditions in this Section 5 applicable to Options
generally shall apply to a Senior Participant's Options to the extent they are
not inconsistent with the provisions of this Section 5(f).
6. RESTRICTED SHARES.
(a) Time of Award. "Restricted Shares" are shares of Common Stock that
are subject to certain restrictions on their disposition and to the rights of
the Company to reacquire such shares upon the occurrence of certain events, all
on the terms specified in the Plan. Subject to an Eligible Employee's election
under Section 5(c), Restricted Shares shall be awarded to Eligible Employees on
the terms specified herein. Awards of Restricted Shares ("Restricted Share
Awards") shall be made for each fiscal year of the Company during the term of
the Plan as of the last day of each such fiscal year (a "Restricted Share Award
Date"). The amounts of the Restricted Share Awards shall be determined in
accordance with Section 6(b) as soon as administratively practical after the end
of each such fiscal year (a "Restricted Share Determination Date").
(b) Amount of Award. The portion of an Award Amount in any specific
fiscal year that is available for Restricted Shares (a "Restricted Share Award
Amount") shall be equal to such Award Amount less any Option Award Amount
elected, or deemed elected, pursuant to Section 5(c) with respect to such Award
Amount. The number of Restricted Shares awarded to a Participant for any
specific fiscal year of the Company is determined by dividing the Participant's
Restricted Share Award Amount for such fiscal year by the greater of (a) the
Market Value of the Common Stock on the applicable Restricted Share
Determination Date and (b) $16 (subject to adjustment as referred to in Section
10). All calculations shall be rounded down to the nearest whole share.
(c) Restrictions.
(1) Restricted Period. Restricted Shares shall be subject to the
restrictions described herein for three (3) years from their applicable
Restricted Share Award Date (a "Restricted Period"). Any Restricted Period
shall be extended by the length of any leave of absence, except a leave of
absence for medical reasons approved in writing by the Administrator.
During any Restricted Period, a Participant will have the entire
beneficial ownership and the right to vote his Restricted Shares and
receive any dividends thereon; provided, however, a Participant may
not sell, transfer, pledge or otherwise dispose of or encumber his
Restricted Shares (other than by will or by the laws of descent and
distribution) during any applicable Restricted Period. A Participant
shall not be entitled to delivery of a certificate representing shares
of Common Stock until the expiration of the Restricted Period
applicable to such shares as Restricted Shares.
(2) Forfeiture. A Participant will forfeit his Restricted Shares if
his employment with the Company is terminated for any reason other than
death or Disability within any Restricted Period. A termination of
employment shall not be deemed to occur if a Participant merely transfers
from the Company to a Subsidiary, from one Subsidiary to another Subsidiary
or from a Subsidiary to the Company.
(3) Termination of Restrictions.
(A) If a Participant's employment with the Company is terminated
during any Restricted Period because of death or Disability, the
restrictions on his Restricted Shares will end and he (or his
beneficiary, personal representative or distributee, as applicable)
will be entitled to receive and retain his Restricted Shares.
(B) A Restricted Period shall end, and Participants shall have a
nonforfeitable right to their Restricted Shares, immediately upon a
Change in Control.
(d) Awards for Senior Participants. The terms of this Section 6(d) shall
apply to any Restricted Shares held by a Senior Participant, except as may be
provided in Section 6(e). A percentage of any Restricted Shares held by a
Senior Participant shall not be forfeited (but shall remain subject to their
restrictions during any applicable Restricted Period) merely because such Senior
Participant's employment with the Company is terminated (other than a
Termination for Aggravated Cause). Such percentage shall be determined in the
same manner as for Options pursuant to Section 5(f). Upon a Termination for
Aggravated Cause, a Senior Participant shall forfeit all of his Restricted
Shares still subject to a Restricted Period at the time of termination. A
Senior Participant who engages in Competition with the Company during any
Restricted Period shall forfeit all of his Restricted Shares subject to a
Restricted Period at the time such Competition with the Company commences. A
Restricted Period applicable to a Senior Participant's Restricted Shares shall
end upon a Change in Control. Any restrictions, terms or conditions in this
Section 6 applicable to Restricted Shares generally shall apply to a Senior
Participant's Restricted Shares to the extent they are not inconsistent with the
provisions of this Section 6(d).
(e) Phantom Stock Credits. An Eligible Employee who is 60 years of age or
older (an "Over 60 Participant") on any Restricted Share Award Date, and who
elects to receive Restricted Shares as all or part of his award, shall not be
awarded Restricted Shares on that date. Instead, such an Over 60 Participant
shall be awarded "Phantom Stock Credits" which will serve as the basis for an
award of Restricted Shares two years after such a Restricted Share Award Date (a
"Deferred Award Date"), with each Phantom Stock Credit representing the right to
receive one share of Restricted Stock. An account shall be established for each
Over 60 Participant to show the number of Phantom Stock Credits allocated to
him. The award of Phantom Stock Credits allocated to such an account for any
specific fiscal year of the Company shall be in an amount that will entitle such
Over 60 Participant to the number of Restricted Shares to which such Over 60
Participant would have been entitled to receive under the applicable award
formula if such Over 60 Participant had been younger than 60 years of age on the
applicable Restricted Share Award Date.
The number of Phantom Stock Credits in an Over 60 Participant's account
shall be adjusted to reflect dividends on the Common Stock on each dividend
record date after the applicable Restricted Share Determination Date. The
number of additional Phantom Stock Credits allocated to an Over 60 Participant's
account for a cash dividend shall equal the total amount of each such dividend
imputed to such Over 60 Participant (the per share dividend multiplied by the
number of Phantom Stock Credits in such Over 60 Participant's account before
such increase) divided by the Market Value of the Common Stock on the record
date of the dividend. The number of additional Phantom Stock Credits allocated
to an Over 60 Participant's account for a stock dividend shall equal the number
of additional shares of Common Stock to which such Over 60 Participant would
have been entitled if he had been the holder of a number of shares of Common
Stock equal in number to the number of Phantom Stock Credits allocated to his
account as of that dividend record date before such increase. The number of
Phantom Stock Credits allocated to an Over 60 Participant's account instead of
dividends will be added to the total number of such Over 60 Participant's
Phantom Stock Credits for calculating future amounts to be allocated in lieu of
dividends.
Over 60 Participants cannot transfer or assign their Phantom Stock Credits
awarded under the Plan other than by will or by the laws of descent and
distribution. If an Over 60 Participant's employment is terminated (other than
a Termination for Aggravated Cause), he shall not forfeit the right to an award
of Restricted Shares on any Deferred Award Date, nor shall he forfeit Restricted
Shares awarded on any Deferred Award Date, merely because of such a termination.
If an Over 60 Participant's employment is terminated before any Deferred Award
Date because of death or Disability, such Over 60 Participant (or his
beneficiary, personal representative or distributee, as applicable) shall be
entitled to receive at the time of such termination a stock certificate for the
whole number of shares of Common Stock equal to the number of Phantom Stock
Credits then credited to his account (rounded down to the nearest whole number
of shares). Any Deferred Award Date shall occur and any applicable Restricted
Period for Restricted Shares awarded shall end immediately upon a Change in
Control.
If an Over 60 Participant's termination is a Termination for Aggravated
Cause, he shall forfeit the right to an award of Restricted Shares based on any
Phantom Stock Credits attributable to his account and shall forfeit all shares
of Restricted Shares still subject to a Restricted Period at the time of his
Termination for Aggravated Cause. An Over 60 Participant who engages in
Competition with the Company before any Deferred Award Date or the end of any
Restricted Period shall forfeit his Phantom Stock Credits and Restricted Shares.
As of any specific Deferred Award Date, each Over 60 Participant shall be
awarded that number of shares of Restricted Shares equal to the number of
Phantom Stock Credits (rounded down to the nearest whole share) then credited to
his account for the applicable award year. Restricted Shares awarded as of any
Deferred Award Date shall be subject to all of the previously described terms
and restrictions applicable to Restricted Shares, to the extent they are not
inconsistent with the provisions of this Section 6(e), except that any
applicable Restricted Period shall be for only nine months unless extended
during a leave of absence. Over 60 Participants have no rights as stockholders
with respect to their Phantom Stock Credits until their Restricted Shares are
awarded.
7. EMPLOYEE STOCK PURCHASE PLAN.
Solely for purposes of the Code, this Section 7 shall be treated as a
separate plan and referred to as the A.G. Edwards, Inc. Employee Stock Purchase
Plan ("Employee Stock Purchase Plan"). Notwithstanding anything to the contrary
in the Plan, the following provisions shall apply to any options ("Section 423
Options") to purchase Common Stock awarded Participants ("Offering") in
accordance with this Section 7:
(a) Eligibility. Section 423 Options awarded in accordance with the
Employee Stock Purchase Plan shall be granted only to Employees. To be eligible
for an award of Section 423 Options in any specific Offering, an Employee (a
"Stock Purchase Plan Eligible Employee") must be a full-time Employee or part-
time salaried Employee on the Date of Grant (as hereinafter defined) for such
Offering and on the first business day in October of the next year after such
date.
Irrespective of any other provision of the Plan or the Employee Stock
Purchase Plan, no Section 423 Option may be granted to an Employee who owns
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company or a Subsidiary as determined in accordance with
Section 423(b)(3) of the Code; and no Section 423 Option may be granted to any
Employee if such option permits the Employee's rights to purchase stock under
all employee stock purchase plans (as defined in Section 423 of the Code) of the
Company or any Subsidiary to accrue at a rate that exceeds Twenty-Five Thousand
Dollars ($25,000.00) of Market Value of such stock (determined at the time the
Section 423 Option is granted) for each calendar year in which such option is
outstanding at any time.
(b) Timing of Offerings. An Offering shall be made for each fiscal year
of the Company during the term of the Plan as of the first Business Day in
October of each such fiscal year. The total number of shares offered ("Offered
Shares") to all Stock Purchase Plan Eligible Employees in any specific Offering
shall be determined by the Administrator. Subject to a Stock Purchase Plan
Eligible Employee's election to participate in an Offering pursuant to Section
7(e), Section 423 Options shall be granted to each individual who is a Stock
Purchase Plan Eligible Employee on the Date of Grant of any Offering. For
purposes of this Section 7, "Date of Grant" shall have the same meaning as set
forth in Treasury Regulation 1.421-7(c).
(c) Amount of Shares Purchasable. Section 423 Options granted to a
Participant in connection with any specific Offering shall entitle such
Participant to purchase individually at the end of the applicable Offering
Period (as hereinafter defined) his proportionate share of the Offered Shares
for such Offering, based on the percentage that his individual contributions
represent of the total contributions of all Stock Purchase Plan Eligible
Employees with respect to such Offering; provided, however, a Stock Purchase
Plan Eligible Employee may not purchase more than $25,000 worth of Common Stock
as provided in Section 7(a).
Only full shares of Common Stock may be purchased, and no fractional shares
will be issued; provided, any amounts not used to purchase Common Stock shall be
refunded on terms established by the Administrator. If any Offering is
oversubscribed, any amount received from any Participant that is not used to
purchase Common Stock shall be refunded on terms established by the
Administrator. No Section 423 Option awarded in accordance with the terms of
the Employee Stock Purchase Plan shall be transferable otherwise than by will or
by the laws of descent and distribution, and shall be exercisable only by the
Participant to whom it is granted or by a transferee as permitted herein.
(d) Purchase Price. The price ("Purchase Price") per share at which
Participants can purchase Common Stock pursuant to their Section 423 Options
granted with respect to any specific Offering shall be the lesser of the
following two amounts: (1) the greater of (A) 85% of the Market Value of the
Common Stock on the applicable Date of Grant, or (B) 85% of the average of the
Market Values of the Common Stock on the first Business Day of each month for
thirteen (13) consecutive months from and including the month of the applicable
Date of Grant; and (2) 85% of the Market Value on the first Business Day in
October of the next year after the applicable Date of Grant.
(e) Participation and Contributions. To participate in any specific
Offering, a Stock Purchase Plan Eligible Employee must elect to contribute
between 1% and 10% of his total cash compensation (based on salary, commission,
bonus and overtime) paid during the period from the applicable Date of Grant
until the first Business Day in October of the next year after such date (an
"Offering Period").
During any Offering Period, a Participant may not increase or decrease his
contributions; provided, he may stop future contributions for the remainder of
such Offering Period and either use amounts contributed up to that date to
purchase Common Stock at the end of the Offering Period, or request a refund of
the total amount contributed during such Offering Period. A Participant may
request a refund of all, but not less than all, of his contributions prior to
the end of any specific Offering Period, in which case he would cease to be a
Participant in that Offering. If a Participant's employment is terminated prior
to the end of a specific Offering Period, he will not be able to continue
participation in that Offering, and contributions with respect to that Offering
will be automatically refunded.
The Administrator may establish and adopt uniform rules and forms relating
to how and when elections, contributions, withdrawals and refunds may be made by
or paid to Participants. All employees granted Section 423 Options under the
Employee Stock Purchase Plan shall have the same rights and privileges as
required by Section 423(b)(5) of the Code.
(f) Purchase of Stock. Common Stock shall be purchased automatically for
Participants using their accumulated contributions to the maximum possible
extent at the end of any specific Offering Period. Participants must be
Employees at the end of a specific Offering Period to purchase Common Stock in
the Offering.
(g) Reporting Person Restrictions and Limitations. Notwithstanding any
provision contained in this Section 7 to the contrary, the terms of this Section
7(g) shall apply to any Section 423 Options granted to any Reporting Person.
(1) Refunds. If a Reporting Person who is a Participant in the
Employee Stock Purchase Plan requests a refund pursuant to Section 7(e),
such Participant must cease further purchases in the Employee Stock
Purchase Plan for six (6) months, or the Common Stock so distributed must
be held by such Participant six (6) months prior to disposition, unless
otherwise permitted under Rule 16b-3(d)(2)(i)(B).
(2) Termination of Participation. If a Reporting Person who is a
Participant in the Employee Stock Purchase Plan ceases participation in the
Employee Stock Purchase Plan, such Participant may not participate again
for at least six (6) months.
8. OTHER BENEFITS.
A Disinterested Administrator may award Common Stock or the right to
acquire Common Stock to any Employee upon such terms and conditions as such
Disinterested Administrator in its discretion shall determine. Such awards may
consist of any single Benefit, or a combination of the Benefits, described in
the preceding sections (in addition to the award of any such Benefits pursuant
to the terms, conditions and formulae contained in such preceding sections), or
any other right to acquire Common Stock (including, without limitation, options
granted in the form of "Incentive Stock Options" which are intended to qualify
as incentive stock options within the meaning of Section 422 of the Code or
stock appreciation rights), and may be subject to any conditions such
Disinterested Administrator may prescribe, such as a right of first refusal by
the Company to repurchase the shares; provided, however, that any Benefit
awarded in accordance with the provisions of the Plan which grants the right to
purchase shares of Common Stock, except any Benefit which is subject to
restrictions that in the aggregate would amount to a substantial risk of
forfeiture for purposes of Section 83 of the Code, shall require that the price
at which the Participant may purchase such shares shall be at least 85% of the
Market Value of such shares as determined by such Disinterested Administrator at
the time such benefit is awarded.
The Administrator may make any type of awards that can be made by a
Disinterested Administrator; provided, unless the Plan is amended as provided
below, such awards are made only to Employees who are not Reporting Persons.
The Board of Directors may amend the Plan, from time to time as provided or
limited herein, (i) to change any terms, conditions or formulae pursuant to
which an award of Benefits as described in the preceding sections may be awarded
(either increasing or decreasing the amount of such awards); provided, such
changes comply with Rule 16b-3 and/or (ii) to provide terms, conditions and a
formula (complying with Rule 16b-3) pursuant to which any right to acquire
Common Stock (including, without limitation, Incentive Stock Options and stock
appreciation rights) may be awarded, in addition to the Benefits described in
the preceding sections. If any such amendments are made, the awards of Benefits
authorized by such amendments may be administered by the Administrator.
9. SHARES SUBJECT TO PLAN.
Subject to the provisions of Section 10 (relating to adjustment for changes
in capital stock), the maximum number of shares that may be issued under the
Plan (including shares to be issued under the Employee Stock Purchase Plan)
shall not exceed in the aggregate fifty-four million four hundred ninety-two
thousand one hundred eighty-eight (54,492,188) shares of Common Stock of the
Company. Such shares may be unissued shares or treasury shares.
If there is a lapse, expiration, termination or cancellation of any Benefit
without the issuance of shares, or if shares are issued in connection with any
Benefit and later are reacquired by the Company pursuant to rights reserved on
issuance, the shares subject to or reserved for such Benefit may again be used
in connection with the grant of any of the Benefits described in this Plan;
provided, that in no event may the number of shares of Common Stock issued under
this Plan exceed fifty-four million four hundred ninety-two thousand one hundred
eighty-eight (54,492,188), subject to adjustment as described in Section 10.
10. ADJUSTMENT UPON CHANGES IN STOCK.
If any change is made in the shares of Common Stock of the Company by
reason of any merger, consolidation, reorganization, recapitalization, stock
dividend, split up, combination of shares, exchange of shares, change in
corporate structure, or otherwise, appropriate adjustments shall be made by the
Administrator to: (i) the kind and maximum number of shares subject to the
Plan, (ii) the kind and number of shares and price per share of stock subject to
each outstanding Benefit, (iii) the number of Offered Shares referred to in
Section 7(b) and (iv) any other amount herein which is so indicated. Any
increase in the shares, or the right to acquire shares, as the result of such an
adjustment shall be subject to the same terms and conditions that apply to the
Benefit for which such increase was received. No fractional shares of Common
Stock shall be issued under the Plan on account of any such adjustment, and
rights to shares always shall be limited after such an adjustment to the lower
full share.
11. AMENDMENT OF THE PLAN.
Except as provided below, the Board of Directors of the Company may at any
time amend the Plan (including the provisions of the Employee Stock Purchase
Plan); provided, the Board may not, without approval (within twelve months
before or after the date of such change) of such number of the stockholders as
may be required by either federal income tax or securities law for any
particular amendment: (a) increase the maximum number of shares of Common Stock
in the aggregate which may be issued under the Plan, except as may be permitted
under the adjustment provisions of Section 10, or (b) adopt any other amendment
for which shareholder approval is required by federal income tax or securities
laws. The Board of Directors may not alter or impair any Benefit previously
granted under the Plan without the consent of the person to whom the Benefit was
granted.
If required to qualify the Plan under Rule 16b-3, no amendment to the Plan
shall be made more than once every six months that would change the amount,
price or timing of any Benefits awarded by the terms of any formula contained in
the Plan, other than to comport with changes in the Code, the Employment
Retirement Income Security Act of 1974 (as amended), or the rules thereunder.
12. TERMINATION OF THE PLAN.
The Plan shall continue in force until it is terminated by the Board of
Directors. The Board of Directors may terminate or suspend the Plan (including
the Employee Stock Purchase Plan) at any time. No Benefit shall be awarded
after termination of the Plan. Rights and obligations under a Benefit awarded
while the Plan is in effect shall not be altered or impaired by termination or
suspension of the Plan except by consent of the person to whom the Benefit was
awarded.
13. WITHHOLDING TAX.
The Company shall have the right to withhold with respect to any payments
made to Participants under the Plan any taxes required by law to be withheld
because of such payments.
14. RULES OF CONSTRUCTION.
The terms of the Plan shall be construed in accordance with the laws of the
State of Missouri; provided, that the terms of the Plan as they relate to
Incentive Stock Options shall be construed first in accordance with the meaning
under and in a manner that will result in the Plan satisfying the requirements
of the provisions of the Code governing incentive stock options; provided,
further, that the terms of Section 7 of the Plan shall be construed first in
accordance with the meaning under, and in a manner that will result in the
Employee Stock Purchase Plan satisfying the requirements of, the Code governing
such plans. The Plan is intended to qualify under Rule 16b-3 and shall be
interpreted and administered in a manner consistent with such intention. Unless
otherwise expressly provided, any calculation required by any provision of the
Plan shall be rounded down to the nearest whole number. Any word contained in
the text of the Plan shall be read in the singular or plural or as masculine,
feminine or neuter as may be applicable or permissible in the particular
context.
15. NONTRANSFERABILITY.
Each Option or similar right (including a Stock Appreciation Right) granted
under this Plan shall not be transferable other than by will or by the laws of
descent and distribution, and shall be exercisable during the holder's lifetime
only by the holder or the holder's guardian or legal representative.
16. EFFECTIVE DATE.
The Plan originally became effective as of April 21, 1988. The Plan as
currently revised and restated shall become effective on the date stated on the
first page hereof.
CERTIFICATION
The undersigned hereby certifies that the foregoing A.G. Edwards, Inc. 1988
Incentive Stock Plan (as amended and restated) is restated in a form that
reflects separate amendments thereto duly adopted by the Board of Directors of
A.G. Edwards, Inc. and by the stockholders of A.G. Edwards, Inc., through
September 21, 1999.
IN WITNESS WHEREOF, the undersigned has executed this Certification as
of September 21, 1999.
/s/Douglas L. Kelly
Douglas L. Kelly, Secretary
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> AUG-31-1999
<CASH> 139,488
<RECEIVABLES> 3,055,790
<SECURITIES-RESALE> 7,064
<SECURITIES-BORROWED> 250,249
<INSTRUMENTS-OWNED> 398,233
<PP&E> 257,796
<TOTAL-ASSETS> 4,351,748
<SHORT-TERM> 535,000
<PAYABLES> 1,567,985
<REPOS-SOLD> 0
<SECURITIES-LOANED> 393,243
<INSTRUMENTS-SOLD> 30,219
<LONG-TERM> 0
0
0
<COMMON> 96,463
<OTHER-SE> 1,607,667
<TOTAL-LIABILITY-AND-EQUITY> 4,351,748
<TRADING-REVENUE> 130,303
<INTEREST-DIVIDENDS> 111,090
<COMMISSIONS> 675,026
<INVESTMENT-BANKING-REVENUES> 116,087
<FEE-REVENUE> 248,813
<INTEREST-EXPENSE> 8,180
<COMPENSATION> 822,865
<INCOME-PRETAX> 269,634
<INCOME-PRE-EXTRAORDINARY> 269,634
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,854
<EPS-BASIC> 1.77
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