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 UsePursuant to Section 14(a) of
the Commission Only (as permitted by Rule
14a-6(e)(2)Securities Exchange Act of 1934 (Amendment No. )
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LEHMAN BROTHERS HOLDINGS INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
LEHMAN BROTHERS HOLDINGS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
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(2) Aggregate number of securities to which transaction
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
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PRELIMINARY COPY
LEHMAN BROTHERS HOLDINGS INC.
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RICHARD S. FULD, JR.
Chairman and Chief Executive Officer
February 18, 199926, 2001
Dear Stockholder:
The 19992001 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
will be held on Tuesday, March 30, 1999,April 3, 2001, at 10:30 a.m. (New York time) in the
26th Floor Auditorium of 3 World Financial Center, 200 Vesey Street, New York,
New York 10285. A notice of the meeting, a proxy card and a proxy statement
containing information about the matters to be acted upon are enclosed. You are
cordially invited to attend.
This year we have introduced convenient telephonic voting as an alternative
to the traditional proxy card method. We recommend that you take advantage of
this quick and easy voting option.
All holders of record of the Company's outstanding shares of Common Stock
Cumulative Convertible Voting Preferred Stock, Series A and Series B, and Redeemable Voting Preferred Stock at the close of business on February 9, 199912,
2001 will be entitled to vote at the Annual Meeting. It is important that your
shares be represented at the meeting. You will be asked to (i) elect threetwo
Class III Directors; and (ii) ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the 19992001 fiscal year.year; and (iii) adopt an
amendment to the Company's Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 300 million to 600 million
shares. Accordingly, we request that you promptly sign, date and return the
enclosed proxy card, or register your vote online or by telephone according to
the instructions on the proxy card, regardless of the number of shares you hold.
Very truly yours,
[LOGO]
LEHMAN BROTHERS HOLDINGS INC.
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NOTICE OF 19992001 ANNUAL MEETING OF STOCKHOLDERS
---------------------------------------------
To the Stockholders of Lehman Brothers Holdings Inc.:
The 19992001 Annual Meeting of Stockholders of Lehman Brothers Holdings Inc.
(the "Company") will be held on Tuesday, March 30, 1999,April 3, 2001, at 10:30 a.m. (New York
time) in the 26th Floor Auditorium of 3 World Financial Center, 200 Vesey
Street, New York, New York 10285, to:
1. Elect threetwo Class III Directors for terms of three years each;
2. Ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the 19992001 fiscal year;
3. Adopt an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 300 million to 600 million shares; and
3.4. Act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business on February 9, 199912, 2001 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
THE COMPANY WILL ADMIT TO THE ANNUAL MEETING ALL STOCKHOLDERS OF RECORD AT
THE CLOSE OF BUSINESS ON FEBRUARY 9, 1999,12, 2001, ANY PERSONS HOLDING PROOF OF
BENEFICIAL OWNERSHIP OR WHO HAVE BEEN GRANTED PROXIES AND ANY OTHER PERSON THAT
THE COMPANY, IN ITS SOLE DISCRETION, MAY ELECT TO ADMIT. IF YOU PLAN TO ATTEND
THE ANNUAL MEETING, PLEASE CHECK THE APPROPRIATE BOX ON YOUR PROXY CARD OR
REGISTER YOUR INTENTION WHEN VOTING ONLINE OR BY TELEPHONE ACCORDING TO THE
INSTRUCTIONS ON THE
PROXY CARD.PROVIDED.
A copy of the Company's Annual Report to Stockholders is enclosed herewith
unless the Stockholder is afor all Stockholders other than Lehman Brothers employee. The Company'semployees, to whom the Annual
Report to Stockholders is being separately distributed to Lehman Brothers
employees.distributed.
By Order of the Board of Directors
[LOGO]
Jennifer MarreJeffrey A. Welikson
Secretary
New York, New York
February 18, 199926, 2001
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID
ENVELOPE, OR REGISTER YOUR VOTE ONLINE OR BY TELEPHONE ACCORDING TO THE
INSTRUCTIONS ON THE PROXY CARD.
LEHMAN BROTHERS HOLDINGS INC.
3 World Financial Center
New York, New York 10285
February 18, 199926, 2001
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PROXY STATEMENT
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INTRODUCTION
VOTE BY PROXY. This proxy statement (the "Proxy Statement") is furnished in
connection with the solicitation of proxies by the Board of Directors of Lehman
Brothers Holdings Inc. (the "Company" and, together with its subsidiaries, the
"Firm") for use at the 19992001 Annual Meeting of Stockholders of the Company to be
held on Tuesday, March 30, 1999April 3, 2001 at 10:30 a.m. (New York time), or any adjournment
thereof (the "Annual Meeting"). The Company expects to mail this Proxy Statement
and the accompanying proxy card to the Company's stockholders of record at the
close of business on February 9, 199912, 2001 (the "Stockholders") on or about
February 19, 1999.26, 2001.
You are cordially invited to attend the Annual Meeting, but whetherMeeting. Whether or not you
expect to attend in person, you are urged to complete, sign and date the
enclosed proxy card and return it as promptly as possible in the enclosed,
prepaid envelope, or vote your shares online or by telephone according to the
instructions on the proxy.proxy card. Stockholders have the right to revoke their
proxies at any time prior to the time their shares are actually voted by
(i) giving written notice to the Corporate Secretary of the Company, (ii) by
subsequently filing a later dated proxy or (iii) by attending the Annual Meeting
and voting in person. Please note that attendance at the meeting will not by
itself revoke a proxy.
The enclosed proxy indicates on its face the number of shares of common and/or
voting preferred stock registered in the name of each Stockholder at the close
of business on February 9, 199912, 2001 (the "Record Date"). Proxies furnished to
Company employees also indicate the number of shares, if any, (i) held by the
employee under the Lehman Brothers Holdings Inc. Employee Stock Purchase Plan
(the "ESPP"), (ii) that relate to the total number of restricted stock unit
awards granted to the employee pursuant to various of the Company's Incentive
Plans (as defined below), which shares are held, in part, in the 1997 Trust
Under Lehman Brothers Holdings Inc. Incentive Plans (the "1997"Incentive Plans
Trust") and, (iii) held by the employee in a brokerage accountsaccount at the Company's
wholly owned subsidiary, Lehman Brothers Inc. ("LBI") and/or a brokerage account
at Fidelity Brokerage Services, Inc. ("Fidelity Brokerage"), and (iv) held by
the employee under the Lehman Brothers Holdings Inc. Tax Deferred Savings Plan
(recently renamed the Lehman Brothers Savings Plan, and referred to herein as
the "Savings Plan"). Proxies returned by employees will be considered to be
voting instructions returned to the 1997Incentive Plans Trust Trustee (the
"1997 Trust"Incentive Plans Trustee") with respect to the number of shares determined
pursuant to the terms of the agreement governing the 1997Incentive Plans Trust. The
1997 TrustIncentive Plans Trustee shall implement such voting instructions as described
below under "The Voting Stock." Proxies returned by employees withholding shares in
an LBI or Fidelity Brokerage Services, Inc.
("Fidelity") brokerage accountsaccount will be considered to be voting
instructions returned to LBI or Fidelity Brokerage, as applicable, with respect
to such shares, heldand proxies returned by employees holding shares in each
such account. Under the Lehman Brothers Holdings Inc. Tax Deferred Savings
Plan (the "TDSP"),will be considered to be voting instructions returned to the trustees of the TDSPSavings Plan
trustee with respect to such shares. The Savings Plan trustee shall vote allany
shares for which no proxy instructions are received in the same proportions as
the shares held in
participating employees' accounts in a manner that such trustees judge to be in
the best interest of the TDSP participants.for which it has received instructions.
GENERAL. Unless contrary instructions are indicated on the proxy or in a
vote registered online or by telephone, all shares represented by valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted as follows:
FOR the election of the threetwo nominees for Class III Directors named below;
and1
FOR the ratification of the Board of Directors' selection of Ernst & Young
LLP as the Company's independent auditors for the 19992001 fiscal year.year; and
FOR the adoption of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
300 million to 600 million shares.
In the event a Stockholder specifies a different choice on the proxy or by
online or telephone vote, his or her shares will be voted in accordance with the
specification so made. Confidential voting is not provided for in the Company's
Restated Certificate of Incorporation or By-Laws.
The Company's 19982000 Annual Report has been distributed to Stockholders in
connection with this solicitation. A copy (exclusive of exhibits) of the
Company's 19982000 Form 10-K as filed with the Securities and Exchange Commission
(the "SEC") may be obtained without charge by writing to: Lehman Brothers
Holdings Inc., 31 World Financial Center, 24th27th Floor, New York, New York 1028510281
Attn.: Corporate Secretary. The Company's 19982000 Annual Report and 19982000 Form 10-K
also will be available through the Lehman Brothers web site at
http://www.lehman.com.
COST OF SOLICITATION. The cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
directors, officers or employees of the Company in person or by telephone or
telegram, or other means of communication, for which no additional compensation
will be paid. The Company has engaged the firm of Georgeson & CompanyShareholder
Communications Inc. to assist the Company in the distribution and solicitation
of proxies. The Company has agreed to pay Georgeson a fee of $11,000 plus
expenses for its services.
The Company also will reimburse brokerage houses, including LBI, and other
custodians, nominees and fiduciaries for their reasonable expenses, in
accordance with the rules and regulations of the SEC, the New York Stock
Exchange Inc. ("NYSE") and other exchanges, in sending proxies and proxy materials to the
beneficial owners of shares of the Company's voting securities.
THE VOTING STOCK. The Company has fourtwo series of voting stock: Common Stock,
par value $.10 per share (the "Common Stock"), Cumulative Convertible
Voting Preferred Stock, Series A, par value $1.00 per share (the "Series A
Preferred Stock"), Cumulative Convertible Voting Preferred Stock, par value
$1.00 per share (the "Series B Preferred Stock"), and Redeemable Voting Preferred
Stock, par value $1.00 per share ("Redeemable Voting Preferred Stock") (the
Series A Preferred Stock, Series B Preferred Stock and Redeemable Preferred
Stock are collectively referred to herein as the "Voting Preferred Stock," and
the Common Stock and the Redeemable Voting Preferred Stock are collectively referred
to herein as the "Voting Stock").
As of the Record Date, the following shares of Voting Stock were
outstanding:
- 119,411,161[NUMBER] shares of Common Stock (exclusive of 2,532,432[NUMBER] shares held in
treasury), entitled to one vote per share with respect to each matter to
be voted on at the Annual Meeting, - 5,800 shares of Series A Preferred Stock, entitled to .3178313 votes per
share,
- 11,715,428 shares of Series B Preferred Stock, entitled to .3178313 votes
per share, and
- 1,000 shares of Redeemable Voting Preferred Stock, entitled to 1,059 votes
per share.
There is no cumulative voting provision for Common Stock or Redeemable
Voting Preferred Stock. The Common Stock and the Redeemable Voting Preferred
Stock will vote together as a single class on each matter to be voted on at the
meeting.meeting, and in addition the Common Stock will vote as a separate class with
respect to the amendment to the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 300 million to
600 million shares.
The fourtwo classes of Voting Stock will represent the following aggregate votes
at the Annual Meeting:
- The Common Stock will represent an aggregate of 119,411,161[NUMBER] votes, or
96.1477% of the total number of votes entitled to be cast,
- The Series A Preferred Stock will represent an aggregate of 1,843 votes,
or 0.0015% of the total number of votes entitled to be cast,
- The Series B Preferred Stock will represent an aggregate of 3,723,530
votes, or 2.9981%[NUMBER]% of the total number of votes entitled to be cast, and
- The Redeemable Voting Preferred Stock will represent an aggregate of
1,059,000 votes, or 0.8527%[NUMBER]% of the total number of votes entitled to be
cast.
2
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of the shares of Common Stock and Redeemable Voting Preferred Stock
outstanding and entitled to vote on the Record Date shall constitute a quorum.
The 1997Incentive Plans Trust holds shares of Common Stock ("Trust Shares")
issuable to future, current and former employees of the Company in connection
with the granting to such employees of restricted stock unit awards ("RSU
Awards") under the Company's Employee Incentive Plan (the "Employee Incentive
Plan"), the Company's 1994 Management Ownership Plan (the "1994 Plan") and the
Company's 1996 Management Ownership Plan (together with the Employee Incentive
Plan and the 1994 Plan, the "Plans""Incentive Plans").
The 1997Incentive Plans Trust provides that the 1997 TrustIncentive Plans Trustee will
vote all Trust Shares in accordance with instructions received from persons who
have received RSU Awards under the Incentive Plans ("Current Participants"). For
each Current Participant, the 1997 TrustIncentive Plans Trustee shall vote or abstain from
voting, according to instructions received from such Current Participant, with
respect to that number of Trust Shares that results from multiplying (x) the
number of Trust Shares existing on the Record Date by (y) a fraction, the
numerator of which is the number of RSU Awards held by such Current Participant
and as to which the 1997 TrustIncentive Plans Trustee has received voting instructions
from such Current Participant, and the denominator of which is the total number
of RSU Awards held by all Current Participants and as to which the 1997 TrustIncentive
Plans Trustee has received voting instructions. As is the case for all Voting
Stock of the Company, voting instructions given with respect to RSU Awards will
not be confidential.
As of the Record Date, 23,993,727[NUMBER] Trust Shares (representing approximately
19.3%[NUMBER]% of the
votes entitled to be cast at the Annual Meeting) were held by the 1997Incentive
Plans Trust.
As of the Record Date, American Express Company ("American Express") or one
or more of its subsidiaries owned no shares of Common Stock, 67.3% of the
outstanding shares of Series B Preferred Stock, representing approximately 2.0%
of the votes entitled to be cast at the Annual Meeting, and 92.8% of the
outstanding shares of Redeemable Preferred Stock, representing less than 1% of
the votes entitled to be cast at the Annual Meeting. American Express has agreed
that so long as it or any of its subsidiaries holds any shares of Redeemable
Preferred Stock, it will vote such shares or cause such shares to be voted in
the same proportion as the votes cast by the holders of shares of Common Stock
on matters to be voted on by Stockholders.
STOCKHOLDERS ENTITLED TO VOTE. Only Stockholders of record on the Record
Date are entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
3
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
To the knowledge of management, except for the Incentive Plans Trust
(described above) and as described below, no person beneficially owned more than
five percent of any class of Voting Stock as of December 31, 1998.the Record Date.
[TO BE UPDATED--COMMON STOCK OWNERSHIP INFORMATION IS FROM PRIOR YEAR PROXY
STATEMENT.]
NUMBER OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER SHARES CLASS (A)
- --------------------------------------------- -------------------------------------- -------------- -------------------------------------------- ------------ ------------------------
Common Stock................................. The Prudential Insurance 6,599,636(b) 5.8%
Company of America (a) 5,746,758(d) 5.1%
Putnam Investments, Inc.Stock..................... FMR Corp. (b) 6,328,483 (c) Cumulative Convertible Voting Preferred
Stock, Series B............................ American Express (e) 7,884,911(f) 67.3%[PERCENT]
Redeemable Voting
Preferred Stock............Stock................ American Express 928(f) 92.8%Company (d) 928 (e) 92.8
Nippon Life Insurance 72(h) 7.2%
Company (f) 72 (g) 7.2
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(a) Percentages are calculated in accordance with applicable SEC rules and are
based on the number of shares issued and outstanding on the Record Date.
(b) According to Amendment No. 3 to Schedule 13G, filed February 1, 199914, 2000 (the "Prudential"Fidelity
Schedule 13G"), filed by The Prudential Insurance Company of
AmericaFMR Corp. ("Prudential"Fidelity"), Edward C. Johnson 3d and
Abigail P. Johnson, the address of PrudentialFMR Corp. is 751 Broad82 Devonshire Street,
Newark, New Jersey 07102.
(b)Boston, Massachusetts 02109.
(c) The information in this footnote has been extracted from the PrudentialFidelity
Schedule 13G. Prudential holds 7,70013G, and the number of shares shown is as of December 31, 1999. On
such date, Fidelity Management & Research Company ("Fidelity Management &
Research"), a wholly-owned subsidiary of Fidelity,
3
was the beneficial owner of 5,527,531 shares of Common Stock foras a result of
acting as investment adviser to various investment companies registered
under Section 8 of the benefitInvestment Company Act of 1940. On such date,
(1) Edward C. Johnson 3d, chairman of Fidelity, (2) Fidelity, through its
general account. In addition, Prudential may havecontrol of Fidelity Management & Research, and (3) certain unspecified funds
(the "Funds"), each had sole power to dispose of the 5,527,531 shares owned
by the Funds. Neither Fidelity nor Edward C. Johnson 3d had the sole power
to vote or direct or indirectthe voting and/or investment discretion over 6,591,936of the shares owned directly by the Funds,
which power resides with the Funds' Boards of Trustees. Fidelity
Management & Research carries out the voting of the shares under written
guidelines established by the Funds' Boards of Trustees. Also on such date,
Fidelity Management Trust Company ("Fidelity Management Trust"), a
wholly-owned subsidiary of Fidelity, was the beneficial owner of 789,722
shares of Common Stock which are held for the benefitas a result of its clients byserving as investment manager of
certain unspecified institutional account(s) (the "Accounts"). Edward C.
Johnson 3d and Fidelity, through its separate accounts,
externally managed accounts, registered investment companies, subsidiaries
and/or other affiliates. Prudential has disclosed in the Prudential Schedule
13G that it hascontrol of Fidelity Management Trust,
each had sole dispositive power over 789,722 shares and sole power to vote
or to direct the votevoting of 684,482 shares, and sole power to
dispose or direct the disposition with respect to 315,987 shares, sharedno power to vote or to direct
the vote with respect to 6,208,249voting of 105,240 shares and
shared power to dispose or direct the disposition with respect to 6,283,649
shares.
(c) According to Amendment No. 1 to Schedule 13G, filed February 9, 1999 (the
"Putnam 13G"), filed by Putnam Investments, Inc. ("Putnam"), the address of Putnam is One Post Office Square, Boston, Massachusetts 02109.
(d) The information in this footnote has been extracted from the Putnam 13G. Of
the reported shares, 5,417,033 are beneficiallyCommon Stock owned by Putnam Investment
Management, Inc. ("PIM"), a registered invesment advisor and subsidiary of
Putnam, and 329,725 are beneficiallythe Accounts. An
additional 11,230 shares were owned by The Putnam Advisory Company,
Inc.Fidelity International Limited
("PAC"FIL"), also a registered investment advisor and subsidiary of Putnam.
Putnam has disclosed in the Putnam 13G that (1) PIM has nowhich had sole or shared power to vote or to direct the vote of, and sharedsole power only to dispose of such
shares beneficially owned by PIM,shares. FIL provides investment advisory services to various investment
companies and (2) PAC has shared power onlycertain institutional investors. Prior to vote or direct the voteJune 30, 1980, FIL
was a majority-owned subsidiary of 336,040Fidelity Management & Research. FIL
currently operates as an entity independent of Fidelity and shared power only to dispose of
all of, such shares beneficially owned by PAC.
(e)Fidelity
Management & Research.
(d) The address of American Express Company ("American Express") is 3 World
Financial Center, New York, New York 10285.
(f)(e) Based on information furnished by American Express, American Express has
sole investment and sole voting power over all shares.
The Cumulative
Convertible Voting Preferred Stock, Series B, owned by American Express is
convertible into 2,506,072 shares of Common Stock, and if converted would
represent approximately 2.1% of that class.
(g)(f) The address of Nippon Life Insurance Company ("Nippon Life") is 2-2,
Yurakucho, 1-Chome, Chiyoda-ku, Tokyo, 100-8444, Japan.
(h)(g) Based upon information furnished by Nippon Life, Nippon Life also
beneficially owns 4,237,2914,239,292 shares of Common Stock, representing approximately 3.5%[PERCENT]%
of that class as of the Record Date, and has sole investment and sole voting
power over all shares.
4
PROPOSAL 1
ELECTION OF CLASS III DIRECTORS
At the Annual Meeting threetwo Class III Directors are to be elected, each to
serve until the Annual Meeting in 20022004 and until his or her successor is elected
and qualified. The Restated Certificate of Incorporation of the Company
establishes a classified Board of Directors with three classes, designated
Class I, Class II and Class III. The terms of the Class IIII and Class IIIII
Directors continue until the Annual Meetings in 20002002 and 2001,2003, respectively, and
until their respective successors are elected and qualified.
The threetwo nominees for Director are Michael L. Ainslie, John F. AkersRoger S. Berlind and Richard S. Fuld, Jr. Messrs. Akers and FuldDina Merrill, who
were first elected Class I Directors in 19961985 and 1990,1988, respectively.
Mr. Ainslie has been a Class II Director since 1996
and was reelected as such in 1998. Following the resignation of former Class I
Director Masahiro Yamada, Mr. Ainslie agreed to be reclassified as a Class I
Director, subject to his election as such at the Annual Meeting.
Provided that a majority of the outstanding Voting Stock votes on the
proposal, the threeThe two nominees receiving the greatest number of votes cast by the holders
of the Voting Stock will be elected as Class III Directors of the Company.
Abstentions and broker nonvotes will be disregarded and will have no effect on
the vote for directors. Except as stated in the following sentence, the persons
specified on the enclosed proxy card intend to vote for the nominees listed
below, allboth of whom have consented to being named in this Proxy Statement and to
serving if elected. Although management knows of no reason why any nominee would
be unable to serve, the persons designated as proxies reserve full discretion to
vote for another person in the event any such nominee is unable to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
The following information is provided with respect to the nominees for
Director and the incumbent Directors. Italicized wording indicates principal
occupation(s).
NOMINEES FOR ELECTION AS CLASS III DIRECTORS TO SERVE
UNTIL THE 2004 ANNUAL MEETING OF STOCKHOLDERS
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 70
THEATRICAL PRODUCER. Roger S. Berlind, who is also a private investor, has
been a theatrical producer and principal of Berlind Productions since 1981.
Mr. Berlind is also a Director of LBI, a Governor of the League of American
Theaters and Producers and has served as a Trustee of Princeton University, the
Eugene O'Neill Theater Center and the American Academy of Dramatic Arts.
Mr. Berlind serves as the Chairman of the Audit Committee and as a member of the
Finance Committee.
DINA MERRILL DIRECTOR SINCE 1988 AGE: 72
DIRECTOR AND VICE CHAIRMAN OF RKO PICTURES, INC. AND ACTRESS. Dina Merrill,
a Director and Vice Chairman of RKO Pictures, Inc., is an actress and a private
investor. Ms. Merrill was a Presidential Appointee to the Kennedy Center Board
of Trustees and is a Vice President of the New York City Mission Society, a
Trustee of the Eugene O'Neill Theater Foundation and a member of the Board of
Project Orbis, the Juvenile Diabetes Foundation and the Museum of Television and
Radio. Ms. Merrill serves as a member of the Compensation and Benefits Committee
and the Nominating Committee.
5
CLASS I DIRECTORS WHOSE TERMS CONTINUE
UNTIL THE 2002 ANNUAL MEETING OF STOCKHOLDERS
MICHAEL L. AINSLIE DIRECTOR SINCE 1996 AGE: 55
MICHAEL L. AINSLIE DIRECTOR SINCE 1996 AGE: 57
PRIVATE INVESTOR AND FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
SOTHEBY'S HOLDINGS. Mr. Ainslie, a private investor, is the former President,
Chief Executive Officer and a Director of Sotheby's Holdings. He was Chief
Executive Officer of Sotheby's from 1984 to 1994. From 1980 to 1984 he was
President and Chief Executive Officer of the National Trust for Historic
Preservation. From 1975 to 1980 he was Chief Operating Officer of N-Ren Corp., a
Cincinnati-based chemical manufacturer. From 1971 to 1975, he was President of
Palmas Del Mar, a real estate development company. He began his career as an
associate with McKinsey & Company. Mr. Ainslie is a Director of the St. Joe
Company.Company and Artesia Technologies, an internet software provider. He is Vice Chairman of
the Board of Directors of the New York Landmarks Conservancy, as well as a Trustee
of Vanderbilt University. Mr. AinslieUniversity, and also serves as a Director of the United
States Tennis Association and is also Chairman of the Posse Foundation.
Mr. Ainslie serves as a member of the Audit Committee.
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 64
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 66
RETIRED CHAIRMAN OF INTERNATIONAL BUSINESS MACHINES
CORPORATION. Mr. Akers, a private investor, is the retired Chairman of the
Board of Directors of International Business Machines Corporation. Mr. Akers
served as Chairman of the Board of Directors and Chief Executive Officer of IBM
from 1985 until his retirement on May 1, 1993, completing a 33-year career with
IBM. Mr. Akers is a Director of W. R. Grace & Co., The New York Times Company,
PepsiCo, Inc., Hallmark Cards, Inc. and Springs Industries and a member of the U.S. Advisory
Board of Zurich Insurance Company and the Advisory Board of Directorship.Industries. He is a former
member of the Board of Trustees of the California Institute of Technology and
The Metropolitan Museum of Art, as well as the former Chairman of the
5
Board of
Governors of United Way of America. Mr. Akers is also a former member of
President George Bush's Education Policy Advisory Committee. Mr. Akers serves as
a member of the Finance Committee and the Compensation and Benefits Committee.
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 52
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 54
CHAIRMAN AND CHIEF EXECUTIVE OFFICER. Mr. Fuld has been Chairman of the
Board of Directors of the Company and LBI since April 1994 and Chief Executive
Officer of the Company and LBI since November 1993. Mr. Fuld serves as the
Chairman of the Executive Committee and as Chairman and a nonvoting member of
the Nominating Committee. Mr. Fuld was President and Chief Operating Officer of
the Company and LBI from March 1993 to April 1994 and was Co-President and
Co-Chief Operating Officer of both corporations from January 1993 to
March 1993. He was President and Co-Chief Executive Officer of the Lehman
Brothers Division of Shearson Lehman Brothers Inc. from August 1990 to
March 1993. Mr. Fuld was a Vice Chairman of Shearson Lehman Brothers from
August 1984 until 1990. Mr. Fuld has been a Director of LBI since 1984.
Mr. Fuld joined Lehman Brothers in 1969. Mr. Fuld is a member of the Board of
Governors of the New York Stock Exchange.Exchange and is Chairman of the U.S. Thailand
Business Council (USTBC). He is also a former member of the President's Advisory
Committee on Trade Policy Negotiations. Mr. Fuld is a trustee of the Mount Sinai
Medical Center, and former Chairman of the Mount Sinai Children's Center
Foundation. He currently serves on the foundation's Executive Committee. In
addition, he is a member of the University of Colorado Business Advisory
Council, is a member of the Executive Committee of the New York City Partnership
and serves on the Board of Directors of Ronald McDonald House.
Mr. Fuld serves
as the Chairman of the Executive Committee and as Chairman and a nonvoting
member of the Nominating Committee.6
CLASS III DIRECTORS WHOSE TERMS CONTINUE
UNTIL THE 20002003 ANNUAL MEETING OF STOCKHOLDERS
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 67
THOMAS H. CRUIKSHANK DIRECTOR SINCE 1996 AGE: 69
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF HALLIBURTON
COMPANY. Mr. Cruikshank was the Chairman and Chief Executive Officer of
Halliburton Company, a major petroleum industry service company, from 1989 to
1995.1995 and President and Chief Executive Officer from 1983 to 1989. He joined the
company in 1969, and served as a Director from 1977 to 1996. Mr. Cruikshank is a
member of the Board of Directors of The Goodyear Tire & Rubber Company and The
Williams Companies, Inc. and Seagull Energy Corporation. Mr. Cruikshank serves as a member of the Audit
Committee.
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 71
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 73
PRESIDENT OF HENRY KAUFMAN & COMPANY, INC. Dr. Kaufman has been President
of Henry Kaufman & Company, Inc., an investment management and economic and
financial consulting firm, since 1988. For the previous 26 years, he was with
Salomon Brothers Inc, where he was a Managing Director, Member of the Executive
Committee, and in charge of Salomon's four research departments. He was also a
Vice Chairman of the parent company, Salomon Inc. Before joining Salomon
Brothers, Dr. Kaufman was in commercial banking and served as an economist at
the Federal Reserve Bank of New York. Dr. Kaufman is a Director of Federal Home
Loan Mortgage Corporation and W. R. Berkley Corporation. He is the Chairman of
the Board of Trustees of the Institute of International Education, a member of
the Board of Trustees of New York University, the Chairman Emeritus of the Board
of Overseers of the Stern School of Business of New York University and a Member
of the Board of Trustees of the Animal Medical Center. Dr. Kaufman is a Member
of the Board of Trustees of the Whitney Museum of American Art, a Member of the
International Capital Markets Advisory Committee of the Federal Reserve Bank of New York, a
Member of the Advisory Committee to the Investment Committee of the
International Monetary Fund Staff Retirement Plan and a Member of the Board of
Governors of Tel-Aviv University. Dr. Kaufman serves as the Chairman of the
Finance Committee and as a member of the Nominating Committee.
6
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 71
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 73
PRINCIPAL OF JDM INVESTMENT GROUP. Mr. Macomber has been a Principal of JDM
Investment Group, a private investment firm, since 1992. He was Chairman and
President of the Export-Import Bank of the United States from 1989 to 1992,
Chairman and Chief Executive Officer of Celanese Corporation from 1973 to 1986
and a Senior Partner at McKinsey & Co. from 1954 to 1973. Mr. Macomber is a
Director of The Brown Group, Inc., IRI International, Mettler-Toledo International and Textron Inc. He is Chairman of the
Council for Excellence in Government, Rand McNally & Company and Vice Chairman
of the Atlantic Council. He is a Director of the French-American Foundation, the National Executive Services Corps,Campaign to Prevent
Teen Pregnancy and the Smithsonian InstitutionInstitute and a Trustee of the Carnegie
Institution of Washington and the Folger Library. Mr. Macomber serves as the
Chairman of the Compensation and Benefits Committee and as a member of the
Executive Committee and the Nominating Committee.
CLASS II DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
2001 ANNUAL MEETING OF STOCKHOLDERS
Mr. Ainslie, listed above as a nominee for election as a Class I Director,
has been a Class II Director since 1996 and was reelected as such in 1998.
Following the resignation of former Class I Director Masahiro Yamada, Mr.
Ainslie agreed to be reclassified as a Class I Director, subject to his election
as such at the Annual Meeting. If he is not so elected, he will continue as a
Class II Director.
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 68
THEATRICAL PRODUCER. Roger S. Berlind, who is also a private investor, has
been a theatrical producer and principal of Berlind Productions since 1981. Mr.
Berlind is also a Director of LBI, a Governor of the League of American Theaters
and Producers and has served as a Trustee of Princeton University, the Eugene
O'Neill Theater Center and the American Academy of Dramatic Arts. Mr. Berlind
serves as the Chairman of the Audit Committee and as a member of the Finance
Committee.
HIDEICHIRO KOBAYASHI DIRECTOR SINCE 1997 AGE: 54
DIRECTOR AND GENERAL MANAGER FOR THE AMERICAS OF NIPPON LIFE. Mr. Kobayashi
has been affiliated with Nippon Life, Japan's largest insurance company, since
1967, has been General Manager for the Americas since April 1997 and has been a
Director since July 1997. Mr. Kobayashi was General Manager for the
International Finance Department from 1995 to 1997 and was General Manager of
the International Finance and Planning Department from 1994 to 1995. He was
General Manager of the International Finance Department from 1993 to 1994. Mr.
Kobayashi was General Manager of the International Investment Department of
Nippon Life from 1992 to 1993 and President of NLI International Inc. and Chief
Representative of New York from 1989 to 1992. Mr. Kobayashi has been a Director
since May 1997 of PanAgora Asset Management, Inc. Mr. Kobayashi serves as a
member of the Audit Committee and the Finance Committee.
DINA MERRILL DIRECTOR SINCE 1988 AGE: 70
DIRECTOR AND VICE CHAIRMAN OF RKO PICTURES, INC. AND ACTRESS. Dina Merrill,
a Director and Vice Chairman of RKO Pictures, Inc., is an actress and also a
private investor. Ms. Merrill was a Presidential Appointee to the Kennedy Center
Board of Trustees and is a Vice President of the New York City Mission Society,
a Trustee of the Eugene O'Neill Theater Foundation and a member of the Board of
Project Orbis, the Juvenile Diabetes Foundation and the Museum of Television and
Radio. Ms. Merrill serves as a member of the Compensation and Benefits Committee
and the Nominating Committee.
7
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive, Audit, Compensation and Benefits, Finance and Nominating
Committees of the Board of Directors are described below.
EXECUTIVE COMMITTEE. The Executive Committee consists of Mr. Fuld, who
chairs the Executive Committee, and Mr. Macomber. The Executive Committee has
the authority, in the intervals between meetings of the Board of Directors, to
exercise all of the authority of the Board of Directors, except for those matters
that the Delaware General Corporation Law or the Restated Certificate of
Incorporation
7
reserves to the full Board of Directors. The Executive Committee acted by
unanimous written consent 17 times during the fiscal year ended November 30,
19982000 ("Fiscal 1998"2000").
AUDIT COMMITTEE. The Audit Committee consists of Mr. Berlind, who chairs
the Audit Committee, and Messrs. Ainslie Cruikshank and Kobayashi,Cruikshank, all of whom are
Non-employeenon-employee Directors and are independent as defined in the listing standards
of the New York Stock Exchange. The Audit Committee operates under a written
charter adopted by the Board of Directors. A copy of the Audit Committee charter
is attached as Appendix A to this Proxy Statement. The Audit Committee
represents the Board in discharging its responsibilities relating to the
accounting, reporting and financial control practices of the Company. The Audit
Committee has general responsibility for surveillance of financial controls, as
well as for the Company's accounting and audit activities. The Audit Committee
annually reviews the qualifications of the independent auditors, makes
recommendations to the Board of Directors as to their selection, reviews the
audit plan, fees and audit results, and approves non-audit services to be
performed by the auditors and related fees. The Audit Committee held three
meetings during Fiscal 1998.2000.
COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits
Committee (the "Compensation Committee") consists of Mr. Macomber, who chairs
the Compensation Committee, and Mr. Akers and Ms. Merrill, all of whom are
Non-employeenon-employee Directors. The Compensation Committee establishes corporate policy
and programs with respect to the compensation of officers and employees of the
Firm, including establishing compensation policies and practices, such as
salary, cash incentive, restricted stock, long-term incentive compensation and
stock purchase plans and other programs, and making grants under such plans. The
Compensation Committee also establishes and administers all of the Company's
employee benefit and compensation plans and has the authority, where
appropriate, to delegate its duties. The Compensation Committee held sixfive
meetings and acted by telephone or unanimous written consent sevenfive times during Fiscal 1998.2000.
FINANCE COMMITTEE. The Finance Committee consists of Dr. Kaufman, who
chairs the Finance Committee, and Messrs. Akers Berlind and Kobayashi.Berlind. The Finance
Committee reviews and advises the Board of Directors on the financial policies
and practices of the Company, and periodically reviews, among other things,
major capital expenditure programs and significant capital transactions and
recommends a dividend policy to the Board of Directors. The Finance Committee
held two meetings during Fiscal 1998.2000.
NOMINATING COMMITTEE. The Nominating Committee consists of Mr. Fuld, who
chairs the Nominating Committee but is a nonvoting member, and three
Non-employeenon-employee Directors, Messrs. Kaufman and Macomber and Ms. Merrill. The
Nominating Committee considers and makes recommendations to the Company's Board
of Directors with respect to the size and composition of the Board of Directors
and Board Committees and with respect to potential candidates for membership on
the Board of Directors. The Nominating Committee held one meeting during Fiscal
1998.2000. The Nominating Committee will consider nominees for Director recommended
by Stockholders. Stockholders wishing to submit recommendations for the 20002002
Annual Meeting of Stockholders should write to the Corporate Secretary, Lehman
Brothers Holdings Inc., 31 World Financial Center, 24th27th Floor, New York, New York
10285.10281. The Company's By-Laws contain time limitations, procedures and
requirements relating to Stockholder nominations.
8
ATTENDANCE AT MEETINGS BY DIRECTORS
The Board of Directors held seven meetings during Fiscal 1998.2000 and acted once
by unanimous written consent. All Directors attended 75 percent or more of the
aggregate of (a) the total number of meetings of the Board held during the
period when he or she was a Director and (b) the total number of meetings held
by all Committees of the Board on which he or she served during the period when
he
8
or she was a Director. The number of meetings held by each Committee during
Fiscal 19982000 is set forth above.
COMPENSATION OF DIRECTORS
Non-employee Directors receive an annual cash retainer of $45,000 and are
reimbursed for reasonable travel and related expenses. The annual retainer is
paid quarterly; however, the fourth quarter payment will be withheld for failure
to attend 75% of the total number of meetings. During Fiscal 1998,In addition, each Non-employeenon-employee
Director who served as a chairman of a Committee of the Board of Directors
received an additional annual retainer of $15,000 per Committee, each
Non-employee Director who served as a member of the Executive Committee received
an additional annual retainer of $15,000, and each
Non-employeenon-employee Director who served as a Committee member received $1,500 per
Committee meeting.
RESTRICTED STOCK UNIT AND OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS. An
annual equity retainer in the form of a grant of Restricted Stock Units ("RSUs")
representing $80,000 fair market value of Common Stock (as of the date of the
Annual Meeting) is made to each
Non-employeenon-employee Director on the first business day following the Company's Annual
Meeting of Stockholders. The number of RSUs granted is based on the closing
price of the Common Stock on the NYSENew York Stock Exchange on the day such units
are awarded. As of each date that a dividend is paid on Common Stock, each
Non-employeenon-employee Director holding RSUs is credited with a number of additional RSUs
equal to the product of (A) the dividend paid on one share of Common Stock,
multiplied by (B) the number of RSUs held by the Non-employeenon-employee Director, divided
by (C) the closing price of the Common Stock on the NYSENew York Stock Exchange on
such date. The RSUs vest immediately and are payable in Common Stock upon death,
disability or termination of service.
Alternatively, a Non-employeenon-employee Director may elect to receive options, for
three times the number of RSUs he or she would have received, with an exercise
price equal to the closing price of the Common Stock on the NYSENew York Stock
Exchange on the date the award is made. The options have a ten-year term, are
not forfeitable, and become exercisable in one-third increments on each of the
first three anniversaries of the award date or, if sooner, upon termination of
service. This alternative of receiving options was
implemented in March 1998 when the annual equity retainer was only $30,000. In
early 1999, the Board approved an increase in the amount of the equity retainer
to $80,000, in order to align total Director compensation with the Company's
competitors.
THE COMPANY'S DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS. The
Company's Deferred Compensation Plan for Non-employee Directors is a
nonqualified deferred compensation plan, which provides each Non-employeenon-employee
Director an opportunity to elect to defer receipt of cash compensation to be
earned for services on the Board of Directors. Each Non-employeenon-employee Director may
elect to defer all or a specified percentageportion of his or her future cash compensation (or such election may be limited to such Non-employee Director's
annual retainer fees) with
respect to one or more terms as Director. Such an election can be revoked only by a
showing of financial hardship and with the consent of the Compensation
Committee. Amounts deferred are credited quarterly with interest, based upon the
average 30-day U.S. Treasury Bill rate, and compounded annually. Deferred
amounts will be paid in either a lump sum or in annual installments over a
period not to exceed ten years as elected by the Non-employeenon-employee Director. Payments
will commence pursuant to an election byas the Non-employeenon-employee Director elects, at a specified date in the future
or upon termination of service as a Non-employeenon-employee Director.
9
THE COMPANY'S FROZEN RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS. Prior to
May 1994, the Company maintained the Company's Retirement Plan for Non-employee
Directors which was a nonqualified retirement plan which provided a limited
annual retirement benefit for Non-employeenon-employee Directors who had earned five or more
years of service as defined in the plan. Participation in this plan was frozen
on May 31, 1994. Any Non-employeenon-employee Director who had, on such date, completed at
least five years of service as a Director (determined in accordance with thisthe
plan) has vested benefits under thisthe plan. Any individual who was a Non-employeenon-employee
Director on such date, but had not completed five years of service as of such
date, will acquireacquired vested benefits under this plan at the time such individual
completescompleted such five years of service as a Director. Any individual who becomesbecame a
Non-employeenon-employee Director after such date iswas ineligible to participate in this
plan. Vested benefits under this plan will be paid after the individuala participant ceases to
be a Director.
9
EXECUTIVE OFFICERS OF THE COMPANY
Biographies of the current Executive Officers of the Company (the "Executive
Officers"), who comprise the Firm's Executive Committee, are set forth below, excluding Mr. Fuld whoseFuld's biography, which is
included above. Each Executive Officer serves at the discretion of the Board of
Directors.
JOHN L. CECIL AGE: 44
CHIEF FINANCIAL ANDOFFICER. Mr. Goldfarb has been the Chief Financial Officer
of the Company since April 2000 and is a member of the Firm's Operating
Committee. Mr. Goldfarb served as the Company's Controller from July 1995 to
April 2000. Mr. Goldfarb has been the Chief Financial Officer of LBI since
July 1998. Mr. Goldfarb joined the Firm in 1994; prior to that, Mr. Goldfarb was
a partner at Ernst & Young.
JOSEPH M. GREGORY AGE: 48
CHIEF ADMINISTRATIVE OFFICER. Mr. CecilGregory has been the Chief Administrative
Officer of the Company since January 1994 and has been Chief
Financial Officer of the Company since July 1998. He is responsible for Finance,
Technology, Operations, Human Resources, Expense Management and Strategic
Planning. Mr. Cecil is also a member of the Firm's Executive Committee and
Operating Committee. Mr. Cecil joined McKinsey & Company in 1980, was elected
partner in 1986, and was a Director from 1991 through December 1993. Mr. Cecil
is a Vice Chairman of the Board of Directors of Graham-Windham Agency and is the
Chairman of its Executive Committee.
JOSEPH M. GREGORY AGE: 46
HEAD OF GLOBAL EQUITIES.April 2000. From 1996 to April 2000 Mr. Gregory iswas
Head of the Firm's Global Equities Division, in charge of the overall business, a position he has held since 1996.equities
business. Mr. Gregory is also a member of the Firm's Executive Committee and
Operating Committee. From 1994 to 1996 he was Head of the Firm's Fixed Income
Division. He was named Co-Head of the Fixed Income Division in 1991. From 1980
to 1989,1991, he held various management positions in the Fixed Income Division,
including Head of the Firm's Mortgage Business. Mr. Gregory joined the Firm in
1974 as a Commercial Papercommercial paper trader. Mr. Gregory is a member of the Board of
Directors of the Dorothy Rodbell Cohen Foundation.
BRADLEY H. JACK AGE: 40
CO-HEAD
CHIEF EXECUTIVE OFFICER--EUROPE AND ASIA. Mr. Isaacs has been the Head of
the Firm's Asian operations since April 2000 and Head of the Firm's European
operations since December 1999. He is also a member of the Firm's Executive
Committee and Operating Committee. Mr. Isaacs joined the Firm in 1996 as
Co-Chief Operating Officer, European Equities, and later that year became Head
of the Firm's global equity derivatives activities. In 1997 he additionally
became Head of the Firm's overall equities activities in Europe. In March 1999
he was appointed Chief Operating Officer of European activities, and in
December 1999 was appointed Chief Executive of the Firm's European activities.
Prior to joining Lehman Brothers, Mr. Isaacs was an Executive Director at
Goldman Sachs, a firm he joined in 1989.
HEAD OF INVESTMENT BANKING.BANKING DIVISION. Mr. Jack is Co-Headhas been the Head of the
Firm's Investment Banking business responsible for the Division's global industry, product and
geographic groups, a position he has held since 1996. Mr. Jack is also a member of the
Firm's Executive Committee and Operating Committee. From 1993 to 1996 he was a
Sector Head in Investment Banking, responsible for Lehman Brothers'the Firm's businesses
involving Debt Capital Markets, Financial Services, Leveraged Finance and Real
Estate. Previously,Prior to that he was Headhead of the Firm's Fixed-Income Global Syndicate
activities. Mr. Jack joined the Firm in 1984 as an associate in the Fixed Income
Division. Mr. Jack is a member of the Board of Directors of the Dorothy Rodbell
Cohen Foundation and a member of the Board of RegentsTrustees of the American Architectural Foundation.Juilliard School.
STEPHEN M. LESSING AGE: 46
SENIOR CLIENT RELATIONSHIP MANAGER AND HEAD OF PRIVATE CLIENT
GROUP. Mr. Lessing has been Senior Client Relationship Manager and Head of the
Private Client Group since April 2000. Mr. Lessing has served the Firm in a
variety of capacities, including service as Co-Head of the Firm's Capital
Markets
10
STEPHEN M. LESSING AGE: 44
HEAD OF GLOBAL SALES AND RESEARCH.Division. From 1996 to April 2000 Mr. Lessing iswas Head of Global Sales and
Research, responsible for the Firm's Fixed Income and Equity Sales and Research
organizations, as well as of the Private Client Services business, which focuses
on high-net-worth individuals and middle market institutions. He has held this
position since 1996. Mr. Lessing is
also a member of the Firm's Executive Committee and Operating Committee. From
1992 to 1996 he was Head of Global Fixed Income Sales. From 1982 to 1992
Mr. Lessing held various management positions in the Fixed Income Division,
including Head of the Mortgage Business National
Sales Manager for Mortgages and National Sales Manager for Money
Markets, Governments and Central Funding. Mr. Lessing joined the Firm in 1980 as
an associate in the Fixed Income Division. Mr. Lessing is a member of the Board
of Directors of the Dorothy Rodbell Cohen Foundation, a member of the Board of
Directors of the International Tennis Hall of Fame, and a member of the Board of
Directors of Lessing's Inc. MICHAEL F. MCKEEVER AGE: 47
CO-HEAD OF INVESTMENT BANKING. Mr. McKeever is Co-Head of the Firm's
Investment Banking business, responsible for the Division's global industry,
product and geographic groups, a position he has held since 1996. Mr. McKeever
is also a member of the Firm's Executive Committee and Operating Committee. From
1991 to 1996 he was a Sector Head in Investment Banking, responsible for the
Firm's businesses involving Telecommunications, Media, Technology,
Merchandising, and Consumer Products, as well as all investment banking
activities in the Midwest region. From 1986 to 1990 he was Co-Head of the Firm's
equity, debt and derivatives origination business. Mr. McKeever joined the Firm
in 1979 as an associate in Investment Banking. Mr. McKeever is a member of the Board of Directors of the
Dorothy Rodbell Cohen Foundation.
JEFFREY VANDERBEEK AGE: 41Securities Industry Association. He is also a member of the Board of Trustees of
Fairfield University.
JEFFREY VANDERBEEK AGE: 43
HEAD OF FIXED INCOME.CAPITAL MARKETS DIVISION. Mr. Vanderbeek is Head of the Firm's
Capital Markets Division and previously served as Co-Head of that Division. From
1996 to April 2000, Mr. Vanderbeek was Head of the Fixed Income Division, in
charge of the overall business, a position he has held since 1996.fixed income business. Mr. Vanderbeek is also a member of
the Firm's Executive Committee and Operating Committee. He became Chief
Operating Officer of the Fixed Income Government Department in May 1993 and
Chief Operating Officer of the Fixed Income Derivatives Department in
June 1993. Mr. Vanderbeek joined Lehman Brothers in February 1984 as Managing
Director and Chief Operating Officer in the Fixed Income Central Funding
Department. Mr. Vanderbeek is a Vice Chairmanmember of the Board of Directors of the Dorothy
Rodbell Cohen Foundation.
11
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership information as of
February 8, 2001 with respect to the Common Stock as
of December 31, 1998 for each current Director of
the Company (which include all nominees for Director), each Executive Officer
named in the tables set forth under "Compensation of Executive Officers" below
and all current Directors and Executive Officers as a group. Except as described
below, each of the persons listed below has sole voting and investment power
with respect to the shares shown. None of the individualsDirectors or Executive Officers
beneficially ownsowned any of the Company's other outstanding Preferred Stock orequity securities as
much as 1.0% of the outstanding shares of
Common Stock, including shares that may be acquired within 60 days of December
31, 1998, except for Mr. Fuld, who owns approximately 2.6%. All current
Directors and Executive Officers as a group own shares of Common Stock,
including shares that may be acquired within 60 days of December 31, 1998, that
in the aggregate represent approximately 9.2% of the outstanding Common Stock.February 8, 2001.
NUMBER OF SHARES OF
COMMON STOCK WHICH MAY PERCENT OF
NUMBER OF SHARES BE ACQUIRED WITHIN 60 NUMBER OF SHARES DAYS OUTSTANDING
BENEFICIAL OWNER OF COMMON STOCK (A) OF DECEMBER 31, 1998FEBRUARY 8, 2001 COMMON STOCK (B)
- ---------------------------------------------------------------------------------- ------------------- -------------------------- ------------------------
Michael L. Ainslie................................................ 11,962 0Ainslie................... 23,945 9,546 *
John F. Akers..................................................... 3,195 0Akers........................ 8,439 9,546 *
Roger S. Berlind (b).............................................. 125,642 0
John L. Cecil..................................................... 736,589 707,000(c)................. 291,408 9,546 *
Thomas H. Cruikshank.............................................. 8,364Cruikshank................. 21,254 0 *
Richard S. Fuld, Jr. (c).......................................... 1,458,871 1,737,589(d)............. 3,853,247 3,431,640 [percent]
Joseph M. Gregory................................................. 823,889 838,000Gregory.................... 2,080,748 2,177,652 [percent]
Jeremy M. Isaacs..................... 515,271 900,000 *
Bradley H. Jack................................................... 435,984 576,835Jack...................... 1,331,130 1,395,264 [percent]
Henry Kaufman (d)................................................. 39,309 0
Hideichiro Kobayashi.............................................. 402 0(e).................... 33,713 7,142 *
Stephen M. Lessing................................................ 710,144 1,051,835Lessing................... 1,941,645 1,832,000 [percent]
John D. Macomber.................................................. 29,642 0
Michael McKeever.................................................. 516,185 558,000Macomber..................... 59,408 9,546 *
Dina Merrill...................................................... 10,882 0Merrill......................... 21,408 9,546 *
Jeffrey Vanderbeek................................................ 519,003 595,000Vanderbeek................... 1,401,044 2,254,000 [percent]
All current Directors and Executive
Officers as a group (15(14
individuals).................................................... 5,430,063 6,064,259....................... 11,660,437 12,045,428 [percent]
- ------------------------
* Less than one percent.
(a) Amounts include vested and unvested RSUs. RSUs are convertible on a
one-for-one basis into shares of Common Stock, but cannot be sold or
transferred until converted to Common Stock and, with respect to each person
identified in the table, are not convertible within 60 days following
December 31, 1998.February 8, 2001. A portion of the vested RSUs held by the Executive
Officers are subject to forfeiture for detrimental or competitive activity.
Nonetheless, an Executive Officer who holds RSUs will be entitled to direct
the 1997 TrustIncentive Plans Trustee to vote a number of Trust Shares that is
proportionate to the number of RSUs held irrespective of vesting; such
number of Trust Shares will be calculated prior to the Annual Meeting and
will be determined by the number of Trust Shares held by the 1997Incentive Plans
Trust on the Record Date and the extent to which Current Participants under
the Incentive Plans return voting instructions to the 1997 TrustIncentive Plans
Trustee. See "Introduction--The Voting Stock."
(b) Percentages are calculated in accordance with applicable SEC rules and are
based on the number of shares issued and outstanding on the Record Date.
(c) Includes 40,00080,000 shares of Common Stock held by Mr. Berlind's wife, as to
which Mr. Berlind disclaims beneficial ownership.
(c)(d) Includes 3,5937,186 shares of Common Stock held by Mr. Fuld's children, as to
which Mr. Fuld acts as custodian.
(d) Held(e) Includes 25,000 shares of Common Stock held by Dr. Kaufman's various family trusts, foundations and partnerships.wife, as to
which Dr. Kaufman has sole voting and investment power over 10,000 of such shares
and shared voting and investment power over 25,000 of such shares.disclaims beneficial ownership.
12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE OFFICER COMPENSATION
The Compensation Committee oversees the Compensation Programs of the
Company, with particular attention to the compensation of the Company's Chief
Executive Officer and the other Executive Officers. The Compensation Committee
is comprised of Mr. Macomber, who chairs the Compensation Committee, Mr. Akers
and Ms. Merrill.
In making its decisions with respect to the compensation of Executive
Officers, the Compensation Committee has adopted the following philosophical
positions and policies:
- Deliver a significant portion of total compensation in equity-based
awards, thereby aligning the financial interest of Executive Officers with
stockholders and encouraging prudent long-term strategic decisions. Where
feasible, based on market conditions and other factors, shares will be
repurchased in the market to avoid stockholder dilution.
- Tie compensation for Executive Officers to both annual and long-term
performance goals, which further aligns the interests of Executive
Officers with those of stockholders and rewards Executive Officers for
achievements.
- Ensure that compensation opportunities are comparable with those at major
competitors, so that the Firm may recruit and retain talented Executive
Officers who are key to the Company's long-term success.
The elements and weightings of the compensation program at the Company are
comparable to those used in the investment banking industry, but are
considerably different from those of other major corporations operating in
different industries. The securities industry typically pays higher levels of
compensation than other industries, such as manufacturing, transportation,
utilities or retail. The nature of the securities industry requires that the
workforce consist of a large percentage of highly skilled professionals, who are
in great demand due to the revenue they can generate. Competitive pressure to
hire these professionals results in high levels of compensation in order to
attract and retain the talent needed to compete effectively.
Total compensation is comprised of base salary and both cash and noncash
incentive compensation. Base salaries are intended to make up a small portion of
total compensation. The greater part of total compensation is based on the
Company's financial performance and other factors and is delivered through a
combination of cash and equity-based awards. This approach results in overall
compensation levels which follow the financial performance of the Company.
During 1998, we added a new feature in the compensation of Executive Officers.
All Executive Officers, other than the Chairman, received the same total
compensation, based on the same broad financial and other performance goals. We
believe this compensation structure will build a team/partnership approach at
the most senior level of the Firm.
As in 1995, 1996 and 1997,years past, a key element of Executive Officer compensation for Fiscal
19982000 was a pre-established compensation formulas for each Executive
Officer,formula, which in Fiscal 1998 were2000 was based
on the Company's return on equity. The formulas were intended to provide a
specific amount of annual compensation, which is paid in cash and Restricted
Stock Units ("RSUs"), which. The RSUs are subject to significant vesting and forfeiture
restrictions, and cannot be sold or transferred until converted to Common Stock.
The percentage of total compensation consisting of RSUs for the Chairman was 60%
in 1998, up from 50% in 1997 and for all other Executive Officers was 50% in
1998, up from approximately 36% in 1997. The Compensation Committee has taken a
similar approach in the RSU award program for senior level employees in 1998, by
increasing the portion of total compensation paid in equity to Managing
Directors by 25% of the portion paid in 1997.
As in 1995, 1996 and 1997,Additionally, Fiscal 19982000 Executive Officer Compensationcompensation included a
long-term incentive plan ("LTIP") as a component of total compensation. Whereas
the cash and RSU components of total compensation are based upon annual
performance goals, the LTIP awards Performance Stock Units ("PSUs") over a
longer period. Under the current LTIP, the Company's return on equity its relative performance withas well as
any price appreciation in the Common Stock over a competitor groupthree and the share price of the
Company, togetherone-half year period
will determine an award of RSUs which will vest in one-third increments in 20022006
through 2004.2008. The performance component of the LTIP seeks to further align
executive performance with Stockholder interests. The vesting component seeks to
encourage the retention of talented executives, particularly if the Company's
return on equity and stock price result in a meaningful award.
13
The Compensation Committee also utilized stock option awards in Fiscal 19982000
to further encourage Executive Officers to strive for long-term Stockholder
value. The options were awarded with exercise prices equal to fair market value
on the date of the grant, and will vestwith terms providing for
13
exercisability in four and one-half years. Vesting accelerates ratably in thirdswas designed to accelerate as
the market price of the Common Stock increasesincreased to levels well above the issuance price.market
price on the date of grant. The price of the Common Stock increased
significantly during Fiscal 2000, meeting these price targets, and such options
became fully exercisable in accordance with their terms. The Compensation
Committee believes that options assist the Firm in maintaining a competitive
compensation program.
In determining overall Executive Officer compensation for Fiscal 1998,2000, the
Compensation Committee also considered a number of business factors and
conditions. Fiscal 19982000 was a record year for the Company which posted the
highest level of revenues, pretax income, and net income and return on equity in its
history. Productivity improved, expenses were further reducedcontrolled and the balance sheet
and liquidity were substantially strengthened. Share price however, was flatup significantly
at fiscal year end 19982000 from fiscal year end 1997 and return on equity decreased by just under a
percentage point.1999. In addition, the Compensation
Committee reviewed compensation provided in the prior year, along with estimates
of compensation for the current year, for competitor firms. In making its
determinations, the Compensation Committee had available to it third-party
advisors knowledgeable ofabout industry practices.
In establishing Fiscal 19982000 compensation for Richard S. Fuld, Jr., the
Company's Chairman and Chief Executive Officer, the Compensation Committee
considered the following performance factors (to which it did not assign any
specific relative weights):
- Overseeing the record financial results of the Company.
- DiversifyingStrengthening the Company's balance sheet.
- Maintaining expense discipline while significantly increasing headcount.
- Further diversifying the sources of revenuesrevenue by strengthening the Firm's
higher margin businesses.
- Maintaining discipline around expense reduction.
- Restructuring seniorAdding to, and strengthening, management withthroughout the establishment of an Executive
Committee.
- Leading the Firm through extremely volatile global capital markets in 1998
and a period of false market rumors about the Firm's viability.organization.
On the general criteria of leadership, management and governance, it is the
Compensation Committee's judgment that Mr. Fuld's Fiscal 19982000 performance was
above expectations, even though there was a slight decrease in return on equity.expectations. Notably, the actual financial results of the Company for
Fiscal 19982000 were significantly higher than for 1997. In addition,1999. Since the Compensation Committee
placed great store in Mr. Fuld's nonfinancial achievements set forth above. Mr.
Fuld's reported compensation for Fiscal 1998 increased modestly from Fiscal
1997. The RSUmajor portion of
Mr. Fuld's compensation increased to 60% in 1998
compared to 50% in 1997, similar to the general approach taken by the
Compensation Committee in increasing the equity portion ofis based on financial results, his Fiscal 2000
compensation paid to
senior employees. The RSUs are assigned a 30% discount because of significant
forfeiture and transfer restrictions over their five year life. The 30% discount
associated with the additional RSUs is reflected as a 4%reflects an increase to total
compensation in the Summary Compensation Table, because of the valuation
methodology the reporting rules require.from 1999.
Section 162(m) of the Internal Revenue Code (the "Code") limits the tax deductibility of
compensation in excess of $1 million unless the payments are made under
qualifying performance-based plans. For the compensation year ended
November 30, 1998,2000, these procedures were adhered to. While the Compensation
Committee currently seeks to maximize the deductibility of compensation paid to
Executive Officers, it will maintain flexibility to take other actions which may
be based on considerations other than tax deductibility.
Compensation and Benefits Committee:
John D. Macomber, Chairman
John F. Akers
Dina Merrill
February 18, 199926, 2001
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, John D. Macomber, John F. Akers and
Dina Merrill served on the Compensation Committee. None of these individuals has
ever served as an officer or employee of the Firm.
14
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the years ended November 30, 1998, 19972000, 1999 and
1996,1998, as applicable, the cash and other compensation paid or accrued and certain
long-term awards made to the Chairman and Chief Executive OfficersOfficer (the "CEO")
and to the Company's five most highly compensated executive officers other than
the CEO for services in all capacities. Messrs. Gregory, Jack, Lessing, McKeever and VanderbeekMr. Isaacs became an Executive OfficersOfficer
in 1998.Fiscal 2000. All such named Executive Officers, other than the Chairman,CEO, received
the same total compensation, based on the same broad financial and other
performance goals. The Compensation Committee believes this compensation
structure will build a team/partnership approach at the most senior level of the
Firm.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------------------
NAME AND PRINCIPAL ------------------------------------------------------------------------------ RESTRICTED SECURITIES ALL OTHER
POSITION AT FISCAL OTHER ANNUAL STOCK UNIT UNDERLYING COMPENSATIONALL OTHER
NOVEMBER 30, 19982000 YEAR SALARY BONUS COMPENSATION AWARDS(B) OPTIONS (C)AWARDS(A) OPTIONS(B) COMPENSATION(C)
- -------------------------------- -------- -------- ---------- ------------- ----------- ---------- ------------ --------------- ------------ ----------- -----------------------------
R. S. Fuld, Jr. (a)............. 1998 $ 750,000 $ 2,350,000 $ 0 $ 6,643,437 350,000 $ 7,908Jr.................. 2000 $750,000 $8,750,000 $0 $13,572,896 800,000 $13,710
Chairman and Chief 19971999 750,000 3,125,0004,500,000 0 5,536,325 325,000 7,5707,500,350 800,000 8,778
Executive Officer 19961998 750,000 2,000,0002,350,000 0 3,927,994 375,000 7,528
J. L. Cecil..................... 1998 $ 450,000 $ 2,300,000 $ 0 $ 3,928,915 300,000 $ 0
Chief Financial and 1997 450,000 3,300,000 0 3,214,640 225,000 0
Administrative Officer 1996 450,000 1,950,000 0 2,285,379 250,000 06,643,437 700,000 7,908
J. M. Gregory................... 2000 $450,000 $8,050,000 $0 $ 7,857,992 600,000 $ 5,339
Chief Administrative 1999 450,000 3,550,000 0 4,285,914 700,000 4,810
Officer 1998 450,000 2,300,000 0 3,928,915 600,000 4,333
J.M. Isaacs..................... 2000 $450,000 $8,050,000 $0 $ 450,0007,857,992 600,000 $ 2,300,000 $ 0 $ 3,928,915 300,000 $ 4,333
Head of Global Equities7,200
Chief Executive Officer--
Europe and Asia
B. H. Jack...................... 19982000 $450,000 $8,050,000 $0 $ 450,000 $ 2,300,0007,857,992 600,000 $ 0
$ 3,928,915 300,000 $ 0
Co-HeadHead of Investment 1999 450,000 3,550,000 0 4,285,914 700,000 0
Banking 1998 450,000 2,300,000 0 3,928,915 600,000 0
S. M. Lessing................... 19982000 $450,000 $8,050,000 $0 $ 7,857,992 600,000 $ 2,347
Senior Client Relationship 1999 450,000 $ 2,300,000 $3,550,000 0 $ 3,928,915 300,000 $ 1,9054,285,914 700,000 2,114
Manager and Head of Global Sales
and Research
M. F. McKeever..................Private 1998 $ 450,000 $ 2,300,000 $ 0 $ 3,928,915 300,000 $ 0
Co-Head of
Investment Banking600,000 1,905
Client Group
J. Vanderbeek................... 19982000 $450,000 $8,050,000 $0 $ 450,0007,857,992 600,000 $ 2,300,000 $ 0 $ 3,928,915 300,000 $ 6101,084
Head of Fixed IncomeCapital Markets 1999 450,000 3,550,000 0 4,285,914 700,000 709
Division 1998 450,000 2,300,000 0 3,928,915 600,000 610
- ------------------------
(a) Mr. Fuld's percentage of total pay awarded in discounted RSUs for 1998
increased from 50% of total pay in 1997 to 60% of total pay in 1998. These
awards are granted at a discount to market price due to their significant
vesting and forfeiture restrictions. The effect of the shift in Mr. Fuld's
1998 total pay into more RSUs increased reportable total pay, as presented
pursuant to SEC rules, by approximately 4%.
(b) Fiscal 19982000 amounts represent RSUs awarded under the Company's 1996
Management Ownership Plan. The values indicated are based on the closing
trading price of the Common Stock on the NYSENew York Stock Exchange ("NYSE")
for December 14, 1998,
$40.875,November 30, 2000, $49.5625, which is also the undiscounted award price
for the Fiscal 19982000 awards. However, RSUs actually are issued at a discount
because they are subject to significant vesting and forfeiture restrictions
and cannot be sold or transferred until they convert to Common Stock on
November 30, 2003.2005. Dividends are payable by the Company on all such holdings
from their daterespective dates of award, and are reinvested in additional RSUs.
15
At November 30, 1998,2000, the total number of RSUs held by Messrs. Fuld, Cecil,
Gregory,
Isaacs, Jack, Lessing McKeever and Vanderbeek is 1,251,173.41, 729,460.53,
808,757.67, 430,697.45, 627,785.90, 483,773.56was 2,763,427.35, 1,846,464.58,
515,271.33, 1,294,334.48, 1,465,235.07, and 486,531.66,1,294,334.48, respectively. The
value of these holdings at the November 30, 19982000 closing price per share of
Common Stock of $50 is $62,558,671, $36,473,027, $40,437,884,
$21,534,873, $31,389,295, $24,188,678$49.5625 was $136,962,368, $91,515,401, $25,538,135,
$64,150,453, $72,620,713 and $24,326,583,$64,150,453, respectively. Included in the
total number of RSUs for Messrs. Fuld, Gregory, Jack, Lessing and Vanderbeek
are the following amounts of RSUs based on 1996 PSU awards: 439,690.25,
329,767.70, 219,845.11, 219,845.11 and 219,845.11, respectively. Also
included in
15
the total number of RSUs for Messrs. Fuld, Gregory, Jack, Lessing and
Vanderbeek are the following amounts of RSUs based on 1997 PSU awards:
523,229.77, 345,330.48, 261,612.90, 261,612.90 and 261,612.90, respectively.
(b) Adjusted to reflect the Company's two-for-one stock split in October 2000.
(c) AmountsThe amount reported under "All Other Compensation" for Mr. Isaacs represents
the Firm's contribution under its U.K. defined contribution pension plan.
The other amounts reported under "All Other Compensation" for Fiscal 19982000
consist of the dollar value of above-market earnings on deferred
compensation. Included are credits to compensation deferred pursuant to the
Executive and Select Employees Plan, which was established in 1985, and the
Lehman Brothers Kuhn Loeb Deferred Compensation Plans, which were
established in 1977 and 1980.
The following table contains information concerning the grant of
nonqualified stock options in Fiscal 19982000 to the named Executive Officers. These
hypothetical present values are presented pursuant to SEC rules even though
there is no assurance that such values will ever be realized. The actual amount,
if any, realized upon the exercise of stock options would depend upon the market
price of Common Stock relative to the exercise price per share of the stock
option at the time the stock option is exercised.
There is no assurance
that the potential value of the stock options reflected in this table will
actually be realized.
OPTION GRANTS IN LAST FISCAL YEARYEAR(A)
INDIVIDUAL GRANTS
-----------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
EXERCISE
UNDERLYING GRANTED TO OR BASEEXERCISE GRANT DATE
OPTIONS EMPLOYEES OR BASE PRICE EXPIRATION PRESENT
NAME GRANTED(A)GRANTED (B) IN FISCAL YEAR PER SHARE DATE VALUE(B)VALUE (C)
- ----------------------------------------- ------------ --------------- ------------ ------------ ---------------- ----------- -------------- ------------- ---------- ----------
R. S. Fuld, Jr........................... 350,000 5.1% $ 48.5625 12/10/2002 $ 3,542,000
J. L. Cecil.............................. 300,000 4.3% $ 48.5625 12/10/2002 $ 3,036,000Jr.................... 800,000 3.8% $31.625 02/17/2005 $5,212,000
J. M. Gregory............................ 300,000 4.3% $ 48.5625 12/10/2002 $ 3,036,000Gregory..................... 600,000 2.9% 31.625 02/17/2005 3,909,000
J. M. Isaacs...................... 600,000 2.9% 31.625 02/17/2005 3,909,000
B. H. Jack............................... 300,000 4.3% $ 48.5625 12/10/2002 $ 3,036,000Jack........................ 600,000 2.9% 31.625 02/17/2005 3,909,000
S. M. Lessing............................ 300,000 4.3% $ 48.5625 12/10/2002 $ 3,036,000
M. F. McKeever........................... 300,000 4.3% $ 48.5625 12/10/2002 $ 3,036,000Lessing..................... 600,000 2.9% 31.625 02/17/2005 3,909,000
J. Vanderbeek............................ 300,000 4.3% $ 48.5625 12/10/2002 $ 3,036,000Vanderbeek..................... 600,000 2.9% 31.625 02/17/2005 3,909,000
- ------------------------
(a) Amounts have been adjusted to reflect the Company's two-for-one stock split
in October 2000.
(b) Five-year nonqualified stock options were granted on December 11, 1997, which
options become exercisableFebruary 18, 2000 with
terms providing for exercisability in four and one-half years and for
accelerated exercisability in one-third increments whenif the closing price of
the Common Stock on the NYSE reaches $55, $62.50,reached $42.50, $47.50 and $70,$52.50,
respectively, for 15 out of 20 consecutive trading days (the "Closing Price Conditions") or,
if sooner, become exercisable entirely in four and one-half years. The
Closing Price Conditionsdays. These price targets
were satisfiedmet during Fiscal 1998 and therefore the
options are currently exercisable.
(b)2000.
(c) These values were calculated using the Black-Scholes option pricing model as
of the grant date. The Black-Scholes model is a mathematical formula that is
widely used and accepted for valuing traded stock options. The model is
premised on immediate exercisability and transferability of the options.
This isoptions,
which was not true for the Company's options granted to the named Executive Officers.Officers
at the time of grant. Therefore, certain discounting assumptions about the
time of exercise and risk of forfeiture were applied, as indicated below.
The values shownfollowing assumptions were calculated usingused in employing the following assumptions: theBlack-Scholes
option pricing model: an exercise price is an amount
aboveequal to the closing price of
the Common Stock on December 11, 1997; the date of grant; an expected option life of two
and one-half years; a dividend rate of $0.24$0.22 per share for Fiscal 1998 based on the Company's
actual regular quarterly dividends;share; a risk-free rate
of return equal to the yield for the U.S. Treasury Strip security with a
maturity date closest to the expiration dateexpected option life of the option grant; andan
expected Common Stock price volatility used is its historic volatility. In addition, the assumed option
term of the awards reflects the likelihood of exercise before the expiration
of the maximum term. Stock options such as these
16
withrate based on historical
volatility; and a five-year term are assumed to be exercised in three years. The10% per annum adjustment for nontransferability or
risk of forfeiture during the vesting period is 10% per annum.period.
16
The following table sets forth information concerning the exercise of stock
options during Fiscal 19982000 by each of the named Executive Officers and the
fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUESVALUES(A)
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES AT
FISCAL YEAR END AT FISCAL YEAR END(B)
SHARES ACQUIRED ON VALUE --------------------------- ------------------------------------------------------------
NAME EXERCISE(A) REALIZED(A)ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- --------------- ----------- ----------- ------------- ------------ ------------- ------------- -----------------
R. S. Fuld, Jr....................Jr........... 800,000 $42,950,000 3,896,640 0 $ 0 1,737,589 0 $ 37,443,473$111,998,085 $ 0
J. L. Cecil....................... 348,000 16,373,500 707,000M. Gregory............ 453,652 20,053,725 2,522,348 0 9,550,75066,433,167 0
J. M. Gregory..................... 262,692 14,710,915 838,000Isaacs............. 0 13,153,625 0 900,000 60,408 17,793,750 1,759,383
B. H. Jack........................ 175,000 9,461,928 576,835Jack............... 319,934 10,133,376 2,133,736 0 6,290,54352,538,787 0
S. M. Lessing.....................Lessing............ 400,000 14,400,000 2,832,000 0 0 1,051,835 0 19,914,970 0
M. F. McKeever.................... 195,755 10,007,913 558,000 0 5,810,25078,322,970 0
J. Vanderbeek..................... 157,086 8,024,945 595,000Vanderbeek............ 236,000 7,001,000 2,254,000 0 6,753,75056,665,345 0
- ------------------------
(a) Options exercised during Fiscal 1998 wereAmounts have been adjusted to reflect the first discretionary exercises
by the named officers since the spin-off of Lehman Brothers from American
ExpressCompany's two-for-one stock split
in 1994. All prior exercises were for options scheduled to expire
during the related fiscal year.October 2000.
(b) Aggregate values shown above represent the excess of $50$49.5625 per share, the
closing price of the Common Stock on November 30, 19982000 on the NYSE, over the
respective exercise prices of the options. The actual amount, if any,
realized upon exercise of stock options will depend upon the market price of
the Common Stock relative to the exercise price per share of the stock
option at the time the stock option is exercised. There is no assurance that
the values of unexercised in-the-money options reflected above will be
realized.
The following table sets forth information concerning LTIP awards made in
Fiscal 2000 to the named Executive Officers.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
TARGET PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL
NAME UNITS (A) MATURATION OR PAYOUT(B)
- ---- --------- -----------------------
R.S. Fuld Jr................................................ 240,000 6/1/00--11/30/08
J. M. Gregory............................................... 180,000 6/1/00--11/30/08
J. M. Isaacs................................................ 180,000 6/1/00--11/30/08
B. H. Jack.................................................. 180,000 6/1/00--11/30/08
S. M. Lessing............................................... 120,000 6/1/00--11/30/08
J. Vanderbeek............................................... 180,000 6/1/00--11/30/08
- ------------------------
(a) Amounts have been adjusted to reflect the Company's two-for-one stock split
in October 2000. Performance Stock Units ("PSUs") are earned based upon
return on equity for the Company for the period June 1, 2000 through
November 30, 2001 and the fiscal years 2002 and 2003, as well as any price
appreciation in the Common Stock from June 1, 2000 through February 28,
2004. Based upon actual performance, participants have the opportunity to
earn from zero units up to a multiple of the target units.
(b) The aggregate number of units earned, if any, will convert to RSUs in fiscal
2004 and vest in one-third increments on November 30, 2006, 2007 and 2008.
17
PENSION BENEFITS
Lehman Brothers Holdings Inc. Retirement Plan (the "Holdings Retirement"U.S. Pension Plan") is a
funded, qualified, noncontributory, integrated, defined benefit pension plan
covering eligible U.S. employees.
All U.S. employees of the Company or a designated subsidiary who have
attained the age of 21 and completed one year of service are generally eligible
to participate in the Holdings RetirementU.S. Pension Plan. The Holdings RetirementU.S. Pension Plan formula provides
for an annual retirement benefit payable at age 65, calculated as a straight
life annuity. Pensionable earnings are total Form W-2 earnings (plus elective
deferrals under the Lehman Brothers Holdings Inc. Tax Deferred
Savings Plan and certain other health plan
deferral amounts) up to the applicable Internal Revenue Service maximum of $150,000 in 1995 and 1996.maximum. For
each year of plan participation prior to 1989, the annual accrual was based on
percentages of pensionable earnings up to and in excess of the social security
taxable wage base. After 1988 the annual accrual is equal to one percent of
pensionable earnings up to the average Social Security taxable wage base plus
1.65% of pensionable earnings in excess of the average taxable wage base.
Generally, participants have a nonforfeitable right to their accrued benefits
upon completing five years of vesting service. As of November 30, 1998,2000, the
estimated annual projected benefits payable upon retirement at a normal
retirement age of 65 for Messrs. Fuld, Cecil, Gregory, Jack, Lessing McKeever and Vanderbeek are
approximately $94,819, $53,795, $102,874, $88,880, $101,172, $94,812$102,573, $88,879, $101,173 and $96,622,$96,624, respectively.
17
Mr. Isaacs is a participant in the Lehman Brothers Pension Scheme (the "U.K.
Pension Plan"), a defined contribution plan covering all U.K. employees of
Lehman Brothers Ltd. who have completed one year of service, attained the age of
25 and are under 60 years of age. The Firm's contribution under the U.K. Pension
Plan for Fiscal 2000 for Mr. Isaacs is reported in the Summary Compensation
Table above.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has adopted a nonqualified, noncontributory Supplemental
Retirement Plan ("SRP") covering certain members of the Executive Committee of
the Company who are at least age 60 and who have completed at least five years
of service or whose age plus service equals or exceeds 85. The SRP is a defined
benefit plan and provides for the payment of reduced benefits payable at age 60
if the participant is above age 45 and has completed five years of service.
Benefits are not payable in cases of termination for cause or employment by a competitor.
In addition, eligibility for SRP benefits is subject to continued employment
through July 1, 2001. As of November 30, 1998,2000, the estimated annual projected
benefits payable upon retirement at age 60 for Mr. Fuld are $1.25 million, and
for each of Messrs. Cecil, Gregory, Jack, Lessing McKeever and Vanderbeek are $700,000. In the
event of a change in control, vesting is accelerated.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
Pursuant to its authority to accelerate vesting and waive the transfer
restrictions for grants of RSUs, in 1994 the Compensation Committee determined
to accelerateprovide for the acceleration of vesting and waive the waiver of transfer
restrictions of the RSUs received by the Executive Officers (and made comparable
provisions for all other employees) in the event of a Hostile Changehostile change of Control,control,
which generally means a tender offer, acquisition of 20% of the Company's voting
securities or a change of a majority of the incumbent Board of Directors, in
each case without the prior approval of a majority of the independent members of
the incumbent Board of Directors. To the extent there is a Changechange of Controlcontrol
which is not Hostile,hostile, then the RSUs would be paid out but the difference between
the acquisition price and the RSU value at grant would be deferred for the
shorter of two years or the term of any remaining restrictions and the
conditions of the original RSU grant would govern the deferred amounts.
Comparable arrangements were implemented for options and restricted stock held by the Executive
Officers and all other employees. Prior to the completion of the performance period, PSUs have pro rata
payouts upon a Change of Control and inIn the case of the 1996 PSU Award Grant,award grants and 1997
PSU award grants, an additional number of RSUs would be payable following a
change of control equal to approximately twice90% and 160%, respectively, of the
number of RSUs areotherwise payable (which aggregate payout,payouts, upon a Changechange of
Control, representscontrol, would represent the full awardawards earned pursuant to the performance
formula). In
18
addition, under a Cash Awards Plan, if a Changechange of Controlcontrol occurs within six
months after a grant of RSUs, then the Chief Executive Officer receives a
payment equal to 350% of his previous annual cash compensation, the Chief
Administrative Officer shall receive 300% and the other Corporate Management Committee membersparticipants shall
receive from 200% to 300%.
PERFORMANCE GRAPH
The performance graph below illustrating cumulative stockholder return
compares the performance of the Common Stock, measured at each fiscal year-end
sinceof the Company's
May 31, 1994 spin-off from American Express,last five fiscal year-ends, with that of (1) an index comprised of the common
stocks of The Bear Stearns Companies Inc., Morgan Stanley Dean Witter & Co. and Salomon Inc (the "Former Peer Group"), (2)
an index comprised of the common stocks of The Bear Stearns Companies Inc.,
Donaldson, Lufkin & Jenrette, Inc.
("DLJ"), J.P. Morgan & Co. Incorporated and Paine Webber Group, Inc. (the "New Peer Group"("Paine
Webber"), and (3)(2) the S&P 500 Index.
The Company has elected to replace the Former Peer Group with the New Peer
Group for purposes of the graph to take into account entities whose businesses
and capital structures better resemble those of the Company. The Company intends
to omit the Former Peer Group index results from its proxy statement performance
graphs in future years.
The common stock of Salomon Inc is not included in the Former Peer Group
index for fiscal 1998 due to its merger on November 28, 1997 with Smith Barney
Holdings, Inc., a wholly owned subsidiary
18
of Travelers Group Inc. With respect to Morgan Stanley, the Former Peer Group
index reflects (1) the performance of the common stock of Morgan Stanley Group,
Inc. through May 30, 1997, its last day of trading prior to Morgan Stanley's
merger into Dean Witter, Discover & Co. (with each share of Morgan Stanley
common stock receiving 1.65 shares of Dean Witter common stock in exchange), and
(2) the performance of the common stock of Dean Witter (since renamed Morgan
Stanley Dean Witter & Co.) from May 31, 1997 forward. Because Donaldson, Lufkin
& Jenrette, Inc. has been a publicly traded company only since October 1995, its
common stock is included in the New Peer Group index results for fiscal 1996,
1997 and 1998 only.
The graph assumes $100 was invested in the Common Stock and each index on
May 31, 1994,November 30, 1995, and that all dividends were reinvested in full. InvestmentsThe
investment in the stocks comprising the peer group indexes haveindex has been weighted at
the beginning of each measurement period according to the issuing companies'
market capitalizations, in accordance with SEC rules. Furthermore, with respect
to the peer group index return for the last month of Fiscal 2000, the
investments in DLJ and Paine Webber were frozen at their values as of
October 31, 2000, the last month-end preceding the date that both such companies
ceased to be publicly traded as a result of their respective acquisitions by
Credit Suisse First Boston and UBS AG.
CUMULATIVE TOTAL RETURN
FOR LEHMAN BROTHERS HOLDINGS INC. COMMON STOCK,
TWOA PEER GROUP INDICESINDEX AND THE S&P 500 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARSNOV-95 NOV-96 NOV-97 NOV-98 NOV-99 NOV-00
Lehman Brothers Holdings Inc. FormerInc................ 100 129.76 226.66 225.37 346.42 451.86
S&P 500..................................... 100 127.87 164.33 203.2 245.67 235.3
Peer Group New Peer Group S&P 500
5/31/94Group.................................. 100 100 100 100
11/30/94 81.85 83.04 88.36 100.81
11/30/95 125.72 108.62 126.97 138.09
11/29/96 163.13 113.95 158.18 176.57
11/28/97 284.96 157.5 226.44 226.91
11/30/98 283.35 198.27 232.16 280.6124.58 178.16 182.24 218.03 285.9
CUMULATIVE TOTAL RETURN (IN DOLLARS)
----------------------------------------------------------------------------------------------------------------------------
11/30/95 11/30/96 11/29/97 11/28/98 11/30/99 11/30/00
-------- -------- -------- -------- -------- --------
5/31/94 11/30/94 11/30/95 11/29/96 11/28/97
--------- ----------- ----------- ----------- -----------
Lehman Brothers Holdings Inc...................................Inc............... 100.00 81.85 125.72 163.13 284.96
Former129.76 226.66 225.37 346.42 451.86
Peer Group..............................................Group................................. 100.00 83.04 108.62 113.95 157.50
New Peer Group................................................. 100.00 88.36 126.97 158.18 226.44127.87 164.33 203.20 245.67 235.30
S & P 500......................................................500.................................. 100.00 100.81 138.09 176.57 226.91
11/30/98
-----------
Lehman Brothers Holdings Inc................................... 283.35
Former Peer Group.............................................. 198.27
New Peer Group................................................. 232.16
S & P 500...................................................... 280.60124.58 178.16 182.24 218.03 285.90
19
CERTAIN TRANSACTIONS AND AGREEMENTS
WITH DIRECTORS AND EXECUTIVE OFFICERS
In the ordinary course of business, the Firm from time to time engages in
transactions with other corporations or financial institutions whose officers or
directors are also Executive Officers or Directors of the Company. Transactions
with such corporations and financial institutions are conducted on an
arm's-length basis and may not come to the attention of the Directors or
Executive Officers of the Company or those of the other corporations or
financial institutions involved.
From time to time, Executive Officers and Directors of the Company and their
associates may be indebted to the Company or its subsidiaries under lending
arrangements offered by those companies to the public. For example, such persons
may be indebted to LBI, as customers, in connection with margin account loans,
revolving lines of credit and other extensions of credit. Such indebtedness is
in the ordinary course of business, is substantially on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and does not involve a more than
normal risk of collectibility or present other unfavorable features. In
addition, such Executive Officers, Directors and associates may engage in
transactions in the ordinary course of business involving other goods and
services provided by the Firm, such as investment services, limited partnership
investments and financial counseling, on terms similar to those extended to
employees of the Company generally. From time to time since the beginning of
Fiscal 1998,2000, the Company, through certain of its subsidiaries, in the ordinary
course of business has provided investment, financial advisory and other
services to certain corporations and entities with which certain of its
Directors and prior Directors are affiliated.
In April 1998,Throughout Fiscal 2000 the Company entered intowas party to a one-year consulting agreement with
Henry Kaufman & Company, Inc. ("HK Company") pursuant to which HK Company provides,will
provide, upon request, advice to the Firm on global initiatives, economic
forecasts and other matters. HK Company receives a consulting fee of $12,500 per
month. Henry Kaufman, a Director of the Company, is a principal of HK Company.
The contract expires in April 2001, subject to renewal by agreement of the
parties.
Lehman Brothers Communications Capital Partners, I L.P. ("Capital Partners I"Communications")
is a limited partnership established in 19862000 to provide senior officers and
other employees, directors and consultants of the Firm with anthe opportunity to
invest in a private equity fund. Communications will co-invest with a Lehman
Brothers subsidiary, Lehman Brothers Communications Associates Inc.
("Associates"), and with Lehman Brothers Communications Partners L.P., a private
equity fund organized for third party investors, generally in proportions based
upon the respective outstanding capital commitments of the three investing
entities. Associates also acts as general partner for Communications. The
investment objective of Communications is to seek substantial capital
appreciation through communications industry capital investments. Communications
has capital commitments of $168.3 million from the limited partners and
$1.7 million from the general partner. Each of the Company's Executive Officers,
each Director, other than Messrs. Akers and Macomber and Ms. Merrill, and
Mr. McKeever, a former executive officer of the Company, are limited partners in
Communications. Adult children of each of Messrs. Akers and Macomber and
Ms. Merrill are also limited partners in Communications. Distributions of
investment proceeds in respect of a communications industry capital investment
generally will be made to the limited partners and the general partner pro rata
in proportion to each of their capital contributions until their capital is
returned, and any subsequent profits generally will be divided 90% to the
limited partners and 10% to the general partner.
Lehman Brothers Partnership Account 2000/2001, L.P. ("Partnership Account
2000") is a limited partnership established in 2000 to provide employees,
consultants and directors of the Firm with the opportunity to invest in a
portfolio of variousinvestment opportunities. Partnership Account 2000 will participate
in a group of proprietary private equity investment partnerships created and
managed by the Firm, as well as other investment opportunities on a leveraged basis. Directorsidentified by the
Firm. A subsidiary of the Company were also given an
opportunityacts as general partner for Partnership
Account 2000. The investment objective of Partnership Account
20
2000 is to invest in Capital Partners I. During Fiscal 1998, Messrs. Fuld,
Gregory, Lessing and McKeever received $194,110, $121,318, $194,110 and
$194,110, respectively, in distributions from Capital Partners I.
Lehman Brothers Capital Partners II, L.P. ("Capital Partners II") isachieve long-term capital appreciation through a limited partnership established in 1988diverse group of
equity-oriented investments. Partnership Account 2000 has capital commitments of
$189.7 million, which may be increased to provide senior officers and other
employeesas much as $220 million. Each of the
Firm with an opportunity to invest in a portfolio of various
investment opportunities on a leveraged basis. Directors of the Company were
also given an opportunity to invest in Capital Partners II. During Fiscal 1998,
Messrs. Berlind, Fuld, Lessing and McKeever received $370,695, $247,130, $61,783
and $98,852, respectively, in distributions from Capital Partners II.
CertainCompany's Executive Officers, payand each Director, other than Messrs. Akers,
Cruikshank and Macomber and Ms. Merrill, are limited partners in Partnership
Account 2000. Adult children of Mr. Macomber are also limited partners in
Partnership Account 2000. The limited partners are contributing an aggregate of
$37.9 million. The general partner is making a regular capital contribution of
$0.4 million and a preferred capital contribution of $151.5 million to
Partnership Account 2000. The general partner's capital contribution, together
with a fixed return, will generally be distributed to the Company forgeneral partner before
any other distributions are made. Thereafter, the personal use of
time-share aircraft used primarily for business bylimited partners' capital
contributions will be distributed to the Company. Payment is at
leastlimited partners, and any subsequent
profits generally will be divided 90% to the amount established bylimited partners and 10% to the
IRS as reasonable for personal use.
20
general partner.
CERTAIN TRANSACTIONS AND AGREEMENTS WITH
AMERICAN EXPRESS AND SUBSIDIARIES
American Express has invested $29.4 million in two merchant banking
partnerships in which subsidiaries of the Company act as general partner, and
American Express received partnership distributions in an aggregate amount of
$5.56 million$100,000 in respect of these investments in Fiscal 1998.2000.
Until January 2001 Lehman Brothers Financial Resource Accounts include,included, as
one of the features of the integrated financial services accounts, the Gold Card
issued by American Express Travel Related Services Company, Inc. ("TRS"), for
which LBI payspaid TRS a portion of the fees received from the holders. TRS also
provides the Corporate Card to employees of the Firm, for which TRS has waived
all annual fees. In January 1994, the Company agreed to consolidate all of the
Firm's domestically initiated business travel reservations through the TRS
Travel Center in Omaha. LBI
and TRS agreed in March 1997 to extend suchSuch arrangements with respect to the Corporate Card and
travel services until June 30, 2000, with TRS as the sole
provider of such services.continue to be in effect.
In August 1990, American Express agreed to guarantee certain payments to
employees who were then active employees of the Company under certain deferred
compensation programs. As of December 31, 1998,2000, deferred compensation with an
aggregate balance of approximately $145$79 million was covered by this guarantee.
The Company pays American Express an annual fee equal to 0.625% on approximately
two-thirds of the outstanding balance under such deferred compensation plans, in
consideration of American Express maintaining the guarantee, which is scheduled
to expire in August 2000.September 2001.
On June 28, 1991, the Company sold its subsidiary, The Balcor Company, to a
wholly owned subsidiary of American Express. In connection therewith, there
remains an
interest bearing note with an unpaidin the principal amount of $88,360,137
as of December 31, 1998, with a maturity of December 31, 2000, payableapproximately $88.4 million was
repaid to the Company by American Express to the Company.
On October 1, 1998,in December 2000.
During Fiscal 2000, the Company repurchased from American Express
$50$88 million (aggregate liquidation preference) of the Company's then-outstanding
Series B Preferred Stock at par.
The Firm, from time to time, provides investment banking, commercial paper
placement, brokerage and various other financial services such as repurchase
transactions, investment advisory, strategic advisory and derivative products to
American Express and its subsidiaries, including acting as placement agent for
medium-term notes, dealer for commercial paper and advisor regarding certain
dispositions. The Firm, American Express and its subsidiaries also engage in the
ordinary course of business in various trading and short-term funding
transactions, including foreign exchange and precious metals transactions. In
addition to the services referred to above, American Express and its
subsidiaries provide banking and other financial services to the Firm. All of
these transactions are done on an arm's-length basis with customary fees.
The Company and American Express entered into an Agreement dated May 26,
1994 (the "Tax Allocation Agreement"), which provided for the allocation,
settlement and payment of the Company's
21
federal, state and local income tax liabilities for the years during which the
Company and any of its subsidiaries were included in the American Express
consolidated Federal income tax return or any combined or unitary state and
local tax returns. Under the terms of the Tax Allocation Agreement, American
Express retained significant control and discretion over issues relating to the
allocation, settlement and payment of the covered tax liabilities, including the
resolution of proposed audit adjustments. For income tax filings relating to
periods commencing on or after June 1, 1994 (the date of the Company's spin-off
date)from American Express), the Company files its own consolidated Federal income
tax return and applicable state and city filings.
The Company, LBI and Lehman Commercial Paper Inc. (collectively, the "LB
Co-tenants") are co-tenants together with American Express and certain of its
subsidiaries (the "AXP Co-tenants" and,
21
together with the LB Co-tenants, the
"Co-tenants") of the leasehold interest in 3 World Financial Center in New York
City (the "Property"). The Co-tenants' relationship with respect to the Property
is governed by an Agreement of Tenants-In-Common. The agreement provides, among
other things, that each Co-tenant is obligated to pay its proportionate share of
all Property obligations and limits the actions that may be taken by individual
Co-tenants. The AXP Co-tenants and LB Co-tenants arewere liable, on a limited
recourse basis, for their proportionate share of the debt (zero-coupon notes
which maturematured in December 2000) issued by the Co-tenants to finance the
Property. The LB Co-tenants' share of such debt as of December 31, 1998 amounts12, 2000, the
date such notes were repaid, amounted to approximately $175$223.2 million and hasuntil
repayment had been guaranteed by American Express. Such debt is secured
by a first mortgage granted on the interest of the Co-tenants as
tenants-in-common in the Property.
CERTAIN TRANSACTIONS WITH OTHER INSTITUTIONAL INVESTORS
AND THEIR SUBSIDIARIES
In June 1999 Fidelity and the Company announced an alliance across a broad
spectrum of investment products, research and distribution channels. Under the
alliance, certain of Fidelity's brokerage clients will gain greater access to a
wide range of equity and fixed income products, including Lehman Brothers
research and the possibility of participating in Lehman Brothers lead-managed
initial and secondary public offerings, and Fidelity will be the principal
channel for Lehman Brothers to distribute underwritten securities to eligible
retail brokerage customers outside its own network of high net worth retail
brokers.
In the ordinary course of business and at customary and usual fees therefor,
the Firm may provide to Prudential and its subsidiaries, PutnamFidelity and its subsidiaries, and other institutional
stockholders, brokerage and other financial services; on the same basis, such
companies may provide mutual fund, insurance and other financial services to the
Firm.
22
PROPOSAL 2
RATIFICATION OF THE COMPANY'S SELECTION OF ITS AUDITORS
The Board of Directors recommends to the Stockholders that they ratify the
selection of Ernst & Young LLP, independent auditors, to audit the accounts of
the Firm for Fiscal 1999.2001.
The affirmative vote of the majority of Voting Stock present in person or by
proxy at the meeting is required to ratify the selection of auditors.
In the event that the Stockholders fail to ratify the appointment, the Board
of Directors will consider it a direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Board of Directors, in
its discretion, may direct the appointment of a new independent accounting firm
at any time during the year if the Board feels that such a change would be in
the best interests of the Company and its Stockholders.
For Fiscal 1998, fees related to the annual examination of the Firm's
financial statements amounted to approximately $4.9 million.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will have the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
22
ERNST & YOUNG LLP FEES FOR FISCAL 2000
AUDIT FEES. Audit fees billed to the Company by Ernst & Young LLP with
respect to the Fiscal 2000 financial statements were $5,500,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. No services
were performed by, or fees incurred to, Ernst & Young LLP in connection with
financial information systems design and implementation projects for Fiscal
2000.
ALL OTHER FEES. All other fees billed by Ernst & Young LLP with respect to
Fiscal 2000 were $6,309,000, including audit related services of $3,963,000 and
other non-audit services of $2,346,000. Audit related services generally include
fees for statutory and employee benefit plan audits, other attest services for
certain subsidiary companies, accounting consultations, internal audit services
and work on SEC registration statements.
The Audit Committee considered whether the provision of services described
above under "All Other Fees" is compatible with maintaining Ernst & Young's
independence.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is composed of three
non-employee Directors and operates under a written charter adopted by the Board
of Directors. The Audit Committee recommends to the Board of Directors the
selection of the Company's independent auditors.
Management is responsible for the Company's internal controls, the financial
reporting process and preparation of the consolidated financial statements of
the Company. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
In this context, the Committee has met and held discussions with management
and the independent auditors. Management represented to the Audit Committee that
the Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles. The Audit Committee reviewed and
discussed the consolidated financial statements with management and the
independent auditors. The Audit Committee further discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Company's independent auditors also provided to the Audit Committee the
written disclosures and letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors that firm's independence.
Based upon the Audit Committee's discussions with management and the
independent auditors and the Audit Committee's review of the representations of
management and the report and letter of the independent auditors provided to the
Audit Committee, the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for the year ended November 30, 2000 for filing with
the Securities and Exchange Commission.
Audit Committee:
Roger S. Berlind, Chairman
Michael L. Ainslie
Thomas H. Cruikshank
February 26, 2001
23
PROPOSAL 3
ADOPTION OF AN INCREASE IN THE NUMBER OF AUTHORIZED COMMON SHARES
GENERAL
The Board of Directors has declared advisable an amendment to the Company's
Restated Certificate of Incorporation to increase the aggregate number of
authorized shares of Common Stock from 300 million to 600 million (the
"Amendment") and has directed that the Amendment be submitted to the
stockholders at the Annual Meeting.
The Restated Certificate of Incorporation presently authorizes the issuance
of 300 million shares of Common Stock and 38 million shares of preferred stock.
The Amendment would increase the authorized number of shares of Common Stock to
600 million. No change is proposed in the number of authorized shares of
preferred stock.
PROPOSED AMENDMENT
If the Amendment is adopted, the text of the first sentence of Article 4.1
of the Company's Restated Certificate of Incorporation would read in its
entirety as follows:
4.1 AUTHORIZED SHARES. The total number of shares of capital stock which
the Corporation shall have authority to issue is six hundred million
(600,000,000) shares of common stock with one vote per share, $0.10 par
value per share (the "Common Stock") and thirty-eight million (38,000,000)
shares of preferred stock, $1.00 par value per share (the "Preferred
Stock").
GENERAL EFFECT OF PROPOSED AMENDMENT AND REASONS FOR APPROVAL
Of the Company's 300 million authorized shares of Common Stock,
approximately 251 million were issued and outstanding as of February 8, 2001
following the Company's October 2000 two-for-one stock split. At February 8,
2001, after taking into account approximately 36.3 million shares of Common
Stock reserved for issuance under compensation plans, approximately
12.7 million of the 300 million shares authorized in the Restated Certificate of
Incorporation remain available for issuance. The Board of Directors believes the
Amendment is advisable in order to maintain the Company's financing and
capital-raising flexibility, to facilitate future stock splits, to have shares
available for use in employee benefit plans and other corporate purposes, and to
generally maintain the Company's flexibility in today's competitive,
fast-changing environment. There are no present agreements, understandings or
plans for the issuance of any of the additional shares that would be authorized
by the Amendment.
Adoption of the Amendment would enable the Board from time to time to issue
additional shares of Common Stock for such purposes and such consideration as
the Board may approve without further approval of the Company's stockholders,
except as may be required by law or the rules of any national securities
exchange on which the shares of Common Stock are at the time listed. As is true
for shares presently authorized, Common Stock authorized by the Amendment may,
among other things, have a dilutive effect on earnings per share and on the
equity and voting power of existing holders of Common Stock.
There are no preemptive rights with respect to Common Stock. The additional
authorized shares of Common Stock would have the identical powers, preferences
and rights as the shares now authorized. Under Delaware law, stockholders will
not have any dissenters' or appraisal rights in connection with the Amendment.
If the Amendment is adopted by the Stockholders, it will become effective upon
executing, acknowledging and filing a Certificate of Amendment required by the
General Corporation Law of Delaware.
VOTE REQUIRED
The affirmative votes of a majority of the outstanding shares of Voting
Stock voting as a single class and a majority of the outstanding shares of
Common Stock voting as a separate class, are
24
required for adoption of the Amendment. In determining whether the Amendment has
received the requisite number of affirmative votes, abstentions and broker
nonvotes will have the same effect as votes against the Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
OTHER MATTERS
Management does not know of any business to be transacted at the meeting
other than as indicated herein. Should any such matter properly come before the
meeting for a vote, the persons designated as proxies will vote thereon in
accordance with their best judgment.
You are urged to sign, date and return the enclosed proxy card as promptly
as possible, using the prepaid envelope provided for such purpose, or vote
online or by telephone according to the instructions on the proxy. It is hoped
that registered Stockholders will give us advance notice of their plans to
attend the Annual Meeting by marking the box provided on the proxy card or by
registering their intention when voting online or by telephone.
If you will need special assistance at the Annual Meeting because of a
disability, please contact the Corporate Secretary of the Company, Ms. Jennifer
Marre,Mr. Jeffrey
A. Welikson, at (212) 526-1936(646) 836-2150 or at jmarre@lehman.com.jwelikso@lehman.com. Directions to the
meeting are on the last page of this Proxy Statement.
DEADLINE FOR SUBMITTING PROPOSALS FOR NEXT YEAR'S MEETING. Stockholders who
intend to present proposals for inclusion in the proxy material to be
distributed by the Company in connection with the Company's 20002002 Annual Meeting
of Stockholders must submit their proposals to the Corporate Secretary of the
Company on or before October 21, 1999.29, 2001.
In addition, in accordance with Article II, Section 9 of the Company's
By-Laws, in order to be properly brought before the 20002002 Annual Meeting by a
Stockholder, notice of a matter must have been (a) specified in a notice of meeting given 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), (b) otherwise properly brought before the meeting
by or at the direction of the Board of Directors or (c) otherwise properly
brought before the meeting by a stockholder. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 90 nor more than 120 days prior to the
first anniversary of the date of this year's Annual Meeting. Accordingly, any
notice given by or on behalf of a stockholder pursuant to the foregoing clause
(c) in connection with the 2000 Annual Meeting must be received no later than
December 31, 1999.
Jennifer MarreJanuary 3, 2002.
Jeffrey A. Welikson
Secretary
New York, New York
February 18, 1999
2326, 2001
25
APPENDIX A
LEHMAN BROTHERS HOLDINGS INC.
AUDIT COMMITTEE CHARTER
RESOLVED, that pursuant to Article ELEVENTH of the Restated Certificate of
Incorporation and Article IV, Section 2 of the By-Laws the Board of Directors
hereby designates an Audit Committee of the Board of Directors, consisting of at
least three independent directors, who have no relationship to the Corporation
that, in the opinion of the Board of Directors, would interfere with the
exercise of their independence from management and the Corporation; and further
RESOLVED, that the Audit Committee shall, on behalf of the Board of Directors,
review the accounting, reporting, audit and control practices established by the
Corporation's management. To discharge its responsibilities the Committee shall
be empowered to conduct its own investigations into relevant issues and, if
deemed necessary by the Committee, to retain private counsel or outside
expertise; the Committee shall meet at least three times per year and shall
report on its activities to the Board of Directors following each meeting of the
Audit Committee; and further
RESOLVED, that, in performing its role, the Audit Committee shall:
1. Select the independent certified public accountants (external auditors) to
audit the accounts of the Corporation and its subsidiaries, taking into
consideration management's proposals for such selection, recommend to the
Board, for ratification by the stockholders, the accounting firm so
selected, and along with the Board, evaluate such external auditors on an
ongoing basis, and if necessary replace such external auditors.
2. Meet with the independent accountants and financial management of the
Corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof,
discuss the results of the audit including any comments or recommendations
of the external auditors.
3. Review the nature and cost of audit, audit-related and non-audit services
performed by the independent accountants.
4. Review any items which could reflect on the external auditors' independence
by (i) requesting from such auditors annually a formal, written statement
delineating all relationships with the Corporation and (ii) discussing any
such relationships and their impact on the auditors' independence. Recommend
that the Board take appropriate action in response to such statement to
satisfy itself of the auditors' independence.
5. Prior to release of the Corporation's Annual Report on Form 10-K, review with
financial management and with the external auditors the financial
information to be contained in such report, and based on such review,
recommend whether to include such financial statements in the report. Any
significant changes in accounting principles or practices should be
explained to the Committee by financial management and the external
auditors.
6. Prior to the release of the Corporation's interim financial results on
Form 10-Q, review with financial management and the external auditors the
financial information to be included therein.
7. Confer with the Corporation's financial and auditing personnel and the
external auditors on the adequacy and effectiveness of the accounting and
financial controls of the Corporation.
8. Review the scope of Internal Audit and Compliance activities, including the
proposed audit plans for the coming year, and the coordination with the
external auditors. Receive a summary of findings from completed internal
audits and a progress report on the current plan.
9. Confer with Internal Auditing and Compliance representatives on significant
audit findings and compliance issues and the management process for
correcting them.
10. Inquire of management, internal audit and the independent accountants about
significant risks and exposures, including technology risks, and assess
management's plans for managing such risks.
11. Receive from management reports of findings, and the responses thereto,
resulting from examinations by regulatory agencies.
12. Review significant cases of employee misconduct or fraud as brought to the
Committee's attention by management.
A-1
DIRECTIONS TO THE LEHMAN BROTHERS HOLDINGS INC.
19992001 ANNUAL MEETING OF STOCKHOLDERS
The Firm's World Headquarters, site of the 19992001 Annual Meeting of
Stockholders, is located at 200 Vesey Street, 3 World Financial Center, on the
west side of lower Manhattan in the office complex known as the World Financial
Center. The World Financial Center is a part of Battery Park City, a development
of office buildings, residences and parks alongside the Hudson River on the
southwestern tip of Manhattan. It is connected to the World Trade Center by two
pedestrian overpasses and is also accessible at street level by automobile.
BY SUBWAY
Take any of the several subway lines (A,(the A, C, E, N or R, or the 1, 2, 3,
4, 5 or 9 trains) that stop at or near the World Trade Center. Walk from the
World Trade Center across West Street (formerly known as the Westside Highway)
via one of the two pedestrian overpasses. The Company's offices are in 3 World
Financial Center, which is the building on the north side of the Winter Garden
in the World Financial Center.
BY AUTOMOBILE OR TAXICAB
Proceed to West Street (formerly known as the Westside Highway) in lower
Manhattan, orienting toward the twin towers of the World Trade Center. Enter the
World Financial Center, which is directly across West Street from the towers, by
turning west on either Murray Street or Vesey Street. Proceed to the main
entrance of 3 World Financial Center, which is the building located at the
southwest corner of Vesey and West Streets. There is only very limited
underground parking in the building. Such parking requires the payment of a fee.
Building security may inspect your car before permitting you to park.
PRELIMINARY COPY
LEHMAN BROTHERS HOLDINGS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Jennifer Marre, Karen M. Muller andProxy for Annual Meeting of Stockholders
This proxy is solicited by the Board of Directors
Joseph Polizzotto, Thomas A. Russo and Jeffrey A. Welikson, or each of
them (with full power to act without the otherothers and with full power of
substitution), are hereby appointed attorneys and proxies to attend the
Annual Meeting of Stockholders to be held on March 30, 1999,April 3, 2001, and any
adjournment thereof, and to vote and act for the undersigned on the matters
listed on the reverse side hereof, which are set forth in detail in the
accompanying Proxy Statement.
This proxy revokes all previous proxies. Unless specified to the contrary,
it will be votedUNLESS SPECIFIED TO THE
CONTRARY, IT WILL BE VOTED FOR all proposals.ALL PROPOSALS. In their discretion, the
proxies are authorized to vote upon any other business which may properly
come before the Annual Meeting or any adjournment thereof.
(Continued, and to be signed and dated, on the reverse side.)
LEHMAN BROTHERS HOLDINGS INC.
P.O. BOX 11034
NEW YORK, N.Y. 10203-0034
LEHMAN BROTHERS VOTE BY TELEPHONE OR INTERNET
LEHMAN BROTHERS HOLDINGS INC. 24 HOURS A DAY, 7 DAYS A WEEK
THREE WORLD FINANCIAL CENTER
NEW YORK, NY 10285
TELEPHONE
800-481-9819800-
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, andbelow; then just follow the simple directions.
INTERNET
http://proxy.shareholder.com/leh
Use the internet to vote your proxy. Have your proxy card in hand when you
access the website. You will be prompted to enter your control number, located
in the box below; then just follow the simple directions.
MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
Your telephone or internet vote authorizes the named proxies to vote
your shares in the same manner as if you marked, signed and returned
the proxy card.
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IF YOU HAVE SUBMITTED YOUR PROXY BY-------------------------------------
If you have submitted your proxy by
telephone or the internet there is no
need for you to mail back your proxy.
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CONTROL NUMBER FOR
TELEPHONE THERE IS NO NEED FOR YOU TO
MAIL BACK YOUR PROXY.
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CALL TOLL-FREE TO VOTE - IT`S FAST AND CONVENIENT CONTROL NUMBER FOR
800-481-9819 TELEPHONEOR INTERNET VOTING
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DETACH PROXY CARD HERE IF YOU ARE NOT
VOTING BY TELEPHONE OR INTERNET
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE-------------------------------------------------------------------------------
If Mailing Your Proxy, Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
/ /
The Board of Directors recommends a vote FOR PROPOSALS 1,all nominees and
FOR proposals 2 ANDand 3.
1. Election of Class II Director Nominees: 01-Roger S. Berlind 02-Dina
Merrill
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
1. Election of Class I
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPT / /
Directors. listed below / /*EXCEPTIONS
for all nominees listed below / /x
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPT" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions
---------------------------------------------------------------------*Exceptions_____________________________________________________________________
2. Ratification of Ernst & Young LLP as independent auditors for the fiscal
year 1999.
2001. FOR / / AGAINST / / ABSTAIN / /
3. Adopt an amendment to the Corporation's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock,
$.10 par value, from 300 million to 600 million.
FOR AGAINST ABSTAIN
4. To act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
Mark here if you plan Address Change and/or
to attend the meeting. / /
ADDRESS CHANGE AND/OR
COMMENTS MARK HERE / /Comments Mark Here x
IMPORTANT: Please sign exactly as
your name or names appear hereon and
when signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
the signature is by a corporation, a
duly authorized officer should sign
in full corporate name. Dated:
________________________ , 1999
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--------------------------------------______________________________, 2001
SIGNATURE(S)
PLEASE SIGN, DATE AND MAIL YOUR PROXY VOTES MUST BE INDICATED
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
VOTES MUST BE INDICATED (x)ENVELOPE (X) IN BLACK OR BLUE INK. X
Nominees: 01 - Michael L. Ainslie, 02 - John F. Akers, 03 - Richard S. Fuld, Jr.
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PLEASE DETACH HERE
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
VOTEUNLESS YOU HAVE VOTED BY TELEPHONE 24 HOURS A DAY, 7 DAYS A WEEKOR
INTERNET.
Dear Incentive Plans Participant:
The Annual Meeting of Stockholders of Lehman Brothers Holdings Inc. will be
held on March 30, 1999.April 3, 2001. State Street Bank and Trust Company, as Trustee of the
1997 Trust under Lehman Brothers Holdings Inc. Incentive Plans, will vote the
shares held in the Trust as directed by Participants who have Voting Awards
allocated to their accounts.
Enclosed in this package are the following materials:
- Chairman's letter, notice of 19992001 Annual Meeting of Stockholders and Proxy
Statement explaining the matters to be voted by stockholders at the
meeting
- Proxy voting instruction card
- Postage paid return envelope
As a Participant holding Voting Awards under the Plans, you may direct the
Trustee how to vote the number of shares of Lehman Brothers Holdings Inc. held
in the Trust equivalent to the Voting Awards allocated to you, according to the
formula described below. To do so, please place an X in the appropriate boxes on
your proxy card, sign and date the card, and return it in the enclosed postage
paid envelope. Alternatively, you may direct the Trustee how to vote your shares
by telephone or online according to the instructions on the proxy card. Your
votes with respect to the matters set forth in the Proxy Statement will not be
confidential.
Participants' number of votes will be determined by multiplying the total
number of Trust shares existing on the Record Date by a number determined by
dividing the number of Voting Awards you own by the total number of Voting
Awards voted. For example: if the Trust holds 1,000 shares on the Record Date,
you hold 50 Voting Awards, and 600 Awards vote, the vote allocated to you would
equal 1,000 Xx 50/600 or 83.33 votes.
BECAUSE YOUR VOTE IS IMPORTANT, YOU ARE STRONGLY ENCOURAGED TO PROVIDE YOUR
VOTING INSTRUCTIONS TO THE TRUSTEE AS SOON AS POSSIBLE.
Sincerely,
STATE STREET BANK AND TRUST COMPANY