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 Revised Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Under rule 14a-12
THE BEAR STEARNS COMPANIES INC.
(Name of Registrant as Specified In Its Charter)
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
THE BEAR STEARNS COMPANIES INC.
PROXY STATEMENT
NOTICE OF THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MARCH 26, 2002
[LOGO]
THE BEAR STEARNS COMPANIES INC.
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
---------------
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders, which will be held on Tuesday, March 26, 2002, at 5:00 P.M., New
York City time, in the Bear Stearns Auditorium, 383 Madison Avenue, 2nd 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,
James E. Cayne
Chairman of the Board,
Chief Executive Officer
March 4, 2002
THE BEAR STEARNS COMPANIES INC.
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
--------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 26, 2002
--------
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 Tuesday, March 26, 2002,
at 5:00 P.M., New York City time, in the Bear Stearns Auditorium, 383 Madison
Avenue, 2nd 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 amendments to The Bear Stearns Companies Inc. Non-Employee
Directors' Stock Option Plan to permit grants of restricted stock
units and grants of options or shares in exchange for a portion of the
annual cash retainer.
3. To approve an amendment to The Bear Stearns Companies Inc. Stock Award
Plan to increase the number of shares subject to awards granted under
the Stock Award Plan.
4. To transact such other business as may properly be brought before the
meeting and any adjournments or postponements thereof.
Holders of record of Common Stock of the Company, par value $1.00 per
share, at the close of business on February 15, 2002, 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
March 4, 2002
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.
THE BEAR STEARNS COMPANIES INC.
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
--------
PROXY STATEMENT
--------
ANNUAL MEETING OF STOCKHOLDERS
MARCH 26, 2002
--------
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 2002 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held in the Bear Stearns Auditorium, 383 Madison
Avenue, 2nd Floor, New York, New York, on Tuesday, March 26, 2002, at 5:00 p.m.,
New York City time, and at any adjournments or postponements thereof. These
proxy materials are being sent on or about March 4, 2002, to holders of record
on February 15, 2002, 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 amendments to The Bear Stearns
Companies Inc. Non-Employee Directors' Stock Option Plan as described herein;
FOR the approval of an amendment to The Bear Stearns Companies Inc. Stock Award
Plan to increase the number of shares subject to awards granted under 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, Mellon Investor 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 solicitation is being made by the Company. All expenses of the Company
in connection with this solicitation will be borne by the Company. Directors,
officers and other employees of the Company also may solicit proxies, without
additional compensation, by telephone, in person or otherwise. The Company also
will request that brokerage firms, nominees, custodians, and fiduciaries forward
proxy materials to the beneficial owners of shares held of record by such
persons and will reimburse such persons and the Company's transfer agent for
reasonable out-of-pocket expenses incurred by them in forwarding such materials.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 21, 1985. The Company succeeded to the business of Bear, Stearns & Co., a
New York limited partnership (the "Partnership"), on October 29, 1985. As used
in this Proxy Statement, all references to "Bear Stearns", "BSB", "BSSC" and
"BSIL" are to Bear, Stearns & Co. Inc., Bear
Stearns Bank plc, Bear, Stearns Securities Corp., and Bear, Stearns
International Limited, respectively, the principal operating subsidiaries of the
Company.
On January 18, 2000, the Company's Board of Directors elected to change its
fiscal year-end to November 30 from June 30, effective with the year beginning
November 27, 1999. The five-month period ended November 26, 1999 is the
Company's "Transition Period". References to fiscal years prior to fiscal 2000
in this proxy statement refer to the fiscal years ended June 30 while references
to fiscal 2001 and 2000 refer to the fiscal years ended November 30, 2001 and
November 30, 2000, respectively.
VOTING SECURITIES
Holders of record of Common Stock at the close of business on February 15,
2002, 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 February 15, 2002, 99,852,892 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 the amendments to The Bear Stearns Companies
Inc. Non-Employee Directors' Stock Option Plan and (ii) the approval of an
amendment to The Bear Stearns Companies Inc. 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 15, 2002, the following is the only entity (other than the
Company's employees as a group) known to the Company to be the beneficial owner
of more than 5% of the Company's outstanding Common Stock.
NAME AND ADDRESS OF TOTAL NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ---------------------- --------
Legg Mason, Inc.(1)(2) 5,510,672 5.52%
100 Light Street
Baltimore, MD 21202
----------
(1) According to the Schedule 13G, filed with the Commission on February 8,
2002, by Legg Mason, Inc., a parent holding company incorporated in
Maryland ("Legg Mason"), Legg Mason beneficially owned 5,510,672 shares of
Common Stock with shared voting and shared dispositive power over 5,510,672
shares. The Legg Mason subsidiaries that acquired Common Stock were
identified and classified as follows: Legg Mason Funds Management, Inc.,
investment adviser; Bartlett & Co., investment adviser; Bingham Legg
Advisers, LLC, investment adviser; Brandywine Asset Management, LLC,
investment adviser; Legg Mason Capital Management, Inc., investment
adviser; Legg Mason Wood Walker, Inc., investment adviser and broker/dealer
with discretion; and Perigee Investment Counsel, Inc., investment adviser.
(2) In addition, Private Capital Management, whose address is 8889 Pelican Bay
Boulevard, Naples, FL 34108, an institutional investment manager and
wholly-owned subsidiary of Legg Mason, Inc., reported on Form 13F, dated
February 15, 2002, that it owns 4,127,425 shares of Common Stock.
The determination that there were no other persons, entities or groups
known to the Company to beneficially own more than 5% of the Common Stock was
based on a review of all statements filed with respect to the Company since the
beginning of the past fiscal year with the Commission pursuant to Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, as amended.
-2-
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 January 31,
2002. 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) and Common Stock represented
by Restricted Stock Units granted under the Stock Award Plan.
PERCENTAGE OF
AMOUNT COMMON STOCK OUTSTANDING
AND NATURE OF PERCENT OF REPRESENTED BY COMMON STOCK,
COMMON STOCK COMMON STOCK CAP UNITS AND CAP UNITS AND
BENEFICIALLY BENEFICIALLY RESTRICTED STOCK RESTRICTED STOCK
NAME AND ADDRESS (1) OWNED (2)(3) OWNED UNITS UNITS COMBINED
------------------ ------------- ------------- -------------- --------------
James E. Cayne (5) ........... 4,702,840 4.70% 2,646,397 5.16%
Carl D. Glickman (6) ......... 371,845 (4) -- (4)
Alan C. Greenberg ............ 48,500 (4) 1,101,003 (4)
Donald J. Harrington, C.M. ... 6,266 (4) -- (4)
Mark E. Lehman (7) ........... 137,841 (4) 316,798 (4)
Marshall J Levinson (8) ...... 939 (4) 20,244 (4)
William L. Mack .............. 28,050 (4) -- (4)
Michael Minikes (9) .......... 299,166 (4) 342,434 (4)
Samuel L. Molinaro Jr. ....... 20,490 (4) 108,563 (4)
Frank T. Nickell ............. 39,501 (4) -- (4)
Frederic V. Salerno .......... 6,417 (4) -- (4)
Alan D. Schwartz ............. 795,008 (4) 1,937,278 1.92%
Warren J. Spector (10) ....... 146,749 (4) 3,654,728 2.67%
Vincent Tese ................. 7,102 (4) -- (4)
Fred Wilpon .................. 7,337 (4) -- (4)
All directors, nominees and
executive officers as a
group (15 individuals) ....... 6,618,051 6.61% 10,127,445 11.76%
----------
(1) The address in each case is 383 Madison Avenue, New York, New York 10179.
(2) Nature of Common Stock beneficially owned is sole voting and investment
power, except as indicated in subsequent notes. Includes an aggregate of
3,362 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 distributed
during March 2002 to the following persons: Mr. Cayne--35,809, Mr.
Greenberg--18,500, Mr. Lehman--4,671, Mr. Levinson--339, Mr.
Minikes--9,165, Mr. Molinaro--690, Mr. Schwartz--26,037, and Mr.
Spector--32,601.
(4) Less than one percent.
(5) Includes 45,669 shares of Common Stock owned by Mr. Cayne's wife, as to
which shares Mr. Cayne disclaims beneficial ownership. Includes 285,715
shares of Common Stock held by a charitable trust, as to which shares Mr.
Cayne disclaims beneficial ownership. Does not include 229,454 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
8,048 shares of Common Stock owned by a child of Mr. Cayne, as to which
shares Mr. Cayne disclaims beneficial ownership.
(6) Does not include 3,427 shares of Common Stock owned by Mr. Glickman's wife,
as to which shares Mr. Glickman disclaims beneficial ownership.
(7) Does not include 29,763 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 77 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 1,247 shares of Common Stock owned by Mr. Minikes' wife,
as to which shares Mr. Minikes disclaims beneficial ownership.
(10) Does not include 636 shares of Common Stock owned by Mr. Spector's wife, as
to which shares Mr. Spector disclaims beneficial ownership.
-3-
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 successor is duly elected and
qualified. Each nominee is currently a director of the Company. Each nominee who
is elected or re-elected to the Board of Directors will hold office until the
next Annual Meeting of Stockholders, in accordance with the By-laws of the
Company. Should any nominee become unable or unwilling to accept nomination or
election, it is intended that the persons named in the enclosed proxy will vote
the shares that they represent for the election of a substitute nominee
designated by the Board of Directors, unless the Board of Directors reduces the
number of directors. At present, it is anticipated that each nominee will be a
candidate.
The affirmative vote of a plurality of the votes cast by holders of shares
of Common Stock is required for the election of directors. Officers serve at the
discretion of the Board of Directors.
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
JANUARY 31, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 2002 AND DIRECTORSHIPS HELD THE COMPANY
---- ----------- ---------------------- -----------
James E. Cayne ................. 67 Chairman of the Board and Chief Executive 1985
Officer of the Company and Bear Stearns,
member of the Executive Committee (as
hereinafter defined)
Carl D. Glickman ............... 75 Private Investor; Trustee, Chairman of the 1985
Executive Committee, Lexington Corporate
Property Trust
Alan C. Greenberg .............. 74 Chairman of the Executive Committee 1985
Donald J. Harrington, C.M. ..... 56 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 ................ 61 Founder and Managing Partner, The Apollo 1997
Real Estate Investment Funds; President
and Senior Managing Partner, The Mack
Organization; Chairman of the Board of
Mack-Cali Realty Corporation and
Metropolis Realty Trust, Inc.; Director, Vail
Resorts, Inc. and Wyndham International, Inc.
Frank T. Nickell ............... 54 President and Chief Executive Officer of Kelso 1993
& Company; Director, Blackrock Inc., Earle
M. Jorgensen Company, Peebles Inc., NYU
Hospitals Center Board of Trustees and New York
University School of Medicine Foundation Board
Frederic V. Salerno ............ 58 Vice Chairman and CFO of Verizon 1992
Communications; Director, Avnet, Inc.,
Viacom, Inc. and Zucotto Wireless, Inc.
Alan D. Schwartz ............... 51 President and Co-Chief Operating Officer 1987 (1)
of the Company and Bear Stearns, member
of the Executive Committee and Head of the
Investment Banking Group of Bear Stearns;
Director, Champps Entertainment, Inc.
-4-
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
JANUARY 31, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 2002 AND DIRECTORSHIPS HELD THE COMPANY
---- ----------- ---------------------- -----------
Warren J. Spector ................ 44 President and Co-Chief Operating Officer 1990 (1)
of the Company and Bear Stearns, member
of the Executive Committee and Head of
the Fixed Income Group of Bear Stearns
Vincent Tese ..................... 58 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Allied Waste
Industries Inc., Bowne & Co. Inc.,
Cablevision Inc., Mack-Cali Realty Corp.,
National Wireless Holdings Inc. and Lynch
Interactive Corp.
Fred Wilpon ...................... 65 Chairman of the Board of Directors of 1993
Sterling Equities, Inc.; Director, Loews
Corporation; President and Chief Executive
Officer of the New York Mets
----------
(1) Did not serve as director during 1997 and 1998.
Mr. Cayne became Chairman of the Board on June 25, 2001. Mr. Cayne has been
Chief Executive Officer of the Company and Bear Stearns for more than the past
five years and prior to June 25, 2001, was President of the Company and Bear
Stearns 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 Executive Committee for more than
the past five years and prior to June 25, 2001, was 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 Managing Partner of the Apollo Real Estate Investment
Funds for more than the past five years. He has been President and Senior
Managing Partner of The Mack Organization (a national owner, developer and
investor in office and industrial buildings and other real estate) for more than
the past five years. Mr. Mack is Chairman of the Board of Mack-Cali Realty
Corporation (a publicly traded real estate investment trust). He is also
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 Vice Chairman and CFO of Verizon Communications
(formerly Bell Atlantic Corporation). Prior to June 2000, Mr. Salerno was the
Senior Executive Vice President and CFO/Strategy and Business Development of
Bell Atlantic Corporation. Prior to the merger of NYNEX Corp. ("NYNEX") and Bell
Atlantic Corporation, Mr. Salerno was the Vice Chairman of the Board of NYNEX
for more than five years. Mr. Salerno served as Chairman of the Board of the
State University of New York from 1990 to 1996.
Mr. Schwartz became President and Co-Chief Operating Officer of the Company
and Bear Stearns and a member of the Executive Committee on June 25, 2001 and
was 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 became President and Co-Chief Operating Officer of the Company
and Bear Stearns and a member of the Executive Committee on June 25, 2001 and
was 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.
-5-
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.
There is no family relationship among any of the directors or executive
officers of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held eight meetings (exclusive of committee
meetings) during the preceding fiscal year. In addition, the Board of Directors
has established four committees whose functions and current members are noted
below. The Audit Committee, Compensation Committee and the Nominating Commitee
(collectively, the "Board Committees") are committees of the Board of Directors
and consist solely of members of the Board of Directors. The Executive Committee
includes individuals who are not members of the Board of Directors, but may
function in a manner comparable to that of the Board Committees under certain
circumstances as described below. Each current director attended 75% or more of
the aggregate number of meetings of the Board of Directors and Board Committees
(including for this purpose, the Executive Committee) on which he served that
were held during the period of service.
EXECUTIVE COMMITTEE. During the last fiscal year, the Executive Committee
of the Company (the "Executive Committee") consisted of Messrs. Cayne, Greenberg
(Chairman) and Lehman for the entire year, Messrs. Schwartz and Spector since
June 25, 2001 and Messrs. Minikes and Molinaro prior to June 25, 2001. Mr.
Molinaro was re-appointed to the Executive Committee effective December 1, 2001.
The Executive Committee met once each week and more frequently, as required,
having held 76 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,
to take all actions with respect to the management of the Company's business
that require action of the Board of Directors, so long as the action is also
approved by a majority of the members who are also directors of the Company,
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 with management and independent and internal
auditors reviews the adequacy of the Company's internal accounting controls that
could significantly affect the Company's 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 five 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 approves the salary and bonus
compensation of other executive officers and other Senior Managing Directors
based upon recommendations made by the Executive Committee and the Bear Stearns
and Co. Inc. Management and Compensation Committee (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 Stock Award Plan and the Restricted Stock Plan.
The Compensation Committee held ten meetings during the preceding fiscal year.
-6-
NOMINATING COMMITTEE. The Nominating Committee of the Board of Directors
(the "Nominating Committee') consists of Messrs. Mack (Chairman), Salerno and
Tese. Each of the foregoing is a director who is not employed by the Company or
affiliated with management. The Nominating Committee considers and makes
recommendations to the Board of Directors with respect to the size and
composition of the Board of Directors and the identification of potential
candidates to serve as directors. It also solicits and considers nominees
recommended by stockholders of the Company. Stockholders wishing to submit
recommendations for the 2003 Annual Meeting should write to the Corporate
Secretary, The Bear Stearns Companies Inc., 383 Madison Avenue, 6th Floor, New
York, New York 10179. The Company's Restated Certificate of Incorporation
contains time limitations, procedures and requirements relating to such
stockholder recommendations. The Nominating Committee was established in fiscal
2001 and held one meeting in that fiscal year.
-7-
AUDIT COMMITTEE REPORT
The members of the Audit Committee (the "Committee") have been appointed by
the Board of Directors (the "Board"). The Committee is governed by a charter
(attached as Exhibit A) which has been approved and adopted by the Board and is
reviewed and reassessed annually by the Committee. The Committee is comprised of
four directors who meet the independence and experience requirements of the New
York Stock Exchange.
The following Audit Committee Report does not constitute soliciting
material and shall not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Audit Committee Report by reference therein.
The Committee assists the Board in monitoring (1) the integrity of the
financial statements of the Company, (2) the compliance by the Company with
legal and regulatory requirements and (3) the independence and performance of
the Company's internal and external auditors.
Management is responsible for the preparation and integrity of the
Company's financial statements. The Committee reviewed the Company's audited
financial statements for the year ended November 30, 2001 and met with both
management and the Company's external auditors to discuss those financial
statements, including the critical accounting policies on which the financial
statements are based. Management and the external auditors have represented to
the Committee that the financial statements were prepared in accordance with
generally accepted accounting principles.
The Committee has received from and discussed with the external auditors
their written disclosure and letter regarding their independence from the
Company as required by Independence Standards Board Standard No. 1. The
Committee also discussed with the external auditors any matters required to be
discussed by Statement on Auditing Standards No. 61.
Based upon these reviews and discussions, the Committee has recommended to
the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended November 30, 2001.
AUDIT COMMITTEE
Carl D. Glickman
William L. Mack
Frederic V. Salerno
Vincent Tese, Chairman
* * *
-8-
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee establishes the compensation policies applicable
to all executive officers. From the time of the Company's initial public
offering after succession on October 29, 1985, to the business of the
Partnership, compensation 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.
To implement the foregoing philosophy, the salary and bonus compensation of
executive officers is determined principally by the operation of the Performance
Compensation Plan (the "Performance Compensation Plan"). In addition, Senior
Managing Directors are required to participate in the Capital Accumulation Plan
and also receive stock options under the Stock Award Plan.
PERFORMANCE COMPENSATION PLAN
Under the Performance Compensation Plan, the executive officers and other
key employees receive a base salary of $200,000 per annum and a share of 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 common 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
executive officer in any fiscal year is 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 any
of the applicable bonus pools computed under the formula designated by the
Compensation Committee.
For fiscal 2001, the Compensation Committee created two separate
performance-based pools. One pool consisted of five participants, the Company's
Chairman of the Board, Chairman of the Executive Committee, Presidents and
General Counsel (the "Executive Committee Pool"), while the other pool consisted
of seven members.
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. During fiscal 2001, the calculation of the Executive Committee
Pool totaled $56,720,000. The Executive Committee members voluntarily elected to
reduce their compensation by approximately 50% to $28,285,000. The total amount
of compensation paid from the pool for the period was awarded to the
participants in a combination of cash, CAP Units (as defined below under "Equity
Ownership and Capital Accumulation Plan") and stock options (see "Stock Award
Plan"). The allocation of compensation to the participants was 67.3% in cash and
32.7% in equity based awards.
The Compensation Committee also established the formulas for calculating
the other bonus pool for fiscal 2001 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 maximum bonus that may be
allocated to a participant in this pool in any fiscal year is $15,000,000. The
total bonus pool resulting from the application of these formulas for fiscal
2001 was $47,318,446, of which the Compensation Committee, based on the
recommendation of the Management and Compensation Committee, and with the
concurrence of the Executive Committee, determined that compensation aggregating
$18,535,000 would be paid to participants in this bonus pool. Compensation was
delivered to participants in this pool 68.8% in cash and 31.2% in equity based
awards.
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. The six current members of the
Executive Committee beneficially own 10.97% of the outstanding Common Stock, CAP
Units and restricted stock units combined, while all directors and executive
officers as a group beneficially own 11.76% of the outstanding Common Stock, CAP
Units and restricted stock units combined, as of January 31, 2002.
-9-
All executive officers are required to participate in the Capital
Accumulation Plan. The executive officers receive a portion of their annual
compensation in the form of stock units ("CAP Units") that will vest over three
years. After a five-year period, each officer 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 officer's Capital Accumulation Account
plus cash in the amount, if any, of such officer's cash balance account at the
end of such period.
For fiscal 2001, executive officers received compensation of approximately
$37,575,126, 67.9% in cash and 32.1% in equity based awards.
STOCK AWARD PLAN
The Stock Award Plan provides the Company with greater flexibility in the
composition of incentive awards. The determination of recipients of stock
options, the terms and conditions of such options within the parameters of the
Stock Award Plan, and the number of shares covered by each option is determined
by the Compensation Committee, based on management's recommendation.
An aggregate of 147,603 ten-year options were granted to executive officers
relating to performance in fiscal 2001. These options were granted with exercise
prices equal to the fair market value of the Common Stock on the date of grant
and become exercisable after three years.
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
respects by the Performance Compensation Plan. Pursuant to the terms of the
Performance Compensation Plan, for fiscal 2001 Mr. Cayne received a base salary
of $200,000 and shared in a bonus pool based on the Company's fiscal 2001
after-tax return on common equity. Mr. Cayne's proportionate share of the fiscal
2001 bonus pool (as well as that of the other members of the Executive
Committee) was determined by the Compensation Committee in February 2001, based
on the recommendation of the Executive Committee as to how the bonus pool 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 2001.
Mr. Cayne voluntarily elected to reduce his fiscal 2001 compensation by
approximately 50% from that which would otherwise have been payable under the
Performance Compensation Plan. Accordingly, Mr. Cayne received compensation
payable from the Executive Committee Pool of $5,172,150 in salary and cash
bonus, $2,001,025 in restricted stock awards in the form of CAP Units and 30,581
stock options. These amounts were based on the Company's financial performance
and allocation of the bonus pool. Due to the substantial portion of Mr. Cayne's
compensation being delivered in the form of stock units and stock options the
ultimate realization of benefits from his current bonus will depend on the
future performance of the Company and its Common Stock.
Section 162(m) of the Internal Revenue Code limits deductibility for
federal income tax purposes of compensation in excess of $1,000,000 annually
paid to individual executive officers named in the Summary Compensation Table
unless certain exceptions, including compensation based on performance goals,
are satisfied. The Performance Compensation Plan and the Stock Award Plan have
been established and maintained in an effort to comply with the
performance-based exception to limits on deductibility of executive officer
compensation. However, while the Compensation Committee currently seeks to
maximize the deductibility of compensation paid to executive officers, it will
maintain the flexibility to take actions which may be based upon other
considerations.
The Compensation Committee believes that the Performance Compensation Plan,
the Capital Accumulation Plan and the Stock Award Plan provide appropriate
incentives to senior management of the Company and are fair and reasonable
methods for determining the compensation of executive officers, including the
Chief Executive Officer, and also serve to align the interests of executives and
stockholders.
COMPENSATION COMMITTEE
Carl D. Glickman, Chairman
Donald J. Harrington
Frank T. Nickell
Vincent Tese
* * *
-10-
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 fiscal years ended
November 30, 2001 and 2000, the Transition Period, which represents the five
month period July 1, 1999 to November 26, 1999 ("Transition") and the fiscal
year ended June 30, 1999:
SUMMARY COMPENSATION TABLE
|---------------------------------------------------------|
| ANNUAL LONG TERM |
| COMPENSATION COMPENSATION AWARDS |
| |
| SECURITIES |
NAME AND FISCAL | RESTRICTED STOCK UNDERLYING | ALL OTHER
PRINCIPAL POSITION YEAR | SALARY BONUS (1) AWARDS (2)(3)(4) OPTIONS (#) | COMPENSATION (5)
---------------------------------------------------------------------------------------------------------------------------
James E. Cayne 2001 | $200,000 $4,972,150 $2,001,025 30,581 | $8,014,650
Chairman of the Board 2000 | 200,000 11,665,172 9,577,402 108,856 | 10,060,813
and Chief Executive Transition | 84,615 4,216,771 3,181,359 72,427 | 4,192,005
Officer 1999 | 200,000 10,871,700 10,311,700 | 8,639,708
| |
| |
Alan C. Greenberg 2001 | $200,000 $2,998,200 $1,175,200 18,702 | $3,472,587
Chairman of the Executive 2000 | 200,000 10,373,868 2,517,611 66,475 | 4,957,838
Committee Transition | 84,615 3,735,562 753,638 44,240 | 2,065,766
1999 | 200,000 9,648,512 3,212,838 | 4,434,095
| |
Samuel L. Molinaro Jr. 2001 | $200,000 $2,544,250 $959,875 15,605 | $249,378
Executive Vice President 2000 | 200,000 2,068,914 2,332,629 21,878 | 203,609
and Chief Financial Transition | 84,615 431,887 231,434 5,571 | 84,837
Officer 1999 | 200,000 671,000 779,000 | 129,892
| |
Alan D. Schwartz 2001 | $200,000 $4,766,890 $1,886,515 28,934 | $5,850,488
President and Co-Chief 2000 | 200,000 9,326,046 7,556,577 86,354 | 7,119,890
Operating Officer Transition | 84,615 3,421,646 2,457,747 57,500 | 2,966,658
1999 | 200,000 8,725,119 8,108,119 | 5,589,797
| |
Warren J. Spector 2001 | $200,000 $4,748,550 $1,900,925 29,141 | $9,946,755
President and Co-Chief 2000 | 200,000 11,150,606 9,142,933 104,062 | 13,214,403
Operating Officer Transition | 84,615 4,039,837 3,028,053 69,167 | 5,506,001
1999 | 200,000 18,000 20,219,713 | 9,658,375
----------
(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".
(3) As of November 30, 2001, the value and the aggregate number of CAP Units in
the accounts of each named person (based on the closing price of the Common
Stock on the Consolidated Transaction Reporting System on such date) was:
Mr. Cayne--$154,226,869 (2,682,206 units); Mr. Greenberg --$64,371,399
(1,119,503 units); Mr. Molinaro--$6,282,074 (109,253 units); Mr.
Schwartz--$112,890,648 (1,963,316 units); and Mr. Spector -- $212,021,448
(3,687,330 units).
(4) On December 11, 2000, Mr. Molinaro received restricted stock units as part
of his compensation pursuant to the Performance Compensation Plan. Mr.
Molinaro's grant was $788,021, which represents 15,879 restricted stock
units. Dividend equivalents of additional restricted stock units are
payable by the Company on all such holdings from the date of grant. These
restricted stock units will vest 33 1/3% per annum commencing June 30,
2003.
(5) 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.
-11-
OPTION GRANTS IN LAST FISCAL YEAR(1)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE (2) PRESENT VALUE (3)
---- --------------- --------------- --------- ---------- -----------------
James E. Cayne 30,581 0.51% $56.88 12/17/11 $579,816
Alan C. Greenberg 18,702 0.31% 56.88 12/17/11 354,590
Samuel L. Molinaro Jr. 15,605 0.26% 56.88 12/17/11 295,871
Alan D. Schwartz 28,934 0.48% 56.88 12/17/11 548,589
Warren J. Spector 29,141 0.48% 56.88 12/17/11 552,513
----------
(1) Represents awards made in December 2001 for performance in fiscal year
2001.
(2) All stock options become exercisable three years after grant date.
(3) Valued using a modified Black-Scholes option pricing model. The exercise
price of each stock option ($56.88) is equal to the closing price on the
Consolidated Transaction Reporting System of a share of Common Stock on
December 17, 2001, the date of the grant. The assumptions used for the
variables in the model were: 33% volatility (a projection of the volatility
of the Common Stock over the 120 month term of the options); a 5.20%
risk-free rate of return (based on the USD Interest Rate Swap Curve,
expressed as a zero-coupon rate over the 120 month term); a 1.00% dividend
yield (which was an estimated projected dividend yield on the date of
grant); and a ten year option term (which is the maximum term of the
options). A discount of 25% was applied to the option value yielded by the
model to reflect the non-marketability of the options. The actual gain, if
any, that executives will realize on their stock options will depend on the
future price of the Common Stock and cannot be accurately forecasted by
application of an option pricing model.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END (1) FISCAL YEAR-END (2)
------------------------------ -----------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--- ----------- -------- ----------- ------------- ----------- -------------
James E. Cayne -- -- -- 211,864 -- $2,215,247
Alan C. Greenberg -- -- -- 129,417 -- 1,352,991
Samuel L. Molinaro Jr. -- -- -- 43,054 -- 276,738
Alan D. Schwartz -- -- -- 172,788 -- 1,758,163
Warren J. Spector -- -- -- 202,370 -- 2,116,932
----------
(1) Includes the option grant for fiscal 2001 that was made on December 17,
2001.
(2) This valuation represents the difference between $57.50, the closing price
of a share of Common Stock reported on the Consolidated Transaction
Reporting System on November 30, 2001 and the exercise prices of those
stock options outstanding at November 30, 2001 (excludes fiscal 2001 grant
awarded on December 17, 2001) multiplied by the number of options
outstanding at each exercise price. The actual value, if any, that
executives will realize upon the exercise of any option will depend upon
the difference between the exercise price of the option and the market
price of the Common Stock on the date the option is exercised.
-12-
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 peer group (the "Peer Group") consist of Merrill Lynch
& Co., Inc., Morgan Stanley, Dean Witter & Co., Goldman Sachs Group 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 November 30,
1996, 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
[REPRESENTATION OF PLOT POINTS IN PRINTED PIECE.]
THE BEAR STEARNS S & P FINANCIAL
COMPANIES INC. PEER GROUP (1) DIVERSIFIED INDEX S&P 500 Index
---------------- ------------- ----------------- -------------
100 100 100 100
169.7 170.09 139.84 126.21
182.53 207.52 197.26 157.5
204.96 294.04 248.46 187.13
237.72 326.5 286.49 173.7
300.6 286.74 267.52 150.52
----------
Assumes $100 invested on November 30, 1996 in the Company's Common Stock; S&P
500 Index; S&P Financial Diversified Index and the Peer Group and that all
dividends have been reinvested.
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
The Bear Stearns Companies Inc. $100.00 $169.70 $182.53 $204.96 $237.72 $300.60
Peer Group (1) 100.00 170.09 207.52 294.04 326.50 286.74
S&P Financial Diversified Index 100.00 139.84 197.26 248.46 286.49 267.52
S&P 500 Index 100.00 126.21 157.50 187.13 173.70 150.52
----------
(1) Peer Group calculation assumes conversion of Morgan Stanley Group Inc.
shares into newly formed company, Morgan Stanley, Dean Witter & Co., in
June 1997. In fiscal year 2000, Goldman Sachs Group Inc. was added to the
peer group. Goldman Sachs Group Inc. is not included in results for 1996,
1997, 1998 and 1999. Donaldson, Lufkin & Jenrette Inc. and Paine Webber
Group Inc. are not included in results for 2001 and 2000 due to their
mergers with Credit Suisse Group and UBS AG, respectively, and the
resulting unavailability of financial information on a comparative basis.
COMPENSATION OF DIRECTORS
In fiscal 2001, each director who was not an employee of the Company
received an annual retainer of $35,000, plus $800 for each meeting of the Board
of Directors attended, and reasonable expenses relating to attendance at such
meetings. Effective for fiscal 2002, these amounts were increased to $50,000 and
$1,500, respectively. Directors who are members of the Audit Committee,
Compensation Committee or Nominating Committee receive additional compensation
at the rate of $1,500 for each meeting of the Audit Committee, Compensation
Committee or Nominating 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.
Pursuant to the provisions of the Non-Employee Directors' Stock Option Plan
(the "Directors' Plan"), each of the directors of the Company who is not an
officer or employee of the Company or any of its subsidiaries (the "Non-Employee
Directors") as of the date of an annual meeting of stockholders and whose
service will continue after such meeting is granted an option to purchase shares
of common stock, with an exercise price equal to the closing price of the Common
Stock on the New York Stock Exchange on the date the grant is made. The number
of shares covered by the option is equal to the quotient of an amount determined
by the Executive Committee divided by the average closing price of the Common
Stock
-13-
for the five trading days immediately preceding the date of such meeting,
subject to adjustment as provided in the Directors' Plan. The options have a
ten-year term, are exercisable six months from the date of grant and are subject
to termination upon the occurrence of certain events as provided in the
Directors' Plan.
Pursuant to the annual grant provisions of the Directors' Plan, each of the
Company's seven Non-Employee Directors received stock options valued at $53,173
in fiscal 2001 and will be granted stock options valued at $42,500 immediately
following the Annual Meeting. In addition, pursuant to amendments to the
Directors' Plan adopted by the Board of Directors on January 8, 2002, each
Non-Employee Director will receive restricted stock units valued at $42,500
immediately following the Annual Meeting. The amendments to the Directors' Plan
adopted by the Board of Directors also permit Non-Employee Directors to elect to
receive options or shares of Common Stock in exchange for up to one-half of the
annual cash retainer paid by the Company for services rendered as a director.
These amendments are subject to approval by the stockholders at the Annual
Meeting. If stockholder approval of the Directors' Plan is not obtained, no
restricted stock units will be granted to Non-Employee Directors.
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 as to interest rates and collateral
requirements) as those prevailing at the time for comparable transactions with
non-affiliated persons, except that for some credit products, the interest rates
charged were equivalent to the lowest of the interest rates charged to other
persons or were the same as those charged to Company employees 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. 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 be approved by the Management and Compensation
Committee. During the fiscal year ended November 30, 2001, the maximum aggregate
amount of month-end loans outstanding was $30,862,299.
The Company has formed several limited partnerships, The BSC Employee Fund,
L.P., The BSC Employee Fund II, The BSC Employee Fund III and The BSC Employee
Fund IV, which provide investment opportunities for the Company's key employees.
The BSC Employee Fund, L.P. (the "Fund") provides an investment opportunity
for the Company's Senior Managing Directors and Managing Directors that are
accredited investors. 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 November 30, 2001, 336
participants in the Fund have purchased a total of 1,029 limited partnership
interests. Each limited partnership interest represents a commitment by the
participant to invest $50,000, of which $25,000 is funded by the participant and
$25,000 is in the form of a nonrecourse, interest-bearing loan from the Company
to the Fund participant. The loans bear interest at the London Interbank Offered
Rate ("LIBOR") plus 1.0%. Capital calls since June 12, 1997 have totaled 100% of
each participant's equity commitment. The total amount loaned to the
participants in the Fund at November 30, 2001 was $8,469,255. 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 ($260,442), Alan D. Schwartz ($210,678), and
Warren J. Spector ($842,712). The aggregate amount of the loans outstanding to
all directors and executive officers as a group on such date was $1,377,035.
The BSC Employee Fund II, L.P. ("Fund II"), provides an investment
opportunity for certain key employees of the Company that are accredited
investors. Fund II has committed to invest $60,850,000 in a diversified group of
private equity funds, sponsored and managed by well-regarded private equity
firms. As of November 30, 2001, 193 participants in Fund
-14-
II have purchased a total of 542 limited partnership interests. Each limited
partnership interest represents a commitment by the participant to invest
$100,000, of which $50,000 is funded by the participant and $50,000 is in the
form of a nonrecourse, interest-bearing loan from the Company to the
participant. The loans bear interest at LIBOR plus 1.0%. Capital calls since
September 28, 2000 have totaled 32.5% of each participant's equity commitment.
The total amount loaned to the participants in Fund II at November 30, 2001 was
$6,678,016. At such date, there were no loans in excess of $60,000 outstanding
to any directors or executive officers.
The BSC Employee Fund III, L.P. ("Fund III"), provides an investment
opportunity for certain key employees of the Company. Fund III has committed to
invest $60,017,271 alongside Bear Stearns Merchant Banking Partners II, L.P.
(the "Merchant Banking Fund"), which will invest by making private equity and
equity-related investments in leveraged buyouts, recapitalizations and growth
capital opportunities and may make investments in preferred stock and debt
having equity components. Fund III is the first in a series of three employee
funds (the "MB Employee Funds") that will invest as side-by-side funds,
alongside the Merchant Banking Fund. As of November 30, 2001, 146 participants
in Fund III have purchased a total of 238 limited partnership interests. Each
limited partnership interest represents a commitment by the participant to
invest $80,000, of which $20,000 is funded by the participant and $60,000 is in
the form of an advance from the Company to the participant. The advances bear
interest at LIBOR plus 1.75%. Capital calls since October 20, 2000 have totaled
30% of each participant's equity commitment. The total amount loaned to the
participants in Fund III at November 30, 2001 was $3,446,552. At such date,
there were no loans in excess of $60,000 outstanding to any directors or
executive officers.
The BSC Employee Fund IV, L.P. ("Fund IV"), provides an investment
opportunity for Senior Managing Directors of the Company that are accredited
investors. Fund IV has committed to invest $106,649,395 alongside the Merchant
Banking Fund. The Merchant Banking Fund will invest in private equity and
equity-related investments in leveraged buyouts, recapitalizations and growth
capital opportunities and may make investments in preferred stock and debt
having equity components. In addition, Fund IV has committed to invest
$37,500,000 alongside Constellation Venture Partners II, L.P. (the
"Constellation Fund"), which will invest in equity and equity related securities
in early and mid-stage media, communications and technology based companies.
Fund IV is the first in a series of three employee funds (the "Combined Employee
Funds") that will co-invest alongside the Merchant Banking Fund and a Bear
Stearns-sponsored venture capital fund (in the case of Fund IV, the
Constellation Fund). As of November 30, 2001, 189 participants in Fund IV have
purchased a total of 478 limited partnership interests. Each limited partnership
interest represents a commitment by the participant to invest $80,000 in the
Merchant Banking Fund (of which $20,000 is funded by the participant and $60,000
is in the form of an advance from the Company to the participant) and $30,000 to
the Constellation Fund (of which $15,000 is funded by the participant and
$15,000 is in the form of an advance from the Company to the participant). The
advances bear interest at LIBOR plus 1.75%. Capital calls since October 20, 2000
have totaled 30% of each participant's equity commitment. The total amount
loaned to the participants in Fund IV at November 30, 2001 was $9,309,178. 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 ($97,991), Alan D. Schwartz
($97,991), Warren J. Spector ($97,991), Mark E. Lehman ($97,991), Samuel L.
Molinaro Jr. ($78,393) and Michael Minikes ($78,393). The aggregate amount of
the loans outstanding to all directors and executive officers as a group on such
date was $587,948.
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
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 2001, the
Company paid the Developer $5,412,848 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.
Effective February 1, 2002, a wholly owned subsidiary of the Company sold
its 6.25% ownership interest in a Citation X executive jet to Gracie Aviation
Corp. ("Gracie Aviation"), a corporation of which Warren J. Spector, the
President and Co-Chief Operating Officer of the Company is the sole stockholder.
Gracie Aviation paid a purchase price of $857,672, the fair market value of the
ownership interest, as determined by Executive Jet Sales Inc., less the
Company's pro rata share of an applicable termination fee. The purchase price
represents $29,391 more than the Company would have received had it exercised a
contractual right to require repurchase of the ownership interest by Executive
Jet. In connection with the sale,
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the Company assigned to Gracie Aviation, and Gracie Aviation assumed, all of the
Company's rights and obligations under the related agreements and documentation.
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 2001.
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 2001 fiscal year all Section 16(a) filing requirements were
complied with.
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II. APPROVAL OF AMENDMENTS TO THE
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
GENERAL
The Non-Employee Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors on March 15, 2000 and was approved by the
Company's stockholders at the 2001 Annual Meeting. The purpose of the Directors'
Plan is to secure for the Company and its stockholders the continued services of
directors of the Company who are not officers or employees of the Company or any
of its subsidiaries (the "Non-Employee Directors"). The Company believes that
the proposed amendments to the Directors' Plan will enhance the Company's
ability to provide Non-Employee Directors with a more direct stake in the future
welfare of the Company and will encourage additional qualified persons to become
directors, which will benefit the Company and its stockholders. Seven
Non-Employee Directors currently serve on the Board of Directors.
PROPOSED AMENDMENTS TO THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Currently, the Directors' Plan provides for the annual grant of options to
Non-Employee Directors. On January 8, 2002, the Board of Directors approved the
amendments to the Directors' Plan set forth in the Non-Employee Directors' Stock
Option and Stock Unit Plan, as amended and restated (the "Amended Directors'
Plan"), subject to stockholder approval at the Annual Meeting. In addition to
the annual grant of options, the Amended Directors' Plan provides for the annual
grant of Restricted Stock Units ("Units") and permits Non-Employee Directors to
elect to receive options or shares of Common Stock in exchange for up to
one-half of the annual cash retainer paid by the Company for services rendered
as a director. The Board of Directors proposes that the stockholders approve the
amendments to the Directors' Plan as set forth in the Amended Directors' Plan, a
copy of which is attached to this Proxy Statement as Exhibit B.
DESCRIPTION OF THE NON-EMPLOYEE DIRECTORS' STOCK OPTION AND STOCK UNIT PLAN, AS
AMENDED AND RESTATED
Stockholders are encouraged to review the Amended Directors' Plan
carefully. This summary of the material terms of the Amended Directors' Plan is
qualified in its entirety by reference to Exhibit B. All references to the
"Amended Directors' Plan" in the remaining text of this subsection shall mean
the Non-Employee Directors' Stock Option and Stock Unit Plan, as amended and
restated.
The Amended Directors' Plan shall be administered by the Board of
Directors. Subject to the provisions of the Amended Directors' Plan, the Board
of Directors shall have the power to construe the Amended Directors' Plan, to
determine all questions arising thereunder, and to adopt and amend such rules
and regulations as it may deem desirable. Any decision of the Board of Directors
in the administration of the Amended Directors' Plan shall be final and
conclusive.
An aggregate of 300,000 shares of Common Stock (subject to adjustment as
provided below and provided in the Amended Directors' Plan) will be subject to
the Amended Directors' Plan. Shares subject to options which terminate, expire
or are cancelled without having been exercised or Units which are forfeited,
will become available for future option grants or awards of Units.
OPTIONS; RIGHT TO EXCHANGE CASH RETAINER FOR OPTIONS OR SHARES
Each Non-Employee Director shall be eligible to receive grants of options
in accordance with the provisions of the Amended Directors' Plan. All options
granted under the Amended Directors' Plan shall be evidenced by an agreement in
such form as the Board of Directors shall prescribe from time to time in
accordance with the Amended Directors' Plan. All options will be non-qualified
options, which are not entitled to special tax treatment under Section 421 of
the Internal Revenue Code.
If approved by the stockholders, the Amended Directors' Plan will also
permit each Non-Employee Director to elect to receive up to one-half of his or
her annual cash retainer in the form of either (i) an option to purchase a
number of shares having a fair market value as of the date of the grant equal to
three times the amount of annual cash retainer being exchanged for the option,
or (ii) shares of Common Stock having a fair market value as of the date of the
grant equal to the amount of annual cash retainer being exchanged. The Board of
Directors has the right to reasonably revise the 3:1 option exchange ratio from
time to time. The number of shares issuable in exchange for the cash retainer
shall be reduced by the number of shares issuable under any options exchanged
for the cash retainer and any election to receive options or shares of Common
Stock will be reduced to the extent necessary to prevent the issuance of
fractional shares. All such elections
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by Non-Employee Directors must be made prior to the date on which the cash
retainer would otherwise have been payable by the Company.
Each person who is or becomes a Non-Employee Director on the date of an
annual meeting of the Company's stockholders and whose service will continue
after such meeting shall be granted an option to purchase a number of shares of
Common Stock. The number of shares covered by the option will be equal to the
quotient of an amount determined by the Executive Committee divided by the
average closing price of the Common Stock for the five trading days immediately
preceding the date of such meeting, subject to adjustment upon changes in
capitalization as provided in the Amended Directors' Plan.
The option price per share of options granted under the Amended Directors'
Plan shall equal the fair market value of a share of Common Stock on the date of
grant. 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 reported for composite transactions in exchange or
quotation system listed securities 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, or (ii) if the Common Stock is not listed on a
national securities exchange or quotation system, by such other method as the
Board of Directors determines in good faith to be reasonable. At the close of
trading on February 26, 2002, the closing price of the Common Stock as reported
on the NYSE was $55.40.
Except in the event of a Change in Control of the Company (as defined
below), no option may be exercised prior to the expiration of six months from
the date of grant. 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 Board of
Directors 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) in
accordance with a cashless exercise program as specified in the Amended
Directors' Plan or (iv) by any combination of the foregoing alternatives or by
any other means that the Board of Directors 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.
Awards of options are not transferable except by will or the laws of
descent and distribution. However, options may be transferred, for no
consideration, to certain family members of the Non-Employee Director or to
trusts for such family members. Except as described below, if a Non-Employee
Director terminates service on the Board of Directors for any reason, any
unexercised option that has not expired may be exercised at any time until the
earlier of (i) the third anniversary of the date of termination and (ii) the
date of expiration of such option with respect to the number of shares of Common
Stock that were exercisable on the date the Non-Employee Director terminated his
or her service with the Company. Any such option will terminate immediately if
(i) such former Non-Employee Director participates in a business which is
directly in competition (as defined in the Amended Directors' Plan) with the
Company or any of its subsidiaries or affiliates or (ii) if such individual
ceases to be a Non-Employee Director for Cause (as defined in the Amended
Directors' Plan).
UNITS
If approved by the stockholders, the Amended Directors' Plan will further
provide that each Non-Employee Director shall be eligible to receive awards of
Units in accordance with the provisions of the Amended Directors' Plan. Each
award of Units granted under the Amended Directors' Plan shall be evidenced by
an agreement in such form as the Board of Directors shall prescribe from time to
time in accordance with the Amended Directors' Plan.
Each person who is or becomes a Non-Employee Director on the date of an
annual meeting of the Company's stockholders and whose service will continue
after such meeting shall be granted a number of Units equal to the quotient of
an amount determined by the Executive Committee divided by the average closing
price of the Common Stock for the five trading days immediately preceding the
date of such meeting, subject to adjustment upon changes in capitalization as
provided in the Amended Directors' Plan.
Each Unit represents the right to receive one share of Common Stock at
settlement upon vesting, subject to cancellation and other terms and
restrictions set forth in the Amended Directors' Plan. Except in the event of
(i) a Non-Employee Director's termination of service other than as a result of
disability or death or (ii) a Change in Control of the Company (as defined
below), Units will vest and will be automatically settled on the date six months
after the grant of the Unit. Units granted shall be credited with dividend
equivalents corresponding to the amount of any cash or non-stock dividends paid
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on the Common Stock and any additional Units resulting from dividend equivalents
shall be subject to the same terms and conditions as the underlying Units. A
Non-Employee Director shall not be permitted to sell, transfer, pledge, or
otherwise encumber the Units or the shares scheduled to be issued in settlement
of such Units prior to the issuance of such shares. If a person shall cease to
be a Non-Employee Director for any reason (other than disability, as defined in
the Amended Directors' Plan, or death) while holding any unvested Units, such
Units shall not vest and shall be immediately cancelled for no value. If a
person shall die or become disabled while a Non-Employee Director, any unvested
Units shall immediately vest and shall be settled as of the date of termination
of service as a Non-Employee Director.
CHANGE IN CONTROL; TERMINATION, MODIFICATION OR AMENDMENT
In the event of a Change in Control of the Company, the Board of Directors
may, to assure fair and equitable treatment of the participants in the Amended
Directors' Plan (i) accelerate the vesting or exercisability of any options or
Units awarded pursuant to the Amended Directors' Plan, (ii) offer to purchase
any outstanding options or Units awarded pursuant to the Amended Directors' Plan
from the holder for their equivalent cash value, as determined by the Board of
Directors, as of the date of the Change in Control; or (iii) make adjustments or
modifications to outstanding awards issued pursuant to the Amended Directors'
Plan, as the Board deems appropriate to maintain and protect the rights and
interests of participants in the Amended Directors' Plan following such Change
in Control. "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 original effective date of the
Directors' 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.
The Board of Directors may terminate, modify or amend the Amended
Directors' Plan at any time on or prior to the expiration date, subject to any
approval by stockholders which is required under any law or regulation. No
amendment may materially impair the rights of a holder of an outstanding award
issued under the Amended Directors' Plan without the holder's consent.
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 for issuance, subject to outstanding options, deliverable upon vesting
of outstanding Units and deliverable in lieu of annual cash retainers and the
price of shares subject to outstanding options under the Amended Directors' Plan
to reflect such change.
The Amended Directors' Plan became effective on the date of its adoption by
the Board of Directors, subject to approval by the stockholders at the 2002
Annual Meeting. The Amended Directors' Plan will terminate upon the earlier of
(i) the adoption of a resolution of the Board of Directors to terminate the
Amended Directors' Plan or (ii) the date on which no shares remain available for
grant of awards and no awards remain outstanding under the Amended Directors'
Plan.
OPTIONS GRANTED UNDER THE DIRECTORS' PLAN
Because the number of options and Units to be awarded under the Amended
Directors' Plan is discretionary, and because the Non-Employee Directors will
have the option to elect to exchange a portion of their annual cash retainer for
options or shares of Common Stock, benefits to be received by Non-Employee
Directors are not determinable. The following table shows the number of shares
of Common Stock issuable upon exercise of stock options granted to all
Non-Employee Directors as a group under the Directors' Plan during the fiscal
year ended November 30, 2001.
NUMBER OF OPTIONS
-----------------
All current directors who are not executive officers, as a group 21,000
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 Non-Employee Director that may affect the accuracy or applicability
of this discussion.
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Options granted or to be granted under the Amended Directors' Plan will be
"non-qualified" stock options and are not intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code. A Non-Employee Director
will realize no income at the time he or she is granted a non-qualified stock
option. Ordinary income generally will be realized when a non-qualified stock
option is exercised. The amount of such income will be equal to the excess of
(i) the fair market value on the exercise date of the shares of Common Stock
issued as a result of such exercise, over (ii) the amount paid for the stock
(the option price). The Company will generally be entitled to a corresponding
tax deduction, at that time, equal to the amount of such ordinary income.
If a Non-Employee Director pays the option price upon exercise of an option
by tendering previously-owned shares of Common Stock having a fair market value
on the exercise date equal to the option price, the Non-Employee Director will
be treated as having exchanged, in a tax-free exchange, the tendered shares for
an equal number of new shares of Common Stock. Such number of new shares will
have a basis equal to, and a holding period identical to, the Non-Employee
Director's basis and holding period in the tendered shares. The number of new
shares of Common Stock received upon such exercise in excess of the number of
shares treated as exchanged will be treated as received by the Non-Employee
Director on the date of exercise for no consideration; the fair market value on
the exercise date of such shares will be treated as ordinary income to the
Non-Employee Director, and the Company will generally be entitled to a
corresponding deduction for such amount.
If a Non-Employee Director makes a timely election to receive additional
options in lieu of a portion of his or her annual cash retainer, there will be
no income realized upon grant of the options. The income tax consequences upon
the exercise of such options will be as described above.
A Non-Employee Director will realize no income at the time he or she is
granted a Unit. Upon the vesting of the Unit, and delivery of a share of Common
Stock, the fair market value of the share of Common Stock, as of the date of
transfer of the share, will be ordinary income to the Non-Employee Director.
Similarly, if a Non-Employee Director elects to receive shares of Common Stock
in lieu of a portion of his or her annual cash retainer, the fair market value
of such shares of Common Stock, as of the date of the transfer of the shares,
will be ordinary income to the Non-Employee Director. In both such cases, the
Company will generally be entitled to a deduction for the amount of such
ordinary income.
Except as otherwise described above with respect to shares treated as
received in a tax-free exchange, a Non-Employee Director who receives shares of
Common Stock pursuant to the terms of the Amended Directors' Plan will have a
tax basis in those shares equal to the amount (if any) paid for the shares plus
the amount (if any) included in the Non-Employee Director's income as a result
of the transfer of the shares to him or her. Gain or loss realized upon
subsequent disposition of such shares of Common Stock will be long- or
short-term capital gain, depending upon the period for which the shares were
held.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS
TO THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN.
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III. APPROVAL OF AMENDMENT TO THE STOCK AWARD PLAN
GENERAL
The Stock Award Plan was adopted by the Board of Directors on September 28,
1999 and was approved by the Company's stockholders at the 1999 Annual Meeting.
The Stock Award Plan was amended by the Company's stockholders at the 2001
Annual Meeting to increase the number of shares available for issuance under the
plan, in connection with an increase in the amount of shares of Common Stock
authorized under the Company's Restated Certificate of Incorporation.
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 options pursuant to the Stock Award Plan in concert with employee
participation in the Capital Accumulation Plan.
The Company relies 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
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, yet in a tax-efficient manner.
PROPOSED AMENDMENT TO THE STOCK AWARD PLAN
Currently, an aggregate of 24,000,000 shares of Common Stock are subject to
the Stock Award Plan. Shares subject to options which terminate or expire
unexercised will become available for future option grants. The Company granted
6,038,092 options related to performance in fiscal 2001. In light of the fact
that equity compensation is a significant component of the Company's
compensation structure, on February 26, 2002, the Board of Directors approved an
amendment to the Stock Award Plan, subject to stockholder approval at the Annual
Meeting, to increase the number of authorized shares of Common Stock available
for the grant of options under the Stock Award Plan to 35,000,000 shares
(subject to adjustment as described below and provided in the Plan). The
proposed increase in the aggregate number of shares available for the grant of
options is intended to enhance the Company's flexibility in structuring
incentive awards by facilitating future stock option grants.
Set forth below is the text of revised section 3.1 of the Stock Award Plan
containing the amendment being proposed at the Annual Meeting. The amendment is
qualified in its entirely by reference to such text.
The text of section 3.1 shall be amended to read as follows:
"3.1 NUMBER OF SHARES. Subject to the provisions of Paragraph 17 (relating
to adjustments upon changes in capitalization), the number of shares of Common
Stock subject at any one time to options granted under the Plan, plus the number
of shares of Common Stock theretofore issued or delivered pursuant to the
exercise of options granted under the Plan, shall not exceed 35,000,000 shares.
If and to the extent that options granted under the Plan terminate, expire or
are cancelled without having been exercised, new options may be granted under
the Plan with respect to the shares of Common Stock covered by such terminated,
expired or cancelled options; provided, that the granting and terms of such new
options shall in all respects comply with the provisions of the Plan."
DESCRIPTION OF THE STOCK AWARD PLAN
All references to the "Plan" in the remaining text of this subsection shall
mean the Stock Award Plan. The summary of the material terms of the Stock Award
Plan is qualified in its entirety by reference to the full text of the Stock
Award Plan, a copy of which is attached to this Proxy Statement as Exhibit C.
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 is determined and administered by the
Compensation Committee.
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INCENTIVE STOCK OPTIONS; NON-QUALIFIED STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS
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 and (ii) stock
appreciation rights granted in tandem with such options ("SARs"). 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 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.
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 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 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 February 26, 2002, the
closing sales price of the Common Stock as reported on the NYSE was $55.40 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) in accordance with a cashless exercise program
as specified in the Plan or (iv) 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.
CHANGE IN CONTROL; TERMINATION, MODIFICATION OR AMENDMENT
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, (ii) offer
to purchase any outstanding option granted pursuant to the Plan from the holder
for its equivalent cash value and (iii) make adjustments or modifications to
outstanding options 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
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(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.
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 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 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. 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 or (ii) ten
years from the effective date of the Plan.
OPTIONS GRANTED UNDER THE STOCK AWARD PLAN
Because the Plan is discretionary, benefits to be received by individual
optionees are not determinable. The following table shows the number of shares
of Common Stock issuable upon exercise of stock options granted to the named
individuals and groups under the Plan relating to the fiscal year ended November
30, 2001.
GROUP OR INDIVIDUAL NUMBER OF OPTIONS
------------------- -----------------
James E. Cayne, Chairman of the Board and Chief Executive Officer ................... 30,851
Alan C. Greenberg, Chairman of the Executive Committee .............................. 18,702
Samuel L. Molinaro Jr., Executive Vice President and Chief Financial Officer ........ 15,605
Alan D. Schwartz, President and Co-Chief Operating Officer .......................... 28,934
Warren J. Spector, President and Co-Chief Operating Officer ......................... 29,141
All current executive officers as a group (8 persons) ............................... 147,603
All current directors who are not executive officers as a group ..................... 21,000
All employees (who are not executive officers) as a group ........................... 5,890,489
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")
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.
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.
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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 "dis-qualifying
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 the clause 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.
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.
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 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.
Under certain circumstances, accelerated vesting or exercise of options or
SARs 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 Sections 280G and 4999 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, with respect to such excess.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE STOCK AWARD PLAN.
-24-
INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
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 November
30, 2002. 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.
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte & Touche"), which includes Deloitte Consulting, for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended November 30, 2001 and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $3.8 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Deloitte & Touche for professional services
rendered for information technology services relating to financial information
system design and implementation for the fiscal year ended November 30, 2001.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche for services rendered to the
Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", for the fiscal
year ended November 30, 2001 were $11.9 million. The aggregate fees billed by
Deloitte & Touche for audit related services and tax services for matters such
as comfort letters and consents related to registration statements filed with
the SEC, agreed upon procedures, reports in connection with securitization
activities, due diligence pertaining to acquisitions, consultation on accounting
standards or transactions, consultation related to tax planning and tax
compliance were $9.7 million. The aggregate fees billed by Deloitte & Touche for
all other services were $2.2 million, including $1.8 million of fees billed by
Deloitte Consulting for other system design and implementation. Deloitte &
Touche has recently announced its intent to separate Deloitte Consulting from
the firm.
FUND RELATED FEES
The Company offers investment products, including money market, equity and
fixed income funds ("Funds"). Deloitte and Touche provides audit and other
services to certain of these Funds. The aggregate fees billed by Deloitte and
Touche for such services in fiscal 2001 were approximately $1.4 million.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.
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 2003 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 2003
Annual Meeting must do so no later than November 4, 2002.
In addition, in accordance with Article VI, Section 2 of the Restated
Certificate of Incorporation, in order to be properly brought before the 2003
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 autho-
-25-
rized proxy for such stockholder, which conforms to the requirements of Article
VI, Section 2 of the Restated 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 2003 Annual Meeting.
Accordingly, any written notice given by or on behalf of a stockholder pursuant
to the foregoing clause (iii) in connection with the 2003 Annual Meeting must be
received no later than February 22, 2003.
STOCKHOLDERS SHARING AN ADDRESS
In accordance with a notice sent to certain street-name stockholders of the
Company who share a single address, only one copy of this Proxy Statement and
the Company's 2001 Annual Report to Stockholders is being sent to that address
unless we received contrary instructions from any stockholder at that address.
This practice, known as "householding," is designed to reduce the Company's
printing and postage costs.
However, if any stockholder residing at such an address wishes to receive a
separate copy of this Proxy Statement or the Company's 2001 Annual Report to
Stockholders, such stockholder may contact the Investor Relations Department of
the Company at 383 Madison Avenue, New York, New York 10179, telephone (212)
272-2000, and the Company will deliver those documents to such stockholder
promptly upon receiving the request. Any such stockholder may also contact the
Investor Relations Department using the above contact information if such
stockholder would like to receive separate proxy statements and annual reports
in the future.
If you are a street-name stockholder who is receiving multiple copies of
the Company's annual report and proxy statement, you may request householding in
the future by following the instructions on this year's street-name voting
instruction form.
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 November 30, 2001, 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 Investor Relations Department of the Company at the
address below. This Proxy Statement and the Company's 2001 Annual Report to
Stockholders and Annual Report on Form 10-K are also available on the Company's
website at http://www.bearstearns.com. The 2001 Annual Report to Stockholders,
Annual Report on Form 10-K and information on the website other than the Proxy
Statement, are not part of the Company's proxy soliciting materials.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
The Bear Stearns Companies Inc.
383 Madison Avenue
New York, New York 10179
March 4, 2002
-26-
EXHIBIT A
THE BEAR STEARNS COMPANIES INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
The members of the Audit Committee shall be appointed by the Board. The
Audit Committee shall be governed by a charter and shall be comprised of at
least three directors who shall meet the independence and experience
requirements of the New York Stock Exchange. The Audit Committee shall assist
the Board in monitoring (1) the integrity of the financial statements of the
Company, (2) the compliance by the Company with legal and regulatory
requirements and (3) the independence and performance of the Company's internal
and external auditors.
The Audit Committee shall meet at least four times annually and shall make
regular reports to the Board. It shall have the authority to retain special
legal, accounting or other consultants to advise the Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or
to meet with any members of, or consultants to, the Committee.
In fulfilling its responsibilities the Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually, recommend
any proposed changes to the Board for approval and ensure inclusion of
the Charter in the Company's annual proxy statement at least once
every three years.
2. Review the annual audited financial statements with management,
including major issues, if any, regarding accounting principles.
3. Review with management and the independent auditor:
(a) Significant financial reporting issues and judgements made in
connection with preparation of the Company's financial
statements.
(b) The adequacy of internal controls that could significantly affect
the Company's financial statements.
4. Ensure review by the independent auditor of the Company's interim
financial information prior to the filing of its quarterly report on
Securities and Exchange Commission Form 10-Q.
5. Meet, as necessary, with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Company's accounting principles and
practices as brought to it's attention by the independent auditor,
internal auditors, management or as required by professional or
regulatory pronouncements and actions.
7. Recommend to the Board the selection and appointment of the
independent auditor, which firm shall be ultimately accountable to the
Audit Committee and the Board.
8. Receive periodic reports from the independent auditor regarding the
auditor's independence. Discuss such reports with the auditor, and if
so determined by the Audit Committee, recommend that the Board take
appropriate action regarding the auditor.
9. Evaluate after gathering information from management, internal audit
and other Board members, the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
10. Review the fees to be paid to the independent auditor as negotiated by
management.
11. Review the appointment and retention of the senior internal auditing
executive.
12. Review, as necessary, with the senior internal auditing executive the
Internal Audit Department's responsibility, budget and staffing.
A-1
13. Review significant reports to management prepared by the internal
auditing department and management's responses thereto, if any.
14. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
15. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit. Such review should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to required information.
(b) Any changes required in the planned scope of the audit.
(c) Any matters communicated by the auditor to management which the
auditor views are material weaknesses and reportable conditions
of material inadequacies as those terms are defined by the
accounting profession or regulators.
16. Prepare the report required by the rules of the Securities and
Exchange Commission (Item 306 of Regulation S-K) to be included in the
Company's annual proxy statement.
17. Discuss with management, the conformity of the Company's subsidiaries
and controlled affiliated entities with applicable significant legal
requirements and the Company's Code of Conduct and advise the Board of
such compliance.
18. Review with the Company's General Counsel legal matters that may have
a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
19. Meet, as deemed necessary, with the chief financial officer, the
senior internal auditing executive and the independent auditor in
separate executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are presented
fairly in accordance with generally accepted accounting principles. This is the
responsibility of management as to the Company's financial statements and the
independent auditor as to the plan, extent and execution of the audit. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor as to the
plan and extent of the audits or to assure compliance with laws and regulations
and the Company's Code of Conduct.
Approved by the Audit Committee on March 14, 2000
Approved by the Board of Directors of The Bear Stearns Companies Inc. on
March 15, 2000
A-2
EXHIBIT B
THE BEAR STEARNS COMPANIES INC.
NON-EMPLOYEE DIRECTORS' STOCK
OPTION AND STOCK UNIT PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 8, 2002
1. PURPOSE. The purpose of The Bear Stearns Companies Inc. Non-Employee
Directors' Stock Option and Stock Unit 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 incentive inherent in holding an equity
interest in the Company's Common Stock, par value $1.00 per share (the "Common
Stock"), by the members of the Board of Directors (the "Board") of the Company
who are not employees of the Company or any of its subsidiaries ("Non-Employee
Directors"). It is expected that such ownership will provide such Non-Employee
Directors with a more direct stake in the future welfare of the Company and
encourage them to remain directors of the Company. It is also expected that the
Plan will encourage qualified persons to become directors of the Company.
Pursuant to the Plan, such Non-Employee Directors will be offered the
opportunity to acquire Common Stock through the grant of options and will
receive Common Stock upon the vesting of restricted stock units. Non-Employee
Directors will also have the opportunity to receive Common Stock or options in
lieu of a portion of the annual cash retainer otherwise payable to them by the
Company.
2. ADMINISTRATION. The Plan shall be administered by the Board. The Board
shall have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreements ("Agreements") embodying grants of stock options
("Options") and restricted stock units ("Units") (collectively, "Awards") made
under the Plan. Subject to the provisions of the Plan, the Board shall have the
power to construe the Plan, to determine all questions arising thereunder, and
to adopt and amend such rules and regulations for the administration of the Plan
as it may deem desirable. Any decision of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or the Secretary or any other officer
of the Corporation to execute and deliver documents on behalf of the Board and
to perform administrative functions under the Plan. No member of the Board shall
be liable for anything done or omitted to be done by such member or by any other
member of the Board in connection with the Plan, except for such member's own
willful misconduct or as expressly provided by statute.
3. SHARES SUBJECT TO GRANTS.
3.1 NUMBER OF SHARES. Subject to the provisions of Paragraph 15, the
number of shares of Common Stock subject at any one time to Awards granted under
the Plan, plus the number of shares of Common Stock theretofore issued or
delivered pursuant to the exercise of Options or the vesting of Units, or in
lieu of payment of annual cash retainers, shall not exceed 300,000 shares. If
and to the extent that Options terminate, expire or are cancelled without having
been exercised, or Units are forfeited, the shares of Common Stock covered by
such terminated, expired or cancelled Options or forfeited Units shall again be
available for issuance or delivery under the Plan, or for the grant of new
Awards under the Plan; provided, that the granting and terms of such new Awards
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 issuance 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 (less
any shares that have been issued pursuant to Awards granted hereunder or in lieu
of payment of annual cash retainers).
4. ELIGIBILITY. Each Non-Employee Director shall be eligible to receive
grants of Awards in accordance with the further provisions of the Plan. All
Awards granted under the Plan shall be evidenced by an Agreement in such form as
the Board shall prescribe from time to time in accordance with the Plan, which
Agreement shall include the applicable provisions contained in Paragraphs 6, 7,
8, 9, 11 and 14, as well as such other provisions (not inconsistent with the
terms of the Plan) as the Board shall deem appropriate.
B-1
5. GRANT OF OPTIONS. Options shall be granted in the following amounts
and on the following dates:
5.1 OPTION GRANTS TO NON-EMPLOYEE DIRECTORS AT INITIAL EFFECTIVE DATE
OF PLAN. An Option to purchase 3,000 shares of Common Stock, subject to
adjustment as provided in Paragraph 15, was granted to each Non-Employee
Director who was a member of the Board on March 16, 2000, the day following the
initial adoption of the Plan by the Board.
5.2 ANNUAL OPTION GRANTS. Each person who is or becomes a
Non-Employee Director on the date of an annual meeting of the Company's
stockholders and whose service will continue after such meeting shall be granted
an Option to purchase a number of shares of Common Stock. The number of shares
covered by the Option will be equal to the quotient of an amount determined by
the Company's Executive Committee divided by the average closing price of the
Common Stock for the five trading days immediately preceding the date of such
meeting, subject to adjustment as provided in Paragraph 15, effective as of the
date of such meeting.
5.3 ELECTION TO RECEIVE OPTION GRANT IN LIEU OF ANNUAL CASH RETAINER.
A Non-Employee Director may elect to receive the grant of an Option in lieu of
the payment of up to one-half of the annual cash retainer to be paid by the
Company for services rendered. The Option granted shall be for a number of
shares of Common Stock having a fair market value as of the date of grant equal
to three (3) times the amount of annual cash retainer being exchanged for the
Option; an election under this Paragraph 5.3 shall be deemed reduced to the
extent necessary to ensure that the Option is granted for a number of whole
shares only. The Board shall have the right to reasonably revise this 3:1
exchange ratio from time to time. An election made by a Non-Employee Director
pursuant to this Paragraph 5.3 must be made prior to the date on which the cash
retainer would otherwise have been payable by the Company.
6. OPTION PRICE. Subject to Paragraph 15, the option price of each share
of Common Stock purchasable under any Option granted under the Plan shall equal
the fair market value of such share of Common Stock on the date of grant of the
Option.
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 reported for composite
transactions in exchange or quotation system listed securities 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, or (ii) if the Common
Stock is not listed on a national securities exchange or quotation system, by
such other method as the Board determines in good faith to be reasonable.
7. EXERCISABILITY AND DURATION OF OPTIONS.
7.1 All Options granted under the Plan shall:
(a) be nonqualified options not entitled to special tax
treatment under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"),
(b) terminate and expire ten (10) years after the date granted,
subject to earlier termination as provided in Paragraphs
7.2, 7.3 and 7.4,
(c) not be exercised for a period of six (6) months from the
date of grant subject to Paragraphs 5.1 and 14, and (d) be
exercisable in the manner provided in Paragraph 8.
7.2 TERMINATION OF SERVICE. Subject to Paragraphs 7.3 and 7.4, if a
person shall cease to be a Non-Employee Director for any reason while holding an
unexercised Option that has not expired, such person, or in the case of his or
her death or adjudication of incompetency, his or her executors, administrators,
distributees, guardian or legal representative, as the case may be, may, at any
time until the earlier to occur of the (y) third anniversary of the date of
cessation and (z) the tenth anniversary of the date of grant, exercise the
Option with respect to any shares of Common Stock as to which it is exercisable
on the date the person ceased to be a Non-Employee Director. To the extent that
Options granted hereunder were not exercisable on the date the person ceased to
be a Non-Employee Director, such Options shall terminate.
7.3 PARTICIPATION IN A COMPETING BUSINESS. If a person shall cease to
be a Non-Employee Director for any reason while holding an Option that has not
expired and has not been fully exercised, such Option will terminate immediately
if and at such time as such person, acting alone or with others, directly or
indirectly, shall engage, either as employee, employer, independent contractor,
consultant, advisor, or director, or as an owner, investor, partner, or
stockholder unless such person's interest is insubstantial, in any business in
an area or region in which the Company or any subsidiary or affiliate conducts
business at the date the event occurs, which is directly in competition with a
business then conducted by the Company or any subsidiary or affiliate. The Board
shall, in its discretion, determine which lines of business the Company or any
subsidiary or affiliate conducts on any particular date and which third parties
may reasonably be deemed to be in competition
B-2
with the Company or any subsidiary or affiliate. For purposes of this Paragraph
7.3, a person's interest as a stockholder is insubstantial if it represents
beneficial ownership of less than three percent of the outstanding class of
stock, and a person's interest as an owner, investor or partner is insubstantial
if it represents ownership, as determined by the Board in its discretion, of
less than three percent of the outstanding equity of the entity.
7.4 TERMINATION OF SERVICE WITH CAUSE. In the event such person shall
cease to be a Non-Employee Director for Cause while holding an Option that has
not expired and has not been fully exercised, such Option shall terminate
immediately. Cause means (A) the Non-Employee Director is charged with a felony
or commission of any act, which would rise to the level of a felony, (B) the
Non-Employee Director is charged with the commission of a lesser crime or
offense that adversely impacts on the business or reputation of the Company, (C)
the Non-Employee Director is charged with the commission of a dishonest or
wrongful act involving fraud, misrepresentation or moral turpitude causing
damage or potential damage to the Company or (D) the Non-Employee Director
commits a breach of fiduciary duty.
8. EXERCISE OF OPTIONS. Options granted under the Plan shall be exercised
by the Non-Employee Director (or by his or her executors, administrators,
distributees, guardian or legal representative as provided in Paragraph 7.2) 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,
accompanied by payment of the full exercise price for the shares being
purchased. Payment of such exercise price shall be made (a) by check payable to
the Company, (b) with the consent of the Board, by delivery of shares of Common
Stock already owned by the Non-Employee Director for at least six months (which
may include shares received at least six months earlier 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 exercise price,
(c) in accordance with a "cashless exercise" program established by the Board in
its sole discretion under which if so instructed by the Non-Employee Director,
shares may be issued directly to the Non-Employee Director's broker or dealer
upon receipt of the purchase price in cash from the broker or dealer, (d) by any
combination of (a), (b), or (c) above, or (e) by other means that the Board
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 Board 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 Board may from time to time prescribe. The date of exercise shall be the
date of the Company's receipt of such notice and payment. The Company shall
effect the transfer of the shares so purchased to the Non-Employee Director (or
such other person exercising the Option pursuant to Paragraph 7.2) as soon as
practicable. No Non-Employee Director 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 except as provided under Paragraph 15. In no event may
any Option granted hereunder be exercised for a fraction of a share.
9. NON-TRANSFERABILITY OF OPTIONS. Except as provided herein, no Option
granted under the Plan or any right evidenced thereby shall be transferable by
the Non-Employee Director other than by will or by the laws of descent and
distribution, and an Option may be exercised, during the lifetime of a
Non-Employee Director, only by such Non-Employee Director. Notwithstanding the
preceding sentence, the Non-Employee Directors with the approval of the
Committee, may transfer his or her Options for no consideration to or for the
benefit of the Non-Employee Director's spouse, parents, children (including
stepchildren or adoptive children), grandchildren, or siblings, or to a trust
for the benefit of any of such persons.
10. DEFERRAL OF OPTIONS. Subject to rules prescribed by the Board, a
Non-Employee Director may elect to defer receipt of shares of Common Stock which
would otherwise be received upon exercise of an Option. Such an election must be
made at least six month prior to the exercise of the Option and must be
irrevocable.
11. RESTRICTED STOCK UNITS.
11.1 IN GENERAL. Each person who is or becomes a Non-Employee Director
on the date of an annual meeting of the Company's stockholders and whose service
will continue after such meeting shall be granted the number of Units equal to
the quotient of an amount determined by the Company's Executive Committee
divided by the average closing price of the Common Stock for the five trading
days immediately preceding the date of such meeting, subject to adjustment as
provided in Paragraph 15, effective as of the date of such meeting. Each Award
shall be evidenced by an Agreement which shall set forth the terms and
conditions of such Award, including without limitation, the date or dates upon
which such Award shall vest and the circumstances (including, without
limitation, Termination of Service, as described in Paragraph 11.4) under which
such Award shall not vest. The Award shall also be subject to such other terms
and conditions not inconsistent herewith as the Board shall determine and
prescribe in the applicable Agreement.
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11.2 NATURE OF RESTRICTED STOCK UNITS; ACCOUNTS. Each Unit represents
a right to receive one share of Common Stock at settlement upon vesting of the
Unit, subject to a risk of cancellation and to the other terms and conditions
set forth in the Plan and the Agreement. The Board shall establish and maintain
an account for each Non-Employee Director to record Units granted to him or her
and transactions and events affecting such Units. Units and other items
reflected in the account will represent only bookkeeping entries and shall
evidence unfunded obligations of the Company.
11.3 VESTING AND SETTLEMENT DATE. Except as otherwise provided in
Paragraph 11.4 or Paragraph 14, outstanding Units will vest and will be
automatically settled on the date six months after the date of grant of the
Unit.
11.4 TERMINATION OF SERVICE. If a person shall cease to be a Non-
Employee Director for any reason (other than disability or death) while holding
an unvested Unit, such Unit shall not vest and shall be immediately cancelled
for no value. If a person shall die or become disabled while a Non-Employee
Director, any unvested Units shall immediately vest, and shall be settled as of
the date of his or her termination of service as a Non-Employee Director. For
purposes of this Paragraph 11.4, a Non-Employee Director shall be considered to
be disabled if he or she is unable to perform the duties of a director due to a
medically-determinable physical or mental impairment, as determined by the Board
on the basis of such evidence, including independent medical reports, as it
deems necessary.
11.5 DIVIDEND EQUIVALENTS. Units granted to a Non-Employee Director
shall be credited with dividend equivalents as provided in this Paragraph 11.5.
Additional Units resulting from dividend equivalents shall be subject to the
same terms and conditions as the underlying Units, as set forth in the Agreement
evidencing the Award.
(i) CASH DIVIDENDS. If the Company declares and pays a cash
dividend on Common Stock, then a number of additional Units
shall be credited to the Non-Employee Director as of the
payment date for such dividend equal to (A) the number of
non-vested Units credited to the Non-Employee Director as of
the record date for such dividend, multiplied by (B) the
amount of cash actually paid as a dividend on each share at
such payment date, divided by (C) the fair market value of a
share of Common Stock at the ex-dividend date.
(ii) NON-STOCK DIVIDENDS. If the Company declares and pays a
dividend on Common Stock in the form of property other than
shares of Common Stock, then a number of additional Units
shall be credited to the Non-Employee Director as of the
payment date for such dividend equal to (A) the number of
Units credited to the Non-Employee Director as of the record
date for such dividend, multiplied by (B) the fair market
value of any property other than shares actually paid as a
dividend on each share at such payment date, divided by (C)
the fair market value of a share of Common Stock at the
ex-dividend date.
(iii)MODIFICATIONS TO DIVIDEND EQUIVALENTS POLICY. Other
provisions of this Paragraph 11.5 notwithstanding, the Board
may modify the manner of payment or crediting of dividend
equivalents hereunder for administrative convenience or for
any other reason.
11.6 RESTRICTION ON TRANSFERABILITY. A Non-Employee Director shall
not be permitted to sell, transfer, pledge, or otherwise encumber the Units
granted to him or her, or the shares that are scheduled to be issued in
settlement of such Units prior to issuance of such shares.
11.7 DELIVERY OF SHARES IN SETTLEMENT OF RESTRICTED STOCK UNITS;
FRACTIONAL SHARES. The Company shall make delivery of shares hereunder in
settlement of Units by either delivering one or more certificates representing
such shares to the Non-Employee Director, registered in the name of the
Non-Employee Director (and any joint name, if so directed by the Non-Employee
Director), or by depositing such shares into an account maintained for the
Non-Employee Director (or of which the Non-Employee Director is a joint owner,
with the consent of the Non-Employee Director) by a broker-dealer affiliated
with the Company. If the Company settles Units by making a deposit of shares
into such an account, the Company may settle any fractional Unit by means of
such deposit. In other circumstances, the Company shall instead pay cash in lieu
of fractional shares, on such basis as the Board may determine. In no event will
the Company in fact issue fractional shares. The Board shall determine whether,
prior to settlement, Units will be reflected as whole Units only or include
fractional Units and related terms.
12. ELECTION TO RECEIVE COMMON STOCK IN LIEU OF ANNUAL CASH RETAINER. In
addition to the election described in Paragraph 5.3, a Non-Employee Director may
elect to receive shares of Common Stock in lieu of the payment of a portion of
the annual cash retainer to be paid by the Company for services rendered. Such
an election may be made with respect to up to one half of the annual cash
retainer to which the Non-Employee Director is entitled, reduced by the amount
(if any) with respect to which an election described in Paragraph 5.3 has been
made. A Non-Employee Director making this election will receive a number of
shares of Common Stock having a fair market value as of the date of grant equal
to the amount of annual cash retainer being exchanged for the shares. An
election under this Paragraph 12 shall be deemed reduced to the extent necessary
to prevent the issuance of fractional shares. An election made by a Non-Employee
Director pursuant
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to this Paragraph 12 must be made prior to the date on which the cash retainer
would otherwise have been payable by the Company.
13. RESTRICTIONS ON DELIVERY AND SALE OF SHARES. Each Award granted under
the Plan is subject to the condition that if at any time the Board, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Award upon any securities exchange or under any state
or federal law or compliance with another legal obligation is necessary or
desirable as a condition of or in connection with the granting of such Award or
the purchase or delivery of shares thereunder, the delivery of any or all shares
pursuant to the Award may be withheld unless and until such listing,
registration, qualification or compliance, shall have been effected. The Board
may require, as a condition of issuance of shares upon the exercise of any
Option or the vesting of any Unit that the Non-Employee Director 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 Board may
require that the sale or other disposition of any shares acquired upon exercise
of an Option hereunder 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 Non-Employee Director 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. The Company may endorse on certificates representing shares
issued upon the exercise of an Option or the vesting of any Unit 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.
14. CHANGE IN CONTROL.
(a) In the event of a Change in Control of the Company, as defined
below, the Board 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 Non-Employee Directors:
(i) accelerate the vesting or exercisability of any Award;
(ii) offer to purchase any outstanding Options or Units from the
holder for their equivalent cash value, as determined by the
Board, as of the date of the Change in Control; or
(iii)make adjustments or modifications to outstanding Awards as
the Board deems appropriate to maintain and protect the
rights and interests of the Non-Employee Directors following
such Change in Control.
Any such action approved by the Board shall be conclusive and binding on
the Company, its subsidiaries and all Non-Employee Directors.
(b) To the extent not otherwise defined in this Plan, the following
terms used in this Paragraph 14 shall have the following
meanings:
"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.
"Beneficial Owner" has the meaning ascribed thereto in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (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 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 18 or who is
first 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.
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"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.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. In the event that any
large, special and non-recurring dividend or other distribution (whether in the
form of cash or other property), Common Stock dividend, forward or reverse
split, recapitalization, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Common Stock such that an
adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of an Award holder's rights under the Plan, then the
Board shall, in such manner as it may deem equitable, adjust any or all of (i)
the number and kind of shares reserved and available for issuance under
Paragraph 3, (ii) the number of shares subject to Options initially granted
under Paragraph 5.1 and the kind of shares granted under Paragraph 5, (iii) the
number and kind of shares deliverable upon exercise of outstanding Options, and
the exercise price per share thereof (provided that no fractional shares will be
delivered upon exercise of any Option), (iv) the number and kind of shares
deliverable upon vesting of outstanding Units, (v) the number and kind of shares
deliverable in lieu of annual cash retainers pursuant to Paragraph 12, and (vi)
the fair market value of shares determined under Paragraph 6.
16. EXPIRATION AND TERMINATION OF THE PLAN.
16.1 GENERAL. The Plan shall expire at such time as no shares remain
available for grant of Awards and no Awards remain outstanding (the "Expiration
Date"). Outstanding Awards shall remain in effect until they have been
exercised, become vested, or have terminated or expired. The Plan may be
terminated, modified or amended by the Board of Directors at any time on or
prior to the Expiration Date; provided, however, that the approval of the
Company's stockholders will be required for any amendment to the extent required
under any law or regulation; and provided further, that any amendments that
materially impair the rights of a holder of an outstanding Award shall be
effective as to such Award only if consented to by such holder.
16.2 MODIFICATIONS. No modification, extension, renewal or other
change in any Award granted under the Plan shall be made after grant, unless the
same is consistent with the provisions of the Plan. In addition, the option
price of an Option may not be changed after grant, other than in the case of an
adjustment described in Paragraph 15.
17. MISCELLANEOUS PROVISIONS OF THE PLAN. The following are miscellaneous
provisions of the Plan:
17.1 Except as expressly provided for in the Plan, no Non-Employee
Director or other person shall have any claim or right to be granted an Award
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Non-Employee Director any right to be retained in the
service of the Company.
17.2 The expenses of the Plan shall be borne by the Company.
17.3 If an Option is exercised by the executors, administrators,
legatees or distributees of the estate of a deceased Non-Employee Director or by
the guardian or legal representative of a Non-Employee Director, or if a Unit
vests by reason of the death or disability of the Non-Employee Director, the
Company shall be under no obligation to issue Common Stock thereunder unless and
until the Company is satisfied that the person or persons exercising the Option,
or receiving the Common Stock, are the duly appointed legal representatives of
the Non-Employee Director or of the deceased Non-Employee Director's estate or
the proper legatees or distributees of such estate.
18. EFFECTIVE DATE OF PLAN. The Non-Employee Directors' Stock Option
Plan became effective on March 15, 2000; this amended and restated Plan shall
become effective on January 8, 2002, the date of its adoption by the Board of
Directors, subject, however, to the approval of the amended and restated Plan by
the Company's stockholders.
19. GOVERNING LAW. The Plan shall be governed by the laws of the State of
New York, without reference to the principles of conflicts of law.
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EXHIBIT C
THE BEAR STEARNS COMPANIES INC.
STOCK AWARD PLAN
(AMENDED AND RESTATED AS OF MARCH 29, 2001)
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 and stock appreciation rights
in tandem with such options. 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 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
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 17
(relating to adjustments upon changes in capitalization), the number of shares
of Common Stock subject at any one time to options granted under the Plan, plus
the number of shares of Common Stock theretofore issued or delivered pursuant to
the exercise of options granted under the Plan, shall not exceed 24,000,000
shares. If and to the extent that options granted under the Plan terminate,
expire or are cancelled without having been exercised, new options may be
granted under the Plan with respect to the shares of Common Stock covered by
such terminated, expired or cancelled options; provided, that the granting and
terms of such new options 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.
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4. EMPLOYEES ELIGIBLE. Options 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 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 17.
An individual receiving any option 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, his or her period of service in the capacity for which the option was
granted. For all purposes of this Plan, the time at which an option 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 17, the option price of each share
of Common Stock purchasable under any incentive stock option or non-qualified
stock option granted under the Plan shall not be less than 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.
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.
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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 30 days 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) below or in the
event of termination as a result of death, in which case
expiration will be at the end of the term set forth in the
option agreement or such other time specified therein);
(c) 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
(d) 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) 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, (d) by any
combination of (a), (b), or (c) above, or (e) 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 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
C-3
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 30 day period following the date
of termination of such employment, his or her options shall thereafter be
exercisable, during the period set forth in the option agreement, or, if no
period is specifically set forth, during the remaining term of the option, 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. 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.
12. WITHHOLDING TAX. Whenever under the Plan shares of stock are to be
delivered upon exercise of a nonqualified stock option, 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), by the Company's withholding of shares
of Common Stock issuable upon the exercise of any option or stock appreciation
right 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.
13. RESTRICTIONS ON DELIVERY AND SALE OF SHARES. Each option 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 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 the purchase or delivery of
shares thereunder, the delivery of any or all shares pursuant to exercise of the
option 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 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 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. The Company may endorse on certificates representing shares
issued upon the exercise of an option 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.
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14. 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
awarded pursuant to this Plan;
(ii) offer to purchase any outstanding options 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 as
the Committee deems appropriate to maintain and protect the
rights and interests of the Participants following such
Change in Control.
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 14 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 19 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.
15. 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.
16. 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.
17. 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 por-
C-5
tion 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 17 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.
18. EXPIRATION AND TERMINATION OF THE PLAN.
18.1 GENERAL. Options 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 19 (the "Expiration Date"), on which date the
Plan will expire except as to options then outstanding under the Plan. Such
outstanding options shall remain in effect until they have been exercised,
terminated or have expired. The Plan may be terminated, modified or 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 17) 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").
18.2 MODIFICATIONS. No modification, extension, renewal or other
change in any option 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. In
addition, the option price of an option may not be changed after grant, other
than in the case of an adjustment described in Paragraph 14 or pursuant to
Paragraph 17.
19. 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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PROXY
THE BEAR STEARNS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 26,2002 AT 5:00 P.M.
The undersigned stockholder of The Bear Stearns Companies Inc. (the "Company")
hereby appoints James E. Cayne and Alan C. Greenberg, 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 in the Bear Stearns Auditorium at 383 Madison Avenue, 2nd Floor, New
York, New York 10179, at 5:00 P.M. New York City time, on March 26, 2002, 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 February 15,
2002, in accordance with the directions indicated herein.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2, 3 AND PURSUANT TO ITEM 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED
HEREIN, "FOR" APPROVAL OF AN AMENDMENTS TO THE NON-EMPLOYEE DIRECTORS' STOCK
OPTION PLAN AND "FOR" APPROVAL OF AN AMENDMENT TO THE STOCK AWARD PLAN TO
INCREASE THE NUMBER OF SHARES SUBJECT TO AWARDS GRANTED UNDER THE STOCK AWARD
PLAN.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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^ FOLD AND DETACH HERE ^
Please mark ___
your votes as | X |
indicated in |___|
this example
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED BELOW TO VOTE FOR
(EXCEPT AS MARKED TO ALL NOMINEES
THE CONTRARY BELOW) LISTED BELOW
Item 1. ELECTION OF DIRECTORS ___ ___
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)
FOR AGAINST ABSTAIN
Item 2. APPROVAL OF ___ ___ ___
AMENDMENTS TO | | | | | |
THE NON-EMPLOYEE |___| |___| |___|
DIRECTORS' STOCK
OPTION PLAN:
Item 3. APPROVAL OF ___ ___ ___
AN AMENDMENT | | | | | |
TO THE STOCK |___| |___| |___|
AWARD PLAN:
Item 4. In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any
adjournments or postponements thereof.
Signature(s)
--------------------------------------------------------------------
Date , 2002
-------------------
(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.)
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^ FOLD AND DETACH HERE ^