SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1997
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ______________
Commission File Number 1-8989
The Bear Stearns Companies Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3286161
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
245 Park Avenue, New York, New York 10167
(Address of principal executive offices) (Zip Code)
(212)272-2000
(Registrant's telephone number, including area code)
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 [ ]
As of February 10, 1998, the latest practicable date, there were 115,099,817
shares of Common Stock, $1 par value, outstanding.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at December 31, 1997
(Unaudited)and June 30, 1997
Consolidated Statements of Income (Unaudited) for the three-and
six-month periods ended December 31, 1997 and December 31, 1996
Consolidated Statements of Cash Flows (Unaudited) for the six-
month periods ended December 31, 1997 and December 31, 1996
Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Assets
<CAPTION>
December 31, June 30,
1997 1997
-------------- ----------------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash and cash equivalents $ 1,269,745 $ 1,249,132
Cash and securities deposited with
clearing organizations or
segregated in compliance with
federal regulations 2,806,890 1,448,814
Securities purchased under agreements
to resell 33,997,149 28,340,599
Securities borrowed 42,821,711 40,711,280
Receivables:
Customers 12,683,829 8,572,521
Brokers, dealers and others 1,458,913 1,227,947
Interest and dividends 416,653 405,892
Financial instruments owned, at
fair value 40,818,227 38,437,280
Property, equipment and leasehold
improvements, net of accumulated
depreciation and amortization 434,587 379,533
Other assets 803,321 660,537
-------------- ----------------
Total Assets $ 137,511,025 $ 121,433,535
============== ================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Liabilities and Stockholders' Equity
<CAPTION>
December 31, June 30,
1997 1997
-------------- -------------
(Unaudited)
(In thousands, except share
data)
<S> <C> <C>
Short-term borrowings $ 14,522,968 $ 14,416,671
Securities sold under agreements
to repurchase 46,243,472 39,431,216
Payables:
Customers 35,663,578 29,921,386
Brokers, dealers and others 1,357,043 2,808,359
Interest and dividends 574,092 452,662
Financial instruments sold, but not
yet purchased, at fair value 22,450,080 20,784,796
Accrued employee compensation and benefits 773,943 907,337
Other liabilities and accrued expenses 1,136,802 964,409
-------------- ----------------
122,721,978 109,686,836
-------------- ----------------
Commitments and contingencies
Long-term borrowings 10,894,572 8,120,328
-------------- ----------------
Guaranteed Preferred Beneficial Interests in Company
Subordinated Debt Securities 200,000 200,000
Preferred stock issued by subsidiary 150,000 150,000
-------------- ----------------
Stockholders' Equity
Preferred Stock 437,500 437,500
CommonStock, $1.00 par value;
200,000,000 shares authorized; 167,784,941
shares issued at December 31, 1997 and
June 30, 1997 167,785 167,785
Paid-in capital 1,883,674 1,874,016
Retained earnings 1,306,688 1,031,736
Capital Accumulation Plan 694,967 655,007
Treasury stock, at cost
Adjustable Rate Cumulative Preferred Stock,
Series A - 2,520,750 shares
at December 31, 1997 and June 30, 1997 (103,421) (103,421)
Common Stock - 50,993,838 shares and
50,191,531 shares at December 31,
1997 and June 30, 1997, respectively (835,604) (772,551)
Note receivable from ESOP Trust (7,114) (13,701)
-------------- ----------------
Total Stockholders' Equity 3,544,475 3,276,371
-------------- ----------------
Total Liabilities and Stockholders' Equity $137,511,025 $121,433,535
============== ================
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
THE BEAR
STEARNS
COMPANIES INC.
CONSOLIDATED
STATEMENTS OF
INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- -------------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
-------------- ---------------- -------------- --------------
(In thousands, except share
data)
<S> <C> <C> <C> <C>
Revenues
Commissions $ 230,496 $ 183,584 $ 443,940 $ 345,154
Principal transactions 390,512 429,239 782,026 724,131
Investment banking 278,884 183,138 498,212 291,832
Interest and dividends 1,081,298 745,610 2,045,869 1,405,867
Other income 11,877 14,959 36,025 25,699
-------------- ---------------- -------------- --------------
Total Revenues 1,993,067 1,556,530 3,806,072 2,792,683
Interest expense 919,304 616,396 1,736,219 1,163,865
-------------- ---------------- -------------- --------------
Revenues, net of interest expense 1,073,763 940,134 2,069,853 1,628,818
-------------- ---------------- -------------- --------------
Non-interest expenses
Employee compensation and benefits 535,793 456,825 1,034,990 801,197
Floor brokerage, exchange
and clearance fees 43,522 34,447 83,107 66,013
Communications 28,824 24,778 56,957 49,334
Depreciation and amortization 27,427 21,450 53,444 41,418
Occupancy 25,387 21,945 48,933 43,291
Advertising and market development 20,057 16,683 36,011 31,439
Data processing and equipment 12,460 8,206 24,694 15,761
Other expenses 120,688 65,245 204,974 111,293
-------------- ---------------- -------------- --------------
Total non-interest expenses 814,158 649,579 1,543,110 1,159,746
-------------- ---------------- -------------- --------------
Income before provision for
income taxes 259,605 290,555 526,743 469,072
Provision for income taxes 99,383 114,043 204,903 184,111
-------------- ---------------- -------------- --------------
Net income $ 160,222 $ 176,512 $ 321,840 $ 284,961
============== ================ ============== ==============
Net income applicable to
common shares 154,299 170,573 309,991 272,991
============== ================ ============== ==============
Earnings per share
$ 1.11 $ 1.21 $ 2.22 $ 1.92
============== ================ ============== ==============
Weighted average common and
common equivalent shares
outstanding 152,312,886 148,780,833 152,757,258 149,826,973
============== ================ ============== ==============
Cash dividends declared
per common share $ 0.15 $ 0.14 $ 0.30 $ 0.29
============== ================ ============== ==============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
---------------------------------
December 31, December
31,
1997 1996
---------------- --------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 321,840 $ 284,961
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization 53,444 41,418
Deferred income taxes (58,468) (38,419)
Other 56,738 33,010
(Increases) decreases in operating receivables:
Cash and securities deposited with clearing
organizations or segregated in compliance with
federal regulations (1,358,076) (450,007)
Securities purchased under agreements to resell (5,656,550) (2,544,512)
Securities borrowed (2,110,431) (1,602,738)
Receivables:
Customers (4,111,308) (70,838)
Brokers, dealers and others (230,966) (1,086,106)
Financial instruments owned (2,380,947) (6,936,876)
Other assets (14,591) 174,340
Increases (decreases) in operating payables:
Securities sold under agreements to repurchase 6,812,256 6,326,918
Payables:
Customers 5,742,192 2,666,872
Brokers, dealers and others (1,454,246) (384,326)
Financial instruments sold, but not yet purchased 1,665,284 2,139,589
Accrued employee compensation and benefits (184,391) (193,796)
Other liabilities and accrued expenses 286,743 (550,219)
---------------- --------------
Cash used in operating activities (2,621,477) (2,190,729)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term borrowings 106,297 2,753,292
Issuance of long-term borrowings 3,433,171 862,638
Capital Accumulation Plan 51,010 (10,714)
Common Stock distributions 7,552 10,729
Note repayment from ESOP Trust 6,587 6,099
Payments for:
Retirement of Senior Notes (660,299) (478,944)
Treasury stock purchases (71,165) (105,655)
Cash dividends paid (47,160) (47,064)
---------------- --------------
Cash provided by financing activities 2,825,993 2,990,381
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvements (108,498) (52,442)
Purchases of investment securities and other assets (80,807) (78,661)
Proceeds from sales of investment securities and other assets 5,402 35,671
---------------- --------------
Cash used in investing activities (183,903) (95,432)
---------------- --------------
Net increase in cash and cash equivalents 20,613 704,220
Cash and cash equivalents, beginning of period 1,249,132 127,847
---------------- --------------
Cash and cash equivalents, end of period $1,269,745 $ 832,067
================ ==============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of The Bear Stearns Companies Inc. and its subsidiaries (the
"Company"). All material intercompany transactions and balances have been
eliminated. Certain prior period amounts have been reclassified to conform
with the current period's presentation or restated for the effects of stock
dividends. The consolidated financial statements reflect all adjustments
which, in the opinion of management, are normal and recurring and are
necessary for a fair statement of the results for the interim periods
presented. The consolidated financial statements are prepared in conformity
with generally accepted accounting principles which require management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. The nature of the Company's business is
such that the results of any interim period may not be indicative of the
results to be expected for an entire fiscal year.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments owned and financial instruments sold, but not yet
purchased consist of the Company's proprietary trading and investment
accounts, at fair value, as follows:
<TABLE>
<CAPTION>
December 31, June 30,
In thousands 1997 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial instruments owned:
US government and agency $ 8,641,199 $ 9,163,407
Other sovereign governments 2,663,875 1,847,691
Corporate equity and convertible debt 10,905,220 11,280,199
Corporate debt 5,777,656 4,961,737
Derivative financial instruments 3,556,782 2,780,231
Mortgages and other mortgage-backed securities 8,811,676 7,858,200
Other 461,819 545,815
------- -------
$ 40,818,227 $ 38,437,280
============ ============
Financial instruments sold, but not yet purchased:
US government and agency $ 8,014,466 $ 8,687,884
Other sovereign governments 3,119,594 1,479,278
Corporate equity 4,221,154 4,985,396
Corporate debt 1,676,024 1,099,700
Derivative financial instruments 5,358,404 4,412,986
Other 60,438 119,552
------ -------
$ 22,450,080 $ 20,784,796
============ ============
</TABLE>
<PAGE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company was contingently liable for unsecured
letters of credit of approximately $2.2 billion and letters of credit of
approximately $104.0 million secured by financial instruments that are
principally used as deposits for securities borrowed and to satisfy margin
deposits at option and commodity exchanges.
In the normal course of business, the Company has been named as a defendant
in several lawsuits which involve claims for substantial amounts. Although
the ultimate outcome of these suits cannot be ascertained at this time, it
is the opinion of management, after consultation with counsel, that the
resolution of such suits will not have a material adverse effect on the
results of operations or the financial condition of the Company.
4. NET CAPITAL REQUIREMENTS
The Company's principal operating subsidiary, Bear Stearns & Co. Inc. ("Bear
Stearns") and Bear Stearns' wholly owned subsidiary, Bear, Stearns
Securities Corp. ("BSSC"), are registered broker-dealers and, accordingly,
are subject to Securities and Exchange Commission Rule 15c3-1 (the "Net
Capital Rule") and the capital rules of the New York Stock Exchange, Inc.
("NYSE") and other principal exchanges of which Bear Stearns and BSSC are
members. Bear Stearns and BSSC have consistently operated in excess of the
minimum net capital requirements imposed by the capital rules. Included in
the computation of net capital of Bear Stearns is net capital of BSSC in
excess of 5% of aggregate debit items arising from customer transactions, as
defined. At December 31, 1997, Bear Stearns' net capital, as defined, of
$1.62 billion exceeded the minimum requirement by $1.59 billion.
Bear Stearns International Limited ("BSIL") and certain other wholly owned,
London-based subsidiaries are subject to regulatory capital requirements of
the Securities and Futures Authority.
<PAGE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share, ("SFAS 128") during the quarter ended December 31, 1997.
SFAS 128 simplifies the standards for computing and presenting earnings per
share ("EPS") previously found in APB Opinion No. 15, Earnings Per Share,
and makes them comparable to international EPS standards. As the Company has
a simple capital structure and makes a single presentation of earnings per
share on the income statement, the adoption of this standard did not affect
the reported amounts of EPS for the current or comparable period. EPS is
computed by dividing net income available to common stockholders by the
weighted average number of common shares outstanding during each period
presented. Common shares include the assumed distribution of shares of
common stock issuable under certain of the Company's deferred compensation
arrangements, with appropriate adjustments made to net income for expense
accruals related thereto. Additionally, shares of common stock issued or
issuable under various employee benefit plans are included as common shares.
6. CASH FLOW INFORMATION
Cash payments for interest approximated interest expense for the six-months
ended December 31, 1997 and December 31, 1996. Income taxes paid totaled
$227.1 million and $218.4 million for the six-months ended December 31, 1997
and December 31, 1996, respectively.
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company, in its capacity as a dealer in over-the-counter derivative
financial instruments and in connection with its proprietary market-making
and trading activities, enters into transactions in a variety of cash and
derivative financial instruments in order to reduce its exposure to market
risk, which includes interest rate, exchange rate, equity price and
commodity price risk. SFAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," defines a derivative
as a future, forward, swap, or option contract, or other financial
instruments with similar characteristics such as caps, floors and collars.
Generally these financial instruments represent future commitments to
exchange interest payment streams or currencies or to purchase or sell other
financial instruments at specific terms at specified future dates. Option
contracts provide the holder with the right, but not the obligation, to
purchase or sell a financial instrument at a specific price before or on an
established date. These financial instruments may have market and/or credit
risk in excess of amounts recorded in the Consolidated Statements of
Financial Condition.
<PAGE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)
In order to measure derivative activity, notional or contract amounts are
frequently utilized. Notional/contract amounts, which are not included on
the balance sheet, are used to calculate contractual cash flows to be
exchanged and are generally not actually paid or received, with the
exception of currency swaps and foreign exchange forwards and
mortgage-backed securities forwards. The notional/contract amounts of
financial instruments that give rise to off-balance-sheet market risk are
indicative only of the extent of involvement in the particular class of
financial instrument and are not necessarily an indication of overall market
risk.
The following table represents the notional/contract amounts of the
Company's outstanding derivative financial instruments as of December 31,
1997 and June 30, 1997:
December 31, June 30,
In billions 1997 1997
--------------------------------------------------------------------------
Interest Rate:
Swap agreements, including options,
swaptions, caps, collars, and floors $251.7 $208.3
Futures contracts 36.7 34.3
Options held 4.5 4.0
Options written 0.5 0.7
Foreign Exchange:
Futures contracts 12.0 19.9
Forward contracts 20.1 13.6
Options held 14.5 10.0
Options written 13.1 9.4
Mortgage-Backed Securities:
Forward Contracts 44.3 40.5
Equity:
Swap agreements 7.5 6.0
Futures contracts 1.2 0.6
Options held 4.4 2.8
Options written 3.7 2.9
<PAGE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)
The derivative instruments used in the Company's trading and dealer activities
are recorded at fair value on a daily basis with the resulting unrealized gains
or losses recorded in the Consolidated Statements of Financial Condition and the
related income or loss reflected in revenues derived from principal
transactions.
The fair values of derivative financial instruments held or issued for trading
purposes as of December 31, 1997 and June 30, 1997 were as follows:
December 31, June 30,
1997 1997
------------------------------------------------------
In millions Assets Liabilities Assets Liabilities
--------------------------------------------------------------------------
Swap agreements $1,013 $1,163 $730 $1,250
Futures and forward
contracts 259 316 172 248
Options held 2,292 1,880
Options written 3,906 2,927
The average monthly fair values of the derivative financial instruments for the
six-months ended December 31, 1997 and the fiscal year ended June 30, 1997 were
as follows:
December 31, June 30,
1997 1997
------------------------------------------------------------------------
In millions Assets Liabilities Assets Liabilities
---------------------------------------------------------------------------
Swap agreements $ 990 $1,336 $ 734 $1,029
Futures and forward
contracts 283 325 245 218
Options held 2,501 1,120
Options written 3,692 1,657
The notional/contract amounts of these instruments do not represent the
Company's potential risk of loss due to counterparty nonperformance. Credit risk
arises from the potential inability of counterparties to perform in accordance
with the terms of the contract. The Company's exposure to credit risk associated
with counterparty nonperformance is limited to the net replacement cost of
over-the-counter contracts in a gain position which are recognized in the
Company's Consolidated Statements of Financial Condition. Exchange-traded
financial instruments, such as futures and options, generally do not give rise
to significant counterparty exposure due to the margin requirements of the
individual exchanges. Generally, options written do not give rise to
counterparty credit risk since they obligate the Company (not its
<PAGE>
counterparty) to perform. The Company's net replacement cost of derivatives in a
gain position after consideration of collateral at December 31, 1997 was
approximately $1,310.2 million.
<PAGE>
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's principal business activities, investment banking, securities
trading and brokerage, are, by their nature, highly competitive and subject to
various risks, in particular volatile trading markets and fluctuations in the
volume of market activity. Consequently, the Company's net income and revenues
in the past have been, and are likely to continue to be, subject to wide
fluctuations, reflecting the impact of many factors including, securities market
conditions, the level and volatility of interest rates, competitive conditions,
and the size and timing of transactions. Moreover, the results of operations for
a particular interim period may not be indicative of results to be expected for
an entire fiscal year.
Certain Statements Contained In This Discussion Are "Forward-looking
Statements" Within The Meaning Of The Private Securities Litigation Reform
Act Of 1995. Such Forward-looking Statements Involve Known And Unknown
Risks And Uncertainties, Including Those Previously Mentioned, Which Could
Cause Actual Results To Differ Materially From Those Discussed In The
Forward-looking Statements.
For a description of the Company's business, including its trading in cash
instruments and derivative products, its underwriting and trading policies, and
their respective risks, and the Company's risk management policies and
procedures, see the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997.
Three-Months Ended December 31, 1997 Compared to December 31, 1996
The December 1997 quarter reflected an environment characterized by
volatile equity and fixed income markets attributed to turbulence in the
Asian markets. Domestic markets reflected volatility, however, experienced
continued strong volumes and a favorable underwriting and merger and
acquisitions environment. Net income in the 1997 quarter was $160.2
million, a decrease of 9.2% from the $176.5 million in the comparable prior
year quarter. Revenues, net of interest expense ("net revenues"), increased
14.2% to $1,073.8 million from $940.1 million in the 1996 quarter. Earnings
per share were $1.11 for the 1997 quarter versus $1.21 for the comparable
1996 quarter. The earnings per share amounts have been adjusted for all
stock dividends.
Commission revenues increased 25.6% in the 1997 quarter to $230.5 million from
$183.6 million in the comparable 1996 quarter. This increase was attributable to
increased revenues from the firm's institutional equities and private client
services as well as increased securities clearance revenues.
<PAGE>
Revenues from principal transactions decreased 9.0% in the 1997 quarter to
$390.5 million from $429.2 million in the comparable 1996 quarter, reflecting
decreases in revenues derived from the Company's fixed income activities,
principally in mortgage-backed securities and corporate bond areas.
The Company's principal transaction revenues by reporting categories, including
derivatives, are as follows:
Three-Months Ended Three-Months Ended
December 31, 1997 December 31, 1996
Fixed Income $226,903 $287,021
Equity 108,297 84,221
Foreign Exchange & Other
Derivative Financial
Instruments 55,312 57,997
------ ------
$390,512 $429,239
======== ========
Investment banking revenues increased 52.3% to $278.9 million in the 1997
quarter from $183.1 million in the comparable 1996 quarter. This increase
reflected an increase in merger and acquisition fees and advisory fees as well
as an increase in underwriting revenues. The increase in underwriting revenues
was principally due to increased levels of equity and high yield new issue
volume as compared to the 1996 quarter.
Net interest and dividends (revenues from interest and net dividends, less
interest expense) increased 25.4% to $162.0 million in the 1997 quarter from
$129.2 million in the comparable 1996 quarter. This increase was primarily
attributable to higher levels of margin debt. Average margin debt increased to
$44.3 billion in the 1997 quarter from $30.3 billion in the comparable 1996
quarter. Average free credit balances increased to $11.0 billion in the 1997
quarter from $7.4 billion in the comparable 1996 quarter.
Employee compensation and benefits increased 17.3% to $535.8 million in the
1997 quarter from $456.8 million in the comparable 1996 quarter. The
increase was attributable to higher incentive and discretionary bonus
accruals and an increase in headcount. Employee compensation and benefits,
as a percentage of net revenues, increased to 49.9% in the 1997 quarter
from 48.6% in the comparable 1996 quarter.
All other expenses increased 44.4% to $278.4 million in the 1997
quarter from $192.8 million in the comparable 1996 quarter. Floor
brokerage, exchange and clearance fees increased 26.3% in the 1997
quarter from the comparable 1996 quarter reflecting the increase in
the volume of securities transactions processed. Expenses related to
depreciation and data processing increased reflecting computer
equipment upgrades. The increase in other expenses was primarily
related to an increase in reserves for legal matters, reflecting the
impact of the settlement of the NASDAQ antitrust litigation, an
increase in accruals for expenses associated with the Capital
Accumulation Plan for Senior Managing Directors (the "CAP Plan") and
increased EDP professional fees. EDP professional fees increased due
to additional consultants hired for various technology initiatives.
The Company's effective tax rate decreased to 38.3% in the 1997 quarter compared
to 39.3% in the comparable 1996 quarter due to a higher level of tax preference
items in the 1997 quarter.
Six-Months Ended December 31, 1997 Compared to December 31, 1996 .
Net income for the six-months ended December 31, 1997 was $321.8 million, an
increase of 12.9% from $285.0 million for the comparable 1996 period. Revenues,
net of interest expense ("net revenues"), increased 27.1% to $2.1 billion in the
1997 period from $1.6 billion in the 1996 period. The increase was attributable
to increases in all revenue categories, particularly investment banking and
commissions. Earnings per share were $2.22 for the 1997 period versus $1.92 for
the comparable 1996 period. The earnings per share amounts have been adjusted
for all stock dividends.
Commission revenues increased 28.6% in the 1997 period to $443.9 million from
$345.2 million in the comparable 1996 period. This increase was primarily
attributable to increased revenues from the firm's institutional equities and
private client services as well as increased securities clearance revenues.
Revenues from principal transactions increased 8.0% in the 1997 period
to $782.0 million from $724.1 million in the comparable 1996 period,
primarily reflecting increases in revenues derived from the Company's
foreign exchange and derivative activities. Additionally, principal
transactions revenues derived from equity activities increased
primarily attributable to increases in the convertible bonds and risk
arbitrage areas. These increases were partially offset by a decline in
the Company's fixed income activities, primarily mortgage-backed
securities and corporate bonds.
<PAGE>
The Company's principal transaction revenues by reporting categories, including
derivatives, are as follows:
Six-Months Ended Six-Months Ended
December 31, 1997 December 31, 1996
Fixed Income $441,125 $474,367
Equity 201,196 156,490
Foreign Exchange & Other
Derivative Financial
Instruments 139,705 93,274
------- ------
$782,026 $724,131
======== ========
Investment banking revenues increased 70.7% to $498.2 million in the 1997 period
from $291.8 million in the comparable 1996 period. This increase reflected an
increase in merger and acquisition fees and advisory fees as well as an increase
in underwriting revenues. The increase in underwriting revenues was principally
due to increased levels of equity and high yield new issue volume as compared to
the 1996 period.
Net interest and dividends (revenues from interest and net dividends,
less interest expense) increased 28.0% to $309.7 million in the 1997
period from $242.0 million in the comparable 1996 period. This
increase was primarily attributable to higher levels of margin debt
and customer short activity. Average margin debt increased to $43.5
billion in the 1997 period from $27.8 billion in the comparable 1996
period. Average free credit balances increased to $10.2 billion in the
1997 period from $7.6 billion in the comparable 1996 period. Average
customer short balances increased to $54.9 billion in the 1997 period
from $36.6 billion in the 1996 period.
Employee compensation and benefits increased 29.2% to $1,035.0 million in
the 1997 period from $801.2 million in the comparable 1996 period. The
increase was attributable to higher incentive and discretionary bonus
accruals and an increase in headcount. Employee compensation and benefits,
as a percentage of net revenues, increased to 50.0% in the 1997 period from
49.2% in the comparable 1996 period.
All other expenses increased 41.7% to $508.1 million in the 1997
period from $358.5 million in the comparable 1996 period. Floor
brokerage, exchange and clearance fees increased 25.9% in the 1997
period from the comparable 1996 period reflecting the increase in the
volume of securities transactions processed. Expenses related to
depreciation and data processing increased reflecting computer
equipment upgrades. The increase in other expenses was primarily
related to an increase in reserves for legal matters, an increase in
accruals for expenses associated with the CAP Plan and increases in
EDP professional fees. EDP professional fees increased due to
additional consultants hired for various technology initiatives.
The Company's effective tax rate decreased to 38.9% in the 1997 period compared
to 39.3% in the comparable 1996 period due to a higher level of tax preference
items in the 1997 period.
Liquidity and Capital Resources
Financial Leverage
The Company maintains a highly liquid balance sheet with a majority of the
Company's assets consisting of marketable securities inventories, which are
marked to market daily, and collateralized receivables arising from
customer-related and proprietary securities transactions. Collateralized
receivables consist of resale agreements secured predominantly by U.S.
government and agency securities, customer margin loans and securities borrowed
which are typically secured by marketable corporate debt and equity securities.
The Company's total assets and financial leverage can fluctuate significantly
depending largely upon economic and market conditions, volume of activity,
customer demand, and underwriting commitments.
The Company's total assets at December 31, 1997 increased to $137.5 billion from
$121.4 billion at June 30, 1997. The increase is primarily attributable to the
growth in securities purchased under agreements to resell, receivables from
customers, and financial instruments owned, at fair value.
The Company's ability to support fluctuations in total assets is a function of
its ability to obtain short-term secured and unsecured funding and its access to
sources of long-term capital in the form of long-term borrowings and equity,
which together form its capital base. The Company continuously monitors the
adequacy of its capital base which is a function of asset quality and liquidity.
Highly liquid assets, such as U.S. government and agency securities, typically
are funded by the use of repurchase agreements and securities lending
arrangements which require very low levels of margin. In contrast, assets of
lower quality or liquidity require higher levels of overcollateralization, or
margin, and consequently increased levels of capital, in order to obtain secured
financing. Accordingly, the mix of assets being held by the Company
significantly influences the amount of leverage the Company can employ and the
adequacy of its capital base.
Funding Strategy
The Company's general funding strategy provides for the
diversification of its short-term funding sources in order to maximize
liquidity. Sources of short-term funding consist principally of
collateralized borrowings, including repurchase transactions and
securities lending arrangements, customer free credit balances,
unsecured commercial paper, medium-term notes and bank borrowings
generally having maturities from overnight to one year.
Repurchase transactions, whereby securities are sold with a commitment for
repurchase by the Company at a future date, represent the dominant component of
secured short-term funding.
The Company continued to increase the utilization of its medium-term
note financing in order to extend maturities of its debt and achieve
additional diversification of its funding sources. In addition to
short-term funding sources, the Company utilizes long-term senior
debt, including medium-term notes, as a longer term source of
unsecured financing. During the six months ended December 31, 1997,
the Company issued $3.4 billion in long-term debt which, net of
retirements, served to increase long-term debt to $10.9 billion at
December 31, 1997 from $8.1 billion at June 30, 1997. The substantial
increase in long-term borrowings reflects both the Company's intent to
further extend maturities to finance balance sheet growth and
favorable market conditions for issuance.
The Company maintains an alternative funding strategy focused on the liquidity
and self-funding ability of the underlying assets. The objective of the strategy
is to maintain sufficient sources of alternative funding to enable the Company
to fund debt obligations maturing within one year without issuing any new
unsecured debt, including commercial paper. The most significant source of
alternative funding is the Company's ability to hypothecate or pledge its
unencumbered assets as collateral for short-term funding.
As part of the Company's alternative funding strategy, the Company regularly
monitors and analyzes the size, composition, and liquidity characteristics of
the assets being financed and evaluates its liquidity needs in light of current
market conditions and available funding alternatives. Through this analysis, the
Company can continuously evaluate the adequacy of its equity base and the
schedule of maturing term-debt supporting its present asset levels. The Company
can then seek to adjust its maturity schedule, in light of market conditions and
funding alternatives.
As part of the Company's alternative funding strategy, the Company maintains a
committed revolving-credit facility (the "facility") totaling $3.7 billion which
permits borrowing on a secured basis by Bear Stearns & Co. Inc. ("Bear
Stearns"), Bear Stearns Securities Corp. ("BSSC") and certain affiliates. The
facility provides that up to $1.85 billion of the total facility may be borrowed
by the Company on an unsecured basis. Secured borrowings can be collateralized
by both investment-grade and non-investment-grade financial instruments. In
addition, this agreement provides for defined margin levels on a wide range of
eligible financial instruments that may be pledged under the secured portion of
the facility. The facility terminates in October 1998 . There were no borrowings
outstanding under the facility at December 31, 1997.
Capital Resources
The Company conducts a substantial portion of all of its operating
activities within its regulated broker-dealer subsidiaries, Bear
Stearns, BSSC, Bear Stearns International Limited ("BSIL") and Bear
Stearns International Trading Limited ("BSIT"). In connection
therewith, a substantial portion of the Company's long-term borrowings
and equity have been used to fund investments in, and advances to,
Bear Stearns, BSSC, BSIL and BSIT. The Company regularly monitors the
nature and significance of those assets or activities conducted
outside the broker-dealer subsidiaries and attempts to fund such
assets with either capital or borrowings having maturities consistent
with the nature and the liquidity of the assets being financed.
During the six-months ended December 31, 1997, the Company repurchased 1,695,166
shares of Common Stock in connection with the CAP Plan at a cost of
approximately $72.1 million. The Company intends, subject to market conditions,
to continue to purchase in future periods a sufficient number of shares of
Common Stock in the open market to enable the Company to issue shares in respect
of all compensation deferred and any additional amounts allocated to
participants under the CAP Plan. Repurchases of Common Stock pursuant to the CAP
Plan are not made pursuant to the Company's Stock Repurchase Plan (the
"Repurchase Plan") authorized by the Board of Directors and are not included in
calculating the maximum aggregate number of shares of Common Stock that the
Company may repurchase under the Repurchase Plan. As of February 10, 1998, there
have been no purchases under the Repurchase Plan.
On January 15, 1998, the Company issued 5,000,000 depositary shares representing
1,250,000 shares of Cumulative Preferred Stock, Series E ("Series E Preferred
Stock"), having an aggregate liquidation preference of $250,000,000. Each
depositary share represents a one-fourth interest in a share of Series E
Preferred Stock. Dividends on the Series E Preferred Stock are payable at an
annual rate of 6.15%. Series E Preferred Stock is redeemable at the option of
the Company at any time on or after January 15, 2008, in whole or in part, at a
redemption price of $200 per share (equivalent to $50 per depositary share),
plus accrued but unpaid dividends to the redemption date.
Cash Flows
Cash and cash equivalents increased by $20.6 million during the six-months ended
December 31, 1997 to $1.3 billion. Cash used in operating activities during the
six-months ended December 31, 1997 was $2.6 billion, mainly representing
increases in securities purchased under agreements to resell, receivables from
customers and financial instruments owned partially offset by increases in
securities sold under agreements to repurchase and payables to customers.
Financing activities provided cash of $2.8 billion, primarily derived from
long-term borrowings proceeds partially offset by retirement of senior notes.
Regulated Subsidiaries
As registered broker-dealers, Bear Stearns and BSSC are subject to the
net capital requirements of the Securities and Exchange Commission,
the New York Stock Exchange, Inc. and the Commodity Futures Trading
Commission, which are designed to measure the general financial
soundness and liquidity of broker-dealers. Bear Stearns and BSSC have
consistently operated in excess of the minimum net capital
requirements imposed by these agencies. Additionally, BSIL and BSIT,
London-based broker-dealer subsidiaries, are subject to the regulatory
capital requirements of the Securities and Futures Authority, a
self-regulatory organization established pursuant to the United
Kingdom Financial Services Act of 1986.
Merchant Banking and Non-Investment-Grade Debt Securities
As part of the Company's merchant banking activities, it participates from time
to time in principal investments in leveraged acquisitions. As part of these
activities, the Company originates, structures and invests in merger,
acquisition, restructuring, and leveraged capital transactions, including
leveraged buyouts. The Company's principal investments in these transactions are
generally made in the form of equity investments or subordinated loans, and have
not required significant levels of capital investment. At December 31, 1997, the
Company's aggregate investments in leveraged transactions and its exposure
related to any one transaction was not material.
As part of the Company's fixed-income securities activities, the Company
participates in the trading and sale of high yield, non-investment-grade debt
securities, non-investment-grade mortgage loans and the securities of companies
that are the subject of pending bankruptcy proceedings (collectively "high yield
securities"). Non-investment-grade mortgage loans are principally secured by
residential properties and include both non-performing loans and real estate
owned. At December 31, 1997, the Company held high yield securities of $ 1.9
billion in long inventory and $ 261.4 million in short inventory.
These investments generally involve greater risk than investment-grade debt
securities due to credit considerations, liquidity of secondary trading markets
and vulnerability to general economic conditions.
The level of the Company's high yield securities inventories, and the impact of
such activities upon the Company's results of operations, can fluctuate from
period to period as a result of customer demands and economic and market
considerations. Bear Stearns' Risk Committee continuously monitors exposure to
market and credit risk with respect to high yield securities inventories and
establishes limits with respect to overall market exposure and concentrations of
risk by both individual issuer and industry group.
<PAGE>
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year and
therefore, without consideration of the impact of the upcoming change in
the century. Such programs may not be able to accurately process dates
ending in the year 2000 and after and the Company has determined that it
needs to modify or replace portions of its software so that its computer
systems will properly utilize dates beyond December 31, 1999.
Over a year ago, the Company established a task force to review and develop an
action plan to address the Year 2000 issue. Such ongoing assessment and
monitoring has continued and includes having the Company assess the degree of
compliance of its significant vendors, clients and correspondents to determine
the extent to which the Company is vulnerable to those third parties' failure to
remediate their own Year 2000 issue. The Company also participates actively on
various industry-wide testing committees.
The Company has and will continue to utilize both internal and
external resources to reprogram, or replace, and test the software for
Year 2000 modifications. The Company's total projected Year 2000
project cost, including the estimated costs and time associated with
the impact of third party Year 2000 issues, are based on presently
available information. Such project cost will primarily be expensed as
incurred. To date, the amounts incurred and expensed related to the
assessment of, and preliminary efforts in connection with, the Year
2000 project and the development of a remediation plan have not been
material to the operation of the Company. The remaining cost of the
Year 2000 project will be funded through operating cash flows and is
not expected to have a material effect on future results of
operations.
The Company presently believes that with modification to existing software and
conversions to new software, the Year 2000 issue can be mitigated. It is
anticipated that the Company will complete the reprogramming and replacement
phase of the project by the end of calendar 1998 which will give the Company
calendar 1999 as a test period. However, if such modifications and conversions
are not completed on a timely basis, the Year 2000 issue could have a material
impact on the operations of the Company. Additionally, there can be no assurance
that the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.
<PAGE>
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------- -----------
The Company's principal business activities by their nature engender significant
market and credit risks. Managing these risks is critical to the success and
stability of the Company. As a result, comprehensive risk management policies
and procedures have been established to identify, control and monitor each of
these major risks. Additionally, the Company's diverse portfolio of business
activities helps to reduce the impact that volatility in any particular market
may have on its net revenues. In addition to market risk, the Company is also
subject to credit risk, operating risk and funding risk.
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument as a result of
fluctuations in interest and currency exchange rates and in equity and commodity
prices. Market risk is inherent to both derivative and non-derivative financial
instruments, and accordingly, the scope of the Company's market risk management
procedures extends beyond derivatives to include all market risk sensitive
financial instruments. The Company's exposure to market risk is directly related
to its role as a financial intermediary in customer-related transactions and to
its proprietary trading and arbitrage activities. For a discussion of the
Company's primary market risk exposures, which includes interest rate risk,
foreign exchange rate risk, and equity price risk, and a discussion of how those
exposures are managed see the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997.
Value at Risk
The estimation of potential losses that could arise from changes in market
conditions is typically accomplished through the use of statistical models which
seek to predict risk of loss based on historical price and volatility patterns.
Such statistical models are commonly known as value at risk. Value at risk is
used to describe a probabilistic approach to measuring the exposure to market
risk. This approach utilizes statistical concepts to estimate the probability of
the value of a financial instrument falling above or below a specified amount.
The calculation utilizes the standard deviation of historical changes in value
of the market risk sensitive financial instruments (i.e., volatility) to
estimate the amount of change in the current value that could occur at a
specified probability level.
Measuring market risk using statistical risk management models has recently
become the main focus of risk management efforts by many companies whose
earnings are significantly exposed to changes in the fair value of financial
instruments. The Company believes that statistical models alone do not provide a
reliable method of monitoring and controlling risk. While value at risk models
are relatively sophisticated, the quantitative risk information generated is
limited by the parameters established in creating the related models. The
financial instruments being evaluated may have features which may trigger a
potential loss in excess of the amounts previously disclosed if the changes in
market rates or prices exceed the confidence level of the
<PAGE>
model used. Therefore, such models do not substitute for the experience or
judgment of senior management and traders, who have extensive knowledge of the
markets and adjust positions and revise strategies as they deem necessary. The
Company uses these models only as a supplement to other risk management tools.
For purposes of Securities and Exchange Commission disclosure requirements, the
Company has performed an entity-wide value at risk analysis of virtually all of
the Company's financial assets and liabilities, including all reported financial
instruments owned and sold, repurchase and resale agreements, and funding assets
and liabilities. The value at risk related to non-trading financial instruments
has been included in this analysis and not reported separately because the
amounts were not material. The calculation is based on a methodology which uses
a one-day interval and a 95% confidence level. Interest rate and foreign
exchange rate risk use a Monte Carlo value at risk approach. For interest rates,
each country's yield curve has five factors which describe possible curve
movements. These were generated from principal component analysis. In addition,
volatility and spread risk factors were used, where appropriate. Inter-country
correlations were also used. Equity price risk was measured using a historical
value at risk. Equity derivatives were treated as correlated with various
indices, of which the Company used forty. Parameter estimates, such as
volatilities and correlations, were based on daily tests through December 31,
1997.
This table illustrates the value at risk for each component of market risk as
of:
December 31, June 30,
in millions 1997 1997
- ----------- ----- -----
MARKET RISK
Interest $14.8 $ 11.6
Currency 3.2 3.2
Equity 12.5 8.9
As previously discussed, the Company utilizes a wide variety of market risk
management methods, including: limits for each trading activity; marking all
positions to market on a daily basis; daily profit and loss statements; position
reports; aged inventory position reports; and independent verification of all
inventory pricing. Additionally, trading department management reports
positions, profits and losses, and trading strategies to the Risk Committee on a
weekly basis. The Company believes that these procedures, which stress timely
communication between trading department management and senior management, are
the most important elements of the risk management process.
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
Spencer C. Busby, et al. v. Donna Karan International, et al./In re Donna Karan
International Inc. Securities Litigation
As previously reported in the Company's 1997 Form 10-K and 10-Q for the first
quarter of 1998, Bear Stearns is a defendant in litigation pending in the United
States District Court for the Eastern District of New York.
On November 10, 1997, plaintiffs filed an amended consolidated complaint.
Plaintiffs allege violations by all defendants, including the Underwriter
Defendants of Sections 11 and 12(a)(2) of the Securities Act of 1933. Other
defendants are alleged to have violated Section 15 of the Securities Act and
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder.
Gregory P. Christofferson, et al. v. Bear Stearns & Co., Inc., et al.
As previously reported in the Company's 1997 Form 10-K and 10-Q for the first
quarter of 1998, Bear Stearns and three Bear Stearns officers are defendants in
a litigation pending in the Superior Court of the State of California in and for
the County of Los Angeles.
The case has been settled.
In re Granite Partners, L.P., Granite Corporation and Quartz Hedge Fund.
As previously reported in the Company's 1997 Form 10-K, Bear Stearns is a
defendant in litigation pending in the United States District Court for the
Southern District of New York.
On October 27, 1997, the Primavera, ABF Capital, Montpellier and Johnston cases
were consolidated for pre-trial purposes.
In re Lady Luck Gaming Corporation Securities Litigation.
As previously reported in the Company's 1997 Form 10-K and 10-Q for the first
quarter of 1998, Bear Stearns is a defendant in litigation pending in the United
States District Court for the District of Nevada.
On October 8, 1997, the court dismissed with prejudice all of plaintiffs' claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The court
also dismissed with prejudice plaintiffs' claims under Sections 11, 12(2) and
20(a) of the Securities Act of 1933, with respect to eleven of sixteen alleged
misrepresentations or
<PAGE>
omissions in the Lady Luck prospectus underlying the litigation. Plaintiffs'
claims with respect to the remaining five alleged misrepresentations or
omissions were dismissed without prejudice, pending the filing of an amended
complaint limited only to those claims.
On November 6, 1997, plaintiffs filed a Third Amended Complaint alleging claims
under Sections 11, 12(2) and 15 of the Securities Act of 1933.
NASDAQ Antitrust Litigation.
As previously reported in the Company's 1997 Form 10-K and 10-Q for the first
quarter of 1998, over 30 market-makers, including Bear Stearns, are defendants
in litigation pending in the United States District Court for the Southern
District of New York.
On December 23, 1997, plaintiffs and all but one of the defendants who
previously had not agreed to settle the litigation, including Bear Stearns,
agreed to a proposed settlement that is subject to court approval. That
settlement requires, among other things, that Bear Stearns (1) pay, on or before
January 7, 1998, approximately $1.1 million to a settlement fund; and (2) pay,
on or before September 30, 1998, to the settlement fund U.S. Treasury securities
which shall mature on or before July 30, 1999, and shall have a value at
maturity of approximately $40.6 million. On December 31, 1997, the court issued
an order expanding the Class Period to May 1, 1989 through July 17, 1996. Also
on December 31, 1997, the court preliminarily approved the proposed settlement
on behalf of the expanded class. The settlement is subject to final approval by
the court following notice to class members and a hearing on the fairness of the
settlement.
Option Portfolio Limited Partnership, et al. v. Bear Stearns & Co., Inc. et al.
On September 17, 1997, eight individuals and entities claiming to have an
interest in a limited partnership that was a former Bear Stearns brokerage
customer commenced an NASD arbitration proceeding against Bear Stearns and a
former Bear Stearns account executive. The claimants assert claims based upon
alleged common law fraud, negligence, breach of fiduciary duty and respondeat
superior. The claimants seek damages in an amount in excess of $23 million.
On December 11, 1997, Bear Stearns filed a petition to stay the arbitration in
New York Supreme Court, New York County, New York.
Bear Stearns denies all allegations of wrongdoing asserted against it in the
arbitration proceeding, intends to defend these claims vigorously and believes
that it has substantial defenses to these claims.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the Company held on October 27, 1997 (the "Annual
Meeting"), the stockholders of the Company approved the Company's Fiscal 1998
Performance Goals under, and an amendment to, the Management Compensation Plan
(the "Performance Goals and Amendment"), amendments to the Capital Accumulation
Plan for Senior Managing Directors (the "CAP Plan Amendments") and amendments to
the Performance Compensation Plan (the "Performance Compensation Plan
Amendments"). In addition, at the Annual Meeting the stockholders of the Company
elected nine directors to serve until the next Annual Meeting of Stockholders or
until successors are duly elected and qualified.
The affirmative vote of a majority of the shares of Common Stock represented at
the Annual Meeting and entitled to vote on each matter was required to approve
the Performance Goals and Amendment, the CAP Plan Amendments and the Performance
Compensation Plan Amendments, while the affirmative vote of a plurality of the
votes cast by holders of shares of Common Stock was required to elect the
directors.
With respect to the approval of the Performance Goals and Amendment, the CAP
Plan Amendments and the Performance Compensation Plan Amendments, set forth
below is information on the results of the votes cast at the Annual Meeting.
Broker
For Against Abstained Non-Votes
Performance Goals
and Amendment 75,898,984 1,605,060 384,623 22,078,356
CAP Plan Amendments 75,078,868 2,310,232 499,566 22,078,357
Performance Compensation
Plan 95,951,429 3,144,759 547,909 322,926
With respect to the election of directors, set forth below is information with
respect to the nominees elected as directors of the Company at the Annual
Meeting and the votes cast and\or withheld with respect to each such nominee.
Nominees For Withheld
--------------------------------- ----------------- -------------------
James E. Cayne 99,468,600 498,423
Carl D. Glickman 99,451,835 515,188
Alan C. Greenberg 99,551,568 415,455
Donald J. Harrington 99,550,079 416,944
William L. Mack 99,009,176 957,847
Frank T. Nickell 99,477,502 489,521
Frederic V. Salerno 99,460,651 506,372
Vincent Tese 99,002,398 964,625
Fred Wilpon 99,468,527 498,496
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) (b) By-laws, as restated as of January 21, 1998
(10)(a)(6) Capital Accumulation Plan for Senior Managing Directors,
as amended and restated as of January 21, 1998
(10)(a)(8) Performance Compensation Plan, as restated as
of January 21, 1998
(11) Statement Re Computation of Per Share Earnings
(12) Statement Re Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the quarter, the Company filed the following Current Reports on Form 8-K.
(i)A Current Report on Form 8-K dated October 14, 1997, pertaining to the
Company's results of operations for the three-months ended September 26, 1997.
(ii) A Current Report on Form 8-K dated October 28, 1997, pertaining to the
declaration of quarterly dividends.
<PAGE>
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.
The Bear Stearns Companies Inc.
(Registrant)
Date: February 13, 1998 By: /s/Sam L. Molinaro
--------------------------
Samuel L. Molinaro Jr.
Senior Vice President - Finance
and Chief Financial Officer
<PAGE>
THE BEAR STEARNS COMPANIES INC.
FORM 10-Q
Exhibit Index
Exhibit No. Description Page
(3) (b) By-laws, as restated as of January 21, 1998 30
(10) (a) (6) Capital Accumulation Plan for Senior Managing
Directors, as amended and restated as of
January 21, 1998 48
(10) (a) (8) Performance Compensation Plan, as restated as
of January 21, 1998 84
(11) Statement Re Computation of Per Share Earnings 89
(12) Statement Re Computation of Earnings to Fixed Charges 90
(27) Financial Data Schedule 91
BY-LAWS
OF
THE BEAR STEARNS COMPANIES INC.
(A Delaware Corporation)
(Restated as of January 21, 1998)
------------------------
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws" means the initial by-laws of the Corporation, as amended from time
to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Chairman of the Board" means the Chairman of the Board of Directors of the
Corporation.
1.7 "Chief Administrative Officer" means the Chief Administrative Officer of the
Corporation.
1.8 "Chief Executive Officer" means the Chief Executive Officer of the
Corporation.
1.9 "Chief Financial Officer" means the Chief Financial Officer of the
Corporation.
1.10 "Chief Operating Officer" means the Chief Operating Officer of the
Corporation.
1.11 "Controller" means the Controller of the Corporation.
1.12 "Corporation" means The Bear Stearns Companies Inc.
1.13 "Directors" means directors of the Corporation.
<PAGE>
1.14 "General Corporation Law" means the General Corporation Law of
the State of Delaware, as amended from time to time.
1.15 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to
the contrary notwithstanding.
1.16 "President" means the President of the Corporation.
1.17 "Secretary" means the Secretary of the Corporation
1.18 "Stockholders" means stockholders of the Corporation.
1.19 "Treasurer" means the Treasurer of the Corporation.
1.20 "Vice President" means a Vice President of the Corporation
1.21 "Whole Board" means the total number of directors of the
Corporation as last determined by the Board of Directors in accordance
with the
Certificate of Incorporation, including any directorships that are vacant for
any reason.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of stockholders shall be held at the office
of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver of notice thereof.
2.2 Annual Meeting. A meeting of stockholders for the
election of directors and the transaction of such other business as may be
brought before such meeting shall be held at such hour and on such business day
in each year as may be determined by resolution adopted by the affirmative vote
of a majority of the Whole Board.
2.3 Deferred Meeting for Election of
Directors. If the election of directors shall not be held on the date designated
therefor or at an adjournment of a meeting convened on such date, the Board of
Directors, by resolution or resolutions adopted by the affirmative vote of a
majority of the Whole Board, shall cause to be held a special meeting of
stockholders for such purpose as soon thereafter as practicable.
2.4 Other
Special Meetings. A special meeting of stockholders (other than a special
meeting for the election of directors), unless otherwise prescribed by statute,
may be called at any other time only at the direction of the Board by resolution
adopted by the affirmative vote of a majority of the Whole Board or such other
person or persons as may be specified in the Certificate of Incorporation. At
any special meeting of stockholders only such business may be transacted as is
related to the purpose or purposes of such meeting set forth in the notice
thereof given pursuant to Section 2.6 of the By-laws or in any waiver of notice
thereof given pursuant to Section 2.7 of the By-laws.
2.5 Fixing Record Date.
For the purpose of determining the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment
<PAGE>
thereof, or to express consent to corporate action in writing without a meeting,
or for the purpose of determining stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix, in advance, a
date as the record date for any such determination of stockholders. Such date
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no such record
date is fixed:
2.5.1 The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held;
2.5.2 The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting (if
permitted), when no prior action by the Board is necessary, shall be
the day on which the first written consent is expressed;
2.5.3 The record date for determining stockholders for any purpose
other than those specified in Sections 2.5.1 and 2.5.2 shall be at the
clobusiness on the day on which the Board adopts the resolution
relating thereto. When a determination of stockholders entitled to
notice of or to vote at any meeting of stockholders has been made as
provided in this Section 2.5 such determination shall apply to any
adjournment thereof, unless the Board fixes a new record date for the
adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided
in Sections 2.5 and 2.7 of the By-laws, whenever under the General
Corporation Law or the Certificate of Incorporation or the By-laws,
stockholders are required or permitted to take any action at a
meeting, written notice shall be given stating the place, date and
hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. A copy of the notice of
any meeting shall be given, personally or by mail, not less than ten
nor more than sixty days before the date of the meeting, to each
stockholder entitled to notice of or to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the
United States mail, with postage prepaid, directed to the stockholder
at his address as it appears on the records of the Corporation. An
affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice required by this
section has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted at the
meeting as originally called. If, however, the adjournment is for more
than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the
meeting.
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2.7 Waivers of Notice. Whenever notice is required to be given to any
stockholder under any provision of the General Corporation Law or the
Certificate of Incorporation or the By-laws, a written waiver thereof, signed by
the stockholder entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a stockholder at a
meeting shall constitute a waiver of notice of such meeting, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
2.8 List of Stockholders. The Secretary shall prepare and make, or cause to be
prepared and made, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.9 Quorum of Stockholders; Adjournment. Except as otherwise provided by law or
by the Certificate of Incorporation, the holders of a majority of the shares of
stock entitled to vote at any meeting of stockholders, present in person or
represented by proxy, shall constitute a quorum for the transaction of any
business at such meeting. When a quorum is once present to organize a meeting of
stockholders, it is not broken by the subsequent withdrawal of any stockholders.
The holders of a majority of the shares of stock present in person or
represented by proxy at any meeting of stockholders, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to another
time and place.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation, every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his name on
the record of stockholders determined in accordance with Section 2.8 of the
By-laws. The provisions of Sections 212 and 217 of the General Corporation Law
shall apply in determining whether any shares of capital stock may be voted and
the persons, if any, entitled to vote such shares; but the Corporation shall be
protected in treating the persons in whose names shares of capital stock stand
on the record of stockholders as owners thereof for all purposes. At any meeting
of stockholders at which a quorum is present, all matters, except as otherwise
provided by law or by the Certificate of Incorporation or by the By-laws, shall
be decided by a majority of the votes cast at such meeting by the holders of
shares present in person or represented by proxy and entitled to vote thereon,
whether or not a quorum is present when the vote is taken. Unless otherwise
determined by the chairman of the meeting, election of directors need not be by
written ballot;
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provided, however, that by resolution duly adopted by the stockholders, a vote
by written ballot shall be required. In voting on any other question on which a
vote by ballot is required by law or is demanded by any stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed by the
stockholder voting or by his proxy, and shall state the number of shares voted.
On all other questions, the voting may be viva voce. Every stockholder entitled
to vote at a meeting of stockholders, or to express consent to or dissent from
corporate action in writing without a meeting, may authorize another person or
persons to act for him by proxy. The validity and enforceability of any proxy
shall be determined in accordance with Section 212 of the General Corporation
Law.
2.11 Selection and Duties of Inspectors at Meeting of Stockholders.
2.11.1
The Board shall, in advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report thereof. The Board
may designate one or more persons as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a
meeting, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
2.11.2 The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at the meeting and the validity of proxies and ballots, (iii) count all votes
and ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of inspector.
2.11.3 The date and time of the opening and the closing
of the polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls, unless the Court of Chancery of the State of
Delaware upon application by a stockholder shall determine otherwise.
2.12
Organization. At every meeting of stockholders, the Chairman of the Board or, in
the absence of the Chairman of the Board, the Chief Executive Officer, and in
the absence of the Chairman of the Board and the Chief Executive Officer, the
and the President, the Chief Operating Officer, and in the absence of any of the
foregoing such person as shall have been designated by resolution adopted by the
affirmative vote of a majority of the Whole Board or by the Chairman of the
Board, shall act as chairman of the meeting. The Secretary, or in his absence
one of the Assistant Secretaries, shall act as secretary of the meeting. In case
none of the officers above designated to act as secretary of the meeting shall
be present, a secretary of the meeting shall be chosen by a majority of the
votes cast at such meeting by the holders of shares of capital stock present in
person or represented by proxy and entitled to vote at the meeting.
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2.13 Order of Business. The order of business at all meetings of stockholders
shall be as determined by the chairman of the meeting, but the order of business
to be followed at any meeting at which a quorum is present may be changed by a
majority of the votes cast at such meeting by the holders of shares of capital
stock present in person or represented by proxy and entitled to vote at the
meeting.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed
by or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or the
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by the By-laws, the Board may exercise all powers and
perform all acts which are not required, by law or by the Certificate of
Incorporation, the By-laws, the Constitution of the New York Stock
Exchange, Inc. or the Rules of the Board of Directors of the New York Stock
Exchange, Inc., to be exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The
Board shall consist of not fewer than eight (8) nor more than forty (40) members
(provided, however, that such maximum number may be increased from time to time
to the extent provided in any resolution or resolutions adopted by the Board
providing for the issuance of any series of Preferred Stock pursuant to Article
V of the Certificate of Incorporation) and within such limits the number of
directors shall be determined, and may be changed from time to time, solely by
resolution adopted by the affirmative vote of a majority of the Whole Board.
Directors need not be stockholders. Each director shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
3.3 Election. Directors shall, except as otherwise required by law or
by the Certificate of Incorporation, be elected by a plurality of the votes cast
at a meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise
provided in the Certificate of Incorporation, any vacancy in the Board caused by
death, resignation, removal, disqualification or any other cause (other than an
increase in the number of directors) may be filled solely by the affirmative
vote of a majority of the directors then in office, though less than a quorum of
the Whole Board, or by a sole remaining director; and a majority of the Whole
Board may fill a vacancy which results from an increase in the number of
directors. A director elected to fill a vacancy shall be elected to hold office
until his successor is elected and qualified, or until his earlier death,
resignation or removal.
<PAGE>
3.5 Resignations. Any director may resign at any time by written notice to the
Corporation. Such resignation shall take effect at the time therein specified,
and, unless otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective.
3.6 Removal of Directors. Subject to the provisions of Section 141(k)
of the General Corporation Law, any or all of the directors may be
removed with or without cause, by the holders of a majority of the
shares then entitled to vote in an election of directors.
3.7 Compensation. Each director, in consideration of his service as
such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at directors' meetings, or both,
as the Board may from time to time determine, together with
reimbursement for the reasonable expenses incurred by him in
connection with the performance of his duties. Each director who shall
serve as a member of any committee of directors in consideration of
his serving as such shall be entitled to such additional amount per
annum or such fees for attendance at committee meetings, or both, as
the Board may from time to time determine, together with reimbursement
for the reasonable expenses incurred by him in the performance of his
duties. Nothing contained in this section shall preclude any director
from serving the Corporation or its subsidiaries in any other capacity
and receiving proper compensation therefor.
3.8 Place and Time of Meetings of the Board. Meetings of the Board or
any committee thereof, regular or special, may be held at any place
within or without the State of Delaware. The times and places for
holding meetings of the Board or any committee thereof may be fixed
from time to time by resolution of the Board or (unless contrary to
resolution of the Board) in the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of directors is held, and as
soon as practicable thereafter, the Board may hold its annual meeting,
without notice of such meeting, for the purposes of organization, the
election of officers and the transaction of other business. The annual
meeting of the Board may be held at any other time and place specified
in a notice given as provided in Section 3.11 of the By-laws for
special meetings of the Board or in a waiver of notice thereof.
3.10 Regular Meetings. Regular meetings of the Board or any committee
thereof may be held at such times and places as may be fixed from time
to time by the Board. Unless otherwise required by the Board, regular
meetings of the Board or any committee thereof may be held without
notice and (unless contrary to resolution of the Board) shall be held
at the Corporation's principal executive offices. If any day fixed for
a regular meeting of the Board or any committee thereof shall be a
Saturday or Sunday or a day on which trading is not conducted by the
New York Stock Exchange, Inc., then such meeting shall be held at the
same hour at the same place on the first business day thereafter which
is not a Saturday, Sunday or a day on which trading is not conducted
by the New York Stock Exchange, Inc.
3.11 Special Meetings. Special meetings of the Board or any committee
<PAGE>
thereof shall be held whenever called by the Chairman, the Chief Executive
Officer or the Secretary or by any two or more directors in the case of the
Board, or in the case of any committee, its chairman or any two members thereof.
Notice of each special meeting of the Board or any committee thereof shall, if
mailed, be addressed to each director at the address designated by him for that
purpose or, if none is designated, at his last known address at least two days
before the date on which the meeting is to be held; or such notice shall be sent
to each director at such address by telegraph, cable, wireless or facsimile
communication, or be delivered to him personally, not later than the day before
the date on which such meeting is to be held. Every such notice shall state the
time and place of the meeting but need not state the purposes of the meeting,
except to the extent required by law. If mailed, each notice shall be deemed
given when deposited, with postage thereon prepaid, in a post office or official
depository under the exclusive care and custody of the United States Postal
Service. Such mailing shall be by first class mail.
3.12 Adjourned Meetings. A
majority of the directors or committee members present at any meeting of the
Board or any committee thereof, as the case may be, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to another
time and place. Notice of any adjourned meeting of the Board or any committee
thereof need not be given to any director, or committee member, whether or not
present at the time of the adjournment. Any business may be transacted at any
adjourned meeting that might have been transacted at the meeting as originally
called.
3.13 Waiver of Notice. Whenever notice is required to be given to any
director or member of a committee of directors under any provision of the
General Corporation Law or of the Certificate of Incorporation or By-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or a committee of directors, need be specified in any written waiver
of notice.
3.14 Organization. At each meeting of the Board, the officers
specified in Article 5 hereof (or, in the absence of all officers designated in
Article 5 hereof so to act, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
3.15 Quorum of Board or Committee. Except as otherwise provided by law,
by the Certificate of Incorporation or elsewhere in these By-laws, (a) a
majority of the directors in office at the time shall constitute a quorum for
the transaction of business, or of any specified item of business, at any
meeting of the Board and (b) a majority of the members of any committee shall
constitute a quorum for the transaction
<PAGE>
of business of such committee, or of any specified item of business, at any
meeting of such committee.
3.16 Action by the Board; Attendance by Conference
Telephone, Etc. All corporate action taken by the Board or any committee thereof
shall be taken at a meeting of the Board, or of such committee, as the case may
be, except that any action required or permitted to be taken at any meeting of
the Board, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee. Members of the Board, or any committee designated by
the Board, may participate in a meeting of the Board, or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 3.16 shall
constitute presence in person at such meeting. Except as otherwise provided by
law, by the Certificate of Incorporation or these By-laws, the vote of a
majority of the directors or committee members present (including those who
participate by means of a conference telephone or similar communications
equipment) at the time of the vote, if a quorum is present at such time, shall
be the act of the Board or such committee.
Article 4A
COMMITTEES OF THE CORPORATION
The Board may, by resolution passed by a majority of the Whole Board, designate
one or more committees of the Corporation, each committee to consist of one or
more of the directors or officers of the Corporation as the Board shall
determine. A member of any committee of the Corporation may be removed with or
without cause by action taken by a majority of the Whole Board. Each such
committee shall have and may exercise such powers, authority and
responsibilities as the Board shall determine and as may be properly granted to
such committee under the laws of the state of Delaware, the Certificate of
Incorporation and these By-Laws. The powers, authority and responsibilities
thereby granted may include those that may be delegated to officers of the
corporation.
Article 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of the Whole Board, designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. A member of any committee of the Board
may be removed with or without cause by action taken by a majority of the Whole
Board. In the absence or disqualification of a member of the committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they
<PAGE>
constitute a quorum, may unanimously appoint another member of the Board to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to the following
matters: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by The General Corporation Law to be
submitted to stockholders for approval or (ii) adopting, amending or repealing
any By-Laws of the Corporation.
ARTICLE 5
OFFICERS 5.1 Officers. The Board shall elect a Chairman of the Board of
Directors, a Chief Executive Officer, a President, a Chief Operating Officer, a
Chief Financial Officer, a Chief Administrative Officer, a Secretary, a
Treasurer and a Controller, and may elect or appoint one or more Vice Presidents
and one or more Managing Directors (who need not be, and unless otherwise
properly elected thereto, shall not be, members of the Board) and such other
officers (including Assistant Secretaries and Assistant Treasurers) as the Board
may determine. The Board may designate one or more Vice Presidents as Executive
Vice Presidents, Senior Vice Presidents or First Vice Presidents, and may use
other descriptive words or phrases to designate the standing, seniority or area
of special competence of the Vice Presidents and Managing Directors elected or
appointed by it. The Board may from time to time elect, or delegate to any one
or more officers the power to appoint, such other officers as may be necessary
or desirable for the business of the Corporation. Each officer shall hold his
office until his successor is elected and qualified or until his earlier death,
resignation or removal in the manner provided in Section 5.2 of the By-laws. Any
two or more offices may be held by the same person, but no officers shall
execute, acknowledge or verify any instrument in more than one capacity if such
instrument is required by law or by the By-laws to be executed, acknowledged, or
verified by two or more officers. The Board may require any officer to give a
bond or other security for the faithful performance of his duties, in such
amount and with such sureties as the Board may determine. All officers as
between themselves and the Corporation shall have such authority and perform
such duties in the management of the Corporation as may be provided in the
By-laws or as the Board or any appointing authority may from time to time
determine.
5.2 Removal of Officers. Any officer of the Corporation may be
removed, with or without cause, by the Board or, except in the case of an
officer elected or appointed by the Board, by any officer to whom the Board
shall have delegated the power to appoint such officer being removed. The
removal of an officer without cause shall be without prejudice to his contract
rights, if any. The election or appointment of an officer shall not of itself
create contract rights.
5.3 Resignations. Any officer may resign at any time by
so notifying the Board or the Chairman of the Board or the Secretary in writing.
Such resignation shall
<PAGE>
take effect at the date of receipt of such notice or at such later time as is
therein specified and, unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective. The resignation of an
officer shall be without prejudice to the contract rights of the Corporation, if
any.
5.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in the By-laws for the regular
election or appointment to such office.
5.5 Compensation. Salaries or other
compensation of the officers may be fixed from time to time by the Board. No
officer shall be prevented from receiving a salary or other compensation by
reason of the fact that he is also a director.
5.6 Chairman of the Board. The
Chairman of the Board, if present, shall preside at each meeting of the
stockholders and of the Board. He shall perform all duties incident to the
office of Chairman of the Board and such other duties as from time to time may
be assigned to him by the Board.
5.7 Chief Executive Officer. The Chief
Executive Officer shall be the chief executive officer of the Corporation and
shall have general supervision over the business of the Corporation, subject,
however, to the control of the Board and of any duly authorized committee of
directors. The Chief Executive Officer, in the absence of the Chairman of the
Board, shall preside at each meeting of the stockholders and of the Board. He
may, with the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer, sign certificates for shares of capital stock of the
Corporation. He may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts and other instruments, except in cases where the
signing and execution thereof shall be expressly delegated by the Board or by
the By-laws to some other officer or agent of the Corporation, or shall be
required by law otherwise to be signed or executed; and, in general, shall
perform all duties incident to the office of Chief Executive Officer and such
other duties as from time to time may be assigned to him by the Board or by the
By-laws.
5.8 The President. The President shall assist the Chief Executive
Officer in the management of and supervision and direction over the business and
affairs of the Corporation, subject, however, to the direction of the Chief
Executive Officer and the control of the Board. The President may, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside,
if present, at each meeting of the stockholders and of the Board. The President
may, with the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer, sign certificates for shares of capital stock of the
Corporation; and, in general, shall perform all duties incident to the Office of
the President and such other duties as from time to time may be assigned to him
by the Board, by the By-laws or by the Chief Executive Officer.
5.9 Chief
Operating Officer. The Chief Operating Officer shall be the chief operating
officer of the Corporation, and shall assist the Chief Executive Officer and the
President in the active management of and supervision and direction over the
business and affairs of the Corporation, subject, however, to the direction of
the Chief
<PAGE>
Executive Officer and the President and the control of the Board. In the absence
of the Chairman of the Board, the Chief Executive Officer and the President, the
Chief Operating Officer shall preside at each meeting of the stockholders and of
the Board. He may, with the Secretary or the Treasurer or an Assistant Secretary
or an Assistant Treasurer, sign certificates for shares of capital stock of the
Corporation. He may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts and other instruments, except in cases where the
signing and execution thereof shall be expressly delegated by the Board or by
the By-laws to some other officer or agent of the Corporation, or shall be
required by law otherwise to be signed or executed; and, in general, shall
perform all duties incident to the office of Chief Operating Officer and such
other duties as from time to time may be assigned to him by the Board, by the
By-laws or by the Chief Executive Officer.
5.10 Chief Financial Officer. The Chief Financial Officer
shall be the chief financial officer of the Corporation, and shall render to the
Board, whenever the Board may require, an account of the financial condition of
the Corporation; shall make, sign and file financial, tax and similar reports to
any state, federal or municipal government, agency or department, or any
self-regulatory organization; shall provide for the continuous review of all
accounts and reports; and shall perform such other duties as from time to time
may be assigned to him by the Board or the Chief Executive Officer.
5.11 Chief Administrative Officer. The Chief Administrative
Officer shall be the principal administrative officer of the Corporation and
shall assist the Chief Operating Officer in the provision of such administrative
and support services as are necessary or appropriate for the conduct of the
business and the affairs of the Corporation, subject to the direction of the
Chief Operating Officer and the Chief Executive Officer and the control of the
Board of Directors. In addition, the Chief Administrative Officer shall perform
such other duties as from time to time may be assigned to him by the Board or by
the Chief Operating Officer.
5.12 Secretary. The Secretary, if present, shall act as
secretary of all meetings of the stockholders and of the Board, and shall keep
the minutes thereof in the proper book or books to be provided for that purpose;
he shall see that all notices required to be given by the Corporation are duly
given and served; he may, with the Chief Executive Officer, the President or the
Chief Operating Officer, sign certificates for required to be given by the
Corporation are duly given and served; he may, with the Chief Executive Officer,
the President or the Chief Operating Officer, sign certificates for shares of
capital stock of the Corporation; he shall be custodian of the seal of the
Corporation and may seal with the seal of the Corporation, or a facsimile
thereof, all certificates for shares of capital stock of the Corporation and all
documents the execution of which on behalf of the Corporation under its
corporate seal is authorized in accordance with the provisions of the By-laws;
he shall have charge of the stock ledger and also of the other books, records
and papers of the Corporation relating to its organization and management as a
Corporation, and shall see that the reports, statements and other documents
required by law are properly kept and filed; and, in general, shall perform all
the duties incident to the office of Secretary and such other duties as from
time to time may be assigned to him by the Board or by the Chief Executive
Officer.
<PAGE>
5.13 Treasurer. The Treasurer shall have charge and custody
of, and be responsible for, all funds, securities and notes of the Corporation;
receive and give receipts for moneys due and payable to the Corporation from any
sources whatsoever; deposit all such moneys in the name of the Corporation in
such banks, trust companies or other depositaries as shall be selected in
accordance with the By-laws; against proper vouchers, cause such funds to be
disbursed by checks or drafts on the authorized depositaries of the Corporation
signed in such manner as shall be determined in accordance with any provisions
of the By-laws, and be responsible for the accuracy of the amounts of all moneys
so disbursed; may, with the Chief Executive Officer, the President or the Chief
Operating Officer, sign certificates for shares of capital stock of the
Corporation; and, in general, shall perform all the duties incident to the
office of the Treasurer and such other duties as from time to time may be
assigned to him by the Board or by the Chief Executive Officer.
5.14 Vice President. Each Executive Vice President, Senior
Vice President, First Vice President and Vice President shall have such powers
and perform such duties as the Board or the Chief Executive Officer from time to
time may prescribe, and shall perform such other duties as may be prescribed in
the By-laws.
5.15 Managing Directors. Each Managing Director shall have
such powers and perform such duties as the Board or the Chief Executive Officer
from time to time may prescribe, and shall perform such other duties as may be
prescribed in the By-laws.
5.16 Controller. The Controller shall be the chief accounting
officer of the Corporation and shall cause to be maintained adequate records of
all assets, liabilities and transactions of the Corporation; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and have control of all the books of account of the Corporation; and
shall perform such other duties as from time to time may be assigned to him by
the Board or by the Chief Executive Officer.
5.17 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board or by the Executive Officer. Assistant Secretaries and Assistant
Treasurers may, with the Chief Executive Officer, the President or the Chief
Operating Officer, sign certificates for shares of capital stock of the
Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any
officer, employee or agent, in the name and on behalf of the Corporation, to
enter into any contract or execute and satisfy any instrument, and any such
authority may be general or confined to specific instances, or otherwise
limited.
6.2 Loans. The Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer or the
Treasurer or any
<PAGE>
other officer, employee or agent authorized by the By-laws or by the Board
may effect loans and advances at any time for the Corporation from any
bank, trust company or other institutions or from any firm, corporation or
individual and for such loans and advances may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness
of the Corporation and, when authorized by the Board so to do, may pledge
and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority
conferred by the Board may be general or confined to specific instances or
otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders
for the payment of money out of the funds of the Corporation and all notes or
other evidences of indebtedness of the Corporation shall be signed on behalf of
the Corporation in such manner as shall from time to time be determined by
resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall be
deposited from time to time to the order of the Corporation in such banks, trust
companies or other depositaries as the Board may select or as may be selected by
an officer, employee or agent of the Corporation to whom such power may from
time to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall
be approved by the Board. Such certificates shall be signed by the Chief
Executive Officer, the President or the Chief Operating Officer and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a
facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles, if the certificate is countersigned by a transfer agent or
registrar other than the Corporation itself or its employee. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued,
such certificate may, unless otherwise ordered by the Board, be issued by
the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the Corporation
shall be made only on the books of the Corporation by the holder thereof or by
his duly authorized attorney appointed by a power of attorney duly executed and
filed with the Secretary or a transfer agent of the Corporation, and on
surrender of the certificate or certificates representing such shares of capital
stock properly endorsed for transfer and upon payment of all necessary transfer
taxes. Every certificate exchanged, returned or surrendered to the Corporation
shall be marked "Cancelled," with the date of
<PAGE>
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from
time to time maintain one or more transfer offices or agents and registry
offices or agents at such place or places as may be determined from time to time
by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The
holder of any shares of capital stock of the Corporation shall immediately
notify the Corporation of any loss, destruction, theft or mutilation of the
certificate representing such shares, and the Corporation may issue a new
certificate to replace the certificate alleged to have been lost, destroyed,
stolen or mutilated. The Board may, in its discretion, as a condition to the
issue of any such new certificate, require the owner of the lost, destroyed,
stolen or mutilated certificate, or his legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.
7.5 Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with the By-laws or with the
Certificate of Incorporation, concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written restriction on the transfer or
registration of transfer of capital stock of the Corporation, if permitted by
Section 202 of the General Corporation Law and noted conspicuously on the
certificate representing such capital stock, may be enforced against the holder
of the restricted capital stock or any successor or transferee of the holder,
including an executor, administrator, trustee, guardian or other fiduciary
entrusted with like responsibility for the person or estate of the holder.
Unless noted conspicuously on the certificate representing such capital stock, a
restriction, even though permitted by Section 202 of the General Corporation
Law, shall be ineffective except against a person with actual knowledge of the
restriction. A restriction on the transfer or registration of transfer of
capital stock of the Corporation may be imposed either by the Certificate of
Incorporation or by an agreement among any number of stockholders or among such
stockholders and the Corporation. No restriction so imposed shall be binding
with respect to capital stock issued prior to the adoption of the restriction
unless the holders of such capital stock are parties to an agreement or voted in
favor of the restriction.
<PAGE>
7.7 Dividends, Surplus, Etc. Subject to the provisions of law and of the
Certificate of Incorporation, the Board: 7.7.1 May declare and pay
dividends or make other distributions on shares of its capital stock in
such amounts and at such time or times as, in its discretion, the condition
of the affairs of the Corporation shall render advisable; 7.7.2 May use and
apply, in its discretion, any of the surplus of the Corporation in
purchasing or acquiring any shares of capital stock of the Corporation, or
purchase warrants therefor, in accordance with law, or any of its bonds,
debentures, notes, scrip or other securities or evidences of indebtedness;
and 7.7.3 May set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
BOOKS AND RECORDS
8.1 Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of the stockholders, the Board and committees of the Board. The Corporation
shall keep at the office designated in the Certificate of Incorporation or at
the office of the transfer agent or registrar of the Corporation, a record
containing the names and addresses of all stockholders, the number and class of
shares held by each and the dates when they respectively became the owners of
record thereof.
8.2 Form of Records. Any records maintained by the Corporation in the regular
course of its business, including its stock ledger, books of account, and minute
books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs, or any other information storage device, provided
that the records so kept can be converted into clearly legible written form
within a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
8.3 Inspection of Books and Records. Except as otherwise
provided by law, the Board shall determine from time to time whether, and, if
allowed, when and under what conditions and regulations, the accounts, books,
minutes and other records of the Corporation, or any of them, shall be open to
the inspection of the stockholders.
<PAGE>
ARTICLE 9
SEAL
The Board may adopt a corporate seal which shall be in the
form of a circle and shall bear the full name of the Corporation, the year of
its incorporation and the word "Delaware."
ARTICLE 10
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and
may be changed, by resolution of the Board.
ARTICLE 11
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, each of
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer and such other officer or officers as from time to time
are so authorized by resolution of the Board or an appropriate committee thereof
may, from time to time, appoint one or more attorneys or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of stock or other securities of such
other corporation, or to consent in writing to any action by any such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause to
be executed on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, consents, waivers or other instruments as he
may deem necessary or proper in the premises; and each of the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, and such other officer or officers as from time to time are so
authorized by resolution of the Board or any appropriate committee thereof may
attend any meeting of the holders of the stock or other securities of any such
other corporation and thereat
<PAGE>
vote or exercise any or all other powers of the Corporation as the holder of
such stock or other securities of such other corporation.
ARTICLE 12
AMENDMENTS
The Board, from time to time, may make, amend or repeal the
By-laws; provided, that any By-laws made, amended or repealed by the Board may
be amended or repealed, and that any By-laws may be made, by the Stockholders.
ARTICLE 13
APPLICATION OF SECTION 203
OF GENERAL CORPORATION LAW
Pursuant to paragraph (b) (2) of Section 203 of the General
Corporation Law, the Corporation elects not to be governed by such Section 203.
THE BEAR STEARNS COMPANIES INC.
CAPITAL ACCUMULATION PLAN FOR
SENIOR MANAGING DIRECTORS
(Restated as of January 21, 1998)
SECTION 1
Purpose
The purpose of the Plan is to promote the interests of the Company and
its stockholders by providing long-term incentives to certain key executives
of the Company and Bear Stearns who contribute significantly to the long-term
performance and growth of the Company.
SECTION 2
Definitions
2.1 Terms Defined. When used herein, the following terms shall have the
following meanings:
"Account" means a Capital Accumulation Account or a Cash Balance Account, as the
context may require.
"Accredited Investor" means an "accredited investor" as defined in Rule 501
under the Securities Act, or any successor rule or regulation.
"Additional Deferral Amount" has the meaning assigned to such term in Section
4.1.
"Additional Plan Election" has the meaning assigned to such term in Section 4.1.
"Adjusted Book Value Per Share" means the amount determined as of the end of any
Fiscal Year by dividing Adjusted Common Stockholders' Equity by the sum of (a)
the number of shares of Common Stock outstanding on such date, (b) the number of
CAP Units credited to the Capital Accumulation Accounts of all Participants as
of such date and the number of Earnings Units credited to the Earnings Unit
Accounts of all participants in the PUP Plan as of such date, (c) the number of
CAP Units to be credited to all such Accounts as a result of making any
adjustment to such Accounts required by Sections 5.1 and 5.10 in respect of all
Fiscal Years ending on or prior to the date of determination and the number of
Earnings Units credited to the Earnings Unit Accounts of all participants in the
PUP Plan as a result of making any adjustment to such accounts required by
Section 4.2 of the PUP Plan in respect of all Fiscal Years ending on or prior to
the date of such determination, and (d) the number of shares of Common Stock
purchased by the Company for purposes other than for the Plan and the PUP Plan
during all Fiscal Years ending on or prior to the date of such determination,
less (e) the number of shares of Common Stock issued by the Company (whether
from Treasury shares or otherwise) other than pursuant to the Plan or the PUP
Plan during all Fiscal Years ending on or prior to the date of such
determination.
"Adjusted Common Stockholders' Equity" means, for the first Fiscal Year of any
Deferral Period, Consolidated Common Stockholders' Equity as of the last day of
the preceding Fiscal Year and for Fiscal Years following the first Fiscal Year
of such Deferral Period, means Adjusted Common Stockholders' Equity determined
for the prior Fiscal Year of such Deferral Period, plus all increases (or less
any decreases) in retained earnings of the Company and its subsidiaries
attributable to net income (or loss), determined on a consolidated basis, minus
all amounts accrued in respect of cash dividends declared with respect to any
capital stock of the Company during such Fiscal Year.
"Adjusted Earnings Per Share" means, for any Fiscal Year, (a) the Company's
consolidated net income or loss for such Fiscal Year, less the amount of the
Preferred Stock Dividend Requirement for such Fiscal Year, plus the product
obtained by multiplying the product of the Net Earnings Adjustment multiplied by
the Average Cost Per Share for such Fiscal Year by the fraction which is 1 minus
the Marginal Tax Rate, divided by (b) the sum of (i) the number of shares of
Common Stock outstanding during such Fiscal Year, computed on a weighted average
basis based on the number of days outstanding during such Fiscal Year, (ii) the
aggregate number of CAP Units credited to the Accounts of all Participants
computed on a weighted average basis based on the number of days outstanding
during such Fiscal Year but not including in such computation the day that CAP
Units are credited, increased or decreased pursuant to Section 5.1, 5.3 or 5.10
of the Plan, and (iii) the aggregate number of Earnings Units credited to the
Earnings Unit Accounts of all participants in the PUP Plan computed on a
weighted average basis based on the number of days outstanding during such
Fiscal Year but not including in such computation the day that Earnings Units
are credited, increased or decreased pursuant to Section 4.2 or 4.5 of the PUP
Plan.
"Adjusted Preferred Stock Dividend Requirement" means, for any Fiscal Year, the
quotient obtained by dividing (i) the aggregate amount of all dividends actually
declared by the Company on, or, if no such dividends are actually declared,
required to be declared by the Company in accordance with the terms of, any
Preferred Stock, in such Fiscal Year, by (ii) the fraction which is one minus
the Marginal Tax Rate for such Fiscal Year.
"Advisory Committee" means a committee of five Participants, of which two shall
be appointed by the President of the Company, two by the President's Advisory
Council of Bear Stearns and one by the Management and Compensation Committee.
"Affiliate" means (a) Bear Stearns, (b) any other subsidiary of the Company and
(c) any other corporation or other entity which is controlled, directly or
indirectly, by, or under common control with, the Company and which the Board
Committee designates as an "Affiliate" for purposes of the Plan.
"Aggregate Imputed Cost" means, with respect to any Fiscal Year, the sum of (a)
the aggregate of the Cost of Carry for such Fiscal Year for all Participants in
the Plan plus (b) the Capital Reduction Charge for such Fiscal Year plus (c) the
product of (i) the sum of the Net Earnings Adjustments for such Fiscal Year for
all Participants in the Plan multiplied by (ii) the Average Cost Per Share for
such Fiscal Year, minus (d) the Dividend Savings for such Fiscal Year.
"Appropriate Committee" means the Management and Compensation Committee or, in
the case of Participants who are Reporting Persons, the Board Committee.
"Associate" of a Person means (a) any corporation or organization of which such
Person is an officer or partner or is, directly or indirectly, the Beneficial
Owner of 10% or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity and (c) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person or who is a director or officer of such Person or any
of its parents or subsidiaries.
"Available Shares" means, with respect to any Fiscal Year or portion thereof,
the sum of (a) the number of shares of Common Stock purchased by the Company in
the open market or in private transactions or otherwise during such period that
have not been previously allocated under the Plan and designated by the Board
Committee at the time of purchase as having been purchased for issuance under
the Plan with respect to the Fiscal Year or portion thereof specified by the
Board Committee and (b) shares of Common Stock purchased prior to such period
that were designated as Available Shares but were not allocated under the Plan
which the Company makes available to the Plan subsequent to the period in which
such shares were purchased and the Board Committee thereafter designates as
Available Shares for issuance under the Plan with respect to the Fiscal Year or
portion thereof specified by the Board Committee.
"Average Cost Per Share" means with respect to any period the weighted average
of the sum of (a) the average price paid (including commissions) by the Company
in respect of Available Shares purchased by the Company during such period and
(b) in respect of Available Shares purchased by the Company prior to such period
that the Company makes available to the Plan and that are accepted by the Board
Committee, the Fair Market Value as of the last trading day of such period.
"Average Federal Funds Rate" means, with respect to any Fiscal Year, the
percentage (expressed as a decimal fraction) obtained by taking the sum of the
Federal Funds Rates for each day during the Fiscal Year and dividing such amount
by the number of days in such Fiscal Year.
"Base Year" means the first Fiscal Year of a Required Deferral Period.
"Bear Stearns" means Bear, Stearns & Co. Inc., a Delaware corporation, and its
successors and assigns.
"Beneficial Owner" has the meaning ascribed thereto in Rule 13d-3 under the
Exchange Act, except that, in any case, a Person shall be deemed the Beneficial
Owner of any securities owned, directly or indirectly, by the Affiliates and
Associates of such Person.
"Beneficiary" of a Participant means the beneficiary or beneficiaries designated
by such Participant in accordance with Section 10 to receive the amount, if any,
payable hereunder upon the death of such Participant.
"Board Committee" means the Compensation Committee of the Board of Directors or
another committee of the Board of Directors designated by the Board of Directors
to perform the functions of the Board Committee hereunder. To the extent
required by Rule 16b-3, the Board Committee shall be composed solely of
directors who are not Participants in the Plan and are in other respects
"Non-Employee Directors" within the meaning of Rule 16b-3.
"Board of Directors" means the Board of Directors of the Company.
"Book Value Adjustment" has the meaning assigned to such term in Section 5.5.
"Business Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or permitted by law to be
closed.
"CAP Units" means the units, each such unit corresponding to one share of Common
Stock, credited to a Participant's Capital Accumulation Account pursuant to
Section 5. All calculations and determinations of the number of CAP Units
hereunder shall be made in whole and fractional units, with such fractional
units rounded to the nearest one-thousandth of a unit.
"Capital Accumulation Account" has the meaning assigned to such term in Section
5.1.
"Capital Reduction Charge" means (a) for Fiscal Years 1991 and 1992, zero; (b)
for Fiscal Year 1993, the product of (i) the excess of (A) the amount determined
by multiplying the Aggregate Imputed Cost of the Plan for Fiscal Year 1992 by
the fraction which is one minus the Marginal Tax Rate for Fiscal Year 1992, over
(B) the aggregate amount of all cash dividends that would have been paid by the
Company during Fiscal Year 1992 on the aggregate number of shares of Common
Stock purchased by the Company and taken into account for purposes of the Plan
in respect of Fiscal Year 1991, if all such shares had remained outstanding, and
(ii) the Average Federal Funds Rate for Fiscal Year 1993; and (c) for each
Fiscal Year thereafter, the product of (x) the sum of (A) the amount determined
by multiplying the Aggregate Imputed Cost of the Plan for the Fiscal Year
preceding the year for which the determination is being made by the fraction
which is one minus the Marginal Tax Rate for such preceding Fiscal Year (the
"Tax-Effected Aggregate Imputed Cost" for such Fiscal Year), plus (B) the
aggregate Tax-Effected Aggregate Imputed Cost of the Plan for all preceding
Fiscal Years, other than the Fiscal Year immediately preceding the year for
which the determination is being made, plus (C) the sum of the respective
amounts obtained by multiplying the Capital Reduction Charge for each preceding
Fiscal Year by the fraction which is one minus the Marginal Tax Rate for the
corresponding Fiscal Year, less (D) the aggregate amount of all cash dividends
that would have been paid by the Company on the aggregate number of shares of
Common Stock purchased by the Company for purposes of the Plan and taken into
account pursuant to Section 5.1, 5.3 or 5.10(a) prior to the end of the Fiscal
Year preceding the year for which the determination is being made, measured from
the date the corresponding CAP Units were first credited to such Accounts, if
all such shares had remained outstanding and (y) the Average Federal Funds Rate
for such Fiscal Year.
"Cash Balance" means the amount from time to time credited to a Participant's
Cash Balance Account.
"Cash Balance Account" has the meaning assigned to such term in Section 5.2.
"Change in Control" means (a) a majority of the Board of Directors ceases to
consist of Continuing Directors; (b) any Person becomes the Beneficial Owner of
50% or more of the outstanding voting power of the Company unless such
acquisition is approved by a majority of the Continuing Directors; (c) the
stockholders of the Company approve an agreement to merge or consolidate into
any other entity, unless such merger or consolidation is approved by a majority
of the Continuing Directors; or (d) the stockholders of the Company approve an
agreement to dispose of all or substantially all of the assets of the Company,
unless such disposition is approved by a majority of the Continuing Directors.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute or statutes.
"Committee" means each of the Advisory Committee, the Board Committee and the
Management and Compensation Committee.
"Common Stock" means the common stock, par value $1.00 per share, of the
Company.
"Company" means The Bear Stearns Companies Inc., a Delaware
corporation, and its successors and assigns.
"Consolidated Common Stockholders' Equity" means, as of any date of
determination, the consolidated stockholders' equity of the Company and its
subsidiaries applicable to Common Stock.
"Continuing Director" means any member of the Board of Directors who is a member
on the Effective Date or who is elected to the Board of Directors after the
Effective Date upon the recommendation or with the approval of a majority of the
Continuing Directors at the time of such recommendation or approval.
"Cost of Carry" means, with respect to a Participant, the sum of (a) the amount
obtained by multiplying the Deferred Tax Benefit for each Plan Year by the
Average Federal Funds Rate in the Fiscal Year for which the determination is
being made, and (b) the amounts obtained by compounding the amounts so obtained
for each preceding Fiscal Year for which a Cost of Carry was calculated less the
tax benefits associated with the amounts so determined, calculated on the basis
of the Marginal Tax Rate in each such Fiscal Year, on an annual basis, at the
Average Federal Funds Rate in effect during each succeeding Fiscal Year; and,
with respect to the Plan as a whole, means the aggregate Cost of Carry of all
Participants in any Fiscal Year.
"Deferral Period" means the period of five Fiscal Years commencing on the first
day of the Fiscal Year following the Plan Year for which a Participant's
compensation being deferred pursuant to this Plan was payable, or such greater
or lesser number of whole Fiscal Years as the Appropriate Committee may approve
pursuant to Section 4.1, 4.3, 4.5 or 4.6. Notwithstanding the foregoing, the
Deferral Period applicable to compensation being deferred for a particular Plan
Year for any Participant who will attain age 56 prior to the last day of any
such Plan Year and who elects in any Plan Election to be governed by this
sentence in the manner specified by the Company shall be, (i) in the case of
Participants who attain the age of 56 in such Plan Year, four Fiscal Years, (ii)
in the case of Participants who attain the age of 57 in such Plan Year, either
three or four Fiscal Years, (iii) in the case of Participants who attain the age
of 58 in such Plan Year, either two, three or four Fiscal Years, or (iv) in the
case of Participants who attain the age of 59 or older in such Plan Year, either
one, two, three or four Fiscal Years, in each such case as the Participant may
so elect for each such Plan Year.
"Deferral Year" means any Fiscal Year during a Deferral Period.
"Deferred Tax Benefit" means, for each Plan Year of a Participant, the sum of
(a) the amounts obtained by multiplying such Participant's Total Deferral
Amount, if any, for such Plan Year by the Marginal Tax Rate for such Plan Year
and (b) the respective amounts obtained by multiplying the dollar amount of all
Net Earnings Adjustments made with respect to the subaccount of such
Participant's Capital Accumulation Account corresponding to such Plan Year by
the respective Marginal Tax Rates for each Deferral Year for which such
adjustments are made. The Deferred Tax Benefit shall be computed and recorded
separately for each Plan Year.
"Disability" means the complete and permanent inability of an individual to
perform his duties due to his physical or mental incapacity, all as determined
by the Appropriate Committee upon the basis of such evidence, including
independent medical reports and data, as the Appropriate Committee deems
necessary or appropriate.
"Dividend Savings" means (a) for Fiscal Year 1991, zero; (b) for Fiscal
Year 1992, the sum of (i) the amount obtained by multiplying (A) the
aggregate number of CAP Units credited to the Capital Accumulation Accounts
of all Participants pursuant to Section 5.1 in respect of Fiscal Year 1991 by
(B) the weighted average per share amount of all cash dividends paid by the
Company on its Common Stock in such Fiscal Year (such weighted average amount
to be determined by multiplying the amount of each such dividend by the
number of days in the Fiscal Year on and after the date on which such
dividend is paid, adding all the amounts so obtained and dividing the total
by the number of days in such Fiscal Year) and by multiplying the product so
obtained by (C) the Average Federal Funds Rate for such Fiscal Year, and (ii)
the amounts (the "Partial Year Dividend Savings") obtained by multiplying (x)
for each fiscal quarter in such Fiscal Year, the aggregate number of CAP
Units credited to the Capital Accumulation Accounts of all Participants
pursuant to Section 5.3 during such Fiscal Year by (y) the respective
weighted average per share amounts of all cash dividends paid by the Company
on its Common Stock in fiscal quarters of such Fiscal Year beginning after
the date on which such CAP Units were so credited (each such weighted average
amount to be determined in the manner described in the preceding clause
(b)(i)(B)), and by multiplying the product so obtained by (z) the Average
Federal Funds Rate for such Fiscal Year; and (c) for Fiscal Year 1993 and
each succeeding Fiscal Year of the Plan, means the amount obtained by first
(i) multiplying the sum of (A) all CAP Units credited to the Capital
Accumulation Accounts of all Participants pursuant to Section 5.1 in respect
of all preceding Fiscal Years of the Plan and all CAP Units credited to such
Accounts pursuant to Section 5.10(a) in respect of Net Earnings Adjustments,
if any, for such Fiscal Years by (B) the weighted average per share amount of
all cash dividends paid by the Company on its Common Stock in the Fiscal Year
for which the determination is being made (determined in the manner described
in the preceding clause (b)(i)(B)), (ii) calculating the amount of cash
dividends that would have been paid by the Company in all preceding Fiscal
Years on the aggregate number of shares of Common Stock purchased by the
Company and taken into account for purposes of this Plan pursuant to Section
5.1, 5.3 or 5.10(a), measured from the date on which the corresponding CAP
Units were credited to Participants' Accounts, if all such shares had
remained outstanding and (iii) multiplying the respective Dividend Savings
determined as provided herein for each preceding Fiscal Year by the fraction
which is one minus the Marginal Tax Rate for the corresponding preceding
Fiscal Year, and then multiplying the sum of the amounts so determined in
clauses (i), (ii) and (iii) by the Average Federal Funds Rate for such Fiscal
Year, and finally adding to such sum the Partial Year Dividend Savings for
such Fiscal Year determined in the manner provided in the preceding clause
(b)(ii).
"Earnings Adjustment" has the meaning assigned to such term in Section 5.4(a).
"Earnings Unit Account" has the meaning specified in the PUP Plan.
"Earnings Units" has the meaning specified in the PUP Plan.
"Effective Date" means September 6, 1990.
"Effective Tax Rate" means, for any Fiscal Year, the fraction the numerator of
which is the consolidated tax expense of the Company and its subsidiaries for
such Fiscal Year and the denominator of which is the consolidated income or loss
before income taxes of the Company and its subsidiaries for such Fiscal Year.
For this purpose, consolidated income or loss of the Company and its
subsidiaries shall be calculated by including extraordinary items and the income
or loss of discontinued operations, and income tax expense shall be calculated
by including the income tax expense attributable to such extraordinary items or
discontinued operations.
"Elective Plan Year" has the meaning assigned to such term in Section 4.3.
"Eligible Employee" means any individual who is employed by Bear Stearns as a
Senior Managing Director and is an Accredited Investor.
"Enrollment Period" in respect of a Plan Year means the period commencing with
the first day of the fiscal quarter immediately preceding such Plan Year and
ending on December 31 of such Plan Year, or such shorter period contained
therein designated by the Board Committee, provided that, unless otherwise
determined by the Board Committee, the Enrollment Period with respect to an
individual who becomes an Eligible Employee after December 31 of a Plan Year
shall be the period commencing on the date such individual becomes an Eligible
Employee and ending on the earliest of (a) the 30th day thereafter, (b) March 31
of the Plan Year in the case of an individual who was an employee prior to
becoming an Eligible Employee or (c) the end of the Plan Year. Without limiting
the generality of the foregoing, the Board Committee may designate one
Enrollment Period for individuals who are Eligible Employees on the first day of
a Base Year and one or more Enrollment Periods for individuals who become
Eligible Employees after the first day of a Base Year; provided, however, with
respect to participants in The Bear Stearns Companies Inc. Management
Compensation Plan in no event shall any Enrollment Period in respect of any Plan
Year extend more than 90 days into such Plan Year so as to allow a Participant
to make an election to increase or decrease the deferral amount or Deferral
Period relating to such Plan Year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time, or any successor statute or statutes.
"Executive Committee" means the Executive Committee of the Board of Directors.
"Fair Market Value" of a share of Common Stock as of any date means the closing
sales price of a share of Common Stock on the composite tape for New York Stock
Exchange listed securities on such date or, if the Common Stock is not quoted on
the composite tape or is not listed on the New York Stock Exchange, on the
principal United States securities exchange registered under the Exchange Act on
which the Common Stock is listed or, if the Common Stock is not listed on any
such exchange, on the National Association of Securities Dealers, Inc. Automated
Quotation National Market System ("NASDAQ-NMS") or, if the Common Stock is not
quoted on NASDAQ-NMS, the average closing bid quotation of a share on the
National Association of Securities Dealers, Inc. Automated Quotation System or
any similar system then in use or, if the Common Stock is not listed or quoted,
the fair value thereof as of such date as determined by the Appropriate
Committee.
"Federal Funds Rate" means, for any day which is a Business Day, the rate for
U.S. dollar funds settled through the Federal Reserve System or other
immediately available U.S. dollar funds, as quoted by an independent broker of
such funds selected by the Company, for the last transaction completed prior to
9:30 A.M. (Eastern time) on the Business Day on which such rate is determined,
rounded up or down on a daily alternating basis to the nearest whole multiple of
one-eighth of one percent, and for any day which is not a Business Day means
such rate as determined for the next preceding day which was a Business Day.
"Fiscal Year" means the fiscal year of the Company commencing on July 1 and
ending on June 30. "Fiscal Year 1991" shall mean the Fiscal Year ending on June
30, 1991; "Fiscal Year 1992" shall mean the Fiscal Year ending on June 30, 1992;
and "Fiscal Year 1993" shall mean the Fiscal Year ending on June 30, 1993. If
the Company shall change its Fiscal Year after the Effective Date so as to end
on a date other than June 30 ("Year-end Date") then, if such new Year-end Date
falls after June 30 and on or prior to December 31, the Fiscal Year in which
such change occurs shall be deemed to consist, for purposes of this Plan, of the
period of not more than 18 months beginning on the July 1 following the last
Fiscal Year preceding such change and ending on such new Year-end Date or, if
such new Year-end Date falls on or after January 1 and prior to June 30, the
Fiscal Year in which such change occurs shall be deemed to consist, for purposes
of this Plan, of the period of less than 12 months beginning on the first day of
the Fiscal Year in which such change occurs and ending on such new Year-end
Date.
"Full Year Units" has the meaning assigned to such term in Section 5.4.
"GAAP" means generally accepted accounting principles in the United States of
America as in effect from time to time.
"Historical Book Value" means, with respect to a CAP Unit credited to a
Participant's Account pursuant to Section 5.1 or 5.10(a), an amount determined
by dividing (a) Consolidated Common Stockholders' Equity as of the end of the
Fiscal Year for which such CAP Unit was credited by (b) the sum of (i) the
aggregate number of shares of Common Stock outstanding on the last day of such
Fiscal Year, (ii) the aggregate number of CAP Units credited to the Capital
Accumulation Accounts of all Participants as of the end of such Fiscal Year,
and, with respect to a CAP Unit credited to a Participant's Account pursuant to
Section 5.3, an amount determined by dividing (x)(i) Consolidated Common
Stockholders' Equity, as of the last day of the Fiscal quarter for which such
CAP Unit was credited, and (iii) the aggregate number of Earnings Units credited
to the Earnings Unit Accounts of all Participants in the PUP Plan as of the end
of such Fiscal Year, less (ii) all increases (or plus any decreases) in retained
earnings of the Company and its subsidiaries attributable to net income (or
loss), determined on a consolidated basis for all fiscal quarters of the Fiscal
Year prior to and including the fiscal quarter during which such CAP Unit was
credited, plus (iii) the amount determined by multiplying (A) a fraction, the
numerator of which is the number of fiscal quarters in the Fiscal Year prior to
and including the fiscal quarter during which such CAP Unit was credited, and
the denominator of which is 4, by (B) the increase (or decrease) in retained
earnings of the Company and its subsidiaries, attributable to net income (or
loss), determined on a consolidated basis for the Fiscal Year during which such
CAP Unit was credited, less (iv) the amount determined by multiplying (C) a
fraction, the numerator of which is the number of fiscal quarters in the Fiscal
Year prior to and including the fiscal quarter during which such CAP Unit was
credited, and the denominator of which is 4, by (D) the total amount accrued in
respect of cash dividends with respect to any capital stock of the Company for
the Fiscal Year during which such CAP Unit was credited, plus (v) the total
amount accrued in respect of cash dividends with respect to any capital stock of
the Company for all fiscal quarters of the Fiscal Year prior to and including
the fiscal quarter during which such CAP Unit was credited by (y) the sum of (i)
the aggregate number of shares of Common Stock outstanding on the last day of
such fiscal quarter, (ii) the aggregate number of CAP Units credited to the
Capital Accumulation Accounts of all Participants as of the end of such date and
(iii) the aggregate number of Earnings Units credited to the Earnings Unit
Accounts of all Participants in the PUP Plan as of the end of such Fiscal Year.
"Income Per Share" for any Fiscal Year means the consolidated income or loss
before income taxes of the Company and its subsidiaries, adjusted as hereinafter
provided, divided by the sum of (a) the number of shares of Common Stock
outstanding during such Fiscal Year, computed on a weighted average basis based
on the number of days outstanding during such Fiscal Year, (b) the number of CAP
Units credited to the Capital Accumulation Accounts of all Participants computed
on a weighted average basis based on the number of days outstanding during such
Fiscal Year but not including in such computation the day that CAP Units are
credited, increased or decreased pursuant to Section 5.1, 5.3 or 5.10 of the
Plan and (c) the aggregate number of Earnings Units credited to the Earnings
Unit Accounts of all Participants in the PUP Plan computed on a weighted average
basis based on the number of days outstanding during such Fiscal Year but not
including in such computation the day that Earnings Units are credited,
increased or decreased pursuant to Section 4.2 or 4.5 of the PUP Plan. For
purposes of this Plan, consolidated income or loss before income taxes of the
Company and its subsidiaries (i) shall be determined prior to any charge or
credit to income required in such Fiscal Year by reason of Net Earnings
Adjustments pursuant to Section 5.10(a), (ii) shall include the amounts of any
pre-tax earnings or loss attributable to discontinued operations or
extraordinary items and (iii) shall be reduced by the Adjusted Preferred Stock
Dividend Requirement during such Fiscal Year, and may be decreased, but not
increased, by such amount determined by the Board Committee in its sole
discretion as appropriate to carry out the purposes of the Plan.
"Initial Plan Election" has the meaning assigned to such term in Section 4.1.
"Investment Letter" means a letter, in a form to be approved by the Appropriate
Committee, by which a Participant represents that he is an accredited Investor
and that he is acquiring his interest in the Plan and any shares of Common Stock
that may be acquired hereunder for investment and without a view to any
distribution thereof.
"Management and Compensation Committee" means the Management and Compensation
Committee of the Company or another committee of the Company or the Board of
Directors designated by the Board of Directors to perform the functions of the
Management and Compensation Committee hereunder.
"Marginal Tax Rate" means the maximum combined marginal rate of tax expressed as
a fraction to which the Company is subject for the applicable Fiscal Year,
including Federal, New York State and New York City income taxes (including any
minimum or alternative tax), net of any tax benefit resulting from the
deductibility of state and local taxes for federal income tax purposes.
"Net Earnings Adjustment" has the meaning assigned to such term in Section
5.10(a).
"Part Year Units" has the meaning assigned to such term in Section 5.4(a).
"Participant" means any Eligible Employee who has validly elected to participate
in the Plan pursuant to Section 4.1.
"Person" means an individual, a corporation, a partnership, an association, a
joint stock company, a trust, any unincorporated organization or a government or
a political subdivision thereof.
"Personal Leave of Absence" means the absence from the Company by a Participant,
with the consent of the Company, for an extended period of time without salary
under circumstances in which a return to full-time employment by the Participant
is contemplated.
"Plan" means The Bear Stearns Companies Inc. Capital Accumulation Plan for
Senior Managing Directors as set forth herein and as amended and restated from
time to time.
"Plan Election" means the election to defer compensation made by a participant
pursuant to Section 4.
"Plan Year" means Fiscal Year 1991, Fiscal Year 1992, Fiscal Year 1993 and any
other Fiscal Year with respect to which the Board Committee makes the
determination provided for in Section 3.1.
"Preferred Stock" means any capital stock of the Company that has a right to
dividends or distributions in liquidation (or both) prior to the holders of the
Common Stock.
"Preferred Stock Dividend Requirement" means, for any Fiscal Year, the amount of
all dividends actually declared by the Company on, or required to be declared by
the Company in accordance with the terms of, any Preferred Stock, in such Fiscal
Year.
"Pre-Plan Earnings Per Share" means, for any Fiscal Year, (a) the sum of (i) the
Company's consolidated net income or loss for such Fiscal Year less (ii) the
amount of the Preferred Stock Dividend Requirement for such Fiscal Year, plus
(iii) the amount obtained by multiplying the Aggregate Imputed Costs of the Plan
deducted in the calculation of consolidated net income or loss for such Fiscal
Year by the fraction which is one minus the Marginal Tax Rate for such Fiscal
Year, divided by (b) the sum of (x) the number of shares of Common Stock
outstanding during such Fiscal Year, computed on a weighted average basis based
on the number of days outstanding during such Fiscal Year, (y) the aggregate
number of CAP Units credited to the Accounts of all Participants computed on a
weighted average basis based on the number of days outstanding during such
Fiscal Year but not including in such computation the day that CAP Units are
credited, increased or decreased pursuant to Section 5.1,5.3 or 5.10 of the
Plan, and (z) the aggregate number of Earnings Units credited to the Earnings
Unit Accounts of all participants in the PUP Plan computed on a weighted average
basis based on the number of days outstanding during such Fiscal Year but not
including in such computation the day that Earnings Units are credited,
increased or decreased pursuant to Section 4.2 or 4.5 of the PUP Plan.
"PUP Plan" means The Bear Stearns Companies Inc. Performance Unit Plan for
Senior Managing Directors, as the same shall be amended, supplemented or
modified from time to time.
"Quarter End Date" has the meaning assigned to such term in Section 5.3.
"Registration Statement" has the meaning assigned to such term in Section 6.7.
"Reporting Person" means a director or officer of the Company who is subject to
the reporting requirements of Section 16(a) of the Exchange Act.
"Required Deferral Amount" means, for any Plan Year, the following percentages
of that portion of a Participant's current compensation for such Plan Year
(prior to giving effect to any effective election hereunder to defer receipt of
a portion of such amount but after giving effect to any effective election to
defer compensation under any other plan sponsored by the Company or any
Affiliate) which exceeds $200,000 (or the then prevailing annual base salary for
Senior Managing Directors of Bear Stearns for such Plan Year):
25% of the first $ 300,000 30% of the next $ 500,000 40% of the next $1,000,000
50% of compensation exceeding $2,000,000
Notwithstanding the foregoing, (a) the Required Deferral Amount for any
Participant who will attain age 55 prior to the last day of any Plan Year and
who elects in his Plan Election to be governed by this sentence in the manner
specified by the Appropriate Committee shall be 25% of such compensation of such
Participant for each Plan Year in which he attains age 55 or older and (b) no
Participant shall be required or entitled to defer any portion of his
compensation for any Plan Year for which he was entitled to receive payment
prior to the date of his Plan Election. The Required Deferral Amount in his
initial Plan Year for any Participant who first becomes an Eligible Employee
after the first day of any Plan Year shall be determined by multiplying each of
the foregoing amounts in this paragraph by a fraction, the numerator of which is
the number of whole months remaining in the Plan Year following his date of
employment and the denominator of which is 12.
"Required Deferral Period" has the meaning assigned to such term in Section 3.1.
"Rule 16b-3" means Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Exchange Act, as the same may be modified or amended from
time to time, and any successor rule.
"Securities Act" means the Securities Act of 1933, as amended from time to time,
or any successor statute or statutes.
"Special Plan Election" has the meaning assigned to such term in Section 4.6.
"Termination Date" means the last day of any Deferral Period.
"Total CAP Units" means the aggregate number of CAP Units, adjusted through any
date of determination thereof, theretofore credited to a Participant's Capital
Accumulation Account.
"Total Deferral Amount" for any Participant means, for each Plan Year, the sum
of the Required Deferral Amount and the Additional Deferral Amount.
2.2 Accounting Terms. Whenever any accounting term is used herein, or the
character or amount of any asset or liability or item of income or expense is
required to be determined, or any consolidation or other accounting computation
is required to be made, for the purposes of this Plan, such accounting term
shall have the meaning assigned to such term or such determination or
computation shall be made (as the case may be), to the extent applicable and
except as otherwise specified herein, in accordance with GAAP.
SECTION 3
Eligibility
3.1 Not later than 90 days after the commencement of any Fiscal Year, the Board
Committee shall determine whether Eligible Employees who are not then
Participants shall be entitled to defer a portion of their compensation for such
Fiscal Year and the two Fiscal Years next succeeding such Fiscal Year (such
three Fiscal Years being referred to collectively as a "Required Deferral
Period"); provided, however, that in the case of the Required Deferral Period of
which the Base Year is the Fiscal Year ending June 30, 1992, such determination
may be made not later than October 30, 1991.
3.2 Each individual who is an Eligible Employee at any time during the
Enrollment Period in respect of a Plan Year and is not then a Participant shall
be eligible to participate in the Plan by deferring compensation as provided in
Section 4.1; provided, however, that an Eligible Employee who does not elect to
participate in the Plan during the Enrollment Period for the first Plan Year in
which he is an Eligible Employee shall not be entitled to participate in the
Plan in respect of subsequent Plan Years unless such participation is approved
by the Appropriate Committee not later than the last day of the Enrollment
Period for such Plan Year; and provided, further, that no individual shall be
eligible to participate in the Plan unless such individual agrees to execute
such documents or agrees to such restrictions, including but not limited to the
execution of an Investment Letter, as the Appropriate Committee in its sole
discretion may require.
SECTION 4
Deferrals of Compensation
4.1 Plan Election. Each Eligible Employee who satisfies the eligibility
requirements of Section 3.2 during a Plan Year may, during the applicable
Enrollment Period, execute and file with the Appropriate Committee a Plan
Election (an "Initial Plan Election"), in the form provided by the Company, (a)
electing to defer (i) the Required Deferral Amount of his current compensation
for each of the three Fiscal Years in the Required Deferral Period and (ii)
subject to the approval of the Appropriate Committee, any amount of his current
compensation in excess of the Required Deferral Amount for his Base Year (the
"Additional Deferral Amount") and (b) electing, subject to the approval of the
Appropriate Committee, a Deferral Period (in whole Fiscal Years) in respect of
the Required Deferral Amount and any Additional Deferral Amount for such Base
Year of more than Five Fiscal Years. During the Enrollment Period occurring
during the second and third Fiscal Years of a Required Deferral Period (or if
there is no Enrollment Period for such Fiscal Year, the period commencing on the
anniversary of the first day of the most recent preceding Enrollment Period and
ending on the anniversary of the last day of such Enrollment Period), a
Participant may execute and file with the Appropriate Committee an additional
Plan Election (an "Additional Plan Election"), in the form provided by the
Company electing, if applicable, a shorter Deferral Period or, subject to the
approval of the Appropriate Committee, an Additional Deferral Amount for such
Fiscal Year or a Deferral Period in respect of the Required Deferral Amount and
any Additional Deferral Amount for such Fiscal Year of more than five Fiscal
Years. The Appropriate Committee may approve any election of an Additional
Deferral Amount and any election of a Deferral Period in excess of five Fiscal
Years, or may deny any such request, in its sole discretion. If the Appropriate
Committee shall deny any election of any Additional Deferral Amount, then the
Additional Plan Election shall be deemed to relate only to the Participant's
Required Deferral Amount for the Fiscal Year involved and, if the Appropriate
Committee shall deny any election of a Deferral Period in excess of five Fiscal
Years, then the Deferral Period applicable to the Required Deferral Amount and
any Additional Deferral Amount for the Fiscal Year involved shall be five Fiscal
Years.
4.2 Effect of Initial Plan Election. An Initial Plan Election filed during the
Enrollment Period in respect of a Plan Year in accordance with Section 4.1 shall
constitute an election (a) to become a Participant in this Plan with respect to
such Fiscal Year and the two succeeding Fiscal Years, (b) to defer for Deferral
Period receipt of the Required Deferral Amount and the Additional Deferral
Amount (if any) approved by the Appropriate Committee for such Fiscal Year and
(c) to defer receipt of the Required Deferral Amount for the second and third
Fiscal Years of the Required Deferral Period beginning with such Fiscal Year for
the Deferral Period or such other period as may be approved by the Appropriate
Committee pursuant to Section 4.1, unless, in the case of such second and third
Fiscal Years, such Participant is excluded from participation in respect of
subsequent Fiscal Years of a Required Deferral Period upon approval of the
Appropriate Committee pursuant to Section 4.5(a).
4.3 Elective Deferrals. For each Plan Year occurring after the third Fiscal Year
of a Participant's Required Deferral Period as to which such Participant has not
theretofore had the opportunity to elect to defer compensation (each such Plan
Year being referred to as an "Elective Plan Year"), such Participant may,
subject as provided below, during the Enrollment Period in respect of any Plan
Year during which the Board Committee has determined pursuant to Section 3.1 to
allow any Eligible Employees to defer compensation for such Elective Plan Year,
execute and file with the Appropriate Committee an Additional Plan Election
electing to defer for the applicable Deferral Period the Required Deferral
Amount of his current compensation for such Elective Plan Year. Thereafter,
during the Enrollment Period occurring during each such Elective Plan Year (or
if there is no Enrollment Period for such Fiscal Year, the period commencing on
the anniversary of the first day of the most recent preceding Enrollment Period
and ending on the anniversary of the last day of such Enrollment Period) a
Participant may execute and file an Additional Plan Election, electing, subject
to the approval of the Appropriate Committee, an Additional Deferral Amount for
such Elective Plan Year and a Deferral Period (in whole Fiscal Years) in respect
of the Required Deferral Amount and any Additional Deferral Amount for such
Elective Plan Year of more than five Fiscal Years or, if applicable, a shorter
Deferral Period. The Appropriate Committee may approve any election under this
Section 4.3 to defer an Additional Deferral Amount and any election of a
Deferral Period in excess of five Fiscal Years, or may deny any such request, in
its sole discretion. If the Appropriate Committee shall deny any election of an
Additional Deferral Amount, then the additional Plan Election shall be deemed to
relate only to the Participant's Required Deferral Amount for the Elective Plan
Year involved and, if the Appropriate Committee shall deny any election of a
Deferral Period in excess of five Fiscal Years, then the Deferral Period
applicable to the Required Deferral Amount and any Additional Deferral Amount
for the Elective Plan Year involved shall be five Fiscal Years. If at any time
there is more than one Elective Plan Year as to any Participant, then the
Appropriate Committee shall determine whether or not the additional Plan
Election which may be submitted in respect of such Elective Plan Years by such
Participant shall relate to one or more than one of such Elective Plan Years. If
the Appropriate Committee determines that such Plan Election shall relate to
more than one Elective Plan Year, then the additional Plan Election to be filed
by such Participant shall constitute an election to defer the Required Deferral
Amount of his current compensation for each of such Elective Plan Years.
Notwithstanding the foregoing, however, if an Eligible Employee does not elect
to defer at least the Required Deferral Amount in respect of any Elective Plan
Year, such Eligible Employee shall be ineligible to submit an additional Plan
Election in respect of any succeeding Elective Plan Year unless the Appropriate
Committee, in its sole discretion, shall determine (including, without
limitation, by reason of hardship as contemplated by Section 4.5(a)) that such
Eligible Employee shall once again be eligible to elect to defer compensation
under this Section 4.3. In the event that the Appropriate Committee shall make
the determination contemplated by the preceding sentence in respect of any
Elective Plan Year for which the Enrollment Period has already expired, then the
Appropriate Committee, may, in its discretion, establish a supplementary
enrollment period for the Eligible Employee involved, in which case such
supplementary enrollment period shall be deemed the Enrollment Period for such
Eligible Employee for purposes of this Plan in respect of the Elective Plan Year
involved.
4.4 Election Irrevocable. The election to defer compensation pursuant to a Plan
Election or Additional Plan Election, once made for the first, second and third
Fiscal Years of a Required Deferral Period or for any Elective Plan Year, shall
be irrevocable and shall not be subject to cancellation by the Participant or,
except as expressly provided herein, by the Appropriate Committee or the
Company. Without limiting the generality of the foregoing, such an election for
the first, second and third Fiscal Years of a Required Deferral Period or for
any Elective Plan Year shall not be subject to cancellation by a Participant by
reason of termination of his employment with the Company or an Affiliate.
4.5 Hardship Exceptions.
(a) A Participant may request to be excluded from participating in the Plan in
respect of any Plan Year other than his Base Year by filing with the Appropriate
Committee during the Enrollment Period occurring during such Fiscal Year (or if
there is no Enrollment Period for such Fiscal Year, the period commencing on the
anniversary of the first day of the most recent preceding Enrollment Period and
ending on the anniversary of the last day of such Enrollment Period) a written
request for non-participation, which request shall set forth the circumstances
that have arisen since the Enrollment Period in respect of such Plan Year that
would make continued participation in the Plan an unanticipated financial
hardship for such Participant. The Appropriate Committee, in its sole
discretion, shall determine whether or not to grant any such request. A
Participant who requests and is granted such an exclusion shall not be eligible
to participate in the Plan in respect of the Plan Year for which such request is
granted, but shall continue to participate in the Plan in respect of any other
Plan Years for which an election has previously been made hereunder and shall be
eligible to participate in the Plan for future Plan Years.
(b) A Participant may request a reduction in any Deferral Period by one or more
Fiscal Years at any time by filing with the Appropriate Committee a written
request setting forth the circumstances that have arisen since the Enrollment
Period for the related Plan Year that would make the failure to reduce the
Deferral Period an unanticipated financial hardship for such Participant. The
Appropriate Committee, in its sole discretion, shall determine whether or not to
grant any such request and, if so, the number of whole Fiscal Years by which the
Deferral Period shall be so reduced.
4.6 Special Elections. The Appropriate Committee shall have the right in its
sole discretion to permit a Participant to execute and file with the Appropriate
Committee, at such times and on such terms and conditions as the Appropriate
Committee shall determine, a Plan Election (a "Special Plan Election") in form
provided by the Company, electing to extend the Deferral Period previously
selected with respect to any Required Deferral Amount and/or Additional Deferral
Amount for such periods and in such proportions as shall be determined by the
Appropriate Committee, provided that the Deferral Period being extended shall
terminate no earlier than the end of the Fiscal Year following the Fiscal Year
in which the Special Plan Election is made, except that any election with
respect to the Deferral Period ending on June 30, 1997 shall be made on or
before December 31, 1996. The Earnings Adjustment with respect to each Plan Year
in any such additional Deferral Period shall be calculated in accordance with
Section 5.4(e).
SECTION 5
Capital Accumulation Accounts;
Cash Balance Accounts
5.1 Annual Credits to Capital Accumulation Accounts. For each Plan Year, the
Company shall credit to each Participant, as of the last day of such Plan Year,
by means of a bookkeeping entry established and maintained by the Company for
each such Participant (a "Capital Accumulation Account"), a number of CAP Units
equal to the quotient obtained by dividing the Total Deferral Amount for such
Plan Year by the Average Cost Per Share of the Available Shares for such Plan
Year. The Available Shares for this purpose shall be the total number of
Available Shares for such Plan Year less a number of shares equal to any CAP
Units credited to Participants in respect of any fiscal quarter during such Plan
Year pursuant to Section 5.3 and less a number of shares equal to the number of
CAP Units to be credited to Participants as an Net Earnings Adjustment pursuant
to Section 5.10(a) for such Plan Year. Notwithstanding the foregoing, if the
aggregate number of CAP Units that otherwise would be credited to the Capital
Accumulation Accounts of all Participants pursuant to the first sentence of this
Section 5.1 would exceed the number of Available Shares, then the aggregate
number of CAP Units to be credited to the Capital Accumulation Accounts of all
Participants shall be limited to the number of Available Shares and such
aggregate number of CAP Units shall be allocated on a pro rata basis, based on
the respective Total Deferral Amounts of each Participant in respect of such
Plan Year. The Company shall record CAP Units credited in respect of each Plan
Year in a separate subaccount of each Participant's Capital Accumulation Account
and any credits or adjustments hereunder to such CAP Units shall be made
separately with respect to the CAP Units credited to each such subaccount.
5.2 Cash Balance Account. If the number of CAP Units which the Company is able
to credit to Participants in respect of any Plan Year is limited by the third
sentence of Section 5.1, then the Company shall also credit to each Participant
an amount equal to (a) the Total Deferral Amount for such Plan Year for such
Participant, less (b) the product of (i) the number of CAP Units credited to
such Participant in respect of such Plan Year and (ii) the Average Cost per
Share of the Available Shares taken into account in such determination. Such
amounts shall be credited as of the last day of such Plan Year by means of a
bookkeeping entry established and maintained by the Company for each Participant
(a "Cash Balance Account"). The Company shall record Cash Balances credited in
respect of each Plan Year in a separate subaccount of each Participant's Cash
Balance Account and any credits or adjustments hereunder to such Cash Balances
shall be made separately with respect to each such subaccount.
5.3 Quarterly Credits in Respect of Cash Balances. If there shall exist a Cash
Balance in the Cash Balance Account of any Participant on the last day of any
fiscal quarter of the Company, including the last day of a Plan Year (a "Quarter
End Date"), the Company shall credit the Capital Accumulation Account of each
such Participant, as of such Quarter End Date, with a number of additional CAP
Units determined by dividing such Cash Balance by the Average Cost Per Share of
the Available Shares acquired by the Company and designated by the Board
Committee as being allocated to such period . If the aggregate number of CAP
Units required to be credited to the Capital Accumulation Accounts of all such
Participants pursuant to the preceding sentence would exceed the number of
Available Shares, then the aggregate number of CAP Units to be credited shall be
limited to the number of Available Shares and such CAP Units shall be allocated
on a pro rata basis, based on the respective Cash Balances of each Participant.
In connection with any crediting of CAP Units pursuant to this Section 5.3, the
Cash Balance of each such Participant shall be reduced by debiting to his Cash
Balance Account an amount equal to the product of the number of CAP Units
credited to his Capital Accumulation Account and the Average Cost Per Share of
the Available Shares acquired by the Company during the annual or quarterly
period specified by the Board Committee.
5.4 Earnings Adjustments. For purposes of calculating the Net Earnings
Adjustment with respect to any Deferral Year pursuant to Section 5.10, the
Earnings Adjustment shall be calculated with respect to such Deferral Year,
after making any credits to the Capital Accumulation Accounts of the
Participants in respect of the fourth fiscal quarter of such Deferral Year
pursuant to Section 5.3, as follows:
(a) first, the Company shall determine a dollar amount of interest to be
credited to each Participant who had a positive Cash Balance at any time during
the Deferral Year by multiplying the daily weighted average amount of each such
Participant's Cash Balance (such weighted average to be determined by adding the
amounts of the Participant's Cash Balance on each day during such Deferral Year
and dividing the total so obtained by the number of days in such Deferral Year)
by a percentage equal to the daily average of the highest rates of interest paid
by Bear Stearns to its employees from time to time during such Deferral Year on
free credit balances;
(b) the Company next shall determine a dollar amount to be credited or
debited to each Participant in respect of CAP Units credited to such
Participant's Capital Accumulation Account as of the first day of the
Deferral Year and at all times throughout such Deferral Year ("Full Year
Units") by multiplying such number of Full Year Units by the Income Per Share
for the Deferral Year; provided, however, that the amount to be credited or
debited pursuant to this clause (b) to a Participant whose employment with
the Company and its Affiliates was terminated during such Deferral Year shall
be the amount determined as aforesaid multiplied by a fraction, the numerator
of which shall be the number of whole months in such Deferral Year prior to
the month in which his employment terminated and the denominator of which
shall be 12;
(c) the Company then shall determine a dollar amount to be credited to
each Participant in respect of CAP Units credited or debited to his Capital
Accumulation Account as of any date subsequent to the first day of the
Deferral Year ("Part Year Units") by multiplying such number of Part Year
Units by the Income Per Share for the Deferral Year and multiplying the
product so obtained by a fraction, the numerator of which shall be the number
of whole months in such Deferral Year during which such Part Year Units were
so credited (less, in the case of a Participant whose employment by the
Company and its Affiliates is terminated in such Deferral Year, the number of
whole months following the effective date of such termination, plus one) and
the denominator of which shall be 12 (if a Participant's Capital Accumulation
Account has been credited with Part Year Units which initially were credited
to such Account as of different dates during the Deferral Year, then the
calculation required by this clause (c) shall be made separately for each
such group of Part Year Units);
(d) the Company then shall calculate a dollar amount to be charged to
each Participant who has any Additional Deferral Amount by determining the
Cost of Carry for such Participant with respect to each Plan Year for which
he has any such Additional Deferral Amount and multiplying each such amount
by a fraction, the numerator of which shall be the Participant's Additional
Deferral Amount for such Plan Year and the denominator of which shall be his
Total Deferral Amount for such Plan Year; provided that the charge computed
pursuant to this subparagraph (d) resulting from an Additional Deferral
Amount in Plan Year 1993 or Plan Year 1994 shall be taken into account only
with respect to a Participant who has elected to defer such Additional
Deferral Amount for more than five Fiscal Years and then only with respect to
Deferral Years after the fifth Deferral Year;
(e) the Company then shall calculate a dollar amount to be charged to
each Participant who elected to defer any Required Deferral Amount in respect
of any Plan Year for more than five Fiscal Years by determining the Cost of
Carry for such Participant with respect to each such Plan Year and
multiplying each such amount by a fraction, the numerator of which shall be
the Participant's Required Deferral Amount for such Plan Year and the
denominator of which shall be his Total Deferral Amount for such Plan Year;
provided that the charge computed pursuant to this subparagraph (e) shall be
taken into account only with respect to Deferral Years after the fifth
Deferral Year;
(f) the Company shall then calculate an amount to be charged to each
Participant whose employment with the Company and its Affiliates has
terminated equal to the Cost of Carry for such Participant for such Deferral
Year or, if his employment terminated in such Deferral Year, for the portion
thereof beginning with the month in which his employment terminated; and
(g) finally, (i) if the sum (or net amount) of the amounts determined
for a Participant in subparagraphs (a), (b) and (c) above is a positive
number and such sum (or net amount) exceeds the aggregate of the charges, if
any, determined for such Participant pursuant to subparagraphs (d), (e) and
(f) above, then the Earnings Adjustment shall equal such sum (or net amount),
as determined for purposes of this Section 5.4, or (ii) if the net amount of
the amounts determined for a Participant in subparagraphs (a), (b) and (c)
less the aggregate of the charges, if any, determined pursuant to
subparagraphs (d), (e) and (f) is a negative number (an "Earnings Charge")
and such Participant has a positive Cash Balance, then (A) such Cash Balance
first shall be reduced by an amount equal to such Earnings Charge (provided
that no such reduction shall be made to the extent the Earnings Charge
relates to a negative result from sub-paragraph (b) or (c)) and (B) if, after
reducing such Cash Balance to zero, any amount determined in accordance with
the preceding clause (ii)(A) remains unapplied, or if such Participant has no
Cash Balance, then the Earnings Adjustment shall be zero.
5.5 Book Value Adjustment. For purposes of calculating the Net Earnings
Adjustment with respect to any Deferral Year pursuant to Section 5.10, the
Book Value Adjustment shall equal the sum of (1) the amount maintained in the
Book Value Adjustment Carry Forward Account pursuant to Section 5.10(a), if
any, and (2) the product of (a) the total number of CAP Units credited to the
Capital Accumulation Account of each Participant as of the last day of such
Deferral Year but without including any CAP Units credited on such date
pursuant to Sections 5.1, 5.3 and 5.10 multiplied by (b) the difference
between Adjusted Book Value Per Share as of the last day of the Deferral Year
and Adjusted Book Value Per Share as of the last day of the preceding
Deferral Year. .
5.6 Overall Cost Limitation. Notwithstanding the provisions of Section
5.10, if the operation of the Plan (without giving effect to this Section
5.6) would result in Adjusted Earnings Per Share for any Fiscal Year being
less than 98.5% of Pre-Plan Earnings Per Share for such Fiscal Year, then,
after making the other credits and adjustments required by Section 5.3, (a)
the Net Earnings Adjustments required by Section 5.10(a) first shall be
reduced or eliminated, and (b) if necessary after eliminating all such Net
Earnings Adjustments, the Cash Balance Accounts of all Participants shall be
reduced or eliminated so that to the extent possible, after giving effect to
all such reductions and eliminations, Adjusted Earnings Per Share for such
Fiscal Year will be 98.5% of Pre-Plan Earnings Per Share.
5.7 Antidilution Adjustments. In the event of a stock split or if the
Company makes any distribution (other than a cash dividend) with respect to
Common Stock after the date CAP Units initially are credited to a
Participant's Capital Accumulation Account in accordance with this Section 5,
the number of CAP Units held in each Participant's Capital Accumulation
Account shall be equitably adjusted (as determined by the Appropriate
Committee in its sole discretion) to reflect such event. If there shall be
any other change in the number or kind of outstanding shares of Common Stock
as a result of a recapitalization, combination of shares, merger,
consolidation or otherwise, the number of CAP Units credited to each
Participant's Capital Accumulation Account shall be equitably adjusted (as
determined by the Appropriate Committee in its sole discretion) to reflect
such event.
5.8 Apportionment of Credits. Whenever CAP Units are credited to a
Participant's Capital Accumulation Account pursuant to Section 5.3 or 5.10 in
respect of any Deferral Year, they shall be apportioned among the CAP Units
originally credited to such Account in respect of each Plan Year on a pro
rata basis, based on the respective number of the CAP Units originally
credited in respect of each such Plan Year, and such additional CAP Units
shall have the same Termination Date as the original CAP Units to which they
are so apportioned.
5.9 Amounts Vested. A Participant shall be fully vested at all times in
the CAP Units credited to his Capital Accumulation Account and in the Cash
Balance credited to his Cash Balance Account; provided, however, that the
establishment and maintenance of, or credits to, such Capital Accumulation
Account and Cash Balance Account shall not vest in any Participant or his
Beneficiary any right, title or interest in or to any specific asset of the
Company.
5.10 Net Earnings Adjustments.
(a) After making any credits to the Capital Accumulation Accounts of
the Participants in respect of the fourth fiscal quarter of such Deferral
Year pursuant to Section 5.3, each Participant's Account shall be adjusted,
effective as of the last day of such Deferral Year, as provided in this
Section 5.10(a). The Company shall credit the Capital Accumulation Account of
each Participant with an additional number of CAP Units (a "Net Earnings
Adjustment") equal to the quotient of (i) the difference between the Earnings
Adjustment calculated in accordance with Section 5.4 and the Book Value
Adjustment calculated in accordance with Section 5.5 for such Deferral Year,
divided by (ii) the Average Cost Per Share of the Available Shares acquired
by the Company and designated by the Board Committee as being allocated to
such period. Notwithstanding the foregoing, however, if (i) the Earnings
Adjustment is a negative number or (ii) the Book Value Adjustment exceeds the
Earnings Adjustment then no CAP Units shall be credited to the Accounts of
any Participants and the amounts of each of such Book Value Adjustment and
Earnings Adjustment shall be disregarded and shall not be taken into account
for purposes of the Plan in any subsequent Deferral Year.
If the aggregate number of CAP Units required to be credited to the
Accounts of all Participants pursuant to this Section 5.10(a) shall exceed
the number of Available Shares in respect of such Plan Year, then the Company
shall credit to each Participant only that number of CAP Units as shall equal
the number of Available Shares, on a pro rata basis, based on the number of
CAP Units which each Participant otherwise would have been entitled to be
credited. In such event, the Company shall also carry forward to subsequent
Deferral Years the respective amounts obtained by multiplying each of the
Earnings Adjustment and the Book Value Adjustment applicable for each
Participant by the fraction which is one minus the quotient obtained by
dividing (a) the number of Available Shares by (b) the aggregate number of
CAP Units required to be credited pursuant to this Section 5.10(a). Such
respective amount shall be credited (or debited) by means of separate
bookkeeping entries established and maintained by the Company to the Cash
Balance Account in respect of the Earnings Adjustment and a "Book Value
Adjustment Carryforward Account" in respect of the applicable Book Value
Adjustment of each Participant. The amounts credited to the Cash Balance
Account in respect of the Earnings Adjustment shall equal the product of (a)
the applicable amount carried forward in respect of Earnings Adjustment and
(b) the Average Cost Per Share for the Plan Year involved.
(b) Notwithstanding anything in the Plan to the contrary, for purposes
of determining Historical Book Value Per Share and Adjusted Book Value Per
Share, the Net Earnings Adjustments credited to each Participants' Capital
Accumulation Account pursuant to Section 5.10(a) shall be disregarded and in
lieu thereof the Earnings Adjustments provided for in Section 5.4 and the
Book Value Adjustments provided for in Section 5.5 shall be deemed made
without giving effect to Section 5.10(a). In addition, for purposes of
calculating the Earnings Adjustment and the Book Value Adjustment (except as
required by Section 5.2 any amounts credited to a Book Value Adjustment
Carryforward Account in a prior Deferral Year shall be deemed made as a Book
Value Adjustment in the year so credited and not carried forward to
subsequent Deferral Years.
5.11 Certification of the Board Committee. As a condition to the right
of any Participant to receive any shares payable in respect of CAP Units
credited to such Participant's Capital Accumulation Account or cash in
respect of such Participant's Cash Account, in respect of fractional CAP
Units credited to such Participant's Capital Accumulation Account or payable
pursuant to Section 6.6, prior to the time CAP Units or cash is credited to
the appropriate Accounts of such Participant or a Participant receives cash
pursuant to Section 6.6, the Board Committee shall be required to certify, by
resolution of the Board Committee or other appropriate action, that the
amounts to which such Participant is entitled have been accurately determined
in accordance with the provisions of the Plan.
SECTION 6
Payment of Benefits
6.1 Distributions. As soon as practicable following each Termination
Date, each Participant shall be entitled to receive from the Company, in
respect of the Total Deferral Amount for the related Plan Year, a number of
shares of Common Stock equal to the Total CAP Units credited to his Capital
Accumulation Account in respect of such Plan Year and an amount in cash equal
to his Cash Balance, if any, in respect of such Plan Year, each determined as
of such Termination Date.
6.2 Accelerated Distributions. Notwithstanding the provisions of Section 6.1 and
in lieu of any distribution on a Termination Date selected by a Participant, a
Participant may receive a distribution prior to a Termination Date as follows:
(a) If a Participant shall die during any Fiscal Year prior to the end
of all of his Deferral Periods, the Participant's estate (or his Beneficiary)
shall be entitled to receive from the Company, as soon as practicable after
the end of the Fiscal Year in which such Participant's death occurs, a number
of shares of Common Stock equal to the Total CAP Units credited to his
Capital Accumulation Account, as adjusted pursuant to Sections 5.6 and 5.10
as of the end of the Fiscal Year in which such Participant's death occurs,
and an amount in cash equal to his Cash Balance, if any, as of the end of the
Fiscal Year in which such Participant's death occurs.
(b) If a Participant's employment with the Company and its Affiliates
shall be terminated for any reason prior to the end of all of his Deferral
Periods (other than by reason of death), or if such Participant shall suffer
a Disability or shall become a Managing Director Emeritus of Bear Stearns,
then such Participant (or his Beneficiary) shall, unless otherwise determined
by the Appropriate Committee as hereinafter provided, continue to be bound
by, and to be subject to, all the terms and provisions of this Plan, except
that (i) in lieu of making any calculations pursuant to subparagraphs (ii)
and (iii) of Section 5.4 in respect of the portion of the Deferral Year
beginning with the month in which his employment terminates and for any
subsequent Deferral Year prior to any Termination Date, the Company shall
credit to the Cash Balance Account of such Participant, on an annual basis as
of the last day of each Fiscal Year, a dollar amount equal to the cash
dividends declared by the Company, in the fiscal quarter of the Company
following the fiscal quarter in which his employment terminated or in any
subsequent fiscal quarter ending on or prior to a Termination Date, on that
number of shares of Common Stock corresponding to the number of CAP Units
credited to his Capital Accumulation Account (A) as of the last day of the
month before his employment terminates in respect of the Fiscal Year in which
his employment terminated and (B) as of the first day of the Fiscal Year
after which his employment terminated in respect of all subsequent Fiscal
Years, and (ii) notwithstanding the provisions of Section 5.5, the Book Value
Adjustment for any Fiscal Year following the Fiscal Year in which his
employment terminated shall be zero. For purposes of calculating the Book
Value Adjustment for the Fiscal Year in which the employment of a Participant
is terminated, the denominator of the fraction referred to in Section 5.5 of
the Plan shall be (in lieu of the Adjusted Book Value Per Share on the last
day of the Deferral Year for which the adjustment is being made) the Adjusted
Book Value Per Share calculated by including in the definition of Adjusted
Common Stockholder Equity (in lieu of all increases (or decreases) in
retained earnings attributable to net income (or loss) minus all amounts
accrued in respect of cash dividends declared with respect to any capital
stock of the Company) the amount determined by multiplying (A) the increase
(or decrease) in retained earnings in such Fiscal Year attributable to net
income (or loss) minus all amounts accrued in respect of cash dividends
declared with respect to any capital stock of the Company by (B) a fraction,
the numerator of which is the number of months in the Fiscal Year prior to
but not including the month in which his employment terminates, and the
denominator of which is 12.
Notwithstanding the foregoing:
(i) the Appropriate Committee shall have the right in its sole
discretion (A) to treat a Participant who has suffered a Disability or who
has become a Managing Director Emeritus of Bear Stearns as a Participant (1)
in all respects under this Plan, (2) to whom the provisions of Section 5.4
but not the provisions of Section 4.1 shall apply or (3) whose employment
with the Company and its Affiliates has terminated and to whom the foregoing
provisions of this paragraph (b) shall apply, and (B) at any time or from
time to time, to change any such treatment with respect to any such
Participant to any other such treatment;
(ii) the Appropriate Committee shall have the right in its sole discretion to
accelerate any Termination Date with respect to any Plan Year of a Participant
whose employment with the Company and its Affiliates terminates to the last day
of the Fiscal Year in which such employment terminates or to the last day of any
subsequent Fiscal Year, in which case the date so determined by the Appropriate
Committee with respect to each such Plan Year shall be the Participant's
Termination Date for all purposes of this Plan with respect to each such Plan
Year. The Appropriate Committee shall give notice of any such determination to
the Participant at least ten days prior to the earliest of such accelerated
Termination Dates. In addition, if a Participant whose employment with the
Company has terminated shall request the Appropriate Committee to accelerate the
Termination Date with respect to any Plan Year of such Participant to the last
day of the Fiscal Year immediately preceding the Fiscal Year in which such
Participant's employment terminates, the Appropriate Committee may in its sole
discretion so accelerate the Termination Date with respect to any such Plan Year
of such Participant. If the Appropriate Committee takes such action, such
Participant's distribution from the Plan for any Plan Year the Termination Date
of which is so accelerated shall be based on the Total CAP Units and his Cash
Balance at the end of such prior Fiscal Year for each such Plan Year, without
giving effect to any adjustments otherwise required to be made during the Fiscal
Year in which his employment terminates, including, without limitation, for Net
Earnings Adjustments, dividends on the Common Stock, or interest, and the
distributions called for in Section 6.1 of the Plan shall be made as soon as
practicable after such action is taken by the Appropriate Committee;
(iii) Notwithstanding clause (ii) above, the Appropriate Committee shall have
the right in its sole discretion to determine that, regardless of the
Termination Date with respect to any other Plan Year or Plan Years, the
Termination Date with respect to the Plan Year in which the employment of the
Participant with the Company and its Affiliates terminates, and the Plan Year
immediately preceding such Plan Year if such employment terminates prior to the
date on which the Capital Accumulation Account of such Participant is credited
pursuant to Section 5.1 hereof with respect to such immediately preceding Plan
Year, shall be the last day of the Fiscal Year immediately preceding the Plan
Year in which such employment terminates or, if applicable, the prior Plan Year;
and
(iv) the Appropriate Committee may permit a Participant whose employment with
the Company and its Affiliates terminates more than five years after the last
day of his first Plan Year and who has elected a Deferral Period of more than
five Fiscal Years for any Plan Year to participate in the Plan with respect to
any such Plan Year for one or more Fiscal Years (but not beyond his Termination
Date as determined in accordance with his applicable Plan Election) on
substantially the same terms as other Participants whose employment has not
terminated, in which case the Capital Accumulation Account of such Participant
shall continue to be adjusted in the manner provided in Section 5.10 for other
Participants except that subparagraph (f) of Section 5.4 shall apply to such a
Participant, and the Termination Date with respect to each such Plan Year shall
be the last day of such Fiscal Year as shall be determined by the Appropriate
Committee.
(c) If a Participant shall take a Personal Leave of Absence prior to
the end of all his Deferral Periods, the Appropriate Committee shall have the
right in its sole discretion to require the Participant to become subject to
the provisions of paragraph (b) above (to the same extent as a Participant
whose employment had terminated) during the period of such Personal Leave of
Absence, except that in the event the Participant resumes full-time
employment after the first day of a Fiscal Year, all calculations under this
Plan with respect to such Fiscal Year shall be made by treating the
Participant in the same manner as a full-time employee for the number of full
months of such employment during such Fiscal Year and as a Participant whose
employment had been terminated for the balance of such Fiscal Year. If the
Appropriate Committee shall not take such action the Participant shall
continue to be treated under this Plan on the same basis as a Participant who
is not on a Personal Leave of Absence.
(d) In addition, in the event of hardship, actual or prospective change
in tax laws, or any other unforeseen or unintended circumstance or event
(including, without limitation, if the tax laws of any foreign jurisdiction
do not provide for tax consequences to Participants or the Company that are
comparable to those provided under United States tax laws), or if desirable
to preserve the deductibility for federal income taxes of compensation paid
or payable by the Company to any Participant, the Appropriate Committee, in
its sole discretion, may accelerate any Termination Date of any Participant
to the last day of any Fiscal Year, in which case the accelerated date
determined by the Appropriate Committee shall be the Termination Date for all
purposes of this Plan.
6.3 Change in Control and Parachute Limitation. Notwithstanding the
provisions of Sections 6.1 and 6.2, within sixty (60) days of the occurrence
of a Change in Control, each Participant shall be entitled to receive from
the Company that number of shares of Common Stock which is equal to the Total
CAP Units credited to his Capital Accumulation Account as of the date of such
Change in Control and an amount in cash equal to his Cash Balance, if any, as
of such date; provided, however, no amount shall be immediately distributable
or payable under the Plan if and to the extent that the Appropriate Committee
determines that such distribution or payment (taken together with any other
payment received or to be received by the Participant from the Company or any
of its Affiliates in connection with a Change in Control) would constitute an
"excess parachute payment" under section 280G of the Code, which would cause
such amount to be subject to an excise tax to the recipient or to be
nondeductible to the Company or any of its Affiliates, or would subject a
Reporting Person to liability under Section 16(b) of the Exchange Act or any
rule or regulation thereunder by reason of transactions or events occurring
on or prior to the occurrence of the Change in Control. Payment of amounts
not distributed by reason of this Section 6.3 shall be made as soon as
practicable, consistent with this Section 6.3.
6.4 Additional Distributions in Certain Cases. In addition to the
amounts provided by Section 6.1, 6.2 or 6.3, if (a) upon making any
distribution to any Participant, the Company determines that the Company or
Bear Stearns would realize a tax benefit calculated at its Marginal Tax Rate
in the year of such distribution (without giving effect to any carryovers or
carrybacks of losses, credits or deductions from any prior or succeeding
Fiscal Year) in excess of the amount of Deferred Tax Benefit in respect of
its liability to such Participant on account of such distribution, and (b)
such Participant's Cash Balance Account or the number of CAP Units credited
to his Capital Accumulation Account had been reduced in a prior Fiscal Year
as a result of the application of subparagraphs (d) or (e) of Section 5.4 or
Section 5.6, then at the time of the distribution pursuant to this Section 6
the Company also shall pay to such Participant, in cash, an additional amount
equal to the lesser of (i) the amount by which the actual tax benefit to be
received by the Company or Bear Stearns exceeds such Deferred Tax Benefit and
(ii) the amount by which such Participant's Cash Balance Account or Capital
Accumulation Account was so reduced. Notwithstanding the foregoing, a
Participant shall not be entitled to any payment from the Company pursuant to
this Section 6.4 in respect of any reduction in his Cash Balance Account or
in the number of CAP Units credited to his Capital Accumulation Account for
any period commencing with the first day of the month following the month in
which his employment by the Company and its Affiliates was terminated.
6.5 Special Provisions for Reporting Persons. If required by Rule
16b-3, shares of Common Stock distributed to Participants who are Reporting
Persons shall bear an appropriate legend to the effect that such shares of
Common Stock may not be transferred for a period of six (6) months after they
are credited to the Account of such Participant".
6.6 Form of Payments. Except as otherwise provided herein, all
distributions in respect of CAP Units to be made to a Participant (or his
Beneficiary) under the Plan shall be made in whole shares of Common Stock.
Payment in respect of any fractional CAP Unit shall be made in cash based
upon the Fair Market Value of a share of Common Stock on the second Business
Day preceding the payment date. Shares of Common Stock distributed hereunder
may be treasury shares, shares of authorized but unissued Common Stock, or a
combination thereof, and shall be fully paid and nonassessable. If shares of
Common Stock are distributed pursuant to Sections 6.1, 6.2(a) or 6.2(b) to
any Participant after the record date for any cash dividend occurring after
the Termination Date with respect to which such shares are distributed or, in
the cases of Sections 6.2(a) or 6.2(b), after the end of the Fiscal Year in
which the death or Disability of a Participant occurs, then such Participant
(or his estate or Beneficiary) shall be entitled to receive from the Company
an amount of cash equal to the cash dividends per share payable to holders of
record on such record date multiplied by the number of shares of Common Stock
so distributed to such Participant after such record date.
6.7 Registration and Listing of Common Stock. Prior to the date on
which any shares of Common Stock are required to be issued to any Participant
under this Plan without taking into account any acceleration of such
distribution date pursuant to the provisions of Section 6.2 of the Plan, the
Company shall file a registration statement (a "Registration Statement") on
Form S-3 and/or Form S-8 (or any successor form then in effect) under the
Securities Act, with respect to all shares of Common Stock which the Company
then estimates are distributable under the Plan; provided, however, that the
Company need not file a Registration Statement hereunder if, prior to such
date, the Company receives a written opinion of counsel to the effect that
such shares of Common Stock may be sold, transferred or otherwise disposed of
under the Securities Act without registration thereunder. The Company shall
use its best efforts to have any such Registration Statement declared
effective as soon as reasonably practicable after filing and shall use
reasonable efforts to keep each such Registration Statement continuously in
effect until all shares of Common Stock to which such Registration Statement
relates have been so issued, and for a two-year period thereafter. From time
to time the Company also shall amend such Registration Statement to cover any
additional shares of Common Stock which become distributable under the Plan
and otherwise would not be covered by such Registration Statement. In the
event that Participants would be precluded from selling any shares of Common
Stock distributable hereunder unless such shares were registered or qualified
under the securities or "blue sky" laws of any state (or otherwise received
the approval of any state governmental or regulatory authority), then the
Company shall use its best efforts to cause such shares of Common Stock to be
duly registered or qualified (or to receive such approval) as may be
required. If the shares of Common Stock distributable hereunder satisfy the
criteria for listing on any exchange on which the Common Stock is then
listed, then (unless such shares of Common Stock already are listed on such
exchange) the Company shall apply for and use its best efforts to obtain a
listing of all such shares of Common Stock on such exchange. All costs and
expenses incurred by the Company in connection with the satisfaction of its
obligations under this Section 6.7 shall be borne by the Company. The Company
shall immediately notify each Participant in the event that a Registration
Statement which has been filed and remains effective contains an untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
Upon receipt of such notice, no Participant shall sell or agree to sell any
shares of Common Stock pursuant to such Registration Statement unless and
until the Company has notified each Participant that such Registration
Statement no longer contains such misstatement or omission. In the event that
shares of Common Stock are issued to Participants hereunder other than
pursuant to a Registration Statement, then, unless the Company shall have
obtained the opinion of counsel referred to above, each certificate
representing such shares shall bear a legend substantially to the following
effect:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended, or applicable state securities
laws, and may not be sold, assigned, transferred, pledged or otherwise
disposed of except in compliance with the requirements of such Act.
By submitting a Plan Election, Each Participant shall be deemed to have
agreed to the foregoing provisions of this Section 6.7.
6.8 Reservation of Shares. The Company, as soon as practicable after
the end of each Fiscal Year prior to the termination of this Plan, shall
reserve such number of shares of Common Stock (which may be authorized but
unissued shares or treasury shares) as shall be required so that the total of
all shares reserved hereunder, including shares reserved pursuant to this
Section 6.8 in preceding Fiscal Years, shall be equal to the number of shares
of Common Stock which the Company would be obligated to issue to all
Participants in accordance with the terms of the Plan if the Plan were to be
terminated at such time.
SECTION 7
Source of Payments
Notwithstanding any other provision of this Plan, the Company shall not
be required to establish a special or separate fund or otherwise segregate
any assets to assure any payments hereunder. If the Company shall make any
investment to aid it in meeting its obligations hereunder, a Participant and
his Beneficiary shall have no right, title or interest whatsoever in or to
any such investments. Nothing contained in this Plan, and no action taken
pursuant to its provisions, including without limitation the acquisition of
any shares of Common Stock by the Company, shall create or be construed to
create a trust of any kind between the Company and any Participant or
Beneficiary. To the extent that any Participant or Beneficiary acquires a
right to receive payments from the Company hereunder, such right shall be no
greater than the right of a general unsecured creditor of the Company.
SECTION 8
Administration of the Plan
8.1 Authority of Committee. The Plan shall be administered by the
Appropriate Committees, which shall have full power and authority as set
forth herein to interpret, to construe and to administer the Plan and to
review claims for benefits under the Plan. Each Appropriate Committee's
interpretations and constructions of the Plan and actions thereunder,
including but not limited to the determination of the amounts to be credited
to any Capital Accumulation Account or Cash Balance Account, shall be binding
and conclusive on all persons and for all purposes.
8.2 Duties of Committee. The Appropriate Committees shall cause the
Company to establish and maintain records of the Plan, of each Capital
Accumulation Account and Cash Balance Account and of each subaccount thereof
established for any Participant hereunder. Either of the Appropriate
Committees may engage such certified public accountants, who may be
accountants for the Company, as it shall require or may deem advisable for
purposes of the Plan, may arrange for the engagement of such legal counsel,
who may be counsel for the Company, and may make use of such agents and
clerical or other personnel as it shall require or may deem advisable for
purposes of the Plan. Each such Committee may rely upon the written opinion
of the accountants and counsel engaged by it. Subject to any limitations
imposed by applicable law (including Rule 16b-3), either Appropriate
Committee may delegate to any agent or to any subcommittee or member of such
Committee its authority to perform any act hereunder, including, without
limitation, those matters involving the exercise of discretion, provided that
such delegation of authority shall be subject to revocation at any time at
the discretion of such Committee.
8.3 Purchase of Common Stock. The Company intends to purchase shares of
Common Stock in the open market or in private transactions or otherwise
during the term of the Plan for issuance to Participants in accordance with
the terms hereof. Shares of Common Stock shall be purchased for purposes of
the Plan and for purposes of the PUP Plan on a combined or joint basis
without identifying shares so purchased as having been purchased for this
Plan or the PUP Plan. Notwithstanding the foregoing, the Company will
specifically designate all such shares at the time they are purchased as
having been purchased for the purpose of making determinations under this
Plan and the PUP Plan; provided, however, that any shares so purchased shall
be the sole property of the Company and no Participant or Beneficiary shall
have any right, title or interest whatsoever in or to any such shares. All
shares of Common Stock purchased by the Company on or after July 1, 1992 and
designated by the Company as having been purchased for the CAP Plan shall be
considered, notwithstanding such designation, to have been purchased for
purposes of both this Plan and the PUP Plan. The acquisition of Common Stock
as described above will be subject to the sole discretion of the Board
Committee, which shall determine the time and price at which and the manner
in which such shares are to be acquired, subject to applicable law. In making
any such determination, the Board Committee may, but shall in no event be
obligated to, consider the recommendations of the Advisory Committee.
8.4 Plan Expenses. The Company shall pay the fees and expenses of accountants,
counsel, agents and other personnel and all other costs of administration of the
Plan.
8.5 Indemnification. To the maximum extent permitted by applicable law,
no member of any Committee shall be personally liable by reason of any
contract or other instrument executed by him or on his behalf in his capacity
as a member of such Committee or for any mistake of judgment made in good
faith, and the Company shall indemnify and hold harmless, directly from its
own assets (including the proceeds of any insurance policy the premiums of
which are paid from the Company's own assets), each member of each Committee
and each other director, officer, employee or agent of the Company to whom
any duty or power relating to the administration or interpretation of the
Plan or to the management or control of the assets of the Plan may be
delegated or allocated, against any cost or expense (including fees,
disbursements and other charges of legal counsel) or liability (including any
sum paid in settlement of a claim with the approval of the Company) arising
out of any act or omission to act in connection with the Plan, unless arising
out of such person's own fraud, willful misconduct or bad faith. The
foregoing shall not be deemed to limit the Company's obligation to indemnify
any member of any Committee under the Company's Restated Certificate of
Incorporation or Bylaws, or under any other agreement between the Company and
such member.
8.6 Maximum Number of Shares.
(a) The aggregate number of CAP Units that may be credited to
Participants' Capital Accumulation Accounts under the Plan for any Plan Year
shall not exceed the equivalent number of shares of Common Stock equal to the
sum of 15% of the outstanding shares of Common Stock as of the last day of
such Plan Year (the "Base Shares") and the number, if any, by which the sum
of the Base Shares in all prior Fiscal Years beginning on or after July 1,
1993 exceeds the number of shares credited to Participants' Capital
Accumulation Accounts under this Plan in all such prior Fiscal Years. For
purposes of determining the number of shares of Common Stock outstanding as
of the last day of any Plan Year, such number shall be calculated as the sum
of (i) the number of shares of Common Stock outstanding at such year end,
(ii) the number of shares underlying CAP Units credited to Participants'
Capital Accumulation Accounts as of such date and Earnings Units credited to
Participants' Earnings Unit Accounts under the PUP Plan as of such date and
(iii) the number of shares underlying CAP Units to be credited to all such
Accounts as a result of making any adjustment to such Accounts required by
Sections 5.1 and 5.10 in respect of all Fiscal Years ending on or prior to
the date of determination and the number of Earnings Units credited to the
Earnings Unit Accounts of all Participants in the PUP Plan as a result of
making any adjustment to such Accounts required by Section 4.2 of the PUP
Plan in respect of all Fiscal Years ending on or prior to the date of such
determination.
(b) If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, spinoff, split up, dividend in kind or other change in
the corporate structure or distribution to the stockholders, appropriate
adjustments may be made by the Board Committee (or if the Company is not the
surviving corporation in any such transaction, the board of directors of the
surviving corporation) in the aggregate number and kind of shares subject to
the Plan, and the number and kind of shares which may be issued under the
Plan. Appropriate adjustments may also be made by the Board Committee in the
terms of any awards under the Plan to reflect such changes and to modify any
other terms of outstanding awards on an equitable basis as the Board
Committee in its discretion determines.
SECTION 9
Amendment and Termination
The Plan shall terminate when all distributions required to be made
hereunder have been made following the last Termination Date. The Plan may be
amended, suspended or earlier terminated, in whole or in part as to a
particular Plan Year, and at any time and from time to time, by the Board
Committee, but except as provided below no such action shall retroactively
impair or otherwise adversely affect the rights of any person to benefits
under the Plan which have accrued prior to the date of such action. Except as
provided in the following sentence, if the Plan is terminated prior to the
end of any Fiscal Year, (i) Participants' Plan Elections in respect of the
Plan Year in which such termination occurs and any subsequent Plan Year shall
be canceled, (ii) the Company shall credit the Capital Accumulation Accounts
of all Participants (other than those whose employment with the Company and
its Affiliates had terminated prior to the date the Plan terminates, except a
Participant referred to in subparagraph (iii) of Section 6.2(b)) in the
manner provided in Section 5.10 in respect of the portion of the Company's
Fiscal Year ended on the date of such termination, and (iii) as soon as
practicable following the end of the Fiscal Year in which such termination
occurs, the Company shall deliver to each Participant the number of shares of
Common Stock corresponding to the number of CAP Units credited to his Capital
Accumulation Account and an amount in cash equal to his Cash Balance which
the Participant otherwise would be entitled to receive pursuant to Section 6
as of the designated Termination Date in respect of the Plan Year or Plan
Years involved. Notwithstanding the foregoing, if the Company shall determine
that the Plan should be terminated immediately, either in its entirety or in
part in respect of any Plan Year, no adjustments or credits shall be made to
the Capital Accumulation Accounts of the Participants pursuant to Section 5
in respect of the Fiscal Year in which such termination occurs and each
Participant shall be entitled to receive from the Company, as soon as
practicable following the date of such termination, shares of Common Stock
and/or amounts in cash determined in accordance with Section 6 hereof as if
the Termination Date in respect of the Plan Year or Plan Years involved were
the last day of the Fiscal Year preceding the Fiscal Year in which such
termination occurs.
In such event, however, the Capital Accumulation Account of each
Participant who is an employee of the Company and/or its Affiliates (or who
is a Participant who has suffered a Disability or who has become a Managing
Director Emeritus of Bear Stearns and whom the Appropriate Committee shall
have determined to treat in the manner specified in clause (1) or (2) of
subparagraph (i) of Section 6.2(b)) on the date of such termination shall be
adjusted in respect of the Fiscal Year in which such termination occurs as
follows: Each such Account shall be credited with an Net Earnings Adjustment
for the Fiscal Year in which such termination occurs except that, for
purposes of computing such Net Earnings Adjustment, Income Per Share for
purposes of calculating the Earnings Adjustment shall be computed for each
terminated Plan Year based only on the consolidated income or loss before
taxes of the Company and its subsidiaries accrued from the beginning of such
Fiscal Year through and including the end of the month in which such
termination occurred, and the Book Value Adjustment for the Fiscal Year in
which such termination occurs shall be calculated on the basis of the shares
distributed pursuant to the preceding sentence in respect of each terminated
Plan Year, provided that for purposes of computing such Book Value
Adjustment, the definition of Adjusted Common Stockholders' Equity used in
the computation of Adjusted Book Value Per Share shall be modified by
deleting the adjustments to Adjusted Common Stockholders' Equity specified
therein and substituting in lieu thereof the following: "plus all increases
(or less any decreases) in retained earnings of the Company and its
subsidiaries attributable to net income (or loss), determined on a
consolidated basis, minus all amounts accrued in respect of cash dividends
declared with respect to any capital stock of the Company during such Fiscal
Year, for the period from the beginning of such Fiscal Year through and
including the month in which such termination occurred." If the Plan is not
terminated in its entirety but one or more Plan Years are terminated, then
any amounts credited to Participants' Accounts pursuant to the preceding
sentence shall continue to be subject to the provisions of the Plan for the
balance of the original Deferral Period with respect to the terminated Plan
Year or Plan Years, as if such Plan Year or Plan Years had not been
terminated. If the Plan is terminated in its entirety, then as soon as may be
practicable thereafter, the Company shall deliver to each Participant (in
addition to amounts distributable pursuant to the fourth sentence of this
paragraph) a number of shares of Common Stock equal to the number of CAP
Units credited to each such Participant's Account pursuant to the second
preceding sentence, provided that if the aggregate number of such CAP Units
exceeds the number of Available Shares for such Fiscal Year as of the date of
determination, then the Company shall deliver to each such Participant only
that number of shares of Common Stock as shall equal the number of Available
Shares on a pro rata basis, based on the number of shares which each
Participant otherwise would have been entitled to receive, and shall
distribute to each Participant an amount in cash equal to the number of
additional shares of Common Stock that would have been distributed to such
Participant but for the limitation contained in this sentence, multiplied by
the Average Cost Per Share of the Available Shares in respect of such Fiscal
Year.
SECTION 10
Designation of Beneficiaries
10.1 General. Each Participant may file with the Appropriate Committee
a written designation of one or more persons as the Beneficiary who shall be
entitled to receive the amount, if any, which the Participant is entitled to
receive under the Plan upon his death. A Participant, from time to time, may
revoke or change his Beneficiary designation without the consent of any prior
Beneficiary by filing a new such designation with the Appropriate Committee.
The most recent such designation received by the Appropriate Committee shall
be controlling; provided, however, that no designation, or change of
revocation thereof, shall be effective unless received by the Appropriate
Committee prior to the Participant's death, and in no event shall any such
designation be effective as of a date prior to such receipt.
10.2 Lack of Designated Beneficiary. If no such Beneficiary designation
is in effect at the time of a Participant's death, or if no designated
Beneficiary survives the Participant, or if such designation conflicts with
law, the Participant's estate shall be deemed to have been designated as his
Beneficiary and shall receive the payment of the amount, if any, payable
under the Plan upon his death. If the Appropriate Committee is in doubt as to
the right of any person to receive such amount, the Committee may cause the
Company to retain such amount, without liability for any interest thereon,
until the rights thereto are determined, or the Appropriate Committee may pay
and deliver such amount into any court of appropriate jurisdiction, and such
payment shall be a complete discharge of the liability of the Plan and the
Company therefor.
SECTION 11
General Provisions
11.1 Successors. The Plan shall be binding upon and inure to the
benefit of the Company, its successors and assigns, and each Participant and
his Beneficiary.
11.2 No Continued Employment. Neither the Plan nor any action taken
thereunder shall be construed as giving to a Participant the right to be
retained in the employ of the Company or any of its Affiliates or as
affecting the right of the Company or any of its Affiliates to dismiss any
Participant.
11.3 Withholding. As a condition to receiving any distribution or
payment of amounts hereunder, the Company may require the Participant to make
a cash payment to the Company or, in its sole discretion, upon the request of
a Participant, may withhold from any amount or amounts payable under the
Plan, in either case, in an amount equal to all federal, state, city or other
taxes as may be required to be withheld in respect of such payments pursuant
to any law or governmental regulation or ruling.
11.4 Non-alienation of Benefits. No right to any amount payable at any
time under the Plan may be assigned, transferred, pledged or encumbered,
either voluntarily or by operation of law, except as expressly provided
herein or as may otherwise be required by law. If, by reason of any attempted
assignment, transfer, pledge or encumbrance, or any bankruptcy or other event
happening at any time, any amount payable under the Plan would be made
subject to the debts or liabilities of the Participant or his Beneficiary or
would otherwise not be enjoyed by him, then the Appropriate Committee, if it
so elects, may terminate such person's interest in any such payment and
direct that the same be held and applied to or for the benefit of the
Participant, his Beneficiary or any other person or persons deemed to be the
natural objects of his bounty, taking into account the expressed wishes of
the Participant (or, in the event of his death, his Beneficiary).
11.5 Incompetency. If the Appropriate Committee shall find that any
person to whom any amount is or was distributable or payable hereunder is
unable to care for his affairs because of illness or accident, or has died,
then the Appropriate Committee, if it so elects, may direct that any payment
due him or his estate (unless a prior claim therefor has been made by a duly
appointed legal representative) or any part thereof be paid or applied for
the benefit of such person or to or for the benefit of his spouse, children
or other dependents, an institution maintaining or having custody of such
person, any guardian or any other person deemed by such Appropriate Committee
to be a proper recipient on behalf of such person otherwise entitled to
payment, or any of them, in such manner and proportion as such Appropriate
Committee may deem proper. Any such payment shall be in complete discharge of
the liability therefor of the Company, the Plan, the Committee or any member,
officer or employee thereof.
11.6 Offsets. To the extent permitted by law, the Company or any of its
Affiliates shall have the absolute right to withhold any shares of Common
Stock or any amounts otherwise required to be distributed or paid to any
Participant or Beneficiary under the terms of the Plan, to the extent of any
amount owed or which in the sole judgment of the Appropriate Committee may in
the future be owed for any reason by such Participant, in the case of a
payment to such Participant, or to the extent of any amount owed or which in
the sole judgment of the Appropriate Committee may in the future be owed for
any reason by the Participant or such Beneficiary, in the case of payment to
a Beneficiary, to the Company or any of its Affiliates, and to set off and
apply the amounts so withheld to payment of any such amount ultimately
determined by the Appropriate Committee, in its sole discretion, to be owed
to the Company or any of its Affiliates, whether or not such amounts shall
then be immediately due and payable and in such order or priority as among
such amounts owed as the Appropriate Committee, in its sole discretion, shall
determine. In determining the amount of a permitted offset under this Section
11.6, any shares of Common Stock required to be distributed to a Participant
or a Beneficiary shall be valued at the Fair Market Value of such Shares on
the date of offset.
11.7 Notices, etc. All elections, designations, requests, notices,
instructions and other communications from a Participant, Beneficiary or
other person to any Appropriate Committee required or permitted under the
Plan shall be in such form as is prescribed from time to time by the
Appropriate Committee, shall be mailed by first-class mail or delivered to
such location as shall be specified by the Appropriate Committee, and shall
be deemed to have been given and delivered only upon actual receipt thereof
at such location.
11.8 Other Benefits. The benefits, if any, payable under the Plan shall be in
addition to any other benefits provided for Participants.
11.9 Interpretation, etc. The captions of the sections and paragraphs
of this Plan have been inserted solely as a matter of convenience and in no
way define or limit the scope or intent of any provisions of the Plan.
References to sections herein are to the specified sections of this Plan
unless another reference is specifically stated. The masculine pronoun
wherever used herein shall include the feminine pronoun, and a singular
number shall be deemed to include the plural unless a different meaning is
plainly required by the context.
11.10 Laws; Severability. The Plan shall be governed by, and construed
in accordance with, the laws of the State of New York, except to the extent
preempted by the Employee Retirement Income Security Act of 1974, as amended.
If any provision of the Plan shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions shall
continue to be effective.
11.11 Effective Date; Board Committee and Stockholder Approval. This
Plan shall be subject to the approval by a vote of the stockholders of
the Company at the 1993 Annual Meeting, and such stockholder approval
shall be a condition to the right of a Participant to receive any
benefits hereunder other than CAP Units and cash credited to
Participants' Accounts prior to such approval.
THE BEAR STEARNS COMPANIES INC.
PERFORMANCE COMPENSATION PLAN
Restated as of January 21, 1998)
Section 1. Purpose. The purposes of The Bear Stearns Companies Inc. Performance
Compensation Plan (the "Plan") are (i) to compensate certain Senior Managing
Directors (other than participants in the Management Compensation Plan) of The
Bear Stearns Companies Inc. and its subsidiaries (the "Company") on an
individual basis for significant contributions to the Company and (ii) to
stimulate the efforts of such persons by giving them a direct interest in the
performance of the Company.
Section 2. Term. The Plan shall be effective as of July 1, 1996 (the
"Effective Date"), and shall be applicable for the five (5) full fiscal years
of the Company ending June 30, 2001, unless earlier terminated by the Company
pursuant to Section 9.
Section 3. Coverage. For purposes of the Plan, the term "Participant"
shall include for each fiscal year each Senior Managing Director so
designated by the Compensation Committee within 90 days following the first
day of such fiscal year.
Section 4. Base Salary.
4.1. Each Participant shall receive a salary of $200,000 per annum
("Base Salary"). The Base Salary of the Participants may be increased from
time to time by the Compensation Committee of the Board (the "Compensation
Committee") by amendment of the Plan pursuant to Section 9.
4.2. Notwithstanding the provisions of Section 4.1 above, in the event
a Participant is not a Senior Managing Director for an entire fiscal year,
his Base Salary for such fiscal year shall be computed by multiplying such
Base Salary as computed under Section 4.1 by a fraction, the numerator of
which is the number of days in such fiscal year during which such Participant
was a Senior Managing Director and the denominator of which is the number of
days in the fiscal year. Any Base Salary shall be in addition to any base
salary payable with respect to periods during the fiscal year in which a
Participant was not a Senior Managing Director.
Section 5. Annual Bonus Pool.
5.1. For each fiscal year of the Company, each Participant shall be
entitled to receive an award of a bonus (the "Bonus"), payable from an annual
bonus fund (the "Annual Bonus Pool") in an amount not to exceed the amount
provided for in Section 6. A Bonus under the Plan shall be the sole bonus
payable with respect to a fiscal year to each Participant ("Full Year
Participant") who was a Senior Managing Director on the date that
proportionate shares of the Annual Bonus Pool for such fiscal year were
determined by the Compensation Committee and who remains a Senior Managing
Director at all times thereafter during such fiscal year. For each fiscal
year, each Participant who was not a Full Year Participant shall be entitled
to such a Bonus, if any, for the portion of such fiscal year not covered by
the Plan, determined in accordance with the procedures applicable to
employees who are not Senior Managing Directors, in addition to the Bonus, if
any, payable pursuant to the Plan.
5.2. For each fiscal year, the formula for calculating the Annual Bonus
Pool shall be determined by the Compensation Committee in writing, by
resolution of the Compensation Committee or other appropriate action, not
later than 90 days after the commencement of such fiscal year. Such formula
shall be based upon one or more of the following criteria, individually or in
combination, adjusted in such manner as the Compensation Committee shall
determine: (a) pre-tax or after-tax return on equity; (b) earnings per share;
(c) pre-tax or after-tax net income; (d) business unit or departmental
pre-tax or after-tax income; (e) book value per share; (f) market price per
share; (g) relative performance to peer group companies; (h) expense
management; and (i) total return to stockholders.
5.3. As a condition to the right of a Participant to receive any Bonus
under this Plan, the Compensation Committee shall first be required to
certify in writing, by resolution of the Compensation Committee or other
appropriate action, that the Bonus has been accurately determined in
accordance with the provisions of this Plan.
5.4. The Compensation Committee shall have the right to reduce the
Bonus of any Participant in its sole discretion at any time and for any
reason prior to the certification of the Bonus otherwise payable to such
Participant pursuant to Section 5.3 hereof.
Section 6. Allocations.
6.1. Prior to the commencement of each fiscal year, or not later than
90 days after the commencement of each fiscal year, the Compensation
Committee shall determine in writing, by resolution of the Compensation
Committee or other appropriate action, each Participant's proportionate share
of the Annual Bonus Pool for such fiscal year, which shall not exceed in
respect of any Participant the amount of $12,000,000 and shall not exceed
100% of the Annual Bonus Pool in the aggregate.
6.2. Notwithstanding anything in Section 6.1 to the contrary, any
Participant who ceases to be a Senior Managing Director for any reason prior
to the end of such fiscal year shall be entitled to a Bonus computed as
follows: A Bonus first shall be computed as if such Participant had been a
Senior Managing Director for the full fiscal year, and such Bonus then shall
be multiplied by a fraction the numerator of which shall be the number of
days in the fiscal year through the date the Participant ceased to be a
Senior Managing Director and the denominator of which shall be the number of
days in the fiscal year; provided, however, that if the application of the
preceding clause would cause the total Bonuses payable under the Plan to
exceed the Annual Bonus Pool, the Bonuses payable to each Participant shall
be reduced pro rata, so that the total of all Bonuses shall equal the Annual
Bonus Pool. If a Participant ceases to be a Senior Managing Director after
the end of the fiscal year in respect of which such Bonus is payable, the
amounts thereof nonetheless shall be payable to him or his estate, as the
case may be.
6.3. Except as hereinafter provided, Bonuses for a fiscal year shall be
payable as soon as practicable following the certification thereof by the
Compensation Committee for such fiscal year. In its discretion, the
Compensation Committee may authorize, prior to the final determination of
Participants' Bonuses for such fiscal year, payments on account of Bonuses
payable hereunder to one or more Participants entitled to such Bonuses, (a)
during the last month of such fiscal year, in an amount not exceeding 95% of
the aggregate amount that would be payable to such Participant or
Participants hereunder as determined by the Controller or Chief Accounting
Officer of the Company (so long as he is not a Participant) on the basis of
his good faith estimate, (b) during the last ten calendar days of such fiscal
year or after the end of such fiscal year, in an amount not to exceed 98% of
the aggregate amount that would be payable to such Participant or
Participants hereunder as determined by the Controller or Chief Accounting
Officer of the Company (so long as he is not a Participant) on the basis of
his good faith estimate, and (c) at any time during such fiscal year or after
the end of such fiscal year to a Participant who ceases to be a Senior
Managing Director for any reason prior to the end of such fiscal year. Within
the limitations set forth in the preceding sentence, the Compensation
Committee may authorize one or more such "on account" payments, but the
aggregate amount of any such on account payments shall not exceed the
aggregate amount permitted to be paid pursuant to the Plan with respect to
the same fiscal year. In connection with any such "on account" payments, the
Compensation Committee shall require an undertaking or other assurance by or
on behalf of the Participant receiving such payment to repay the Company the
amount, if any, by which such "on account" payment exceeds the actual amount
determined to be due to such person under the Plan in respect of such fiscal
year. Any "on account" payments received prior to the end of a fiscal year
shall be discounted to reasonably reflect the time value of money from the
date of payment to the date 30 days after the end of the fiscal year.
6.4. The Compensation Committee may determine that payment of a portion
of the Bonuses shall be deferred, the periods of such deferrals and any
interest, not to exceed a reasonable rate, to be paid in respect of deferred
payments. The Compensation Committee may also define such other conditions of
payments of Bonuses as it may deem desirable in carrying out the purposes of
the Plan.
6.5. In any fiscal year, any balance in the Annual Bonus Pool for any
reason, including the limitation contained in Section 6.1, the forfeiture of
a Bonus under Section 6.2, the reduction of a Bonus under Section 5.4, or
otherwise, shall not be distributed to other Participants and shall not be
carried forward or be available for distribution as Bonuses under the Plan in
a future year or years.
Section 7. Administration and Interpretation. The Plan shall be
administered by the Compensation Committee, which shall have the sole
authority to interpret and to make rules and regulations for the
administration of the Plan. The Compensation Committee may correct any defect
or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent the Compensation Committee deems necessary or
desirable to carry it into effect. Any decision of the Compensation Committee
in the interpretation and administration of the Plan, as described herein,
shall lie within its sole and absolute discretion and shall be final,
conclusive and binding on all parties concerned. No member of the
Compensation Committee and no officer of the Company shall be liable for
anything done or omitted to be done by him or her, by any other member of the
Compensation Committee or by any officer of the Company in connection with
the performance of duties under the Plan, except for his or her own willful
misconduct or as expressly provided by statute. The Compensation Committee
may request advice or assistance or employ such persons (including, without
limitation, legal counsel and accountants) as it deems necessary for the
proper administration of the Plan.
Section 8. Administrative Expenses. Any expense incurred in the
administration of the Plan shall be borne by the Company out of its general
funds and not charged against the Annual Bonus Fund, except insofar as such
expenses shall be taken into account in determining the components of the
Annual Bonus Pool hereunder.
Section 9. Amendment or Termination. The Compensation Committee of the
Company may from time to time amend the Plan in any respect or terminate the
Plan in whole or in part, provided that no such action shall retroactively
impair or otherwise adversely affect the rights of any Participant to
benefits under the Plan which have accrued prior to the date of such action.
Section 10. No Assignment. The rights hereunder, including without
limitation rights to receive a Base Salary or Bonus, shall not be sold,
assigned, transferred, encumbered or hypothecated by an employee of the
Company (except by testamentary disposition or intestate succession), and,
during the lifetime of any recipient, any payment of Base Salary or a Bonus
shall be payable only to such recipient.
Section 11. The Company. For purposes of this Plan, the "Company" shall
include the successors and assigns of the Company, and this Plan shall be
binding on any corporation or other person with which the Company is merged
or consolidated, or which acquires substantially all of the assets of the
Company, or which otherwise succeeds to its business.
Section 12. Stockholder Approval. This Plan shall be subject to
approval by the affirmative vote of a majority of the shares cast in a
separate vote of the stockholders of the Company at the 1996 Annual Meeting
of Stockholders, and such stockholder approval shall be a condition to the
right of a Participant to receive any Bonus hereunder.
<TABLE>
EXHIBIT 11
THE BEAR STEARNS COMPANIES INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Six Months
Ended Ended
------------------------------------- -----------------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------------------------------- -----------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Weighted average common and common
equivalent shares outstanding:
Average Common Stock
outstanding 117,536 121,780 117,983 122,835
Average Common Stock
equivalents:
Common Stock issuable
under employee
benefit plans 466 435 463 426
Common Stock issuable
assuming conversion
of CAP Units 34,311 26,566 34,311 26,566
----------------- ----------------- ----------------- --------------
Total weighted average
common and common
equivalent shares
outstanding 152,313 148,781 152,757 149,827
================= ================= ================= ==============
Net income $ 160,222 $ 176,512 $ 321,840 $ 284,961
Preferred Stock dividend
requirements (5,923) (5,939) (11,849) (11,970)
Income adjustment
(net of tax) applicable
to deferred compensation
arrangements 15,223 9,185 28,755 14,683
----------------- ----------------- ----------------- --------------
Adjusted net income $ 169,522 $ 179,758 $ 338,746 $ 287,674
================= ================= ================= ==============
Earnings per share
$ 1.11 $ 1.21 $ 2.22 $ 1.92
================= ================= ================= ==============
</TABLE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12
(In thousands, except for ratio)
<CAPTION>
(Unaudited) (Unaudited)
Six Months Six Months Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended Ended Ended
December 31, 1997 December 31, 1996 June 30, 1997 June 30, 1996 June 30, 1995 June 30, 1994 June 30, 1993
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before taxes
on income $ 526,743 $ 469,072 $1,013,690 $ 834,926 $ 388,082 $ 642,799 $ 614,398
------------ ------------ ------------- ----------- ----------- ---------- --------
Add: Fixed Charges
Interest 1,736,219 1,163,865 2,551,364 1,981,171 1,678,515 1,023,866 710,086
Interest factor
in rents 14,790 13,144 26,516 25,672 24,594 21,772 20,084
------------- ------------ ------------ ----------- ---------- ---------- --------
Total fixed charges 1,751,009 1,177,009 2,577,880 2,006,843 1,703,109 1,045,638 730,170
----------- ----------- ------------ ------------ ------------- ---------- ---------
Earnings before fixed
charges and taxes
on income $2,277,752 $1,646,081 $3,591,570 $2,841,769 $2,091,191 $1,688,437 $1,344,568
========== =========== ========== ========= ========== ======== ========
Ratio of earnings to
fixed charges 1.3 1.4 1.4 1.4 1.2 1.6 1.8
=========== =========== ============ ========= ========= ======== ========
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Consolidated Statement of Financial Condition at December 31,
1997 and the unaudied Consolidated Statement of Income for the six-months
ended December 31, 1997, which are contained in the body of the
accompanying Form 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,269,745
<RECEIVABLES> 14,559,395
<SECURITIES-RESALE> 33,997,149
<SECURITIES-BORROWED> 42,821,711
<INSTRUMENTS-OWNED> 40,818,227
<PP&E> 434,587
<TOTAL-ASSETS> 137,511,025
<SHORT-TERM> 14,522,968
<PAYABLES> 37,594,713
<REPOS-SOLD> 46,243,472
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 22,450,080
<LONG-TERM> 10,894,572
0
437,500
<COMMON> 167,785
<OTHER-SE> 2,939,190
<TOTAL-LIABILITY-AND-EQUITY> 137,511,025
<TRADING-REVENUE> 782,026
<INTEREST-DIVIDENDS> 2,045,869
<COMMISSIONS> 443,940
<INVESTMENT-BANKING-REVENUES> 498,212
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 1,736,219
<COMPENSATION> 1,034,990
<INCOME-PRETAX> 526,743
<INCOME-PRE-EXTRAORDINARY> 526,743
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321,840
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
</TABLE>
