SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule of Registration Statement No.:
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(3) Filing Party:
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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
--------
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders, which will be held on Thursday, October 28, 1999, 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
October 7, 1999
<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 28, 1999
--------
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 28,
1999, 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 eleven directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and
qualified.
2. To approve an amendment to The Bear Stearns Companies Inc.
Performance Compensation Plan.
3. To approve amendments to The Bear Stearns Companies Inc. Capital
Accumulation Plan for Senior Managing Directors.
4. To approve The Bear Stearns Companies Inc. Stock Award Plan.
5. 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 20, 1999, 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
October 7, 1999
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 28, 1999
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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 1999 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 28, 1999, 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 October 7, 1999, to holders
of record on September 20, 1999, 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 by the
Company prior to the receipt of the notice or later proxy. 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 an amendment to The Bear Stearns
Companies Inc. Performance Compensation Plan, as heretofore amended (the
"Performance Compensation Plan"), as described herein; FOR the approval of
amendments to The Bear Stearns Companies Inc. Capital Accumulation Plan for
Senior Managing Directors, as heretofore amended (the "Capital Accumulation
Plan"), as described herein; FOR the approval of The Bear Stearns Companies Inc.
Stock Award Plan (the "Stock Award 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 LLC, 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.
<PAGE>
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", "BSSC" and "BSIL" are
to Bear, Stearns & Co. Inc., Bear, Stearns Securities Corp., and Bear, Stearns
International Limited, respectively, the principal subsidiaries of the Company.
VOTING SECURITIES
Holders of record of Common Stock at the close of business on September
20, 1999, 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 20, 1999, 117,466,675 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 an amendment to the Performance Compensation
Plan, (ii) the approval of amendments to the Capital Accumulation Plan, and
(iii) the approval of the Stock Award 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 following table sets forth certain information furnished to the
Company regarding each person or group of persons known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock as of
September 8, 1999:
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF SHARES OF OUTSTANDING COMMON
BENEFICIAL OWNER COMMON STOCK STOCK(1)
---------------- ------------ --------
Tiger Management
Corporation(2) 7,007,160 5.97%
Tiger Management L.L.C.
Tiger Performance L.L.C.
101 Park Avenue
New York, New York 10178
(1) Based on outstanding shares of 117,466,675.
(2) Tiger Management Corporation ("TMC") reported on SEC Form 13F dated 6/30/99
that it has shared voting and dispositive power with respect to 7,007,160 shares
of common stock on behalf of the clients of Tiger Management L.L.C. ("TMLLC")
and Tiger Performance L.L.C. ("TPLLC"). Julian H. Robertson, Jr. is the ultimate
controlling person of TMC, TMLLC and TPLLC.
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<PAGE>
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
8, 1999. 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).
<TABLE>
<CAPTION>
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
-------------------- ------------ ----- ------------ --------
<S> <C> <C> <C> <C>
James E. Cayne (5)............. 4,086,381 3.48% 2,631,131 4.22%
Carl D. Glickman (6)........... 362,139 (4) - (4)
Alan C. Greenberg.............. 274,886 (4) 1,308,066 (4)
Donald J. Harrington, C.M...... 254 (4) - (4)
Mark E. Lehman (7)............. 110,720 (4) 297,876 (4)
Marshall J Levinson (8) ....... 1,363 (4) 21,355 (4)
William L. Mack................ 21,000 (4) - (4)
Michael Minikes (9) ........... 457,812 (4) 472,621 (4)
Samuel L. Molinaro Jr.......... 8,061 (4) 51,135 (4)
Frank T. Nickell............... 31,906 (4) - (4)
Frederic V. Salerno............ 390 (4) - (4)
Alan D. Schwartz............... 937,635 (4) 1,830,242 1.74%
Warren J. Spector (10)......... 388,202 (4) 3,367,231 2.36%
Vincent Tese................... 1,050 (4) - (4)
Fred Wilpon.................... 1,274 (4) - (4)
All directors, nominees and
executive officers as a
group (15 individuals)......... 6,683,073 5.69% 9,979,657 10.46%
</TABLE>
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(Footnotes on following page)
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<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
3,199 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 September 1999 to the following persons: Mr. Cayne -
47,866, Mr. Greenberg - 24,885, Mr. Lehman - 3,500, Mr. Levinson - 503,
Mr. Minikes - 12,963, Mr. Molinaro - 656, Mr. Schwartz - 23,440, and Mr.
Spector - 41,583.
(4) Less than one percent.
(5) Does not include 43,495 shares of Common Stock owned by Mr. Cayne's wife,
as to which shares Mr. Cayne disclaims beneficial ownership. Does not
include 230,623 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 7,665 shares of Common Stock owned by a child
of Mr. Cayne, as to which shares Mr.
Cayne disclaims beneficial ownership.
(6) Does not include 3,264 shares of Common Stock owned by Mr. Glickman's
wife, as to which shares Mr. Glickman disclaims beneficial ownership.
(7) Does not include 30,252 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 74 shares of Common Stock held in a trust established for
Mr. Levinson's daughter, as to which shares Mr. Levinson disclaims
beneficial ownership.
(9) Does not include 1,696 shares of Common Stock owned by Mr. Minikes' wife,
as to which shares Mr. Minikes disclaims beneficial ownership.
(10) Does not include 606 shares of Common Stock owned by Mr. Spector's wife,
as to which shares Mr. Spector disclaims beneficial ownership.
-4-
<PAGE>
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
except for Messrs. Schwartz and Spector. 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.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 8, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1999 AND DIRECTORSHIPS HELD THE COMPANY
---- ---- ---------------------- -----------
<S> <C> <C> <C>
James E. Cayne................. 65 President and Chief Executive Officer of 1985
the Company and Bear Stearns, member of the
Executive Committee (as hereinafter
defined)
Carl D. Glickman............... 73 Private Investor; In the United States, 1985
Director, Lexington Corporate Property
Trust and Office Max Inc.; In Israel,
Director, Alliance Tire and Rubber Company
(1992) Ltd. and The Jerusalem Economic
Corporation Ltd., Trustee, Cleveland State
University
Alan C. Greenberg.............. 72 Chairman of the Board of the Company and 1985
Bear Stearns and Chairman of the Executive
Committee
Donald J. Harrington, C.M...... 53 President, St. John's University; Director, 1993
The Reserve Fund, Reserve Institutional
Trust, Reserve Tax-Exempt Trust, Reserve
New York Tax-Exempt Trust and Reserve
Special Portfolios Trust
William L. Mack................ 59 Founder and Managing Partner, The Apollo 1997
Real Estate Investment Funds; President and
Senior Managing Partner, The Mack
Organization; Chairman of the Board of
Metropolis Realty Trust, Inc.; Director,
Mack-Cali Realty Corporation, Koger Equity,
Inc. and Vail Resorts, Inc.
Frank T. Nickell............... 52 President and Chief Executive Officer of 1993
Kelso & Company; Director, Earle M.
Jorgensen Company and Peebles Inc.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
SEPTEMBER 8, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 1999 AND DIRECTORSHIPS HELD THE COMPANY
---- ---- ---------------------- -----------
<S> <C> <C> <C>
Frederic V. Salerno............ 56 Senior Executive Vice President and 1992
CFO/Strategy and Business Development and
Director of Bell Atlantic Corporation;
Director, Avnet, Inc., KeySpan Energy
Corp., The Hartford and Viacom, Inc.
Alan D. Schwartz............... 49 Executive Vice President and Head of the 1987 (1)
Investment Banking Group of Bear Stearns;
Director, Unique Casual Restaurants, Inc.,
Young & Rubicam, Inc.
Warren J. Spector.............. 41 Executive Vice President and Head of the 1990 (1)
Fixed Income Group of Bear Stearns
Vincent Tese................... 56 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Allied Waste
Industries Inc., Angram, Inc., Bowne & Co.,
Inc., Cablevision International, Custodial
Trust Company, Mack-Cali Realty Corp. and
KeySpan Energy Corp.
Fred Wilpon.................... 62 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Chairman of
Executive Committee and Director of
Pathogenesis Corporation; President and
Chief Executive Officer of the New York Mets
</TABLE>
(1) Did not serve as director during 1997 and 1998.
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<PAGE>
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.
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) and Managing Partner of the Apollo Real Estate
Investment Funds for more than the past five years. 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. Schwartz has been an Executive Vice President of Bear Stearns for more
than the past five years. Prior to June 30, 1999, Mr. Schwartz was an Executive
Vice President of the Company and a member of the Executive Committee for more
than the past five years. Mr. Schwartz is responsible for all of the investment
banking activities of Bear Stearns.
Mr. Spector has been an Executive Vice President of Bear Stearns for
more than the past five years. Prior to June 30, 1999, Mr. Spector was an
Executive Vice President of the Company and a member of the Executive
Committee for more than the past five years. Mr. Spector is responsible for
all of the fixed income activities of Bear Stearns.
Mr. Tese has been Chairman of Wireless Cable International Inc. since
April 1995. Mr. Tese was Chairman of Cross Country Wireless Inc. 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.
-7-
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Board of Directors held six meetings (exclusive of committee meetings)
during the preceding fiscal year. In addition, the Board of Directors has
established three 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, except Messrs. Nickell and Tese,
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. During the last fiscal year, the Executive Committee
of the Company (the "Executive Committee") consisted of Messrs. Cayne, Greenberg
(Chairman), Lehman, Schwartz and Spector. It met once each week and more
frequently, as required, having held 59 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 that 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 that 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. Glickman, Mack, Salerno, and Tese (Chairman).
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 six 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 Performance
Compensation Plan pursuant to which the salary and bonus compensation of certain
Senior Managing Directors (including certain executive officers) of the Company
is determined. The Compensation Committee also approved the salary and bonus
compensation of other executive officers and other Senior Managing Directors
based upon recommendations made 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.
The Board of Directors does not have a nominating committee.
-8-
<PAGE>
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 members of the Executive Committee and certain
other Senior Managing Directors (who may also be executive officers) is
determined by the operation of the Performance Compensation Plan, which plan has
been adopted and is administered by the Compensation Committee and has been
approved by the stockholders. The fiscal year 1999 salaries and bonuses of
Senior Managing Directors, to the extent not determined by 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 Performance Compensation Plan,
which was adopted in 1996, is designed to implement the foregoing philosophy.
Under the Performance Compensation Plan, certain Senior Managing Directors
(including executive officers) of the Company designated by the Compensation
Committee receive a base salary of $200,000 per annum and a share of a
performance-based bonus fund.
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 the
development and maintenance of the Company's franchise, (iv) controlling costs,
and (v) promoting cooperation within and between business units.
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 ownership of the Company's
Common Stock. During fiscal year 1999, 94% of the more than 400 eligible Senior
Managing Directors of Bear Stearns (including all executive officers of the
Company) participated in the Capital Accumulation Plan.
On September 28, 1999, the Board of Directors, based on the recommendation
of the Compensation Committee, adopted The Bear Stearns Companies Inc. Stock
Award Plan (the "Stock Award Plan"), which is subject to approval by the
stockholders at the Annual Meeting. The Stock Award Plan will allow for the
grant of stock options and other stock awards. The Compensation Committee
intends to grant future stock awards pursuant to the Stock Award Plan in concert
with employee participation in the Capital Accumulation Plan. Such awards are
expected to be paid in lieu of cash compensation otherwise payable to employees.
Total compensation to employees including any future grants of stock awards made
pursuant to the Stock Award Plan will be determined in relation to the Company's
overall compensation philosophy and competitive conditions for attracting and
retaining key employees.
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If the Stock Award Plan had been in effect for fiscal 1999, there would
have been no increase in the total compensation payable to any employees,
including the Company's executive officers. The Compensation Committee believes
that the Stock Award Plan, in conjunction with the Capital Accumulation Plan
will serve to link the interests of management and the stockholders.
Compensation under the Stock Award Plan is intended to qualify for deductibility
by the Company pursuant to Section 162(m) of the Internal Revenue Code.
PERFORMANCE COMPENSATION PLAN
The Compensation Committee is also responsible for administering the
Performance Compensation Plan (the "Plan"). All of the Company's Senior Managing
Directors, including executive officers, are eligible to participate in the
Plan. The Compensation Committee is required to designate those Senior Managing
Directors who are participating in the Plan (the "Participants") within 90 days
after the beginning of each fiscal year. Under the terms of the Plan, each of
the Participants receives a base salary of $200,000 per annum and also shares in
a performance-based bonus pool. The Compensation Committee determines the
formula for calculating one or more bonus pools within 90 days after the
beginning of each fiscal year 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 Plan exceed 100% of the bonus pools computed under
the formula designated by the Compensation Committee, as previously described
above.
For fiscal year 1999, the Compensation Committee created two separate
performance-based pools. One pool consisted of five Participants, who were also
members of the Company's Executive Committee (the "Executive Committee Pool"),
while the other pool consisted of eight members, including three executive
officers. The Compensation Committee established a formula for calculating the
Executive Committee Pool based on the Company's adjusted after-tax return on
common equity. The maximum amount allocable to the Executive Committee Pool was
$150,000,000, of which the maximum percentage of any individual Participant was
30% of such pool. The total bonus pool resulting from this formula for fiscal
1999 was $75,655,000 as compared to the $76,091,000 paid in fiscal 1998 under
the terms of the Management Compensation Plan.
The Compensation Committee also established the formulas for calculating
the other bonus pool for fiscal year 1999 and the share for each Participant
based upon a combination of factors including departmental pre-tax profits and
adjusted pre-tax return on equity of the Company. The total bonus pool resulting
from the application of these formulas for fiscal year 1999 was $76,500,000 of
which the Compensation Committee, based on the recommendation of the Management
and Compensation Committee, and concurrence of the Executive Committee,
determined that bonuses aggregating $31,450,000 would be paid to Participants in
the other bonus pools.
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 Plan has 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 three current members of the Executive Committee
beneficially own 5.47% of the outstanding Common Stock and CAP Units combined,
while all directors, nominees and executive officers as a group beneficially own
10.46% of the outstanding Common Stock and CAP Units combined as of September 8,
1999.
The Capital Accumulation Plan has been and will continue to be a major
contributor to equity ownership by senior executives. During fiscal year 1999,
94% of the more than 400 eligible Senior Managing Directors of Bear Stearns
(including all executive officers of the Company) participated in the Capital
Accumulation Plan.
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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
generally defer a portion of their annual compensation for a period (a "Deferral
Period") of five years after the end of the fiscal year for which it was
otherwise payable.
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"). 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 such participant's Capital Accumulation Account plus cash in the
amount, if any, of the participant's cash balance account at the end of such
period.
For fiscal years 1997, 1998 and 1999 participants in the Capital
Accumulation Plan have deferred a total of approximately $718,000,000 in
compensation which in turn has been used to acquire approximately 19.4 million
CAP Units. Furthermore, for fiscal year 1999, 39.60% 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 56.45% of such compensation was deferred by all
executive officers, directors and nominees. As of June 30, 1999, a total of
39,623,426 CAP Units were credited to the accounts of participants, representing
24.87% of the outstanding Common Stock and CAP Units combined.
Pursuant to the terms of the Capital Accumulation Plan participants will
only receive CAP Units to the extent shares are purchased from existing
stockholders. Accordingly, employee stock ownership is increased without
substantial dilution to earnings per common 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.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The total compensation of Mr. Cayne, the Company's Chief Executive
Officer, along with other members of the Executive Committee, is determined in
all material respects by the Performance Compensation Plan. Pursuant to the
terms of the Performance Compensation Plan, for fiscal year 1999 Mr. Cayne
received a base salary of $200,000 and shared in a bonus fund based on the
Company's fiscal year 1999 after-tax return on equity. Mr. Cayne's proportionate
share of the fiscal year 1999 bonus fund (as well as that of the other members
of the Executive Committee) was determined by the Compensation Committee in
September 1998, 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 1999.
Mr. Cayne's total salary and bonus compensation for fiscal 1999 was
$21,383,400, an increase of 7% over fiscal 1998, which reflects the Company's
financial performance and the allocation of the bonus fund. Of the total fiscal
year 1999 compensation of Mr. Cayne, 48.2% 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. In the five year period from
fiscal 1994 through fiscal 1998, Mr. Cayne deferred $38,018,537 into the CAP
Plan. The $8,639,708 reported in the All Other Compensation column of the
Summary Compensation Table on page 13 reflect fiscal 1999 earnings related to
these deferrals.
The Compensation Committee believes that the Performance Compensation Plan
and the Capital Accumulation Plan provide appropriate incentives to senior
management of the Company and are fair and reasonable methods for determining
the compensation of 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.
Upon the recommendation of the Compensation Committee, the Company
recently amended the Performance Compensation Plan and the Capital Accumulation
Plan and adopted the Stock Award Plan, subject to the receipt of approval by the
stockholders of the Company at the Annual Meeting. Collectively, these changes
enhance the flexibility available to the Compensation Committee in structuring
the compensation packages of key employees to reflect their contributions to the
Company and also enhance the Company's ability to attract and
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retain key individuals in an intensely competitive business environment. The
Stock Award Plan is more fully described below under "Approval of the Stock
Award Plan."
Compensation Committee
Carl D. Glickman, Chairman
Donald J. Harrington
Frank T. Nickell
Vincent Tese
* * *
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COMPENSATION TABLES AND OTHER INFORMATION
The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company (other than the Chief Executive Officer) for the three fiscal years
ended June 30, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------
NAME AND FISCAL RESTRICTED STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2)(3) COMPENSATION (4)
- ------------------ ---- ------ -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
James E. Cayne 1999 $200,000 $10,871,700 $10,311,700 $8,639,708
Chief Executive Officer 1998 200,000 10,171,830 9,611,830 7,192,766
and President 1997 200,000 10,175,750 9,616,250 3,223,209
Alan C. Greenberg 1999 200,000 9,648,512 3,212,838 4,434,095
Chairman of the Board 1998 200,000 13,698,880 4,562,960 3,716,754
1997 200,000 14,132,375 4,707,625 1,685,120
Alan D. Schwartz 1999 200,000 8,725,119 8,108,119 5,589,797
Executive Vice President 1998 200,000 8,009,714 7,398,714 4,578,028
1997 200,000 8,002,250 7,412,750 1,981,791
Warren J. Spector 1999 200,000 18,000 20,219,713 9,658,375
Executive Vice President 1998 200,000 4,175,000 14,657,522 8,276,621
1997 200,000 4,204,500 14,635,500 3,523,924
Mark E. Lehman 1999 200,000 2,544,650 1,994,650 869,158
Executive Vice President 1998 200,000 2,177,275 1,627,275 674,445
1997 200,000 1,892,500 1,342,500 278,866
</TABLE>
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 Performance Compensation Plan. See
"Executive Compensation - Compensation Committee Report Performance
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 1999, 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, 1999, the following CAP
Units were credited to such persons' Cap Units accounts as a result of
their fiscal year 1999 deferrals: Mr. Cayne -- 186,949; Mr. Greenberg --
58,248; Mr. Schwartz -- 146,999; Mr. Spector -- 366,580; and Mr. Lehman --
36,162. 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, 1999, 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
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System on such date) was: Mr. Cayne -- $125,243,138 (2,678,997 units); Mr.
Greenberg -- $62,315,483 (1,332,951 units); Mr. Schwartz -- $86,659,676
(1,853,683 units); Mr. Spector -- $159,362,066 (3,408,814 units); and Mr.
Lehman -- $14,089,351 (301,376 units).
(4) Represents preferential earnings paid 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 its Peer Group. The entities
included in the Company's current peer group (the "Peer Group") consist of
Merrill Lynch & Co., Inc., Morgan Stanley, Dean Witter & Co., PaineWebber Group
Inc., Donaldson, Lufkin & Jenrette, Inc. and Lehman Brothers Holdings, Inc. The
performance graph assumes the value of the investment in the Company's Common
Stock and each index was $100 on June 30, 1994, 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 OMITTED]
Assumes $100 invested on June 30, 1994 in the Company's Common Stock; S&P 500
Index; S&P Financial Diversified Index; the Peer Group and that all dividends
have been reinvested.
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<PAGE>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
The Bear Stearns Companies Inc. 100.00 136.45 162.70 252.57 425.83 372.65
Peer Group (1) 100.00 148.18 174.32 300.63 541.13 556.06
S & P Financial Diversified Index 100.00 125.62 167.09 247.97 382.01 496.22
S & P 500 Index 100.00 126.07 158.85 213.97 288.94 354.70
- -------------------------
(1) 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 not
included in results for 1994 and 1995. The Peer Group no longer includes
Bankers Trust Corporation, due to its merger with Deutsche Bank and the
unavailability of financial information. The Peer Group also does not
include Travelers Group, Inc., due to its merger with Citigroup, Inc. and
the unavailability of financial information on a comparable basis.
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 committee 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 unusual terms or conditions which are disadvantageous to
the Company. 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 that could be substantial depending
on various factors, including the size of the transaction. Bear Stearns
periodically in the ordinary course of its business, enters into transactions,
as principal, involving the purchase or sale of securities and commercial paper
(including different forms of repurchase transactions) with directors, officers,
employees of the Company and members of their immediate families. Such purchases
and sales of securities or commercial paper on a principal basis are 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
BSSC 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, 1999, the maximum aggregate
amount of month-end loans outstanding against commissions and other compensation
was approximately $3,884,278.
The Company has formed a limited partnership, The BSC Employee Fund, L.P.
(the "Fund"), which provides an 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, 1999, 337 participants in the Fund have purchased a total of 1,215
limited partnership interests. Each limited partnership interest represents a
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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 Fund participant. The loans bear interest at the
London Interbank Offered Rate plus 1.0%. Capital calls since June 12, 1997 have
totalled 71.94% of each participant's equity commitment. The total amount loaned
to the participants in the Fund at June 30, 1999 was $15,821,900. At such date,
loans in excess of $60,000 were outstanding to the following directors or
executive officers in the aggregate dollar amount set forth after each of their
respective names: James E. Cayne ($263,258), Alan D. Schwartz ($263,258), and
Warren J. Spector ($1,053,033). The aggregate amount of the loans outstanding to
all directors and executive officers as a group on such date was $1,658,527.
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. The Company entered into an
agreement with Bradick 383 Associates LLC (the "Developer"), of which Sterling
BSC owns a 60% interest and Hines owns a 40% interest. Under the terms of this
agreement, relating to the development of the Company's new world headquarters
being developed at 383 Madison Avenue, the Company has agreed to pay a
development fee of $12 million and has also agreed to reimburse the Developer
for any direct administrative costs associated with the project. During fiscal
1999, the Company paid the Developer $3,846,105 related to this agreement. 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.
The Company represented Apollo Real Estate Investment Funds and other
entities in a $1 billion convertible preferred investment in Patriot American
Hotels. The Company received fee income in the amount of $12 million in 1999 in
connection with this transaction. William L. Mack, a director of the Company, is
the Founder and Managing Partner of Apollo Real Estate Investment Funds.
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 1999.
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 Form 5's were required, the Company believes
that during the 1999 fiscal year all Section 16(a) filing requirements were
complied with.
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II. APPROVAL OF AMENDMENT TO THE PERFORMANCE COMPENSATION PLAN
GENERAL
The Performance Compensation Plan was adopted by the Compensation
Committee on September 10, 1996 and was approved by stockholders at the 1996
Annual Meeting. The Performance Compensation 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 Performance
Compensation Plan, prior to the proposed amendment being considered at the
Annual Meeting, were adopted effective October 29, 1998 and are reflected in the
amended and restated Performance Compensation Plan filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for fiscal quarter ended December 31,
1998.
The Performance Compensation Plan is applicable for the five fiscal years
of the Company ending June 30, 2003. All of the Company's Senior Managing
Directors, including executive officers, are eligible to participate in the
Performance Compensation Plan. The Compensation Committee is required to
designate those Senior Managing Directors who are participating in the
Performance Compensation Plan (the "Participants") within 90 days after the
beginning of each fiscal year. Under the terms of the Performance Compensation
Plan, each of the Participants receives a base salary of $200,000 per annum and
also shares in a performance-based bonus pool. The Compensation Committee
determines the formula for calculating one or more bonus pools within 90 days
after the beginning of each fiscal year 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 formula designated by the Compensation Committee
as previously described above. The Compensation Committee, in its sole
discretion, may reduce the amount of the bonus of any Participant. 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 million, and the proportionate share of
such bonus pool for any fiscal year for each Participant who is a member of the
Executive Committee shall not exceed 30% of the amount of such bonus pool. The
maximum bonus that may be allocated to a Participant who is not a member of the
Executive Committee in any fiscal year is $15 million. The Performance
Compensation Plan may be amended by the Compensation Committee provided that no
such action may retroactively impair or otherwise adversely affect the rights of
any Participant prior to the date of such action.
PROPOSED AMENDMENT TO PERFORMANCE COMPENSATION PLAN
On September 29, 1999, the Compensation Committee adopted an amendment to
the Performance Compensation Plan, subject to stockholder approval at the Annual
Meeting. The proposed amendment to the Performance Compensation Plan would set
the maximum amount allocable by the Compensation Committee to the annual bonus
pool relating to Participants who are members of the executive committee of Bear
Stearns in the aggregate for any fiscal year at $150 million, and establish that
the maximum bonus that may be allocable to a Participant who is not a member of
the executive committee of Bear Stearns at $15 million.
The amendment to the Performance Compensation Plan is 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 for Senior Managing
Directors who are or may become members of the executive committee of Bear
Stearns in the future. (See "Executive Compensation - Compensation Committee
Report - Performance Compensation Plan" for a discussion of Section 162(m) of
the Internal Revenue Code.)
Set forth below is the text of the revised Section 5.5 of the Performance
Compensation Plan containing the amendment being proposed at the Annual Meeting.
The amendment is qualified in its entirety by reference to such text.
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"Section 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 OF BEAR, STEARNS & CO. INC. 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 such executive committee shall not exceed $15,000,000."
The foregoing amendment to the Performance Compensation Plan would not
have changed any of the benefits paid to participants if it had been in effect
for fiscal year 1999, 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 PERFORMANCE COMPENSATION PLAN.
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III. APPROVAL OF AMENDMENTS 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
amendment being considered at the Annual Meeting, were adopted effective October
29, 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, 1998. 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 subsequent to 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 1999, 94% of the more than 400 eligible Senior Managing
Directors participated in the Capital Accumulation Plan, including all executive
officers. Participants in any fiscal year are generally required to defer the
following percentages of their total compensation for such fiscal year (after
deducting any amounts deferred under other plans sponsored by the Company) that
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.
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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 such participant's Capital Accumulation Account plus
cash, if any, in 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.
PROPOSED AMENDMENTS 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, in
private transactions (which may include the repurchase from participants of
Common Stock distributed upon the expiration of a Deferral Period), or by
entering into forward contracts to purchase Common Stock under the Capital
Accumulation Plan from participants at the time the Common Stock is distributed.
Forward contracts entitle participants to receive an amount of cash equal to the
average price of the Common Stock on the New York Stock Exchange during the term
of the forward contract. The Compensation Committee has determined that it would
be advantageous to both the Company and participants to have a provision in the
repurchase contract that would not require the Company to repurchase stock when
the price was above a predetermined level, nor would it require the participant
to sell stock when the price was below a
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predetermined level with respect to that period. Participants will continue to
benefit from 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 Common Stock at the time of distribution. The ultimate purchase
price paid by the Company pursuant to a forward purchase contract may be higher
than the trading price of the Common Stock at the time of repurchase, thereby
resulting in a benefit to participants. This amendment is 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).
On September 7, 1999, the Compensation Committee adopted an amendment to
the Capital Accumulation Plan, subject to stockholder approval at the Annual
Meeting. The amendment to Section 8.7 would allow entering into forward
contracts containing a purchase price that falls within a range of prices
defined by the Board Committee. Set forth below is the text of the revised
Section 8.7 of the Capital Accumulation Plan containing the amendment being
proposed at the 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
SUCH PRICE IS WITHIN THE RANGE DEFINED BY THE BOARD COMMITTEE, AND
PROVIDED FURTHER 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 that 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 Capital Accumulation Plan presently provides that the entire amount of
a participant's deferral will be credited as CAP Units (or as a credit to the
participant's cash account, in the event that sufficient CAP Units are not
available.) On September 29, 1999, the Capital Accumulation Plan was amended by
the Compensation Committee, subject to stockholder approval at the Annual
Meeting, to provide that a portion of a participant's deferrals may not be
credited as CAP Units. Specifically, the Compensation Committee will determine a
percentage of a participant's deferrals which will not be credited to the
participant's Capital Accumulation Account. It is intended that the participant
will instead receive options to purchase shares of Common Stock pursuant to the
Stock Award Plan (see approval of the Stock Award Plan) or other consideration.
Set forth below is the text of the revised sections of the Capital
Accumulation Plan containing the amendments being proposed at the Annual
Meeting. The amendments are qualified in their entirety by reference to such
text.
1. The following definitions shall be added to Section 2.1:
"Stock Award Amount" means, for a Plan Year, a dollar amount equal to the
sum of (a) a Participant's Required Deferral Amount for the Plan Year,
multiplied by the related Stock Award Percentage, plus (b) a Participant's
Additional Deferral Amount, if any, multiplied by the related Stock Award
Percentage.
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* * * * * * * **
"Stock Award Percentage" means, for any Plan Year, the percentage
determined by the Compensation Committee, which will be applied to either
the Required Deferral Amount or the Additional Deferral Amount to
determine the amount which will be awarded pursuant to the Stock Award
Plan. The Compensation Committee has the right to select different
percentages for determining each of these amounts.
2. The definition of "Total Deferral Amount" in Section 2.1 shall be
amended to read as follows:
"Total Deferral Amount" for any Participant means, for each Plan Year, the
sum of the Required Deferral Amount and the Additional Deferral Amount,
reduced by the Stock Award Amount.
The foregoing amendments to the Capital Accumulation Plan would not have
had any impact on benefits paid to participants if they had been in effect for
fiscal year 1999, 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 AMENDMENTS
TO THE CAPITAL ACCUMULATION PLAN.
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IV. APPROVAL OF THE STOCK AWARD PLAN
The Board of Directors proposes that the stockholders approve the Stock
Award Plan, a copy of which is attached to this Proxy Statement as Exhibit A.
Stockholders are encouraged to review the Stock Award Plan carefully. Any
description in this Proxy Statement of the Stock Award Plan is qualified in its
entirety by a reference to Exhibit A.
On September 28, 1999, the Board of Directors adopted the Stock Award
Plan, subject to approval by the stockholders at the Annual Meeting. The Stock
Award Plan is 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 "Description of the Stock Award Plan - Certain
Federal Income Tax Consequences - Limitations on Company Deductions; Parachute
Payments" for a discussion of Section 162(m) of the Internal Revenue Code). If
stockholder approval of the Stock Award Plan is not obtained, no options or
other equity participation will be issued under the Stock Award Plan.
PURPOSE
The purpose of the Stock Award Plan is to provide the Company with greater
flexibility in the composition of incentive awards and to secure for the Company
and its stockholders the continued services of key employees who are important
to the success and growth of the business of the Company and its subsidiaries.
The Company believes that awards under the Stock Award Plan may serve to broaden
the equity participation of such key employees and further link the long-term
interests of management and stockholders. The Company will consider awards
pursuant to the Stock Award Plan in light of its overall compensation philosophy
and competitive conditions in the marketplace. The Company intends to grant
future stock awards pursuant to the Stock Award Plan in concert with employee
participation in the Capital Accumulation Plan.
The Bear Stearns Companies Inc. 1985 Stock Option Plan (the "1985 Option
Plan") expired on October 28, 1995. The only grants pursuant to the 1985 Option
Plan were made in August of 1989 and there are no remaining unexercised options
outstanding. Since that date, the Company has relied on the Capital Accumulation
Plan to provide long-term incentive compensation to the Company's key
executives. The Company adopted the Stock Award Plan in the belief that the
flexibility to selectively use options and other stock awards as part of an
overall compensation package for key employees may enhance the Company's ability
to attract and retain such individuals in an intensely competitive business
environment. A number of the Company's competitors utilize equity awards as a
significant component of their incentive compensation programs. The use of
equity-based compensation as a larger percentage of total compensation should
more closely align executive incentives with the long-term goals of the
Company's stockholders, in a tax-efficient manner.
DESCRIPTION OF THE STOCK AWARD PLAN
The Stock Award Plan is set forth as Exhibit A to this Proxy Statement and
the summary of the material terms of the Stock Award Plan contained herein is
qualified in its entirety by a reference to Exhibit A. All references to the
"Plan" in the remaining text of this subsection shall mean the Stock Award Plan.
The determination of employee recipients of options and awards, their
terms and conditions within the parameters of the Plan and the number of shares
covered by each option or award will be determined and administered by the
Compensation Committee ("Committee").
Key employees of the Company or any of its subsidiaries, including
executive officers and directors, to the extent that they are key employees of
the Company or any of its subsidiaries, are eligible to participate in the Plan
based upon its terms and conditions. Awards may be granted by the Compensation
Committee and may include: (i) options to purchase shares of Common Stock in the
form of incentive stock options, as defined in Section 422 of the Internal
Revenue Code ("ISOs"), or non-qualified stock options; (ii) stock appreciation
rights granted in tandem with such options ("SARs"); (iii) restricted stock
awards; and (iv) stock units representing the right to receive shares of Common
Stock at the end of a specified deferral period. At the time of original grant
of options, the Compensation Committee may also authorize the grant of reload
options, which shall be non-qualified stock options for such number of shares of
Common Stock as were used by the participant to pay the purchase price upon the
exercise of previously granted options, but are still subject to the other terms
set forth in the Plan. For each calendar year, during any part of which the Plan
is in effect, no participant may be granted awards relating in the aggregate to
more than 1,000,000 shares of Common Stock, as adjusted to reflect certain
changes to the outstanding Common Stock pursuant to the Plan. Awards of options
and SARs are not transferable except by will or the laws of descent
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and distribution. However, non-qualified stock options may be transferred, for
no consideration, to certain family members of the plan participant or to trusts
for such family members. Restricted stock awards and deferred stock units remain
subject to the restrictions established by the Compensation Committee for the
restriction or deferral period and may not be sold, transferred, pledged or
otherwise encumbered during such period. Shares of such restricted stock and
deferred stock units will be forfeited and will revert to the Company upon the
recipient's termination of employment during the restriction or deferral period,
except to the extent that the Compensation Committee finds that such forfeiture
is not in the best interest of the Company.
The option price per share of options granted under the Plan shall be
determined by the Compensation Committee. However, the per share option price of
any ISO shall not be less than 100% of the fair market value (as hereinafter
defined) of a share of Common Stock at the time the ISO is granted, and the per
share option price of any non-qualified stock option shall not be less than 50%
of the fair market value of a share of Common Stock at the time the
non-qualified stock option is granted. The "fair market value" of the Common
Stock on any date means (i) if the Common Stock is listed on a national
securities exchange or quotation system, the closing sales price on such
exchange or quotation system on such date or, in the absence of reported sales
on such date, the closing sales price on the immediately preceding date on which
sales were reported, (ii) if the Common Stock is not listed on a national
securities exchange or quotation system, the mean between the bid and offered
prices as quoted by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") for such date or (iii) if the Common Stock
is neither listed on a national securities exchange or quotation system nor
quoted by NASDAQ, the fair value as determined by such other method as the
Compensation Committee determines in good faith to be reasonable. At the close
of trading on September 20, 1999, the closing sales price of the Common Stock as
reported on the NYSE was $41.375 per share. Each option shall be exercisable at
such times, or upon the occurrence of such events, and in such amount, as may be
determined by the Compensation Committee and stated in the option award
agreement. The term of each option may not exceed ten years from the date of
grant. Payment of the option price upon exercise of an option may be made (i) by
check payable to the Company, (ii) with the consent of the Compensation
Committee by delivery of Common Stock already owned by the optionee for at least
six months (which may include shares received as the result of a prior exercise
of an option) having a fair market value (determined as of the date such option
is exercised) equal to all or part of the aggregate purchase price, (iii) with
the consent of the Compensation Committee, and at the election of the
participant, by withholding from those shares that would otherwise be obtained
upon exercise of the option a number of shares having a fair market value equal
to the option exercise price, (iv) in accordance with a cashless exercise
program as specified in the Plan or (v) by any combination of the foregoing
alternatives or by any other means that the Compensation Committee deems
appropriate. No optionee shall have any rights to dividends or other rights of a
stockholder with respect to his or her shares subject to the option until the
optionee has given written notice of exercise and paid in full for such shares.
The Compensation Committee may, in its sole discretion, with respect to
each option granted under the Plan, grant tandem stock appreciation rights, that
is, the right to relinquish such option in whole or in part and to receive a
cash payment equal to the excess of the fair market value of the stock covered
by the relinquished option (or part thereof) over the applicable option price.
Awards of restricted stock under the Plan may be in addition to or in lieu
of option grants. During the restriction period (which may be a restriction
period that ends after certain period(s) of time and/or upon the attainment of
certain performance goals, as set by the Compensation Committee) the recipient
of restricted stock is not permitted to sell, transfer, pledge or otherwise
encumber the shares, and upon the recipient's termination of employment during
the restriction period, shares of restricted stock shall generally revert to the
Company. If provided by the Compensation Committee shares of restricted stock
may become free of restriction under certain circumstances such as death,
permanent disability or retirement of the recipient or the occurrence of a
Change in Control of the Company (as hereinafter defined) or following any other
termination of employment where the Compensation Committee determines that
forfeiture is not in the best interest of the Company.
Deferred stock units represent the right to receive shares of Common Stock
after the deferral period and subject to such other terms and conditions as set
by the Compensation Committee. During the deferral period, dividends on the
specified number of shares of Common Stock covered by the deferred stock units
may be paid in cash, or deferred and/or the value thereof automatically
reinvested in additional deferred stock units as the Committee may determine or
permit the participant to elect.
In the event of a Change in Control of the Company, the Compensation
Committee may, to assure fair and equitable treatment of the participants in the
Plan (i) accelerate the exercisability of any outstanding options, or the
expiration of restriction periods of restricted stock or deferred stock units
awarded pursuant to the Plan; (ii) offer to purchase any outstanding option,
shares of restricted stock or deferred stock units made pursuant to the Plan
from
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the holder for its equivalent cash value; and (iii) make adjustments or
modifications to outstanding options, restricted stock or deferred stock units
as the Compensation Committee deems appropriate to maintain and protect the
rights and interests of participants in the Plan following such Change in
Control. In no event, however, may any option be exercised prior to the
expiration of six months from the date of grant (unless otherwise provided in
the option agreement pursuant to which such option was granted) or after ten
years from the date of grant. "Change in Control" means: (a) a majority of the
Board of Directors ceases to consist of Continuing Directors (as hereinafter
defined); (b) any person becomes the beneficial owner of 25% 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. "Continuing Directors" means
those members of the Board of Directors on the effective date of the Plan or who
are elected to the Board of Directors after such date upon the recommendation or
with the approval of a majority of the Continuing Directors at the time of such
recommendation or approval.
An aggregate of 25,000,000 shares of Common Stock (subject to adjustment
as described below and provided in the Plan) will be subject to the Plan. No
more than 8,000,000 of such shares may be awarded as restricted stock awards.
Shares subject to options which terminate or expire unexercised, or shares of
restricted stock which are forfeited, will become available for future option
grants or restricted stock awards.
The Company's Board of Directors may terminate, modify or amend the Plan,
but no amendment may be made which would, without the approval of the
stockholders (i) change the class of employees eligible to receive an award of
restricted stock or options payable in Common Stock, (ii) increase the total
number of shares reserved for issuance under the Plan or (iii) materially
increase the benefits accruing to participants under the Plan, within the
meaning of Rule 16b-3 promulgated under the Exchange Act. The Compensation
Committee may amend the terms of any award of restricted stock or option already
granted, provided that any such retroactive amendment is consistent with the
provisions of the Plan and does not disqualify an ISO under the provisions of
Section 422 of the Internal Revenue Code.
In the event of certain changes to the outstanding Common Stock such as
stock splits, stock dividends, reclassifications or recapitalizations, the Board
of Directors shall appropriately adjust the character and number of shares
available under the Plan and the Compensation Committee shall appropriately
adjust the character, number and price of shares subject to outstanding options
to reflect such changes.
The Plan became effective on the date of its adoption by the Board of
Directors, subject to approval by the stockholders at the Annual Meeting. The
Plan will terminate upon the earlier of (i) the adoption of a resolution of the
Company's Board of Directors to terminate the Plan, (ii) the date all shares of
Common Stock subject to the Plan are purchased according to the Plan, or (iii)
ten years from the effective date of the Plan.
The size of future grants of stock options and stock appreciation rights
and awards of restricted stock or deferred stock units to officers, directors
and employees eligible to participate in the Plan is not determinable as of the
date of this Proxy Statement because of the discretionary nature of such grants
and awards. There has been no determination to grant any options or other
incentive awards under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the Internal Revenue Code and
applicable regulations thereunder in effect on the date hereof. Any subsequent
changes in the Internal Revenue Code or such regulations may affect the accuracy
of this discussion. In addition, this discussion does not consider any state,
local or foreign tax consequences or any circumstances that are unique to a
particular Plan participant that may affect the accuracy or applicability of
this discussion.
Incentive Stock Options ("ISOs")
(a) Neither the grant nor the exercise of an ISO will be treated as the
receipt of taxable income by the employee or a deductible item by the
Company. The amount by which the fair market value of the shares issued
upon exercise exceeds the option strike price will constitute an item of
adjustment that must be taken into account in determining the employee's
alternative minimum tax.
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(b) If the employee holds shares acquired by him or her upon the exercise of
an ISO until the later of two years from the date of grant of the option
and one year from such exercise and has been an employee of the Company at
all times from the date of grant of the ISO to the day three months before
such exercise, then any gain realized by the employee on a later sale or
exchange of such shares will be a capital gain and any loss sustained will
be a capital loss. The Company will not be entitled to a tax deduction
with respect to any such sale or exchange of ISO shares.
(c) If the employee disposes of any shares acquired upon the exercise of an
ISO during the two-year period from the date of grant of the option or the
one-year period beginning on the day after such exercise (i.e., a
"disqualifying disposition"), the employee will generally be obligated to
report as ordinary income for the year in which the disposition occurred
the amount by which the fair market value of such shares on the date of
exercise of the option (or, as noted in clause (d) below, in the case of
certain sales or exchanges of such shares for less than such fair market
value, the amount realized upon such sale or exchange) exceeds the option
strike price, and the Company will be entitled to an income tax deduction
equal to the amount of such ordinary income reported by the employee on
his or her federal income tax return.
(d) If an ISO holder who has acquired stock upon the exercise of an ISO makes
a disqualifying disposition of any such stock, and the disposition is a
sale or exchange with respect to which a loss (if sustained) would be
recognized by the ISO holder, then the amount includable in the ISO
holder's gross income, and the amount deductible by the Company, will not
exceed the excess (if any) of the amount realized on the sale or exchange
over the tax basis of the stock.
NON-QUALIFIED STOCK OPTIONS ("NQSOS")
In the case of an NQSO, the grant of the option will not result in taxable
income to the option holder or an income tax deduction to the Company. The NQSO
holder generally recognizes ordinary income at the time the NQSO is exercised in
the amount by which the fair market value of the shares acquired exceeds the
option strike price. The Company is generally entitled to a corresponding
ordinary income tax deduction, at that time, equal to the amount of such
ordinary income.
STOCK APPRECIATION RIGHTS ("SARS")
The granting of SARs does not produce taxable income to participating
employees or an income tax deduction for the Company. The exercise of a SAR for
cash is immediately taxable as ordinary income to the grantee and deductible by
the Company.
RESTRICTED STOCK
An employee generally will not recognize any taxable income upon the award
of any restricted stock which is not vested. Dividends paid with respect to
restricted stock prior to the vesting of such stock will be taxable as
compensation income to the employee. Generally, an employee will recognize
ordinary income upon the vesting of restricted stock in an amount equal to the
fair market value of the shares of Common Stock on the date they became vested.
However, pursuant to Section 83(b) of the Internal Revenue Code, an employee may
elect to recognize compensation income upon the award of restricted stock based
on the fair market value of the shares of Common Stock subject to such award on
the award date. If an employee makes such an election, dividends paid with
respect to such restricted stock will not be treated as compensation, but rather
as dividend income, and the employee will not recognize additional income when
the restricted shares vest.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income included by the employee on his or her federal income
tax return for the year when the restricted stock vests (or year in which an
applicable Internal Revenue Code Section 83(b) election is made). The Company
will also be entitled to a compensation deduction for the dividends that are
paid on restricted stock that has not yet vested (as described in the
immediately preceding paragraph) when such dividends are reported by the
employee on his or her federal income tax return.
LIMITATIONS ON COMPANY DEDUCTIONS; PARACHUTE PAYMENTS
Under Section 162(m) of the Internal Revenue Code, certain compensation
payments in excess of $1,000,000 are subject to a limitation on deductibility by
the Company. This limitation on deductibility applies with respect to that
portion of compensation in excess of $1,000,000 paid to individual executive
officers named in the
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Summary Compensation Table per taxable year. However, certain "performance-based
compensation" the material terms of which are disclosed to and approved by
stockholders is not subject to this limitation on deductibility. The Company has
structured the Plan with the intention that compensation resulting therefrom
would be such performance-based compensation and would be deductible. To
qualify, the Company is seeking stockholder approval of the Plan.
Under certain circumstances, accelerated vesting or exercise of options or
SARs, or the accelerated lapse of restrictions on restricted stock, in
connection with a Change in Control of the Company might be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of
Section 280G of the Internal Revenue Code. To the extent it is so considered,
the optionee or grantee may be subject to an excise tax equal to 20% of the
amount of the excess parachute payment and the Company may be denied a tax
deduction.
The adoption of the Stock Award Plan would not have provided determinable
benefits to participants if it had been in effect for fiscal 1999. 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 STOCK AWARD
PLAN.
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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, 2000. 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 in
connection therewith, 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 2000 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 2000
Annual Meeting must do so no later than June 9, 2000.
In addition, in accordance with Article VI, Section 2 of the Certificate
of Incorporation, in order to be properly brought before the 2000 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 of 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 2000 Annual Meeting. Accordingly, any written notice given by or on behalf
of a stockholder pursuant to the foregoing clause (iii) in connection with the
2000 Annual Meeting must be received no later than September 27, 2000.
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, 1999, 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
October 7, 1999
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EXHIBIT A
THE BEAR STEARNS COMPANIES INC.
STOCK AWARD PLAN
1. PURPOSE. The purpose of The Bear Stearns Companies Inc. Stock
Award Plan (the "Plan") is to secure for The Bear Stearns Companies Inc. and its
successors and assigns (the "Company") and its stockholders the benefits of the
additional incentive, inherent in the ownership of the Company's common stock,
par value $1.00 per share (the "Common Stock"), by selected key employees of the
Company and its subsidiaries who are important to the success and growth of the
business of the Company and its subsidiaries and to help the Company and its
subsidiaries secure and retain the services of such persons. Compensation
awarded under the Plan is intended to qualify for tax deductibility pursuant to
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended from time to time or any successor statute or statutes (the "Code"), to
the extent deemed appropriate by the Committee (as defined in Paragraph 2.1).
Pursuant to the Plan, such employees will be offered the opportunity
to acquire Common Stock through the grant of options, stock appreciation rights
in tandem with such options and awards of restricted stock. Options granted
under the Plan will be either "incentive stock options," intended to qualify as
such under the provisions of Section 422 of the Code, or "nonqualified stock
options." For purposes of the Plan, the terms "parent" and "subsidiary" shall
mean "parent corporation" and "subsidiary corporation," respectively, as such
terms are defined in Sections 424(e) and (f) of the Code.
2. COMMITTEE.
2.1 ADMINISTRATION. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). Any vacancy on the Committee, whether due to action of the Board
of Directors or due to any other cause, may be filled, and shall be filled if
required to maintain a Committee of at least two disinterested persons, by
resolution adopted by the Board of Directors. For purposes of the Plan, a person
shall be deemed to be a "disinterested person" if, at the time of reference,
such person is not, and has not been at any time during the preceding one-year
period, eligible to participate in the Plan or any other plan of the Company or
any of its affiliates entitling participants therein to acquire stock, stock
options or stock appreciation rights of the Company or any of its affiliates.
Notwithstanding any of the foregoing, the Board of Directors may designate one
or more persons, who at the time of such designation are not disinterested
persons, to serve on the Committee effective upon the date such person or
persons qualify as disinterested persons.
2.2 PROCEDURES. The Committee shall select one of its members
as Chairman and shall adopt such rules and regulations as it shall deem
appropriate concerning the holding of its meetings and the administration of the
Plan. A majority of the whole Committee shall constitute a quorum, and the acts
of a majority of the members of the Committee present at
<PAGE>
a meeting at which a quorum is present, or acts approved in writing by all of
the members of the Committee, shall be the acts of the Committee.
2.3 INTERPRETATION. The Committee shall have full power and
authority to interpret the provisions of the Plan and any agreement evidencing
options or restricted stock awards granted under the Plan, and to determine any
and all questions arising under the Plan, and its decisions shall be final and
binding on all participants in the Plan.
3. SHARES SUBJECT TO GRANTS.
3.1 NUMBER OF SHARES. Subject to the provisions of Paragraph
19 (relating to adjustments upon changes in capitalization), the number of
shares of Common Stock subject at any one time to options or awards of
restricted stock or deferred stock units granted under the Plan, plus the number
of shares of Common Stock theretofore issued or delivered pursuant to the
exercise of options granted, and awards of restricted stock and deferred stock
units made, under the Plan, shall not exceed 25,000,000 shares; provided, that
no more than one-third of such shares may be awarded as restricted stock awards.
If and to the extent that options granted under the Plan terminate, expire or
are cancelled without having been exercised, or restricted stock or deferred
stock units are forfeited, new options, restricted stock or deferred stock units
may be granted under the Plan with respect to the shares of Common Stock covered
by such terminated, expired or cancelled options or forfeited shares of
restricted stock or deferred stock units; PROVIDED, that the granting and terms
of such new options, restricted stock awards and deferred stock units shall in
all respects comply with the provisions of the Plan.
3.2 CHARACTER OF SHARES. Shares of Common Stock delivered
under the Plan may be authorized and unissued Common Stock, issued Common Stock
held in the Company's treasury, or both.
3.3 RESERVATION OF SHARES. There shall be reserved at all
times for sale or award under the Plan a number of shares of Common Stock
(authorized and unissued Common Stock, issued Common Stock held in the Company's
treasury, or both) equal to the maximum number of shares set forth in Paragraph
3.1.
4. EMPLOYEES ELIGIBLE. Options and awards of restricted stock may be
granted under the Plan to any key employee of the Company or any of its
subsidiaries, or to any prospective key employee of the Company or any of its
subsidiaries, conditioned upon, and effective not earlier than, such person's
becoming an employee. Directors and executive officers shall be eligible to
receive grants under the Plan only if they are also key employees of the Company
or any of its subsidiaries. Notwithstanding the foregoing:
(a) No member of the Committee, while serving as such,
shall be eligible to receive any grants under the Plan and no person designated
by the Board of Directors pursuant to Paragraph 2.1 to serve on the Committee
effective at the time he or she qualifies as a disinterested person shall be
eligible to receive any grants under the Plan during the period from the date
such designation is made to the date such designation becomes effective.
(b) No incentive stock options may be granted under the
Plan to any person who owns, directly or indirectly (within the meaning of
Sections 422(b)(6) and
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424(d) of the Code), at the time the incentive stock option is granted, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the employee's employer corporation or of its parent, if any, or any of
its subsidiaries, unless the option price is at least 110% of the fair market
value of the shares subject to the option, determined on the date of the grant,
and the option by its terms is not exercisable after the expiration of five
years from the date such option is granted.
(c) In each calendar year during any part of which the
Plan is in effect, no Participant (as defined below) may be granted options
relating in the aggregate to more than 1,000,000 shares of Common Stock, subject
to adjustment as provided in Paragraph 19.
An individual receiving any option, restricted stock award or
deferred stock units under the Plan is hereinafter referred to as a
"Participant." Any reference herein to the employment of a Participant by the
Company shall include (i) his or her employment by the Company or any of its
subsidiaries, and (ii) with respect to a Participant who was not an employee of
the Company or any of its subsidiaries at the time of grant of his or her option
or award, his or her period of service in the capacity for which the option or
award was granted. For all purposes of this Plan, the time at which an option or
award is granted, in the case of the grant of an option to a key employee shall
be deemed to be the effective date of such grant.
5. GRANT OF OPTIONS. The Committee shall determine, within the
limitations of the Plan, the persons to whom options are to be granted, the
number of shares that may be purchased under each option, the option price, and
shall designate options at the time of grant as either "incentive stock options"
or "nonqualified stock options"; PROVIDED, that the aggregate fair market value
(determined as of the time the option is granted) of the Common Stock with
respect to which incentive stock options become exercisable for the first time
by any Participant (as defined in Paragraph 4) in any calendar year (under all
stock option plans of the employee's employer corporation and its parent, if
any, and its subsidiaries) shall not exceed $100,000 (the provisions of Section
422(d) of the Code are intended to govern). In determining the persons to whom
options shall be granted and the number of shares to be covered by each option,
the Committee shall take into consideration the person's present and potential
contribution to the success of the Company and its subsidiaries and such other
factors as the Committee may deem proper and relevant. Each option granted under
the Plan shall be evidenced by a written agreement between the Company and the
Participant containing such terms and conditions and in such form, not
inconsistent with the provisions of the Plan or, with respect to incentive stock
options, Section 422 of the Code, as the Committee shall provide.
6. OPTION PRICE. Subject to Paragraph 19, the option price of each
share of Common Stock purchasable under any incentive stock option granted under
the Plan shall be not less than the fair market value of such share of Common
Stock at the time the option is granted, and the option price of each share of
Common Stock purchasable under any non-qualified stock option granted under the
Plan shall not be less than 50% of the fair market value of such share of Common
Stock at the time the option is granted. The option price of an option issued in
a transaction described in Section 424(a) of the Code shall be an amount which
conforms to the requirements of that Section and the regulations thereunder.
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<PAGE>
For purposes of this Plan, the "fair market value" of the Common
Stock on any date means (i) if the Common Stock is listed on a national
securities exchange or quotation system, the closing sales price on such
exchange or quotation system on such date or, in the absence of reported sales
on such date, the closing sales price on the immediately preceding date on which
sales were reported, (ii) if the Common Stock is not listed on a national
securities exchange or quotation system, the mean between the bid and offered
prices as quoted by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") for such date or (iii) if the Common Stock
is neither listed on a national securities exchange or quotation system nor
quoted by NASDAQ, the fair value as determined by such other method as the
Committee determines in good faith to be reasonable.
7. STOCK APPRECIATION RIGHT. The Committee, in its sole discretion,
may in connection with the grant of any option also grant to the Participant a
stock appreciation right. Such stock appreciation right shall be granted by the
Committee simultaneously with the grant of the related stock option. A stock
appreciation right shall be exercised in the manner provided in Paragraph 9, and
shall result in the cancellation of options on shares with respect to which the
Participant exercises a stock appreciation right, and, upon such exercise, the
Company shall pay to the Participant an amount equal to the excess of the fair
market value of such shares with respect to which options are cancelled on the
date of exercise over the option price of such shares. A stock appreciation
right shall be exercisable to the same extent and under the same conditions as
the underlying option, except that a stock appreciation right granted in
connection with an incentive stock option may be exercised only when the fair
market value of the shares subject to the option exceeds the option price of
such shares. Payments on the exercise of stock appreciation rights shall be made
by the Company in cash to the Participant as soon as practicable following
exercise.
8. EXERCISABILITY AND DURATION OF OPTIONS.
8.1 DETERMINATION OF COMMITTEE; ACCELERATION. Each option
granted under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the agreement evidencing the option. Subsequent to the grant of an
option which is not immediately exercisable in full, the Committee, at any time
before complete termination of such option, may accelerate the time or times at
which such option may be exercised in whole or in part.
8.2 AUTOMATIC TERMINATION. The unexercised portion of any
option granted under the Plan shall automatically and without notice terminate
and become null and void at the time of the earliest to occur of the following:
(a) The expiration of ten years from the date on which
such option was granted;
(b) The expiration of three months from the date of
termination of the Participant's employment by the Company unless a longer
period is provided by the Committee (other than a termination described in
subparagraph (c) or (d) below); PROVIDED, that if the Participant shall die
during such three-month period, the time of termination of the
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<PAGE>
unexercised portion of any such option shall be determined under the provisions
of subparagraph (c) below;
(c) The expiration of six months following the issuance
of letters testamentary or letters of administration to the executor or
administrator of a deceased Participant, if the Participant's death occurs
either during his employment by the Company or during the three-month period
following the date of termination of such employment (other than a termination
described in subparagraph (d) below), but in no event later than one year after
the Participant's death;
(d) The termination of the Participant's employment by
the Company if such termination constitutes or is attributable to a breach by
the Participant of an employment or consulting agreement with the Company or any
of its subsidiaries, or if the Participant is discharged or his or her services
are terminated for cause; or
(e) The expiration of such period of time or the
occurrence of such event as the Committee in its discretion may provide upon the
granting thereof.
The Committee or the Board of Directors shall have the right to
determine what constitutes cause for discharge or termination of services,
whether the Participant has been discharged or his or her services terminated
for cause and the date of such discharge or termination of services, and such
determination of the Committee or the Board of Directors shall be final and
conclusive.
9. EXERCISE OF OPTIONS, STOCK APPRECIATION RIGHTS. Options and stock
appreciation rights granted under the Plan shall be exercised by the Participant
(or by his or her executors or administrators, as provided in Paragraph 10) as
to all or part of the shares covered thereby, by the giving of written notice of
exercise to the Company, specifying the number of shares to be purchased or the
number of shares with respect to which stock appreciation rights are being
exercised, accompanied, in the case of an option, by payment of the full
purchase price for the shares being purchased. Payment of such purchase price
shall be made (a) by check payable to the Company, (b) with the consent of the
Committee, by delivery of shares of Common Stock already owned by the
Participant for at least six months (which may include shares received as the
result of a prior exercise of an option) having a fair market value (determined
as of the date such option is exercised) equal to all or part of the aggregate
purchase price, (c) with the consent of the Committee and at the election of the
Participant, by withholding from those shares that would otherwise be obtained
upon exercise of the option a number of shares having a fair market value equal
to the option exercise price, (d) in accordance with a "cashless exercise"
program established by the Committee in its sole discretion under which if so
instructed by the Participant, shares may be issued directly to the
Participant's broker or dealer upon receipt of the purchase price in cash from
the broker or dealer, (e) by any combination of (a), (b), (c) or (d) above, or
(f) by other means that the Committee deems appropriate. Such notice of
exercise, accompanied by such payment, shall be delivered to the Company at its
principal business office or such other office as the Committee may from time to
time direct, and shall be in such form, containing such further provisions
consistent with the provisions of the Plan, as the Committee may from time to
time prescribe. The date of exercise shall be the date of the Company's receipt
of such notice. The Company shall effect the transfer of the shares so
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<PAGE>
purchased to the Participant (or such other person exercising the option
pursuant to Paragraph 10 hereof) as soon as practicable. No Participant or other
person exercising an option shall have any of the rights of a stockholder of the
Company with respect to shares subject to an option granted under the Plan until
due exercise and full payment has been made as provided above. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date of such due exercise and full payment. In no event may any
option granted hereunder be exercised for a fraction of a share.
10. NON-TRANSFERABILITY OF OPTIONS. Except as provided herein, no
option granted under the Plan or any right evidenced thereby shall be
transferable by the Participant other than by will or by the laws of descent and
distribution, and an option may be exercised, during the lifetime of a
Participant, only by such Participant. Notwithstanding the preceding sentence:
(a) in the event of a Participant's death during his or her employment by the
Company, its parent, if any, or any of its subsidiaries, or during the
three-month period following the date of termination of such employment, his or
her options shall thereafter be exercisable, during the period specified in
Paragraph 8.2(c), by his or her executors or administrators; and (b) the
Participant, with the approval of the Committee, may transfer his or her options
(other than incentive stock options) for no consideration to or for the benefit
of the Participant's spouse, parents, children (including stepchildren or
adoptive children), grandchildren, or siblings, or to a trust for the benefit of
any of such persons.
11. RESTRICTED STOCK. Participants may be granted awards of
restricted stock under the Plan, subject to the applicable provisions of the
Plan, including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Committee shall determine.
(a) Awards of restricted stock may be in addition to or
in lieu of option grants.
(b) During a period set by, and/or until the attainment
of particular performance goals based upon criteria established by the Committee
at the time of each award of restricted stock (the "restriction period"), the
Participant shall not be permitted to sell, transfer, pledge, or otherwise
encumber the shares of restricted stock; except that such shares may be used, if
the Committee permits, to pay the option price of any option granted under the
Plan; PROVIDED, that an equal number of shares delivered to the Participant upon
exercise of the option shall carry the same restrictions as the shares of
restricted stock so used.
(c) If so provided by the Committee, the applicable
restriction period shall expire, and shares of restricted stock shall become
free of all restrictions if (i) the Participant dies, (ii) the Participant's
employment terminates by reason of permanent disability, as determined by the
Committee, (iii) the recipient retires, or (iv) a "Change in Control" of the
Company occurs (as defined in Paragraph 16). The Committee may require medical
evidence of permanent disability, including medical examinations by physicians
selected by it. If the Committee determines that any such recipient is not
permanently disabled, the restricted stock held by such recipient shall be
forfeited and revert to the Company.
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(d) Unless and to the extent otherwise provided in
accordance with Paragraph 11(c), shares of restricted stock shall be forfeited
and revert to the Company upon the Participant's termination of employment
during the restriction period, except to the extent the Committee, in its sole
discretion, finds that such forfeiture is not in the best interest of the
Company and, therefore, waives all or part of the application of this provision
to the restricted stock held by such Participant.
(e) Stock certificates for restricted stock shall be
registered in the name of the Participant but shall be appropriately legended
and returned to the Company by the Participant, together with a stock power,
endorsed in blank by the Participant. The Participant shall be entitled to vote
shares of restricted stock and shall be entitled to all dividends paid thereon,
except that dividends paid in Common Stock or other property shall be subject to
the same restrictions as apply to the restricted stock with respect to which
they are paid.
(f) Restricted stock shall become free of the foregoing
restrictions upon expiration of the applicable restriction period and the
Company shall then deliver certificates evidencing such Common Stock to the
recipient.
12. DEFERRED STOCK UNITS. Participants may be granted units
representing the right to receive shares of Common Stock at the end of a
specified deferral period ("deferred stock units"), subject to applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine.
(a) Deferred stock units shall be exercisable for shares
of Common Stock after the period and upon the terms set by the Committee. If so
provided by the Committee, the applicable deferral period shall expire when (i)
the Participant dies, (ii) the Participant's employment terminates by reason of
permanent disability, as determined by the Committee, (iii) the recipient
retires, or (iv) a "Change in Control" of the Company occurs (as defined in
Paragraph 16). The Committee may require medical evidence of permanent
disability, including medical examinations by physicians selected by it. If the
Committee determines that any such recipient is not permanently disabled, the
deferred stock units held by such recipient shall be forfeited and revert to the
Company.
(b) Unless and to the extent otherwise provided in
accordance with Paragraph 12(a), deferred stock units shall be forfeited and
revert to the Company upon the Participant's termination of employment during
the deferral period, except to the extent the Committee, in its sole discretion,
finds that such forfeiture is not in the best interest of the Company and,
therefore, waives all or part of the application of this provision to the
deferred stock units held by such Participant.
(c) Unless otherwise determined by the Committee at the
date of grant, dividends on the specified number of shares of Common Stock
covered by the deferred stock units will be paid at the dividend payment date in
cash, or the payment of such dividends shall be deferred and/or the amount or
value thereof automatically reinvested in additional deferred stock units, as
the Committee shall determine or permit the Participant to elect. Unless
otherwise determined by the Committee, shares of Common Stock distributed in
connection with
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<PAGE>
a stock split or stock dividend, and other property distributed as a dividend,
shall be subject to restrictions, risk of forfeiture, and/or deferral to the
same extent as the deferred stock units with respect to which such Common Stock
or other property has been distributed.
13. RELOAD OPTIONS. At the time an option (the "original option") is
granted, the Committee may also authorize the grant of a "reload option," which
shall be subject to the following terms:
(a) The number of shares of Common Stock subject to the
reload option shall be the number of shares, if any, used by the Participant to
pay the purchase price upon exercise of the original option, plus the number of
shares, if any, delivered by the Participant to satisfy the tax withholding
requirement relating to such exercise.
(b) The reload option shall be a nonqualified stock
option.
(c) The grant of the reload option shall be effective
upon the date of exercise of the original option, and the term of the reload
option shall be the period, if any, remaining from that date to the date upon
which the original option would have expired.
(d) The grant of the reload option shall not be
effective if, on the date of exercise of the original option, the Participant is
not employed by the Company.
(e) Except as specified in (a) through (d) above, the
terms of the reload option shall be as prescribed in the preceding Paragraphs of
this Plan.
14. WITHHOLDING TAX. (a) Whenever under the Plan shares of stock are
to be delivered upon exercise of a nonqualified stock option or deferred stock
unit, the Company shall be entitled to require as a condition of delivery that
the Participant remit or, in appropriate cases, agree to remit when due an
amount sufficient to satisfy all federal, state and local withholding tax
requirements relating thereto. At the option of the Company, such amount may be
remitted by check payable to the Company, in shares of Common Stock (which may
include shares received as the result of a prior exercise of an option or
deferred stock unit), by the Company's withholding of shares of Common Stock
issuable upon the exercise of any option or stock appreciation right or pursuant
to any award of restricted stock or deferred stock unit pursuant to the Plan, or
any combination thereof. Whenever an amount shall become payable to a
Participant in connection with the exercise of a stock appreciation right, the
Company shall be entitled to withhold therefrom an amount sufficient to satisfy
all federal, state and local withholding tax requirements relating to such
amount.
(b) Recipients of restricted stock, pursuant to
Paragraph 11, shall be required to remit to the Company an amount sufficient to
satisfy all applicable tax withholding requirements upon expiration of
restriction periods or upon such earlier date(s) as may be elected pursuant to
Section 83 of the Code, unless other arrangements satisfactory to the Company
have been made for the withholding of applicable taxes. At the option of the
Company, the amount referred to in the preceding sentence may be remitted by
check payable to the Company, in shares of Common Stock (which may include
shares of Common Stock received as the result of a prior exercise of an option),
by the Company's withholding of shares of Common Stock issuable upon the
exercise of any option or stock appreciation right or
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pursuant to any award of restricted stock or deferred stock unit pursuant to the
Plan, or any combination thereof.
15. RESTRICTIONS ON DELIVERY AND SALE OF SHARES. Each option and
restricted stock award and deferred stock unit granted under the Plan is subject
to the condition that if at any time the Committee, in its discretion, shall
determine that the listing, registration or qualification of the shares covered
by such option or award upon any securities exchange or under any state or
federal law is necessary or desirable as a condition of or in connection with
the granting of such option or award or the purchase or delivery of shares
thereunder, the delivery of any or all shares pursuant to exercise of the option
or upon expiration of the restriction or deferral period may be withheld unless
and until such listing, registration or qualification shall have been effected.
The Committee may require, as a condition of exercise of any option, or grant of
a restricted stock award or deferred stock unit that the Participant represent,
in writing, that the shares received are being acquired for investment and not
with a view to distribution and agree that the shares will not be disposed of
except pursuant to an effective registration statement, unless the Company shall
have received an opinion of counsel satisfactory to the Company that such
disposition is exempt from such requirement under the Securities Act of 1933.
The Committee may require that the sale or other disposition of any shares
acquired upon exercise of an option hereunder or upon expiration of a
restriction or deferral period shall be subject to a right of first refusal in
favor of the Company, which right shall permit the Company to repurchase such
shares from the Participant or his or her representative prior to their sale or
other disposition at their then current fair market value in accordance with
such terms and conditions as shall be specified in the agreement evidencing the
grant of the option, restricted stock award or deferred stock unit. The Company
may endorse on certificates representing shares issued upon the exercise of an
option or expiration of a restriction or deferral period, such legends referring
to the foregoing representations or restrictions or any other applicable
restrictions on resale as the Company, in its discretion, shall deem
appropriate.
16. CHANGE IN CONTROL.
(a) In the event of a Change in Control of the Company,
as defined below, the Committee may, in its sole discretion, provide that any of
the following applicable actions be taken as a result, or in anticipation, of
any such event to assure fair and equitable treatment of Participants:
(i) accelerate the exercisability of any outstanding
options, or the expiration of restriction periods of restricted stock or the
expiration of deferral periods of deferred stock units awarded pursuant to this
Plan;
(ii) offer to purchase any outstanding options or shares
of restricted stock or deferred stock units made pursuant to this Plan from the
holder for its equivalent cash value, as determined by the Committee, as of the
date of the Change in Control; or
(iii) make adjustments or modifications to outstanding
options, restricted stock or deferred stock units as the Committee deems
appropriate to maintain and protect the rights and interests of the Participants
following such Change in Control.
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Any such action approved by the Committee shall be conclusive and
binding on the Company, its subsidiaries and all Participants.
(b) In no event, however, may (i) any option be
exercised prior to the expiration of six (6) months from the date of grant
(unless otherwise provided in the agreement evidencing the option), or (ii) any
option be exercised after ten (10) years from the date it was granted.
(c) To the extent not otherwise defined in this Plan,
the following terms used in this Paragraph 16 shall have the following meanings:
"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 Committee designates as an "Affiliate" for purposes of the Plan.
"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.
"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.
"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 25% 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.
"Continuing Director" means any member of the Board of Directors who
is a member on the effective date of the Plan as set forth in Paragraph 21 or
who is elected to the Board of Directors after such date upon the recommendation
or with the approval of a majority of the Continuing Directors at the time of
such recommendation or approval.
"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.
-10-
<PAGE>
17. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any
option granted under the Plan shall confer upon any Participant the right to
continue as an employee of the Company or affect the right of the Company or any
of its subsidiaries, to terminate the Participant's employment at any time,
subject, however, to the provisions of any agreement of employment between the
Participant and the Company, its parent, if any, or any of its subsidiaries.
18. TRANSFER, LEAVE OF ABSENCE. For purposes of this Plan, neither
(i) a transfer of an employee from the Company to a subsidiary or other
affiliate of the Company, or vice versa, or from one subsidiary or affiliate of
the Company to another, nor (ii) a duly authorized leave of absence, shall be
deemed a termination of employment.
19. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. In the event of
any stock split, stock dividend, reclassification or recapitalization which
changes the character or amount of the Company's outstanding Common Stock while
any portion of any option theretofore granted under the Plan is outstanding but
unexercised, the Committee shall make such adjustments in the character and
number of shares subject to such options and in the option price, as shall be
equitable and appropriate in order to make the option, as nearly as may be
practicable, equivalent to such option immediately prior to such change;
PROVIDED, HOWEVER, that no such adjustment shall give any Participant any
additional benefits under his or her option; and PROVIDED FURTHER, that, with
respect to any outstanding incentive stock option, if any such adjustment is
made by reason of a transaction described in Section 424(a) of the Code, it
shall be made so as to conform to the requirements of that Section and the
regulations thereunder.
If any transaction (other than a change specified in the preceding
paragraph) described in Section 424(a) of the Code affects the Company's Common
Stock subject to any unexercised option theretofore granted under the Plan
(hereinafter for purposes of this Paragraph 19 referred to as the "old option"),
the Board of Directors or any surviving or acquiring corporation may take such
action as it deems appropriate, and in conformity with the requirements of that
Section and the regulations thereunder, to substitute a new option for the old
option, in order to make the new option, as nearly as may be practicable,
equivalent to the old option, or to assume the old option.
If any such change or transaction shall occur, the number and kind
of shares for which options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
20. EXPIRATION AND TERMINATION OF THE PLAN.
20.1 GENERAL. Options and awards of restricted stock and
deferred stock units may be granted under the Plan at any time and from time to
time on or prior to the tenth anniversary of the effective date of the Plan as
set forth in Paragraph 21 (the "Expiration Date"), on which date the Plan will
expire except as to options then outstanding and stock subject to restriction or
deferral periods under the Plan. Such outstanding options shall remain in effect
until they have been exercised, terminated or have expired; such restricted
stock shall remain subject to restriction until expiration of the restriction
period in accordance with Paragraph 11 hereof and such deferred stock units
shall remain subject to deferral until expiration of the deferral period in
accordance with Paragraph 12. The Plan may be terminated, modified or
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<PAGE>
amended by the Board of Directors at any time on or prior to the Expiration
Date, except with respect to any options then outstanding under the Plan;
PROVIDED, HOWEVER, that the approval of the Company's stockholders will be
required for any amendment which (i) changes the class of employees eligible for
grants, as specified in Paragraph 4, (ii) increases the maximum number of shares
subject to grants, as specified in Paragraph 3 (unless made pursuant to the
provisions of Paragraph 19) or (iii) materially increases the benefits accruing
to participants under the Plan, within the meaning of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
20.2 MODIFICATIONS. No modification, extension, renewal or
other change in any option or award of restricted stock or deferred stock unit
granted under the Plan shall be made after grant, unless the same is consistent
with the provisions of the Plan and does not disqualify an incentive stock
option under the provisions of Section 422 of the Code.
21. EFFECTIVE DATE OF PLAN. The Plan shall become effective on
September 28, 1999, the date of its adoption by the Board of Directors, subject,
however, to the approval of the Plan by the Company's stockholders within 12
months of such adoption.
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<PAGE>
THE BEAR STEARNS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 28, 1999 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 28, 1999, 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 20, 1999, 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, 4 AND PURSUANT TO ITEM 5.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES
NAMED HEREIN, "FOR" APPROVAL OF AN AMENDMENT TO THE PERFORMANCE COMPENSATION
PLAN, "FOR" APPROVAL OF AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN FOR SENIOR
MANAGING DIRECTORS, AND "FOR" APPROVAL OF THE STOCK AWARD PLAN.
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,
Alan D. Schwartz, Warren J. Spector, 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 AN AMENDMENT TO THE PERFORMANCE COMPENSATION PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 3. APPROVAL OF AMENDMENTS TO THE CAPITAL ACCUMULATION PLAN FOR SENIOR
MANAGING DIRECTORS:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 4. APPROVAL OF THE STOCK AWARD PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 5. 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 ___________________________, 1999
<PAGE>
APPENDIX 1
THE BEAR STEARNS COMPANIES INC.
PERFORMANCE COMPENSATION PLAN
(Amended and Restated as of October 7, 1999)
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 POOLS.
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 funds (the "Annual Bonus Pools") 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 Pools 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
<PAGE>
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 Pools 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 of Bear, Stearns & Co. Inc. 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 such 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 Pools 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 Pools, the Bonuses
payable to each Participant shall be reduced pro rata, so that the total of all
Bonuses shall equal the Annual Bonus Pools. If a Participant ceases
<PAGE>
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 Pools 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
<PAGE>
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 Pools, except insofar as such
expenses shall be taken into account in determining the components of the Annual
Bonus Pools 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>
APPENDIX 2
THE BEAR STEARNS COMPANIES INC.
CAPITAL ACCUMULATION PLAN FOR
SENIOR MANAGING DIRECTORS
(Amended and Restated as of October 7, 1999)
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
<PAGE>
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, plus the effect of the tax benefit related to the earnings adjustment for
the related Plan Year minus all amounts accrued in respect of cash dividends
declared with respect to any capital stock of the Company during such Fiscal
Year.
"Adjusted Earnings Per Share" means, for any Fiscal Year, (a) the
Company's consolidated net income or loss for such Fiscal Year, less the amount
of the Preferred Stock Dividend Requirement for such Fiscal Year, plus the
product obtained by multiplying the product of the Net Earnings Adjustment
multiplied by the Average Cost Per Share for such Fiscal Year by the fraction
which is 1 minus the Marginal Tax Rate, divided by (b) the sum of (i) the number
of shares of Common Stock outstanding during such Fiscal Year, computed on a
weighted average basis based on the number of days outstanding during such
Fiscal Year, (ii) the aggregate number of CAP Units credited to the Accounts of
all Participants computed on a weighted average basis based on the number of
days outstanding during such Fiscal Year but not including in such computation
the day that CAP Units are credited, increased or decreased pursuant to Section
5.1, 5.3 or 5.10 of the Plan, and (iii) the aggregate number of Earnings Units
credited to the Earnings Unit Accounts of all participants in the PUP Plan
computed on a weighted average basis based on the number of days outstanding
during such Fiscal Year but not including in such computation the day that
Earnings Units are credited, increased or decreased pursuant to Section 4.2 or
4.5 of the PUP Plan.
"Adjusted Preferred Stock Dividend Requirement" means, for any
Fiscal Year, the quotient obtained by dividing (i) the aggregate amount of all
dividends actually declared by the Company on, or, if no such dividends are
actually declared, required to be declared by the Company in accordance with the
terms of, any Preferred Stock, in such Fiscal Year, by (ii) the fraction which
is one minus the Marginal Tax Rate for such Fiscal Year.
"Advisory Committee" means a committee of five Participants, of
which two shall be appointed by the President of the Company, two by the
President's Advisory Council of Bear Stearns and one by the Management and
Compensation Committee.
"Affiliate" means (a) Bear Stearns, (b) any other subsidiary of
the Company and (c) any other corporation or other entity which is controlled,
directly or indirectly, by, or under common control with, the Company and which
the Board Committee designates as an "Affiliate" for purposes of the Plan.
"Aggregate Imputed Cost" means, with respect to any Fiscal Year,
the sum of (a) the aggregate of the Cost of Carry for such Fiscal Year for all
Participants in the Plan plus (b) the Capital Reduction Charge for such Fiscal
Year plus (c) the product of (i) the sum of the
<PAGE>
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.
<PAGE>
"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
<PAGE>
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.
<PAGE>
"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
<PAGE>
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
<PAGE>
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.
<PAGE>
"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
<PAGE>
during such Fiscal Year but not including in such computation the day that
Earnings Units are credited, increased or decreased pursuant to Section 4.2 or
4.5 of the PUP Plan. For purposes of this Plan, consolidated income or loss
before income taxes of the Company and its subsidiaries (i) shall be determined
prior to any charge or credit to income required in such Fiscal Year by reason
of Net Earnings Adjustments pursuant to Section 5.10(a), (ii) shall include the
amounts of any pre-tax earnings or loss attributable to discontinued operations
or extraordinary items and (iii) shall be reduced by the Adjusted Preferred
Stock Dividend Requirement during such Fiscal Year, and may be decreased, but
not increased, by such amount determined by the Board Committee in its sole
discretion as appropriate to carry out the purposes of the Plan.
"Initial Plan Election" has the meaning assigned to such term in
Section 4.1.
"Investment Letter" means a letter, in a form to be approved by
the Appropriate Committee, by which a Participant represents that he is an
accredited Investor and that he is acquiring his interest in the Plan and any
shares of Common Stock that may be acquired hereunder for investment and without
a view to any distribution thereof.
"Management and Compensation Committee" means the Management and
Compensation Committee of the Company or another committee of the Company or the
Board of Directors designated by the Board of Directors to perform the functions
of the Management and Compensation Committee hereunder.
"Marginal Tax Rate" means the maximum combined marginal rate of
tax expressed as a fraction to which the Company is subject for the applicable
Fiscal Year, including Federal, New York State and New York City income taxes
(including any minimum or alternative tax), net of any tax benefit resulting
from the deductibility of state and local taxes for federal income tax purposes.
"Net Earnings Adjustment" has the meaning assigned to such term
in Section 5.10(a).
"Part Year Units" has the meaning assigned to such term in
Section 5.4(a).
"Participant" means any Eligible Employee who has validly elected
to participate in the Plan pursuant to Section 4.1.
"Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or a political subdivision thereof.
"Personal Leave of Absence" means the absence from the Company by
a Participant, with the consent of the Company, for an extended period of time
without salary under circumstances in which a return to full-time employment by
the Participant is contemplated.
"Plan" means The Bear Stearns Companies Inc. Capital Accumulation
Plan for Senior Managing Directors as set forth herein and as amended and
restated from time to time.
<PAGE>
"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.
<PAGE>
"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.
"Stock Award Amount" means, for a Plan Year, a dollar amount
equal to the sum of (a) a Participant's Required Deferral Amount for the Plan
Year, multiplied by the related Stock Award Percentage, plus (b) a Participant's
Additional Deferral Amount, if any, multiplied by the related Stock Award
Percentage.
"Stock Award Percentage" means, for any Plan Year, the percentage
determined by the Compensation Committee, which will be applied to either the
Required Deferral Amount or the Additional Deferral Amount to determine the
amount which will be awarded pursuant to the Stock Award Plan. The Compensation
Committee has the right to select different percentages for determining each of
these amounts.
"Termination Date" means the last day of any Deferral Period.
<PAGE>
"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, reduced by the Stock Award 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
<PAGE>
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
<PAGE>
Period and ending on the anniversary of the last day of such Enrollment Period)
a Participant may execute and file an Additional Plan Election, electing,
subject to the approval of the Appropriate Committee, an Additional Deferral
Amount for such Elective Plan Year and a Deferral Period (in whole Fiscal Years)
in respect of the Required Deferral Amount and any Additional Deferral Amount
for such Elective Plan Year of more than five Fiscal Years or, if applicable, a
shorter Deferral Period. The Appropriate Committee may approve any election
under this Section 4.3 to defer an Additional Deferral Amount and any election
of a Deferral Period in excess of five Fiscal Years, or may deny any such
request, in its sole discretion. If the Appropriate Committee shall deny any
election of an Additional Deferral Amount, then the additional Plan Election
shall be deemed to relate only to the Participant's Required Deferral Amount for
the Elective Plan Year involved and, if the Appropriate Committee shall deny any
election of a Deferral Period in excess of five Fiscal Years, then the Deferral
Period applicable to the Required Deferral Amount and any Additional Deferral
Amount for the Elective Plan Year involved shall be five Fiscal Years. If at any
time there is more than one Elective Plan Year as to any Participant, then the
Appropriate Committee shall determine whether or not the additional Plan
Election which may be submitted in respect of such Elective Plan Years by such
Participant shall relate to one or more than one of such Elective Plan Years. If
the Appropriate Committee determines that such Plan Election shall relate to
more than one Elective Plan Year, then the additional Plan Election to be filed
by such Participant shall constitute an election to defer the Required Deferral
Amount of his current compensation for each of such Elective Plan Years.
Notwithstanding the foregoing, however, if an Eligible Employee does not elect
to defer at least the Required Deferral Amount in respect of any Elective Plan
Year, such Eligible Employee shall be ineligible to submit an additional Plan
Election in respect of any succeeding Elective Plan Year unless the Appropriate
Committee, in its sole discretion, shall determine (including, without
limitation, by reason of hardship as contemplated by Section 4.5(a)) that such
Eligible Employee shall once again be eligible to elect to defer compensation
under this Section 4.3. In the event that the Appropriate Committee shall make
the determination contemplated by the preceding sentence in respect of any
Elective Plan Year for which the Enrollment Period has already expired, then the
Appropriate Committee, may, in its discretion, establish a supplementary
enrollment period for the Eligible Employee involved, in which case such
supplementary enrollment period shall be deemed the Enrollment Period for such
Eligible Employee for purposes of this Plan in respect of the Elective Plan Year
involved.
4.4 Election Irrevocable. The election to defer compensation
pursuant to a Plan Election or Additional Plan Election, once made for the
first, second and third Fiscal Years of a Required Deferral Period or for any
Elective Plan Year, shall be irrevocable and shall not be subject to
cancellation by the Participant or, except as expressly provided herein, by the
Appropriate Committee or the Company. Without limiting the generality of the
foregoing, such an election for the first, second and third Fiscal Years of a
Required Deferral Period or for any Elective Plan Year shall not be subject to
cancellation by a Participant by reason of termination of his employment with
the Company or an Affiliate.
4.5 Hardship Exceptions.
(a) A Participant may request to be excluded from
participating in the Plan in respect of any Plan Year other than his Base Year
by filing with the Appropriate Committee during the Enrollment Period occurring
during such Fiscal Year (or if there is no Enrollment
<PAGE>
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.
<PAGE>
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:
<PAGE>
(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
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
<PAGE>
(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
<PAGE>
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.
(e) Notwithstanding anything else contained in this Plan, upon
determination by the Appropriate Committee to accelerate any Termination Date or
distribution of payment pursuant to this Plan, in consideration of such
decision, the Appropriate Committee shall require the Participant to execute an
agreement, in form and substance satisfactory to the Appropriate Committee,
providing for the Participant's agreement not to solicit any employees of the
Company for a period terminating on the last deferral date when the Participant
would have otherwise received a distribution from the Plan; and the Appropriate
Committee may require, in its sole discretion, the Participant to further agree
to such terms and conditions as determined by the Appropriate Committee in its
sole discretion.
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
<PAGE>
Common Stock which is equal to the Total CAP Units credited to his Capital
Accumulation Account as of the date of such Change in Control and an amount in
cash equal to his Cash Balance, if any, as of such date; provided, however, no
amount shall be immediately distributable or payable under the Plan if and to
the extent that the Appropriate Committee determines that such distribution or
payment (taken together with any other payment received or to be received by the
Participant from the Company or any of its Affiliates in connection with a
Change in Control) would constitute an "excess parachute payment" under section
280G of the Code, which would cause such amount to be subject to an excise tax
to the recipient or to be nondeductible to the Company or any of its Affiliates,
or would subject a Reporting Person to liability under Section 16(b) of the
Exchange Act or any rule or regulation thereunder by reason of transactions or
events occurring on or prior to the occurrence of the Change in Control. Payment
of amounts not distributed by reason of this Section 6.3 shall be made as soon
as practicable, consistent with this Section 6.3.
6.4 Additional Distributions in Certain Cases. In addition to
the amounts provided by Section 6.1, 6.2 or 6.3, if (a) upon making any
distribution to any Participant, the Company determines that the Company or Bear
Stearns would realize a tax benefit calculated at its Marginal Tax Rate in the
year of such distribution (without giving effect to any carryovers or carrybacks
of losses, credits or deductions from any prior or succeeding Fiscal Year) in
excess of the amount of Deferred Tax Benefit in respect of its liability to such
Participant on account of such distribution, and (b) such Participant's Cash
Balance Account or the number of CAP Units credited to his Capital Accumulation
Account had been reduced in a prior Fiscal Year as a result of the application
of subparagraphs (d) or (e) of Section 5.4 or Section 5.6, then at the time of
the distribution pursuant to this Section 6 the Company also shall pay to such
Participant, in cash, an additional amount equal to the lesser of (i) the amount
by which the actual tax benefit to be received by the Company or Bear Stearns
exceeds such Deferred Tax Benefit and (ii) the amount by which such
Participant's Cash Balance Account or Capital Accumulation Account was so
reduced. Notwithstanding the foregoing, a Participant shall not be entitled to
any payment from the Company pursuant to this Section 6.4 in respect of any
reduction in his Cash Balance Account or in the number of CAP Units credited to
his Capital Accumulation Account for any period commencing with the first day of
the month following the month in which his employment by the Company and its
Affiliates was terminated.
6.5 Special Provisions for Reporting Persons. If required by
Rule 16b-3, shares of Common Stock distributed to Participants who are Reporting
Persons shall bear an appropriate legend to the effect that such shares of
Common Stock may not be transferred for a period of six (6) months after they
are credited to the Account of such Participant.
6.6 Form of Payments. Except as otherwise provided herein, all
distributions in respect of CAP Units to be made to a Participant (or his
Beneficiary) under the Plan shall be made in whole shares of Common Stock.
Payment in respect of any fractional CAP Unit shall be made in cash based upon
the Fair Market Value of a share of Common Stock on the second Business Day
preceding the payment date. Shares of Common Stock distributed hereunder may be
treasury shares, shares of authorized but unissued Common Stock, or a
combination thereof, and shall be fully paid and nonassessable. If shares of
Common Stock are distributed pursuant to Sections 6.1, 6.2(a) or 6.2(b) to any
Participant after the record date for any cash dividend occurring after the
Termination Date with respect to which such shares are distributed or, in the
<PAGE>
cases of Sections 6.2(a) or 6.2(b), after the end of the Fiscal Year in which
the death or Disability of a Participant occurs, then such Participant (or his
estate or Beneficiary) shall be entitled to receive from the Company an amount
of cash equal to the cash dividends per share payable to holders of record on
such record date multiplied by the number of shares of Common Stock so
distributed to such Participant after such record date.
6.7 Registration and Listing of Common Stock. Prior to the
date on which any shares of Common Stock are required to be issued to any
Participant under this Plan without taking into account any acceleration of such
distribution date pursuant to the provisions of Section 6.2 of the Plan, the
Company shall file a registration statement (a "Registration Statement") on Form
S-3 and/or Form S-8 (or any successor form then in effect) under the Securities
Act, with respect to all shares of Common Stock which the Company then estimates
are distributable under the Plan; provided, however, that the Company need not
file a Registration Statement hereunder if, prior to such date, the Company
receives a written opinion of counsel to the effect that such shares of Common
Stock may be sold, transferred or otherwise disposed of under the Securities Act
without registration thereunder. The Company shall use its best efforts to have
any such Registration Statement declared effective as soon as reasonably
practicable after filing and shall use reasonable efforts to keep each such
Registration Statement continuously in effect until all shares of Common Stock
to which such Registration Statement relates have been so issued, and for a
two-year period thereafter. From time to time the Company also shall amend such
Registration Statement to cover any additional shares of Common Stock which
become distributable under the Plan and otherwise would not be covered by such
Registration Statement. In the event that Participants would be precluded from
selling any shares of Common Stock distributable hereunder unless such shares
were registered or qualified under the securities or "blue sky" laws of any
state (or otherwise received the approval of any state governmental or
regulatory authority), then the Company shall use its best efforts to cause such
shares of Common Stock to be duly registered or qualified (or to receive such
approval) as may be required. If the shares of Common Stock distributable
hereunder satisfy the criteria for listing on any exchange on which the Common
Stock is then listed, then (unless such shares of Common Stock already are
listed on such exchange) the Company shall apply for and use its best efforts to
obtain a listing of all such shares of Common Stock on such exchange. All costs
and expenses incurred by the Company in connection with the satisfaction of its
obligations under this Section 6.7 shall be borne by the Company. The Company
shall immediately notify each Participant in the event that a Registration
Statement which has been filed and remains effective contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. Upon
receipt of such notice, no Participant shall sell or agree to sell any shares of
Common Stock pursuant to such Registration Statement unless and until the
Company has notified each Participant that such Registration Statement no longer
contains such misstatement or omission. In the event that shares of Common Stock
are issued to Participants hereunder other than pursuant to a Registration
Statement, then, unless the Company shall have obtained the opinion of counsel
referred to above, each certificate representing such shares shall bear a legend
substantially to the following effect:
The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or applicable state
securities laws, and may not be sold,
<PAGE>
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
<PAGE>
Company, and may make use of such agents and clerical or other personnel as it
shall require or may deem advisable for purposes of the Plan. Each such
Committee may rely upon the written opinion of the accountants and counsel
engaged by it. Subject to any limitations imposed by applicable law (including
Rule 16b-3), either Appropriate Committee may delegate to any agent or to any
subcommittee or member of such Committee its authority to perform any act
hereunder, including, without limitation, those matters involving the exercise
of discretion, provided that such delegation of authority shall be subject to
revocation at any time at the discretion of such Committee.
8.3 Purchase of Common Stock. The Company intends to purchase
shares of Common Stock in the open market or in private transactions or
otherwise during the term of the Plan for issuance to Participants in accordance
with the terms hereof. Shares of Common Stock shall be purchased for purposes of
the Plan and for purposes of the PUP Plan on a combined or joint basis without
identifying shares so purchased as having been purchased for this Plan or the
PUP Plan. Notwithstanding the foregoing, the Company will specifically designate
all such shares at the time they are purchased as having been purchased for the
purpose of making determinations under this Plan and the PUP Plan; provided,
however, that any shares so purchased shall be the sole property of the Company
and no Participant or Beneficiary shall have any right, title or interest
whatsoever in or to any such shares. All shares of Common Stock purchased by the
Company on or after July 1, 1992 and designated by the Company as having been
purchased for the CAP Plan shall be considered, notwithstanding such
designation, to have been purchased for purposes of both this Plan and the PUP
Plan. The acquisition of Common Stock as described above will be subject to the
sole discretion of the Board Committee, which shall determine the time and price
at which and the manner in which such shares are to be acquired, subject to
applicable law. In making any such determination, the Board Committee may, but
shall in no event be obligated to, consider the recommendations of the Advisory
Committee.
8.4 Plan Expenses. The Company shall pay the fees and expenses
of accountants, counsel, agents and other personnel and all other costs of
administration of the Plan.
8.5 Indemnification. To the maximum extent permitted by
applicable law, no member of any Committee shall be personally liable by reason
of any contract or other instrument executed by him or on his behalf in his
capacity as a member of such Committee or for any mistake of judgment made in
good faith, and the Company shall indemnify and hold harmless, directly from its
own assets (including the proceeds of any insurance policy the premiums of which
are paid from the Company's own assets), each member of each Committee and each
other director, officer, employee or agent of the Company to whom any duty or
power relating to the administration or interpretation of the Plan or to the
management or control of the assets of the Plan may be delegated or allocated,
against any cost or expense (including fees, disbursements and other charges of
legal counsel) or liability (including any sum paid in settlement of a claim
with the approval of the Company) arising out of any act or omission to act in
connection with the Plan, unless arising out of such person's own fraud, willful
misconduct or bad faith. The foregoing shall not be deemed to limit the
Company's obligation to indemnify any member of any Committee under the
Company's Restated Certificate of Incorporation or Bylaws, or under any other
agreement between the Company and such member.
<PAGE>
8.6 Maximum Number of Shares.
(a) The aggregate number of CAP Units that may be credited to
Participants' Capital Accumulation Accounts under the Plan for any Plan Year
shall not exceed the equivalent number of shares of Common Stock equal to the
sum of 15% of the outstanding shares of Common Stock as of the last day of such
Plan Year (the "Base Shares") and the number, if any, by which the sum of the
Base Shares in all prior Fiscal Years beginning on or after July 1, 1993 exceeds
the number of shares credited to Participants' Capital Accumulation Accounts
under this Plan in all such prior Fiscal Years. For purposes of determining the
number of shares of Common Stock outstanding as of the last day of any Plan
Year, such number shall be calculated as the sum of (i) the number of shares of
Common Stock outstanding at such year end, (ii) the number of shares underlying
CAP Units credited to Participants' Capital Accumulation Accounts as of such
date and Earnings Units credited to Participants' Earnings Unit Accounts under
the PUP Plan as of such date and (iii) the number of shares underlying CAP Units
to be credited to all such Accounts as a result of making any adjustment to such
Accounts required by Sections 5.1 and 5.10 in respect of all Fiscal Years ending
on or prior to the date of determination and the number of Earnings Units
credited to the Earnings Unit Accounts of all Participants in the PUP Plan as a
result of making any adjustment to such Accounts required by Section 4.2 of the
PUP Plan in respect of all Fiscal Years ending on or prior to the date of such
determination.
(b) If there shall be any change in the Common Stock of the
Company, through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, spinoff, split up, dividend in kind or other change in
the corporate structure or distribution to the stockholders, appropriate
adjustments may be made by the Board Committee (or if the Company is not the
surviving corporation in any such transaction, the board of directors of the
surviving corporation) in the aggregate number and kind of shares subject to the
Plan, and the number and kind of shares which may be issued under the Plan.
Appropriate adjustments may also be made by the Board Committee in the terms of
any awards under the Plan to reflect such changes and to modify any other terms
of outstanding awards on an equitable basis as the Board Committee in its
discretion determines.
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 SUCH PRICE IS
WITHIN THE RANGE DEFINED BY THE BOARD COMMITTEE, AND PROVIDED FURTHER 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
<PAGE>
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, 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
<PAGE>
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
<PAGE>
effective unless received by the Appropriate Committee prior to the
Participant's death, and in no event shall any such designation be effective as
of a date prior to such receipt.
10.2 Lack of Designated Beneficiary. If no such Beneficiary
designation is in effect at the time of a Participant's death, or if no
designated Beneficiary survives the Participant, or if such designation
conflicts with law, the Participant's estate shall be deemed to have been
designated as his Beneficiary and shall receive the payment of the amount, if
any, payable under the Plan upon his death. If the Appropriate Committee is in
doubt as to the right of any person to receive such amount, the Committee may
cause the Company to retain such amount, without liability for any interest
thereon, until the rights thereto are determined, or the Appropriate Committee
may pay and deliver such amount into any court of appropriate jurisdiction, and
such payment shall be a complete discharge of the liability of the Plan and the
Company therefor.
SECTION 11
General Provisions
11.1 Successors. The Plan shall be binding upon and inure to
the benefit of the Company, its successors and assigns, and each Participant and
his Beneficiary.
11.2 No Continued Employment. Neither the Plan nor any action
taken thereunder shall be construed as giving to a Participant the right to be
retained in the employ of the Company or any of its Affiliates or as affecting
the right of the Company or any of its Affiliates to dismiss any Participant.
11.3 Withholding. As a condition to receiving any distribution
or payment of amounts hereunder, the Company may require the Participant to make
a cash payment to the Company or, in its sole discretion, upon the request of a
Participant, may withhold from any amount or amounts payable under the Plan, in
either case, in an amount equal to all federal, state, city or other taxes as
may be required to be withheld in respect of such payments pursuant to any law
or governmental regulation or ruling.
11.4 Non-alienation of Benefits. No right to any amount payable
at any time under the Plan may be assigned, transferred, pledged or encumbered,
either voluntarily or by operation of law, except as expressly provided herein
or as may otherwise be required by law. If, by reason of any attempted
assignment, transfer, pledge or encumbrance, or any bankruptcy or other event
happening at any time, any amount payable under the Plan would be made subject
to the debts or liabilities of the Participant or his Beneficiary or would
otherwise not be enjoyed by him, then the Appropriate Committee, if it so
elects, may terminate such person's interest in any such payment and direct that
the same be held and applied to or for the benefit of the Participant, his
Beneficiary or any other person or persons deemed to be the natural objects of
his bounty, taking into account the expressed wishes of the Participant (or, in
the event of his death, his Beneficiary).
11.5 Incompetency. If the Appropriate Committee shall find that
any person to whom any amount is or was distributable or payable hereunder is
unable to care for his affairs
<PAGE>
because of illness or accident, or has died, then the Appropriate Committee, if
it so elects, may direct that any payment due him or his estate (unless a prior
claim therefor has been made by a duly appointed legal representative) or any
part thereof be paid or applied for the benefit of such person or to or for the
benefit of his spouse, children or other dependents, an institution maintaining
or having custody of such person, any guardian or any other person deemed by
such Appropriate Committee to be a proper recipient on behalf of such person
otherwise entitled to payment, or any of them, in such manner and proportion as
such Appropriate Committee may deem proper. Any such payment shall be in
complete discharge of the liability therefor of the Company, the Plan, the
Committee or any member, officer or employee thereof.
11.6 Offsets. To the extent permitted by law, the Company or
any of its Affiliates shall have the absolute right to withhold any shares of
Common Stock or any amounts otherwise required to be distributed or paid to any
Participant or Beneficiary under the terms of the Plan, to the extent of any
amount owed or which in the sole judgment of the Appropriate Committee may in
the future be owed for any reason by such Participant, in the case of a payment
to such Participant, or to the extent of any amount owed or which in the sole
judgment of the Appropriate Committee may in the future be owed for any reason
by the Participant or such Beneficiary, in the case of payment to a Beneficiary,
to the Company or any of its Affiliates, and to set off and apply the amounts so
withheld to payment of any such amount ultimately determined by the Appropriate
Committee, in its sole discretion, to be owed to the Company or any of its
Affiliates, whether or not such amounts shall then be immediately due and
payable and in such order or priority as among such amounts owed as the
Appropriate Committee, in its sole discretion, shall determine. In determining
the amount of a permitted offset under this Section 11.6, any shares of Common
Stock required to be distributed to a Participant or a Beneficiary shall be
valued at the Fair Market Value of such Shares on the date of offset.
11.7 Notices, etc. All elections, designations, requests,
notices, instructions and other communications from a Participant, Beneficiary
or other person to any Appropriate Committee required or permitted under the
Plan shall be in such form as is prescribed from time to time by the Appropriate
Committee, shall be mailed by first-class mail or delivered to such location as
shall be specified by the Appropriate Committee, and shall be deemed to have
been given and delivered only upon actual receipt thereof at such location.
11.8 Other Benefits. The benefits, if any, payable under the
Plan shall be in addition to any other benefits provided for Participants.
11.9 Interpretation, etc. The captions of the sections and
paragraphs of this Plan have been inserted solely as a matter of convenience and
in no way define or limit the scope or intent of any provisions of the Plan.
References to sections herein are to the specified sections of this Plan unless
another reference is specifically stated. The masculine pronoun wherever used
herein shall include the feminine pronoun, and a singular number shall be deemed
to include the plural unless a different meaning is plainly required by the
context.
11.10 Laws; Severability. The Plan shall be governed by, and
construed in accordance with, the laws of the State of New York, except to the
extent preempted by the Employee Retirement Income Security Act of 1974, as
amended. If any provision of the Plan
<PAGE>
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.
