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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ___)
[x] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE BEAR STEARNS COMPANIES INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction: 5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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4) Date Filed:
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<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
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To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders, which will be held on Thursday, October 29, 1998, at 5:00 P.M.,
New York City time, in the Bear Stearns Auditorium, 245 Park Avenue, 5th Floor,
New York, New York.
At the meeting we will be reporting to you on your Company's current
operations and outlook. Stockholders will elect directors of the Company and
transact such other items of business as are listed in the Notice of Annual
Meeting and more fully described in the Proxy Statement which follows. The
Company's Board of Directors and management hope that many of you will be able
to attend the meeting in person.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. ACCORDINGLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT
YOUR SHARES WILL BE REPRESENTED. IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY
WITHDRAW YOUR PROXY SHOULD YOU WISH TO VOTE IN PERSON.
Sincerely yours,
Alan C. Greenberg
Chairman of the Board
September 30, 1998
<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 29, 1998
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To the Stockholders of
THE BEAR STEARNS COMPANIES INC.:
The Annual Meeting of Stockholders of The Bear Stearns Companies Inc., a
Delaware corporation (the "Company"), will be held on Thursday, October 29,
1998, at 5:00 P.M., New York City time, in the Bear Stearns Auditorium, 245 Park
Avenue, 5th Floor, New York, New York, for the following purposes:
1. To elect nine directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified.
2. To approve amendments to The Bear Stearns Companies Inc. Performance
Compensation Plan.
3. To approve an amendment to The Bear Stearns Companies Inc. Capital
Accumulation Plan for Senior Managing Directors.
4. To transact such other business as may properly be brought before the
meeting and any adjournments or postponements thereof.
Holders of record of Common Stock of the Company, par value $1.00 per
share, at the close of business on September 21, 1998, will be entitled to
notice of, and to vote on, all matters presented at the meeting and at any
adjournments or postponements thereof.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
September 30, 1998
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
THE BEAR STEARNS COMPANIES INC.
245 Park Avenue
New York, New York 10167
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 29, 1998
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This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being furnished to the holders of Common
Stock of The Bear Stearns Companies Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the 1998 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held in the Bear Stearns Auditorium, 245 Park
Avenue, 5th Floor, New York, New York, on Thursday, October 29, 1998, at 5:00
P.M., New York City time, and at any adjournments or postponements thereof.
These proxy materials are being mailed on or about September 30, 1998, to
holders of record on September 21, 1998, of the Company's Common Stock, par
value $1.00 per share ("Common Stock").
A proxy may be revoked by a stockholder prior to its exercise in any of
three ways: by written notice to the Secretary of the Company; by submission of
another proxy bearing a later date; or by voting in person at the Annual
Meeting. Revocation by notice to the Secretary of the Company or by submission
of a later proxy will not affect a vote on any matter which is taken prior to
the receipt of the notice or later proxy by the Company. The mere presence at
the Annual Meeting of the stockholder appointing the proxy will not revoke the
appointment. If not revoked, the proxy will be voted at the Annual Meeting in
accordance with the instructions indicated on the proxy by the stockholder. If
no instructions are indicated, the proxy will be voted FOR the slate of
directors described herein; FOR the approval of amendments to The Bear Stearns
Companies Inc. Performance Compensation Plan, as heretofore amended (the
"Performance Compensation Plan"), as described herein; FOR the approval of an
amendment to The Bear Stearns Companies Inc. Capital Accumulation Plan for
Senior Managing Directors, as heretofore amended (the "Capital Accumulation
Plan"), as described herein; and, as to any other matter of business that may be
brought before the Annual Meeting, in accordance with the judgment of the person
or persons voting on the matter.
The Company has adopted a policy of encouraging stockholder participation
in corporate governance by ensuring the confidentiality of stockholder votes.
The Company has designated an independent third party, ChaseMellon Shareholder
Services L.L.C., the Company's transfer agent, to receive and to tabulate
stockholder proxy votes. The manner in which any stockholder votes on any
particular issue will be kept confidential and will not be disclosed to the
Company or any of its officers or employees except (i) where disclosure is
required by applicable law, (ii) where disclosure of a vote of a stockholder is
expressly requested by such stockholder, or (iii) where the Company concludes in
good faith that a bona fide dispute exists as to the authenticity of one or more
proxies, ballots or votes, or as to the accuracy of any tabulation of such
proxies, ballots or votes. However, aggregate vote totals may be disclosed to
the Company from time to time and publicly announced at the Annual Meeting. The
policy of ensuring confidentiality of stockholder votes will also apply to
shares of Common Stock held in customer accounts at the Company's subsidiary,
Bear, Stearns Securities Corp. Holders of Common Stock whose shares are held in
such accounts will be requested to give instructions with respect to the manner
in which their shares are to be voted to Automatic Data Processing, Inc., which
has been directed not to disclose such instructions to the Company.
This mail solicitation is being made by the Company. All expenses of the
Company in connection with this solicitation will be borne by the Company.
Directors, officers and other employees of the Company also may solicit proxies,
without additional compensation, by telephone, in person or otherwise. The
Company also will request that brokerage firms, nominees, custodians, and
fiduciaries forward proxy materials to the beneficial owners of shares held of
record by such persons and will reimburse such persons and the Company's
transfer agent for reasonable out-of-pocket expenses incurred by them in
forwarding such materials.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 21, 1985. The Company succeeded to the business of Bear, Stearns & Co., a
New York limited partnership (the "Partnership"), on October 29, 1985. As used
in this Proxy Statement, all references to "Bear Stearns" and "BSSC" are to
Bear, Stearns & Co. Inc., and Bear, Stearns Securities Corp., respectively, the
principal subsidiaries of the Company.
VOTING SECURITIES
Holders of record of Common Stock at the close of business on September 21,
1998, are entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. Each outstanding share of Common Stock
entitles the holder thereof to one vote. Shares of Common Stock represented by
CAP Units (as hereinafter defined) credited pursuant to the Capital Accumulation
Plan are not outstanding and are not entitled to vote at the Annual Meeting.
On September 21, 1998, 113,471,600 shares of Common Stock were outstanding.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of such shares shall constitute a quorum.
Assuming the presence of a quorum at the Annual Meeting, the affirmative
vote of a plurality of the votes cast by holders of shares of Common Stock is
required for the election of directors. The affirmative vote of a majority of
the shares of Common Stock represented at the meeting and entitled to vote is
required for (i) the approval of amendments to the Performance Compensation
Plan, and (ii) the approval of an amendment to the Capital Accumulation Plan. An
abstention with respect to any proposal will be counted as present for purposes
of determining the existence of a quorum, but will have the practical effect of
a negative vote as to that proposal. Brokers (other than Bear Stearns and BSSC)
who do not receive a stockholder's instructions are entitled to vote on the
election of directors. The New York Stock Exchange (the "NYSE") determines
whether brokers who do not receive instructions will be entitled to vote on the
other proposals contained in this Proxy Statement. Under the rules of the NYSE,
if Bear Stearns and BSSC do not receive a stockholder's instructions, and other
brokers are entitled to vote on a proposal, Bear Stearns and BSSC are also
entitled to vote such shares of Common Stock, but only in the same proportion as
the shares represented by votes cast by all other record holders with respect to
such proposal. In the event of a broker non-vote with respect to any proposal
coming before the meeting caused by the beneficial owner's failure to authorize
a vote on such proposal, the proxy will be counted as present for the purpose of
determining the existence of a quorum, but will not be deemed present and
entitled to vote on that proposal for the purpose of determining the total
number of shares of which a majority is required for adoption, having the
practical effect of reducing the number of affirmative votes required to achieve
a majority vote for such matter by reducing the total number of shares from
which a majority is calculated.
The Company is not aware of any person or group of persons who are the
beneficial owners of more than 5% of the Company's outstanding Common Stock as
of September 3, 1998.
SECURITY OWNERSHIP OF MANAGEMENT
The following information with respect to the outstanding shares of Common
Stock beneficially owned by each director of the Company, each nominee for
director of the Company, each executive officer named in the Summary
Compensation Table under "Executive Compensation" and all directors, nominees
and executive officers of the Company as a group, is furnished as of September
3, 1998. Also set forth below as of such date is certain information with
respect to the number of shares of Common Stock represented by CAP Units
credited to the accounts of such persons pursuant to the Capital Accumulation
Plan (notwithstanding that shares underlying CAP Units generally are not deemed
to be beneficially owned for this purpose because the named persons have neither
the present ability to direct the vote nor the ability to dispose of such shares
and will not have such rights within the next 60 days).
AMOUNT PERCENTAGE OF
AND NATURE OF PERCENT OF OUTSTANDING
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY REPRESENTED AND CAP UNITS
NAME AND ADDRESS(1) OWNED(2)(3) OWNED BY CAP UNITS COMBINED
------------------- ------------- ------------ ------------ -------------
James E. Cayne (5).... 3,564,208 3.07% 2,563,151 4.04%
Carl D. Glickman (6).. 349,395 (4) -- (4)
Alan C. Greenberg..... 325,000 (4) 1,320,740 1.09%
Donald J. Harrington.. 242 (4) -- (4)
Mark E. Lehman (7).... 70,828 (4) 246,406 (4)
William L. Mack....... -- (4) -- (4)
Samuel L. Molinaro Jr. 1,343 (4) 34,722 (4)
William J. Montgoris.. 198,731 (4) 243,581 (4)
Frank T. Nickell...... 30,387 (4) -- (4)
Frederic V. Salerno... 368 (4) -- (4)
Alan D. Schwartz...... 745,171 (4) 1,642,958 1.57%
Warren J. Spector (8). 162,697 (4) 2,910,393 2.03%
Vincent Tese.......... 1,000 (4) -- (4)
Fred Wilpon........... 1,214 (4) -- (4)
All directors, nominees
and executive officers
as a group
(14 individuals)... 5,450,584 4.69% 8,961,951 9.50%
- - ---------------
(Footnotes on following page)
(1) The address in each case is 245 Park Avenue, New York, New York 10167.
(2) Nature of Common Stock beneficially owned is sole voting and investment
power, except as indicated in subsequent notes. Includes an aggregate of
3,040 shares of Common Stock owned by directors, nominees and executive
officers through The Bear Stearns Companies Inc. Employee Stock Ownership
Plans (the "ESOPs"). Shares owned by the ESOPs that are allocated to
employees' accounts are voted on a "pass through" basis by the employees to
whose accounts such shares are allocated. Shares not allocated to
employees' accounts, and allocated shares for which voting directions have
not been received, are voted by the trustee of the ESOPs in proportion to
the manner in which allocated shares are directed to be voted by the
employees.
(3) Does not include shares underlying CAP Units credited under the Capital
Accumulation Plan, except for the following number of shares to be
distributed during October 1998 to the following persons: Mr. Montgoris -
6,572 and Mr. Spector - 10,903.
(4) Less than one percent.
(5) Does not include 41,424 shares of Common Stock owned by Mr. Cayne's wife,
as to which shares Mr. Cayne disclaims beneficial ownership. Does not
include 224,603 shares of Common Stock held by trusts established for Mr.
Cayne's children, as to which shares Mr. Cayne disclaims beneficial
ownership. Does not include 7,300 shares of Common Stock owned by a child
of Mr. Cayne, as to which shares Mr. Cayne disclaims beneficial ownership.
(6) Does not include 3,109 shares of Common Stock owned by Mr. Glickman's wife,
as to which shares Mr. Glickman disclaims beneficial ownership.
(7) Does not include 29,632 shares of Common Stock held in a trust established
for Mr. Lehman's wife, as to which shares Mr. Lehman disclaims beneficial
ownership.
(8) Does not include 551 shares of Common Stock owned by Mr. Spector's wife, as
to which shares Mr. Spector disclaims beneficial ownership.
I. ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends the election of each of
the nominees set forth below as a director of the Company to serve until the
next Annual Meeting of Stockholders or until his or her successor is duly
elected and qualified. Each nominee is currently a director of the Company. Each
nominee who is elected or re-elected to the Board of Directors will hold office
until the next Annual Meeting of Stockholders, in accordance with the By-laws of
the Company. Should any nominee become unable or unwilling to accept nomination
or election, it is intended that the persons named in the enclosed proxy will
vote the shares that they represent for the election of a substitute nominee
designated by the Board of Directors, unless the Board of Directors reduces the
number of directors. At present, it is anticipated that each nominee will be a
candidate.
The affirmative vote of a plurality of the votes cast by holders of shares
of Common Stock is required for the election of directors. Officers serve at the
discretion of the Board of Directors.
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 15, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1998 AND DIRECTORSHIPS HELD THE COMPANY
---- ------------- ---------------------- -----------
James E. Cayne........ 64 President and Chief 1985
Executive Officer of the
Company and Bear Stearns,
member of the Executive
Committee (as hereinafter
defined) and Chairman of the
Management and Compensation
Committee (as hereinafter
defined)
Carl D. Glickman...... 72 Private Investor; In the 1985
United States, Director,
Continental Health
Affiliates, Inc., Infutech,
Inc., Lexington Capital
Properties Trust and Office
Max Inc.; In Israel,
Director, Alliance Tire
Company (1992) Ltd. and The
Jerusalem Economic
Corporation Ltd.
Alan C. Greenberg..... 71 Chairman of the Board of the 1985
Company and Bear Stearns and
Chairman of the Executive
Committee
Donald J. Harrington.. 52 President, St. John's 1993
University; Director, The
Reserve Fund, Reserve
Institutional Trust, Reserve
Tax-Exempt Trust, Reserve
New York Tax-Exempt Trust
and Reserve Special
Portfolios Trust
William L. Mack....... 58 President and Senior 1997
Managing Partner, The Mack
Organization; Founder and
Managing Partner, The Apollo
Real Estate Investment
Funds; Chairman of the Board
of Metropolis Realty Trust,
Inc.; Director, Mack-Cali
Realty Corporation, Koger
Equity, Inc. and Vail
Resorts, Inc.
Frank T. Nickell...... 51 President and Chief 1993
Executive Officer of Kelso &
Company; Director, Earle M.
Jorgensen Company and
Peebles Inc.
Frederic V. Salerno... 55 Senior Executive Vice 1992
President and CFO/Strategy
and Business Development and
Director of Bell Atlantic
Corporation; Director,
Avnet, Inc., MarketSpan
Corp., and Viacom, Inc.
Vincent Tese.......... 55 Chairman and Director of 1994
Wireless Cable International
Inc.; Director, Allied Waste
Industries Inc., Angram,
Inc., Bowne & Co., Inc.,
Cablevision International,
Custodial Trust Co.,
Mack-Cali Realty Corp. and
MarketSpan Corp.
Fred Wilpon........... 61 Chairman of the Board of 1993
Directors of Sterling
Equities, Inc.; Chairman of
Executive Committee and
Director of Pathogenesis
Corporation; President and
Chief Executive Officer of
the New York Mets
Mr. Cayne has been Chief Executive Officer of the Company and Bear Stearns
since July 1993. Mr. Cayne has been President of the Company for more than the
past five years.
Mr. Glickman has been a private investor for more than the past five years.
Mr. Glickman is also currently Chairman of the Compensation Committee of the
Board of Directors of the Company.
Mr. Greenberg has been Chairman of the Board of the Company for more than
the past five years. Mr. Greenberg was Chief Executive Officer of the Company
and Bear Stearns from the Company's inception until July 1993.
Father Harrington has been the President of St. John's University for more
than the past five years.
Mr. Mack has been President and Senior Managing Partner of The Mack
Organization (a national owner, developer and investor in office and industrial
buildings and other real estate) for more than the past five years, and a
founder and Managing Partner of the Apollo Real Estate Investment Funds, since
April 1993. In 1997, Mr. Mack was appointed Chairman of the Executive Committee
and Director of Mack-Cali Realty Corporation (a publicly traded real estate
investment trust). Mr. Mack is Chairman of the Board of Metropolis Realty Trust,
Inc. (the owner of high rise office buildings).
Mr. Nickell has been President of Kelso & Company, a privately held
merchant banking firm, for more than the past five years. Mr. Nickell was
appointed Chief Executive Officer of Kelso & Company in 1998.
Mr. Salerno is the Senior Executive Vice President and CFO/Strategy and
Business Development of Bell Atlantic Corporation ("Bell Atlantic"). Prior to
the merger of NYNEX Corp. ("NYNEX") and Bell Atlantic, Mr. Salerno was the Vice
Chairman of the Board of NYNEX for more than the past five years. Mr. Salerno
served as Chairman of the Board of the State University of New York from 1990 to
1996.
Mr. Tese has been Chairman of Wireless Cable International Inc. (a wireless
cable company) since April 1995. Mr. Tese was Chairman of Cross Country Wireless
Inc. (a wireless cable company) from October 1994 to July 1995 and was a
corporate officer and a general partner of Cross Country Wireless Inc.'s
predecessors, Cross Country Wireless Cable - I, L.P. and Cross Country Wireless
Cable West, L.P., from 1990 until October 1994. Mr. Tese was the Director of
Economic Development for the State of New York from June 1987 to December 1994.
Mr. Tese is currently Chairman of the Audit Committee of the Board of Directors
of the Company.
Mr. Wilpon has been Chairman of the Board of Directors of Sterling
Equities, Inc., a privately held entity, and certain affiliates thereof, which
are primarily real estate development/owner management companies, for more than
the past five years. Mr. Wilpon has also been President and Chief Executive
Officer of the New York Mets baseball team for more than the past five years.
Mr. Wilpon has been a Director of Pathogenesis Corporation, a publicly held
bio-pharmaceutical company, for more than the past five years and currently
serves as Chairman of its Executive Committee.
There is no family relationship among any of the directors or executive
officers of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held seven meetings (exclusive of committee
meetings) during the preceding fiscal year. In addition, the Board of Directors
has established four committees whose functions and current members are noted
below. The Audit Committee and Compensation Committee (collectively, the "Board
Committees") are committees of the Board of Directors and consist solely of
members of the Board of Directors. The Executive Committee includes individuals
who are not members of the Board of Directors, but may function in a manner
comparable to that of the Board Committees under certain circumstances as
described below. Each current director attended 75% or more of the aggregate
number of meetings of the Board of Directors and meetings of the Board
Committees (including for this purpose, the Executive Committee) on which he or
she served which were held during such period.
Executive Committee. The Executive Committee of the Company (the "Executive
Committee") consists of Messrs. Cayne, Greenberg (Chairman), Lehman, Schwartz
and Spector. It meets once each week and more frequently, as required, having
held 64 meetings during the preceding fiscal year. The Executive Committee has
the authority between meetings of the Board of Directors to take action with
respect to a variety of matters delegated by the Board of Directors which are
considered to be in the ordinary course of the Company's business and, so long
as the action is also approved by a majority of the members who are also
directors of the Company, take all actions with respect to the management of the
Company's business which require action of the Board of Directors, except with
respect to certain matters that by law and the provisions of the Certificate of
Incorporation must be approved by the Board of Directors.
Audit Committee. The Audit Committee of the Board of Directors (the "Audit
Committee") consists of Messrs. Mack, Salerno, Tese (Chairman) and Wilpon. Each
of the foregoing is a director who is not employed by the Company or affiliated
with management. This Committee is responsible for reviewing and helping to
ensure the integrity of the Company's financial statements. Among other matters,
the Audit Committee reviews the Company's expenditures, reviews the Company's
internal accounting controls and financial statements, reviews with the
Company's independent accountants the scope of their audit, their report and
their recommendations, and recommends the selection of the Company's independent
accountants. The Audit Committee held nine meetings during the preceding fiscal
year.
Compensation Committee. The Compensation Committee of the Board of
Directors (the "Compensation Committee") consists of Messrs. Glickman
(Chairman), Harrington, Nickell and Tese. Each of the foregoing is a director
who is not employed by the Company or affiliated with management. The
Compensation Committee establishes the compensation policies used in determining
the compensation of all executive officers and other Senior Managing Directors,
including members of the Board of Directors who are employees of the Company
("employee directors"). The Compensation Committee administers The Bear Stearns
Companies Inc. Management Compensation Plan, as heretofore amended (the
"Management Compensation Plan") pursuant to which the salary and bonus
compensation of the members of the Executive Committee is determined in fiscal
1998 and also administers the Performance Compensation Plan pursuant to which
the salary and bonus compensation of certain Senior Managing Directors
(including certain executive officers) of the Company (other than the voting
members of the Executive Committee) is determined. The Compensation Committee
also approves the salary and bonus compensation of other executive officers and
other Senior Managing Directors based upon recommendations by the Executive
Committee and the Management and Compensation Committee of the Company (the
"Management and Compensation Committee") applying criteria established by the
Compensation Committee. The Compensation Committee also administers certain
aspects of the Capital Accumulation Plan. The Compensation Committee held ten
meetings during the preceding fiscal year.
Management and Compensation Committee. The Management and Compensation
Committee consists of Messrs. Cayne (Chairman), Montgoris, Schwartz and Spector
and Richard Harriton, Bruce M. Lisman, Donald R. Mullen Jr., David M. Solomon
(since September 1998), and Robert M. Steinberg. The Management and Compensation
Committee considers and acts upon matters involving the day-to-day business and
affairs of the Company and its subsidiaries and, where appropriate, recommends
action to the Board of Directors or Board Committees with respect to those
matters not in the ordinary course of business and affairs of the Company, in
either case without in any way limiting or impairing the existing power or
authority of the executive officers of the Company. In connection therewith, the
Management and Compensation Committee approves compensation amounts for
employees of the Company and its subsidiaries below the level of Senior Managing
Director, and recommends to the Compensation Committee and/or the Executive
Committee compensation amounts for Senior Managing Directors of Bear Stearns
other than participants in the Management Compensation Plan and the Performance
Compensation Plan. The Management and Compensation Committee also administers
certain aspects of the Capital Accumulation Plan. The Management and
Compensation Committee meets once a week and more frequently as required and
held 60 meetings during the preceding fiscal year.
The Board of Directors does not have a nominating committee.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
OVERVIEW
The Compensation Committee establishes the compensation policies applicable
to all executive officers and other Senior Managing Directors. The salary and
bonus compensation of the members of the Executive Committee is determined by
the operation of the Management Compensation Plan, and the salary and bonus
compensation of certain other Senior Managing Directors (who may also be
executive officers) is determined by the operation of the Performance
Compensation Plan, which plans have been adopted and are administered by the
Compensation Committee and have been approved by the stockholders. The fiscal
year 1998 salaries and bonuses of Senior Managing Directors, to the extent not
determined by the Management Compensation Plan or the Performance Compensation
Plan, were approved by the Compensation Committee based upon recommendations by
the Executive Committee and the Management and Compensation Committee, which
committees based their recommendations on criteria established by the
Compensation Committee.
COMPENSATION POLICIES
From the time of the Company's initial public offering after succession on
October 29, 1985 to the business of the Partnership, compensation for senior
executives of the Company has been strongly influenced by the principle that the
compensation of senior executives should be structured to directly link the
executives' financial reward to Company performance. Thus, senior executives
would both share in the success of the Company as a whole and be adversely
affected by poor Company performance, thereby aligning their interests with the
interests of the Company's stockholders. The Management Compensation Plan, which
has been in effect in various forms since the Company's initial public offering,
and the Performance Compensation Plan, which was adopted in 1996, are designed
to implement the foregoing philosophy. The salary and bonus compensation of the
Chief Executive Officer and other members of the Executive Committee is
determined by the Management Compensation Plan which presently provides each
participant with a base salary of $200,000 per annum and a share of a bonus fund
determined on the basis of the Company's Adjusted Annual Pre-Tax Return on
Equity ("Pre-Tax ROE," as defined below). Under the Performance Compensation
Plan, certain Senior Managing Directors (including certain executive officers)
of the Company (other than the voting members of the Executive Committee)
designated by the Compensation Committee receive a base salary of $200,000 per
annum and a share of a performance-based bonus fund. The proposed amendments to
the Performance Compensation Plan are intended to cover, among other things,
performance compensation awards for participants under the Management
Compensation Plan, which will be terminated after approval of such amendments.
See "Approval of Amendments to the Performance Compensation Plan."
The Company's compensation practice with respect to other Senior Managing
Directors has been designed to link individual compensation with performance.
Accordingly, the base salary of most other Senior Managing Directors has been
limited to $200,000 per annum, with the preponderance of total compensation
being in the form of a bonus determined on the basis of the following criteria:
(a) the overall annual performance of the Company; (b) the performance of any
business unit or units in which the employee participates; (c) the need to
maintain compensation levels comparable to those of competing financial services
companies, including those in the Company's peer groups; and (d) the individual
performance of the employee in question from the viewpoints of (i) managerial
responsibilities, (ii) direct production of revenue, (iii) recruiting and
development and maintenance of the Company's franchise, (iv) controlling costs,
and (v) promoting cooperation within and between business units.
The Compensation Committee also considers the relationship of the Company's
total compensation expense to the Company's total revenues, net of interest
expense, in evaluating the overall reasonableness of the compensation of other
executive officers.
The Compensation Committee believes that the establishment of the Capital
Accumulation Plan during fiscal year 1991 represented an important additional
step in the Company's goal to further strengthen the alignment of management and
stockholder interests, by increasing management employee ownership of the
Company's Common Stock. During fiscal year 1998, 95% of the more than 300 Senior
Managing Directors of Bear Stearns (including all executive officers of the
Company) participated in the Capital Accumulation Plan.
The Compensation Committee views the Company's compensation policies as
having substantially contributed to the Company's historical operating
performance, which has been characterized by consistently high levels of return
on common equity (see comparison in the chart below to the average return on
common equity of the Company's current peers (the "New Peer Group")). The New
Peer Group consists of Merrill Lynch & Co., Inc., Morgan Stanley, Dean Witter, &
Co., Paine Webber Group Inc. and four newly-added entities, Bankers Trust
Corporation, Donaldson, Lufkin & Jenrette, Inc., Lehman Brothers Holdings, Inc.
and Travelers Group, Inc. The Company's peer group in prior years (the "Old Peer
Group") consisted of Merrill Lynch & Co., Inc., Morgan Stanley, Dean Witter &
Co., Paine Webber Group Inc. and Salomon Inc. The Company believes that the
business of the entities constituting the New Peer Group more closely resembles
the business and capital structure of the Company. The following chart compares
the Company's return on common equity to the New Peer Group and Old Peer Group
for the five twelve-month periods ended June 30 shown below:
RETURN ON EQUITY
THE BEAR STEARNS COMPANIES INC. V. PEER GROUP AVERAGE
[GRAPHIC NO. 1 - "Return on Equity" graph appears here in paper format.]
June 30,
------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
The Bear Stearns Companies Inc. 23.3% 13.5% 25.6% 27.9% 21.7%
New Peer Group(1) 18.2% 10.8% 18.6% 21.0% 21.2%
Old Peer Group (2) 16.7% 5.7% 22.4% 21.6% 24.1%
- - ---------------
(1) The New Peer Group Index includes Morgan Stanley, Dean Witter & Co.,
Merrill Lynch & Co., Inc., Paine Webber Group, Inc., Bankers Trust
Corporation, Lehman Brothers Holdings, Inc., Donaldson, Lufkin & Jenrette,
Inc., and Travelers Group, Inc. As a result of the merger of Morgan Stanley
Group Inc. and Dean Witter, Discover & Co. in June 1997, the return on
equity for the twelve months ended June 30, 1997 and 1998 are based on the
results of Morgan Stanley, Dean Witter & Co. while all prior periods only
included the results of Morgan Stanley Group Inc. Donaldson, Lufkin &
Jenrette, Inc. are included in results for the twelve months ended June
1996, 1997 and 1998 only. Lehman Brothers Holdings, Inc. is included in
results for the twelve months ended June 1995, 1996, 1997 and 1998 only.
The information for Morgan Stanley, Dean Witter & Co., and Lehman Brothers
Holdings, Inc. is based on annual results through May 31 for each of the
five years reported, which was their nearest quarter end reporting date.
(2) The Old Peer Group consists of Morgan Stanley, Dean Witter & Co., Merrill
Lynch & Co., Inc., Paine Webber Group Inc. and Salomon Inc., except for
June 1998 which does not include results for Salomon Inc.
MANAGEMENT COMPENSATION PLAN
During fiscal 1998, the Compensation Committee administered the Management
Compensation Plan, which provided that each member of the Executive Committee
would receive a base salary of $200,000 per annum and share in a bonus fund
determined on the basis of the Company's Pre-Tax ROE. The Pre-Tax ROE for fiscal
year 1998 was 41.24%, resulting in a bonus fund of $76,091,000. If the Company's
fiscal year 1998 Pre-Tax ROE had not exceeded 2%, the compensation of the
members of the Executive Committee would have been limited to their salaries of
$200,000 per annum. For information with respect to the members of the Executive
Committee, see "Election of Directors -- Board and Committee Meetings --
Executive Committee."
"Pre-Tax ROE" is defined generally in the Management Compensation Plan as
the number expressed as a percentage determined by dividing (a) Adjusted Pre-Tax
Income (as defined below) for a fiscal year by (b) Consolidated Common
Stockholders' Equity as of the last day of the immediately preceding fiscal
year. "Adjusted Pre-Tax Income" of the Company is defined generally in the
Management Compensation Plan as consolidated income before income taxes, after
deducting the base salaries of participants in the Management Compensation Plan
and dividends on preferred stock, but before deducting any bonus payments under
the Management Compensation Plan and any adjustments relating to the Capital
Accumulation Plan.
The share of the bonus fund to be allocated to each member of the Executive
Committee, which may not exceed 30%, was determined in September 1997 by the
Compensation Committee upon the recommendation of the Executive Committee, which
based such recommendation on the same criteria established by the Compensation
Committee for determining the total compensation of Senior Managing Directors
who are not members of the Executive Committee for fiscal year 1998.
On September 25, 1998, the Board of Directors decided to terminate the
Management Compensation Plan for fiscal year 1999 and thereafter, and to include
the participants previously covered under the Management Compensation Plan in
the Performance Compensation Plan, which is to be amended subject to stockholder
approval at the Annual Meeting. See "Approval of Amendments to the Performance
Compensation Plan" for a discussion of the amendments to the Performance
Compensation Plan. The termination of the Management Compensation Plan and
proposed amendments to the Performance Compensation Plan are designed to provide
the Compensation Committee greater flexibility in establishing appropriate
incentive based compensation arrangements for key employees.
PERFORMANCE COMPENSATION PLAN
The Compensation Committee also administers the Performance Compensation
Plan. Under the proposed amendments to the Performance Compensation Plan, all of
the Company's Senior Managing Directors (which may include executive officers)
are eligible to participate in the Performance Compensation Plan. Prior to the
proposed amendments, all Senior Managing Directors, except for voting members of
the Executive Committee, were eligible to participate in the Performance
Compensation Plan. The total compensation of those Senior Managing Directors of
the Company designated to participate in the Performance Compensation Plan by
the Compensation Committee within 90 days after the beginning of each fiscal
year (the "Participants") is determined by the Performance Compensation Plan.
Under the Performance Compensation Plan, each of the Participants receives a
base salary of $200,000 per annum and shares in a performance-based bonus pool.
For each fiscal year, the formula for calculating one or more bonus pools will
be determined by the Compensation Committee 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 versus peer group
companies; (h) expense management; and (i) total return to stockholders.
The share of one or more of the bonus pools to be allocated to each
Participant in any fiscal year will be determined by the Compensation Committee,
in its sole discretion. However, under no circumstance may the aggregate amount
of the bonuses paid under the Performance Compensation Plan exceed 100% of the
bonus pools computed under the formulas designated by the Compensation Committee
as described above.
For fiscal year 1998 the Compensation Committee selected four Senior
Managing Directors (including an executive officer) of the Company as
Participants. The Committee also established a formula for calculating the bonus
pool for fiscal year 1998 and the share for each Participant based upon a
combination of factors including departmental pre-tax profits and the "Adjusted
Pre-Tax Return on Equity" of the Company (which term has essentially the same
meaning as under the Management Compensation Plan). The total bonus pool
resulting from the application of the formula for fiscal year 1998 was
$36,255,000 of which the Compensation Committee, based on the recommendation of
the Management and Compensation Committee, determined that bonuses aggregating
$18,200,000 would be paid to the Participants.
The amended Performance Compensation Plan will be extended to cover members
of the Executive Committee. Under the amended terms of the Performance
Compensation Plan, the annual bonus pool for the Executive Committee will be
determined by the Compensation Committee based upon one or more of the criteria
outlined above. Pursuant to the amended Performance Compensation Plan, the
maximum amount allocable to the Executive Committee bonus pool in any fiscal
year will be $150,000,000, of which the maximum percentage of any individual
Participant will be 30% of the amount of such pool. For fiscal 1999, the
Compensation Committee has adopted performance goals for the determination of
compensation to be paid to members of the Executive Committee under the
Performance Compensation Plan which are consistent with those historically
provided under the Management Compensation Plan. Accordingly, the bonus pool
allocable to the Executive Committee for fiscal 1999 will be determined on the
basis of the Company's return on common equity.
For Participants in the Performance Compensation Plan who are not members
of the Executive Committee, there will be one or more separate bonus pools
determined by the Compensation Committee based on one or more of the criteria
outlined above. The maximum bonus allocable to any individual Participant, who
is not a member of the Executive Committee, is $15,000,000.
Section 162(m) of the Internal Revenue Code limits deductibility for
federal income tax purposes of compensation in excess of $1,000,000 paid to
individual executive officers named in the Summary Compensation Table per
taxable year unless certain exceptions, including compensation based on
performance goals, are satisfied. The Management Compensation Plan and the
Performance Compensation Plan have been established and maintained in an effort
to comply with the performance-based exception to limits on deductibility of
executive officer compensation.
EQUITY OWNERSHIP AND CAPITAL ACCUMULATION PLAN
A focus on performance and growth and the direct alignment of employee and
stockholder interests flows from the substantial ownership of Common Stock and
CAP Units by senior executives of the Company. As shown under "Security
Ownership of Management," the five current members of the Executive Committee
beneficially own 8.94% of the outstanding Common Stock and CAP Units combined,
while all directors, nominees and executive officers as a group beneficially own
9.50% of the outstanding Common Stock and CAP Units combined as of September 3,
1998.
The Capital Accumulation Plan has been and will continue to be a major
contributor to equity ownership by senior executives. During fiscal year 1998,
95% of the more than 300 Senior Managing Directors of Bear Stearns (including
all executive officers of the Company) participated in the Capital Accumulation
Plan. For fiscal years 1996, 1997 and 1998 participants in the Capital
Accumulation Plan have deferred a total of approximately $580,000,000 in
compensation. Furthermore, for fiscal year 1998, 49.1% of the salary and bonus
compensation (including amounts deferred pursuant to the Capital Accumulation
Plan) of the current members of the Executive Committee was deferred in the
Capital Accumulation Plan while 48.32% of such compensation was deferred by all
executive officers. These deferrals were, or will be, credited to participants'
accounts in the form of CAP Units which entitle the participants to share in the
pre-tax income of the Company and eventually to receive shares of Common Stock
of the Company. As of June 30, 1998, 34,489,308 CAP Units were credited to the
accounts of participants representing 22.75% of the outstanding Common Stock and
CAP Units combined.
Under the Capital Accumulation Plan, all Senior Managing Directors of Bear
Stearns (including executive officers of the Company) are eligible to
participate on an elective basis. Participants in the Capital Accumulation Plan
are entitled to defer a portion of their compensation earned during each fiscal
year. Participants' compensation will be deferred for a period (a "Deferral
Period") of five years after the end of the fiscal year for which it was
otherwise payable, which period may be extended or reduced under certain
circumstances, including the financial hardship of the Participant.
A Participant's compensation deferred pursuant to the Capital Accumulation
Plan will be credited to such Participant's deferred compensation account (the
"Capital Accumulation Account") in the form of units ("CAP Units"). The number
of CAP Units to be so credited generally will be determined by dividing the
amount of each Participant's compensation deferred in respect of such fiscal
year by the average cost per share of Common Stock acquired for purposes of the
Capital Accumulation Plan. Each CAP Unit credited to a Participant's Capital
Accumulation Account will entitle the Participant to receive, on an annual
basis, a Net Earnings Adjustment generally equal to the Company's pre-tax
earnings per share (as determined in accordance with the Capital Accumulation
Plan) for such fiscal year less an adjustment for changes in the Company's book
value per share of the Common Stock during such year resulting from increases or
decreases in the Company's retained earnings attributable to net income or loss,
after deducting dividends declared with respect to any capital stock of the
Company, during such year. Upon the termination of a Participant's Deferral
Period under the Capital Accumulation Plan, the Participant will be entitled to
receive from the Company a number of freely transferable shares of Common Stock
equal to the number of CAP Units then credited to his Capital Accumulation
Account plus cash in the amount, if any, of the Participant's cash balance
account at the end of such period.
Since shares for the Capital Accumulation Plan are purchased from existing
stockholders and not from the Company, employee stock ownership is increased
without substantial dilution to earnings per share or book value per common
share. Such shares may be purchased in the open market or from Participants who
have received shares of Common Stock pursuant to the Capital Accumulation Plan.
In order to provide an additional source of shares for issuance under the
Capital Accumulation Plan and afford Participants the ability to engage in an
orderly disposition of shares at prices designed to protect against trading
volatility at the time of a distribution, the Compensation Committee has
approved an amendment to the Capital Accumulation Plan, subject to stockholder
approval at the Annual Meeting, to permit the Company to enter into forward
contracts to purchase shares of Common Stock from such Participants. The
amendment of the Capital Accumulation Plan is more fully described below under
"Approval of Amendment to the Capital Accumulation Plan".
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The total compensation of Mr. Cayne, the Company's CEO, along with other
members of the Executive Committee, is determined in all material respects by
the Management Compensation Plan. Pursuant to the terms of the Management
Compensation Plan, for fiscal year 1998 Mr. Cayne received a base salary of
$200,000 and shared in a bonus fund based on the Company's fiscal year 1998
Pre-Tax ROE. Mr. Cayne's proportionate share of the fiscal year 1998 bonus fund
(as well as that of the other members of the Executive Committee) was determined
by the Compensation Committee in September 1997, based on the recommendation of
the Executive Committee as to how the bonus fund should be allocated among the
members of the Executive Committee. The Executive Committee's recommendations
were based on the same criteria established by the Compensation Committee for
determining the total compensation of Senior Managing Directors who were not
members of the Executive Committee for fiscal year 1998.
Mr. Cayne's total salary and bonus compensation was approximately
$20,000,000 during both fiscal 1997 and 1998, which reflects both the Company's
strong financial performance and the allocation of the bonus fund. Of the total
fiscal year 1998 compensation of Mr. Cayne, 48.1% was deferred under the Capital
Accumulation Plan. Consequently, the ultimate realization of a substantial
portion of Mr. Cayne's benefit from his current bonus will depend on the future
performance of the Company and its Common Stock.
The Compensation Committee believes that the amended Performance
Compensation Plan and the amended Capital Accumulation Plan provide appropriate
incentives to senior management of the Company and are fair and reasonable
methods on which to base compensation for such employees. Collectively, these
plans provide flexibility in structuring the compensation package for key
employees, while the Capital Accumulation Plan serves to align employee and
stockholder interests.
Compensation Committee
Carl D. Glickman, Chairman
Donald J. Harrington
Frank T. Nickell
Vincent Tese
* * *
<PAGE>
COMPENSATION TABLES AND OTHER INFORMATION
The following table set forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company (other than the CEO) for the three fiscal years ended June 30, 1998:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------
Restricted All Other
Name and Fiscal Stock Compensation
Principal Position Year Salary Bonus(1) Awards(2)(3) (3)(4)
- - ------------------ ------ ------ -------- ------------ ------------
James E. Cayne 1998 $200,000 $10,171,830 $ 9,611,830 $7,192,766
CEO 1997 200,000 10,175,750 9,616,250 3,223,209
and President 1996 200,000 8,972,750 8,413,250 2,060,125
Alan C. Greenberg 1998 200,000 13,698,880 4,562,960 3,716,754
Chairman 1997 200,000 14,132,375 4,707,625 1,685,120
of the Board 1996 200,000 13,039,500 4,346,500 1,080,728
Alan D. Schwartz 1998 200,000 8,009,714 7,398,714 4,578,028
Executive 1997 200,000 8,002,250 7,412,750 1,981,791
Vice President 1996 200,000 6,693,666 6,117,334 1,200,713
Warren J. Spector 1998 200,000 4,175,000 14,657,522 8,276,621
Executive 1997 200,000 4,204,500 14,635,500 3,523,924
Vice President 1996 200,000 4,194,750 12,276,250 2,093,489
Mark E. Lehman 1998 200,000 2,177,275 1,627,275 674,445
Executive 1997 200,000 1,892,500 1,342,500 278,866
Vice President 1996 200,000 1,647,500 1,097,500 152,710
For each of the above-named officers, compensation information is provided
for the full fiscal years during which he served as an executive officer of the
Company.
(1) Represents amounts payable under the Management Compensation Plan. See
"Executive Compensation -- Compensation Committee Report -- Management
Compensation Plan".
(2) Represents the portion of the named executive officer's bonus deferred
pursuant to the Capital Accumulation Plan. See "Executive Compensation --
Compensation Committee Report -- Equity Ownership and Capital Accumulation
Plan". In accordance with the Capital Accumulation Plan, all amounts are
immediately vested but, typically, are not payable for a minimum of five
years. Pursuant to the terms of the Capital Accumulation Plan, the Company
may only allocate CAP Units to Participants based upon the amount of shares
of the Company's Common Stock repurchased during the fiscal year for
purposes of the Capital Accumulation Plan. During fiscal 1998, the Company
used a portion of the amount deferred by Participants to purchase shares.
Therefore, the amounts reflected as restricted stock awards in the table
above have only been partially allocated to the Participants' CAP Unit
accounts. For the fiscal year ended June 30, 1998, the following CAP Units
were credited to such persons' Cap Units Accounts as a result of their
fiscal year 1998 deferrals: Mr. Cayne -- 77,076; Mr. Greenberg -- 36,590;
Mr. Schwartz -- 59,329; Mr. Spector -- 117,537; and Mr. Lehman -- 13,049.
The remaining amounts deferred were credited to the Participants' Capital
Accumulation Plan Cash Accounts. 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
allocate CAP Units with respect to the amounts reflected in the Capital
Accumulation Plan Cash Accounts.
(3) As of June 30, 1998, the value and the aggregate number of CAP Units
credited to the accounts of each named person (based on the closing price
of the Common Stock on the Consolidated Transaction Reporting System on
such date) was: Mr. Cayne -- $145,779,213 (2,563,151 units); Mr. Greenberg
-- $75,117,088 (1,320,740 units); Mr. Schwartz -- $93,443,236 (1,642,958
units); Mr. Spector -- $166,148,710 (2,921,296 units); and Mr. Lehman --
$14,014,341 (246,406 units).
(4) Represents preferential earnings paid on, and in the form of, CAP Units
pursuant to the Capital Accumulation Plan that exceed cash dividends paid
on the equivalent shares of Common Stock.
PERFORMANCE GRAPH
The following performance graph compares the performance of an investment
in the Company's Common Stock over the last five fiscal years with the S&P 500
Index, the S&P Financial Diversified Index and two peer groups. The entities
included in the Company's current peer group (the "New Peer Group") consist of
Merrill Lynch & Co., Inc., Morgan Stanley, Dean Witter & Co., Paine Webber Group
Inc., and four newly added entities: Bankers Trust Corporation, Donaldson,
Lufkin & Jenrette, Inc., Lehman Brothers Holdings, Inc. and Travelers Group,
Inc. The Company's peer group in prior years (the "Old Peer Group") consisted of
Merrill Lynch & Co., Inc., Morgan Stanley, Dean Witter & Co., Paine Webber Group
Inc. and Salomon Inc. The Company believes that the business of the entities
constituting the New Peer Group more closely resembles the business and capital
structure of the Company. The performance graph assumes the value of the
investment in the Company's Common Stock and each index was $100 on June 30,
1993 and that all dividends have been reinvested. There can be no assurance that
the Company's future stock performance will correlate with past stock
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC NO. 2 - "Comparison of Five-Year Cumulative Total Return" graph appears
here in paper format]
Assumes $100 invested on June 30,
1993 in the Company's Common Stock;
S&P 500 Index; S&P Financial
Diversified Index; the New Peer
Group; and Old Peer Group and that
all dividends have been reinvested
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
The Bear Stearns Companies Inc. 100 81.89 111.74 133.24 206.83 348.72
New Peer Group (1) 100 85.89 117.65 160.78 278.98 466.01
Old Peer Group (2) 100 97.86 123.33 151.73 246.07 488.92
S & P Financial Diversified Index 100 98.48 123.71 164.56 244.21 376.22
S & P 500 Index 100 101.41 127.84 161.08 216.98 293.01
- - ---------------
(1) The New Peer Group Index includes Morgan Stanley, Dean Witter & Co.,
Merrill Lynch & Co., Inc., Paine Webber Group, Inc., Bankers Trust
Corporation, Lehman Brothers Holdings, Inc., Donaldson, Lufkin & Jenrette,
Inc., and Travelers Group, Inc. Peer group calculation assumes conversion
of Morgan Stanley Group Inc. shares into newly formed company, Morgan
Stanley, Dean Witter & Co., in June 1997. Donaldson, Lufkin & Jenrette,
Inc.'s performance is only included in results for 1996, 1997 and 1998.
Lehman Brothers Holdings, Inc.'s performance is not included in results for
1993.
(2) The Old Peer Group consists of Morgan Stanley, Dean Witter & Co., Merrill
Lynch & Co., Inc., Paine Webber Group Inc. and Salomon Inc., except for
1998 which excludes Salomon Inc.'s performance.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives an annual
retainer of $25,000, plus $800 for each meeting of the Board of Directors
attended, and reasonable expenses relating to attendance at such meetings.
Directors who are members of the Audit Committee and directors who are members
of the Compensation Committee receive additional compensation at the rate of
$1,500 for each meeting of the Audit Committee or Compensation Committee
attended, with the exception of telephone conference meetings (where a quorum
consists of directors attending via telephone conference call) as to which the
compensation paid for participation is $200.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CERTAIN TRANSACTIONS
The Company, in the ordinary course of business, has extended credit to
certain of its directors, officers and employees in connection with their
purchase of securities. Such extensions of credit have been made on
substantially the same terms, including interest rates and collateral
requirements, as those prevailing at the time for comparable transactions with
non-affiliated persons, and did not involve more than the normal risk of
collectability or have other unfavorable features present. To the extent
officers and employees of the Company and members of their immediate families
wish to purchase securities in brokerage transactions, they ordinarily are
required to do so through Bear Stearns, which offers them a discount from its
standard commission rates in connection therewith which could be substantial
depending on various factors, including the size of the transaction. Bear
Stearns also, from time to time and in the ordinary course of its business, has
entered into transactions involving the purchase or sale of securities and
commercial paper (including different forms of repurchase transactions) from or
to directors, officers and employees of the Company and members of their
immediate families, as principal. Such purchases and sales of securities or
commercial paper on a principal basis were effected on substantially the same
terms as similar transactions with unaffiliated third parties.
The Company, from time to time, has made loans to its officers and other
employees against commissions and other compensation which would otherwise be
payable to them in the ordinary course of business. Interest is generally
charged by the Company on such loans at the same rate of interest charged by
Bear Stearns on loans to purchase securities. The Company currently requires
that any such loan in excess of $7,500 made to officers and other employees
against commissions or other compensation be approved by the Management and
Compensation Committee. During the fiscal year ended June 30, 1998, the maximum
aggregate amount of month-end loans against commissions and other compensation
was approximately $3,900,000.
The Company has formed a limited partnership, The BSC Employee Fund, L.P.
(the "Fund"), which provides a unique investment opportunity for the Company's
Senior Managing Directors and Managing Directors. The Fund has committed to
invest $62,000,000 in a diversified group of closed-end acquisition and
leveraged buyout funds that are managed by highly regarded private equity firms.
As of June 30, 1998, 337 participants in the Fund have purchased a total of
1,202 limited partnership interests. Each limited partnership interest
represents a commitment by the participant to invest $50,000 of which $25,000 is
funded by the participant and $25,000 is in the form of a nonrecourse,
interest-bearing loan from the Company to the participant of the Fund. The loans
bear interest at the London Interbank Offered Rate plus 1.0%. Capital calls have
taken place since June 12, 1997 for a total of 57% of each participant's equity
commitment. The total amount loaned to the participants of the Fund at June 30,
1998 was $13,368,644. At such date, loans in excess of $60,000 were outstanding
to the following directors or officers in the aggregate dollar amount set forth
after each of their respective names: James E. Cayne ($222,440), Alan D.
Schwartz ($222,440), and Warren J. Spector ($889,760). The aggregate amount of
the loans outstanding to all directors and executive officers as a group on such
date was $1,356,884.
Other than as described in this Proxy Statement, no director or executive
officer of the Company was indebted to the Company during the last fiscal year
for any amount in excess of $60,000.
Sterling BSC Inc. ("Sterling BSC") and Hines Interests Limited Partnership
("Hines"), as a joint venture (the "Joint Venture"), are acting as a consultant
to the Company on certain real estate matters. In fiscal 1998, the Company paid
the Joint Venture $2,005,556 for consulting services provided to the Company. In
addition, Bradick 383 Associates LLC (the "Developer"), of which Sterling BSC
owns a 60% interest and Hines owns a 40% interest, has entered into an agreement
with the Company relating to the development of the Company's new world
headquarters being developed at 383 Madison Avenue. The Company has agreed to
pay a minimum of $12 million to the Developer, which is subject to increase
based upon a percentage of total development costs, as well as a potential
discretionary incentive fee in an amount to be determined by the Company. Fred
Wilpon, a director of the Company, is Chairman, Chief Executive Officer and a
33.75% stockholder of Sterling BSC. Mr. Wilpon and members of his family own
approximately 85% of the outstanding stock of Sterling BSC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Glickman, Harrington, Nickell and Tese, none of whom is or has been an officer
or an employee of the Company. There were no "Compensation Committee Interlocks"
during fiscal year 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and any persons who own more than ten
percent of the Company's Common Stock, to file reports of initial ownership of
the Company's Common Stock and subsequent changes in that ownership with the
Securities and Exchange Commission and furnish the Company with copies of all
forms they file pursuant to Section 16(a). Based solely upon a review of the
copies of the forms furnished to the Company, or written representations from
certain reporting persons that no Forms 5 were required, the Company believes
that during the 1998 fiscal year all Section 16(a) filing requirements were
complied with, except that one report for one transaction was filed late by
Vincent Tese.
II. APPROVAL OF AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN
The Board of Directors proposes that the stockholders approve the
amendments to the Performance Compensation Plan. The amendments are being
submitted to stockholders in an effort to meet the requirements for
deductibility by the Company under Section 162(m) of the Internal Revenue Code.
(See "Executive Compensation -- Compensation Committee Report -- Performance
Compensation Plan" for a discussion of Section 162(m) of the Internal Revenue
Code).
PROPOSED AMENDMENTS
On September 25, 1998, the Compensation Committee adopted amendments to the
Performance Compensation Plan, subject to stockholder approval at the Annual
Meeting. The principal amendments are: (a) to amend Section 1 to include voting
members of the Executive Committee as eligible participants under the
Performance Compensation Plan; (b) to amend Section 2 to set the term of the
Plan for five full fiscal years commencing as of July 1, 1998; (c) to amend
Section 5 to allow for the establishment of more than one bonus pool under the
Plan; (d) to add Section 5.5 to provide for an aggregate annual maximum of
$150,000,000 for the bonus pool related to members of the Executive Committee
and to provide for an annual maximum of $15,000,000 for each participant who is
not a member of the Executive Committee; and (e) to amend Section 6.1 to provide
for an annual maximum for each participant of the pool related to the Executive
Committee of not more than 30% of such pool. A copy of the Performance
Compensation Plan as amended and restated as of September 25, 1998, subject to
stockholder approval at the Annual Meeting, is attached to this Proxy Statement
as Exhibit A and is marked to show the proposed amendments to such Plan. The
description of such Plan in this Proxy Statement is qualified in its entirety by
reference to Exhibit A.
The Management Compensation Plan was terminated beginning in fiscal 1999
and for all fiscal years thereafter. Participants in the Management Compensation
Plan will be included in the Performance Compensation Plan, subject to
stockholder approval of the amendments to the Performance Compensation Plan at
the Annual Meeting. For fiscal 1999, the Compensation Committee has adopted
performance goals for the determination of compensation to be paid to members of
the Executive Committee under the Performance Compensation Plan which are
consistent with those provided under the Management Compensation Plan in fiscal
1998. Accordingly, the bonus pool allocable to the Executive Committee under the
Performance Compensation Plan for fiscal 1999 will be determined on the basis of
the Company's return on common equity. Since the amounts payable under the
Performance Compensation Plan will be based on future performance, such amounts
are not determinable at the present time. However, the following table reflects
the amounts that would have been paid for the fiscal year ended June 30, 1998 if
the formula for computing the annual bonus pools pursuant to the amended
Performance Compensation Plan, as established by the Compensation Committee on
September 25, 1998, had been in effect for such year:
PERFORMANCE COMPENSATION PLAN (1)
NAME AND POSITION DOLLAR VALUE ($)(2)
----------------- -------------------
James E. Cayne,
CEO and President............................. 19,429,926
Alan C. Greenberg,
Chairman of the Board......................... 17,935,316
Warren J. Spector,
Executive Vice President...................... 18,495,795
Alan D. Schwartz
Executive Vice President...................... 15,132,923
Mark E. Lehman
Executive Vice President...................... 3,736,524
Executive Group.................................. 78,530,484
Non-Executive Director Group..................... 0
Other Employee Group(3).......................... 14,600,000
- - ---------------
(1) This calculation assumes the percentage of the bonus pool allocated to each
member of the Executive Committee was the same as under the Management
Compensation Plan in effect for fiscal year 1998 based on the performance
goals set by the Compensation Committee in accordance with the Performance
Compensation Plan. These amounts do not reflect actual amounts to be paid
in fiscal 1999.
(2) Includes amounts that would have been payable as bonuses under the
Performance Compensation Plan and bonus compensation that would have been
deferred pursuant to the Capital Accumulation Plan. See "Summary
Compensation Table -- Annual Compensation -- Bonus and Compensation Awards
-- Restricted Stock Awards", and footnotes (1) and (2) thereto.
(3) Excluding those employees included in the categories entitled "Executive
Group" and "Non-Executive Director Group."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS
TO THE PERFORMANCE COMPENSATION PLAN.
III. APPROVAL OF AMENDMENT TO THE CAPITAL ACCUMULATION PLAN
GENERAL
The Capital Accumulation Plan was adopted initially by the Board of
Directors and approved by stockholders as of September 6, 1990. The Capital
Accumulation Plan was amended thereafter on a number of occasions by the
Compensation Committee, both with and without stockholder approval, as required.
The last amendments to the Capital Accumulation Plan, prior to the proposed
amendments being considered at the Annual Meeting, were adopted effective
January 21, 1998 and are reflected in the amended and restated Capital
Accumulation Plan filed as an Exhibit to the Company's Quarterly Report on Form
10-Q for fiscal quarter ended December 31, 1997. All references to the "Plan" in
the remaining text of this subsection shall mean the Capital Accumulation Plan.
Under the Capital Accumulation Plan, all Senior Managing Directors of Bear
Stearns (including the executive officers of the Company) are eligible to
participate on an elective basis. Participants in the Capital Accumulation Plan
are entitled to defer a portion of their compensation earned during each fiscal
year. Participants are generally required to commit to defer a portion of their
compensation during each of the three fiscal years following their initial
election to participate in the Capital Accumulation Plan. Thereafter, whenever
the Compensation Committee allows a new group of Senior Managing Directors to
participate in the Capital Accumulation Plan for three years, the duration of
the Capital Accumulation Plan is extended, thereby permitting existing
Participants to defer compensation for an additional fiscal year or years.
During fiscal year 1998, 95% of the more than 300 Senior Managing Directors
participated in the Capital Accumulation Plan, including all executive officers.
Participants in any fiscal year will generally be required to defer the
following percentages of that portion of their total compensation for such
fiscal year (after deducting any amounts deferred under other plans sponsored by
the Company) which exceeds $200,000 (or the then prevailing annual base salary
for Senior Managing Directors):
25% of the first................................ $ 300,000
30% of the next................................. 500,000
40% of the next................................. 1,000,000
50% of the compensation exceeding............... 2,000,000
In lieu of the foregoing amounts, Senior Managing Directors over the age of
55 may elect to defer only 25% of their aggregate compensation in excess of
$200,000 and all Participants may elect to defer all or any portion of their
compensation in excess of $200,000 in addition to the minimum amount set forth
in the table above ("Additional Deferral Amounts"), subject, in the case of
Additional Deferral Amounts to the approval of the Management and Compensation
Committee, or in the case of persons subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Reporting
Persons"), to the approval of the Compensation Committee.
Participants' compensation will be deferred for a period (a "Deferral
Period") of five years after the end of the fiscal year for which it was
otherwise payable, which period may be extended or reduced under certain
circumstances, including the financial hardship of the Participant. Participants
over the age of 55 may elect a shorter deferral period. A Participant's
compensation deferred pursuant to the Capital Accumulation Plan will be credited
to such Participant's deferred compensation account (the "Capital Accumulation
Account") in the form of units ("CAP Units"). The number of CAP Units to be so
credited generally will be determined by dividing the amount of each
Participant's compensation deferred in respect of such fiscal year by the
average cost per share of Common Stock acquired for the purposes of the Capital
Accumulation Plan.
Each CAP Unit credited to the Participant's Capital Accumulation Account
will entitle the Participant to receive, on an annual basis, a Net Earnings
Adjustment generally equal to the Company's pre-tax earnings per share (as
determined in accordance with the Capital Accumulation Plan) for such fiscal
year less an adjustment for changes in the Company's book value per share of the
Common Stock during such years resulting from increases or decreases in the
Company's retained earnings attributable to net income or loss after deducting
dividends declared with respect to any capital stock of the Company, during such
year. The Net Earnings Adjustment generally will be credited to Participants'
Capital Accumulation Accounts on an annual basis in the form of a number of
additional CAP Units.
Notwithstanding the foregoing, the aggregate number of CAP Units that may
be credited pursuant to the Capital Accumulation Plan in respect of any fiscal
year may not exceed the number of Available Shares (as defined in the Capital
Accumulation Plan) acquired for the Capital Accumulation Plan with respect to
such fiscal year. Because of this limitation, if the Company is not able to
credit CAP Units in respect of all compensation deferred for any fiscal year, or
to make any required Net Earnings Adjustments in full, then the amount of
compensation for which no CAP Units were awarded will be credited instead to an
interest-bearing "cash balance account" maintained for each Participant. In
subsequent fiscal years, to the extent that the Company acquires shares of
Common Stock and the Compensation Committee designated such shares for such use
under the Capital Accumulation Plan, it will credit at the end of each fiscal
quarter a number of CAP Units corresponding to such shares. The price at which
CAP Units will be so credited in respect of deferred cash balances will be the
average cost per share of the corresponding shares of Common Stock acquired by
the Company during such fiscal quarter.
Upon the termination of a Participant's Deferral Period under the Capital
Accumulation Plan, the Participant will be entitled to receive from the Company
a number of freely transferable shares of Common Stock equal to the number of
CAP Units then credited to his Capital Accumulation Account plus cash in the
amount, if any, of the Participant's cash balance account at the end of such
period. If a Participant dies, the Participant's estate (or the designated
beneficiary) will receive the number of shares of Common Stock corresponding to
the CAP Units then credited to such Participant's account as of the first day of
the fiscal year following the date of death plus any cash in the Participant's
cash balance account. If a Participant's employment is terminated for any reason
prior to the end of the Deferral Period (other than by reason of death), the
Management and Compensation Committee or, in the case of a Reporting Person, the
Compensation Committee (the "Appropriate Committee") has the discretion, among
other things, to accelerate the distribution of CAP Units in the form of shares
of Common Stock for all Plan Years plus any cash in his cash balance account,
and/or void any deferral elections for which CAP Units have not yet been
credited and distribute cash in lieu of shares with respect thereto.
The maximum number of CAP Units that may be credited to all Capital
Accumulation Plan Participants' Capital Accumulation Accounts under the Capital
Accumulation 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 defined in the Capital Accumulation Plan) 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 the Capital Accumulation Plan in all prior fiscal years.
The Company reserves the right to terminate the entire Capital Accumulation
Plan, or any portion of the Plan representing a particular fiscal year's
deferred compensation, at any time in its sole discretion. The Capital
Accumulation Plan also provides for acceleration of deferrals in the event of
certain defined events constituting a "change in control" of the Company. In the
event of a "change in control," the Capital Accumulation Plan will be deemed to
be terminated immediately, and the shares of Common Stock will be issued within
60 days thereafter. The Capital Accumulation Plan may be amended by the
Compensation Committee provided that no such action shall retroactively impair
or otherwise adversely affect the rights of any person prior to the date of any
action.
A Participant may not assign, pledge or otherwise transfer his interest in
his Capital Accumulation Account except by designating a beneficiary who shall
be entitled to receive any amounts payable under the Capital Accumulation Plan
upon the Participant's death. The Company is not required to establish a special
or separate fund or to otherwise segregate any assets to assure any payments
under the Capital Accumulation Plan, and has no obligation to invest all or any
portion of the Participants' Capital Accumulation Accounts in Common Stock. The
Capital Accumulation Plan provides that the rights of each Participant shall be
no greater than the rights of a general unsecured creditor of the Company.
AMENDMENT TO CAPITAL ACCUMULATION PLAN
The Capital Accumulation Plan presently permits the Company to purchase
shares of Common Stock, for issuance under the Plan, in the open market or in
private transactions, which may include the repurchase from Participants of
Common Stock distributed upon the expiration of a Deferral Period. The
Compensation Committee has determined that there would be advantages to both the
Company and Participants if the Company were authorized to enter into forward
contracts to purchase Common Stock distributed under the Capital Accumulation
Plan from Participants at the time the Common Stock is distributed. Each
Participant who is eligible to enter into a forward contract, as determined by
the Compensation Committee, and chooses to do so would be permitted to select
some or all of the shares of Common Stock that the Participant is entitled to
receive under the Capital Accumulation Plan in the Deferral Period ending in the
then current Fiscal Year of the Company, and to sell those shares to the Company
under the forward contract. The forward contracts, which would be entered into
not more than 12 months prior to the expiration of a Deferral Period, would
entitle the Participants to receive an amount of cash equal to the average
trading price of the Company's Common Stock on the NYSE during the term of the
forward contract. Thus, should the trading price of the Company's Common Stock
on the date of repurchase under the forward contract be higher than the average
trading price over the term of the contract, the Company would pay less than it
would otherwise have paid were it to purchase shares in the open market on such
date; and if the average trading price is higher than the trading price on the
date of repurchase, the Company would pay more. Since the ultimate purchase
price may be higher than the trading price of the Company's Common Stock at the
time of repurchase, thereby resulting in a benefit to Participants, the
amendment to the Capital Accumulation Plan is being submitted to stockholders in
an effort to meet the requirements of Section 162(m) of the Internal Revenue
Code. (See "Executive Compensation -- Compensation Committee Report --
Performance Compensation Plan" for a description of Section 162(m) of the
Internal Revenue Code.)
In order to authorize the repurchase of shares of Common Stock by means of
forward contracts, an amendment to the Capital Accumulation Plan was approved by
the Compensation Committee (referred to in the Plan as the "Board Committee") on
September 25, 1998, subject to stockholder approval at the Annual Meeting. If
approved by stockholders, a new Section 8.7 would be added to the Capital
Accumulation Plan permitting the Company, upon authorization of the Compensation
Committee, to enter into agreements with one or more Participants for the
purchase of all or part of the Common Stock representing CAP Units previously
credited to their accounts that will be received by them upon the expiration of
their applicable Deferral Period. The Company's purchase price for the shares
will be determined on the basis of the average of the trading prices of the
Company's Common Stock on the NYSE during the term of the forward contract, but
the contract will terminate unless the Company satisfies performance goals
timely established by the Compensation Committee. The formula for determining
the performance goals will be based upon one or more of the following criteria,
adjusted in such manner as the Compensation Committee shall determine, for a
period of not less than nine months of the applicable Fiscal Year: (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
versus peer group companies; (h) expense management; and (i) total return to
stockholders. The forward contract may contain such other terms and conditions
as may be determined by the Compensation Committee.
The principal advantages of the amendment would be to provide an additional
source of Available Shares for the Capital Accumulation Plan, while providing
Participants with the ability to engage in an orderly disposition of their
shares at prices designed to afford protection against undue volatility in the
trading price of the Company's Common Stock at the time of distribution. The
determination of those Participants to be offered the right to enter into
forward contracts will be discretionary with the Compensation Committee, and
Participants will have full discretion as to whether or not to enter into such
contracts. It is also contemplated that consummation of the forward contracts
will be conditioned upon receipt by the Company of an Internal Revenue Service
ruling substantially to the effect that these amendments to the Capital
Accumulation Plan would not adversely affect qualification of the Plan under
Section 162(m) of the Internal Revenue Code.
On June 30, 1998, an aggregate of 4,119,527 shares of Common Stock were
distributed representing CAP Units previously credited to Participants' Capital
Accumulation Accounts for the 1993 Plan Year and to certain Participants for
other Plan Years. It is presently contemplated that approximately 7.3 million
shares of Common Stock will be distributed on or about June 30, 1999 with
respect to CAP Units previously credited to Participants' accounts for the 1994
Plan Year. Pursuant to the proposed amendment, the Company would be authorized
to enter into forward contracts with respect to any or all of such shares.
Set forth below is the text of the new Section 8.7 of the Capital
Accumulation Plan containing the amendment being proposed for approval at the
1998 Annual Meeting. The amendment is qualified in its entirety by reference to
such text.
"Section 8.7 Forward Repurchases of Common Stock. The Company shall have
the right, upon authorization of the Board Committee, to enter into forward
contracts for the repurchase from one or more Participants of any or all
shares of Common Stock representing CAP Units previously credited to the
Capital Accumulation Accounts of such Participants with respect to any Plan
Year and distributed on or after the relevant Termination Date of the
Deferral Period ending in the then current Fiscal Year, having such terms
and conditions as shall be determined by the Board Committee, for a
purchase price per share equal to the average of the closing prices of the
Common Stock as reported on the New York Stock Exchange Consolidated Tape
for each day of trading in the Common Stock during the period from the
effective date of the contract to the date of repurchase, provided that a
contract may not be entered into more than twelve (12) months prior to the
expiration of the applicable Deferral Period and will terminate, and be
null and void, unless the Company satisfies performance goals established
by the Board Committee in writing, by resolution of the Board Committee or
other appropriate action, not later than ninety (90) days after the
commencement of the Fiscal Year to which the performance goals relate, and
certified by the Board Committee in writing as having been satisfied prior
to the relevant Termination Date. The formula for calculating the
performance goals shall be based upon one or more of the following
criteria, individually or in combination, adjusted in such manner as the
Board Committee shall determine, for a period of not less than nine (9)
months of the applicable Fiscal Year: (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."
The foregoing amendment to the Capital Accumulation Plan would not have
provided determinable benefits to Participants if it had been in effect for
fiscal year 1998, and the amount of benefits in future years, if any, are not
determinable at the present time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE CAPITAL ACCUMULATION PLAN.
INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as the Company's
independent auditors to conduct the audit of the Company's books and records for
the fiscal year ended June 30, 1999. Deloitte & Touche LLP also served as the
Company's independent auditors for the previous fiscal year. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting to
respond to questions and to make a statement should they so desire.
OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of any
business other than that described above that will be presented at the Annual
Meeting. If any other business should properly come before the Annual Meeting,
it is intended that the persons named in the enclosed proxy will have
discretionary authority to vote the shares which they represent.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
In accordance with rules promulgated by the Securities and Exchange
Commission, any stockholder who wishes to submit a proposal for inclusion in the
proxy material to be distributed by the Company in connection with the 1999
Annual Meeting must do so no later than June 2, 1999.
In addition, in accordance with Article VI, Section 2 of the Certificate of
Incorporation, in order to be properly brought before the 1999 Annual Meeting, a
matter must have been (i) specified in a written notice of such meeting (or any
supplement thereto) given to the stockholders by or at the direction of the
Board of Directors (which would be accomplished if a stockholder proposal were
received by the Secretary of the Company as set forth in the preceding
paragraph), (ii) brought before such meeting at the direction of the Board of
Directors or the Chairman of the meeting, or (iii) specified in a written notice
given by or on behalf of a stockholder or record on the record date for such
meeting or a duly authorized proxy for such stockholder, which conforms to the
requirements of Article VI, Section 2 of the Certificate of Incorporation and is
delivered personally to, or mailed to and received by, the Secretary of the
Company at the address below not less than 10 days prior to the first
anniversary of the date of the notice accompanying this Proxy Statement;
provided, however, that such notice need not be given more than 75 days prior to
the 1999 Annual Meeting. Accordingly, any written notice given by or on behalf
of a stockholder pursuant to the foregoing clause (iii) in connection with the
1999 Annual Meeting must be received no later than September 20, 1999.
REPORTS
The Company will furnish without charge to each person whose proxy is being
solicited, upon the written request of any such person, a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998, as filed
with the Securities and Exchange Commission, including the financial statements
and schedules thereto. Requests for copies of such Annual Report on Form 10-K
should be directed to the Corporate Communications Department of the Company at
the address below.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
The Bear Stearns Companies, Inc.
245 Park Avenue
New York, New York 10167
September 30, 1998
<PAGE>
EXHIBIT A
THE BEAR STEARNS COMPANIES INC.
PERFORMANCE COMPENSATION PLAN
( Amended and Restated as of September 25 , 1998)
Section 1. Purpose. The purposes of The Bear Stearns Companies Inc.
Performance Compensation Plan , as amended and restated (the "Plan") are
(i) to compensate certain Senior Managing Directors 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, 1998 (the
"Effective Date"), and shall be applicable for the five (5) full fiscal years of
the Company ending June 30, 2003 , 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 s .
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 one or
more annual bonus fund s (the "Annual Bonus Pool s ") 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 s 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 s 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.
5.5. The maximum amount allocable by the Compensation Committee to the
Annual Bonus Pool related to Participants who are members of the Executive
Committee in the aggregate for any fiscal year shall not exceed $150,000,000.
The maximum amount allocable to any individual Participant who is not a member
of the Executive Committee shall not exceed $15,000,000.
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 s for such fiscal year, which shall not exceed in respect of any
Participant who is a member of the Executive Committee 30% of the amount of
such Annual Bonus Pool .
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 s , the
Bonuses payable to each Participant shall be reduced pro rata, so that the total
of all Bonuses shall equal the Annual Bonus Pool s . 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 s 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 Pool s , except insofar as
such expenses shall be taken into account in determining the components of the
Annual Bonus Pool s 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 1998 Annual Meeting of Stockholders,
and such stockholder approval shall be a condition to the right of a Participant
to receive any Bonus hereunder.
<PAGE>
THE BEAR STEARNS COMPANIES INC.
Proxy Solicited on Behalf of the Board of
Directors for Annual Meeting of Stockholders --
October 29, 1998 at 5:00 P.M.
The undersigned stockholder of The Bear Stearns Companies Inc. (the
"Company") hereby appoints Alan C. Greenberg and James E. Cayne, and each of
them, as attorneys and proxies, each with power of substitution and revocation,
to represent the undersigned at the Annual Meeting of Stockholders of the
Company to be held on October 29, 1998, and at any adjournments or postponements
thereof, with authority to vote all shares of Common Stock of the Company held
or owned by the undersigned on September 21, 1998, in accordance with the
directions indicated herein.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR ITEMS 1, 2, 3 AND PURSUANT TO ITEM 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED
HEREIN, "FOR" APPROVAL OF THE AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN
AND "FOR" APPROVAL OF AN AMENDMENT TO THE CAPITAL ACCUMULATION PLAN FOR SENIOR
MANAGING DIRECTORS.
Item 1. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY TO VOTE FOR
ALL NOMINEES LISTED BELOW
(except as marked to
the contrary below
--------------------
Nominees for Directors: James E. Cayne, Carl D. Glickman, Alan C. Greenberg,
Donald J. Harrington, William L. Mack, Frank T. Nickell, Frederic V. Salerno,
Vincent Tese and Fred Wilpon.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE
NAMED ABOVE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME)
Item 2. APPROVAL OF THE AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 3. APPROVAL OF AN AMENDMENT TO THE CAPITAL ACCUMULATION PLAN FOR SENIOR
MANAGING DIRECTORS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 4. In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any
adjournments or postponements thereof.
Signature(s): ______________________________________________
(Please date and sign exactly as name appears
hereon. When signing as attorney,
administrator, trustee, custodian or guardian,
give full title as such. Where more than one
owner, all should sign. Proxies executed by a
partnership or corporation should be signed in
the full partnership or corporate name by a
partner or authorized officer.)
Dated _______________, 1998
<PAGE>
Appendix 1 to
Definitive Proxy
Statement of
The Bear Stearns
Companies Inc.
THE BEAR STEARNS COMPANIES INC.
CAPITAL ACCUMULATION PLAN FOR
SENIOR MANAGING DIRECTORS
(Amended and Restated as of September 25, 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
<PAGE>
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 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.l.
"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.
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"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.
<PAGE>
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 a 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
8.7 Forward Repurchases of Common Stock.
The Company shall have the right, upon authorization of the Board
Committee, to enter into forward contracts for the repurchase from one or more
Participants of any or all shares of Common Stock representing CAP Units
previously credited to the Capital Accumulation Accounts of such Participants
with respect to any Plan Year and distributed on or after the relevant
Termination Date of the Deferral Period ending in the then current Fiscal Year,
having such terms and conditions as shall be determined by the Board Committee,
for a purchase price per share equal to the average of the closing prices of the
Common Stock as reported on the New York Stock Exchange Consolidated Tape for
each day of trading in the Common Stock during the period from the effective
date of the contract to the date of repurchase, provided that a contract may not
be entered into more than twelve (12) months prior to the expiration of the
applicable Deferral Period and will terminate, and be null and void, unless the
Company satisfies performance goals established by the Board Committee in
writing, by resolution of the Board Committee or other appropriate action, not
later than ninety (90) days after the commencement of the Fiscal Year to which
the performance goals relate, and certified by the Board Committee in writing as
having been satisfied prior to the relevant Termination Date. The formula for
calculating the performance goals shall be based upon one or more of the
following criteria, individually or in combination, adjusted in such manner as
the Board Committee shall determine, for a period of not less than nine (9)
months of the applicable Fiscal Year: (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.
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,
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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 a 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.
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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
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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.
