SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
(X) Definitive Revised Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Under rule 14a-12
THE BEAR STEARNS COMPANIES INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
THE BEAR STEARNS COMPANIES INC.
PROXY STATEMENT
NOTICE OF THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MARCH 26, 2003
[LOGO]
THE BEAR STEARNS COMPANIES INC.
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
------------------------
To Our Stockholders:
You are cordially invited to attend the 2003 Annual Meeting of
Stockholders, which will be held on Wednesday, March 26, 2003, at 5:00 P.M., New
York City time, in the Bear Stearns Auditorium, 383 Madison Avenue, 2nd Floor,
New York, New York.
At the meeting we will be reporting to you on your Company's current
operations and outlook. Stockholders will elect directors of the Company and
transact such other items of business as are listed in the Notice of Annual
Meeting and more fully described in the Proxy Statement which follows. The
Company's Board of Directors and management hope that many of you will be able
to attend the meeting in person.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. ACCORDINGLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT
YOUR SHARES WILL BE REPRESENTED. IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY
WITHDRAW YOUR PROXY SHOULD YOU WISH TO VOTE IN PERSON.
Sincerely yours,
James E. Cayne,
Chairman of the Board,
Chief Executive Officer
February 28, 2003
THE BEAR STEARNS COMPANIES INC.
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 26, 2003
------------------------
To the Stockholders of
THE BEAR STEARNS COMPANIES INC.:
The Annual Meeting of Stockholders of The Bear Stearns Companies Inc., a
Delaware corporation (the "Company"), will be held on Wednesday, March 26, 2003,
at 5:00 P.M., New York City time, in the Bear Stearns Auditorium, 383 Madison
Avenue, 2nd Floor, New York, New York, for the following purposes:
1. To elect twelve directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified.
2. To approve amendments to The Bear Stearns Companies Inc. Performance
Compensation Plan to:
a. Increase the maximum aggregate amount of the bonus pool that
can be paid to executive committee members from $150,000,000
to $165,000,000.
b. Extend its term for an additional period commencing as of July
1, 2003 and terminating on November 30, 2008.
3. To transact such other business as may properly be brought before the
meeting and any adjournments or postponements thereof.
Holders of record of Common Stock of the Company, par value $1.00 per
share, at the close of business on February 14, 2003, will be entitled to notice
of, and to vote on, all matters presented at the meeting and at any adjournments
or postponements thereof.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
February 28, 2003
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
THE BEAR STEARNS COMPANIES INC.
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
MARCH 26, 2003
------------------------
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being furnished to the holders of Common
Stock of The Bear Stearns Companies Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the 2003 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held in the Bear Stearns Auditorium, 383 Madison
Avenue, 2nd Floor, New York, New York, on Wednesday, March 26, 2003, at 5:00
p.m., New York City time, and at any adjournments or postponements thereof.
These proxy materials are being sent on or about February 28, 2003, to holders
of record on February 14, 2003, of the Company's Common Stock, par value $1.00
per share ("Common Stock").
A proxy may be revoked by a stockholder prior to its exercise in any of
three ways: by written notice to the Secretary of the Company; by submission of
another proxy bearing a later date; or by voting in person at the Annual
Meeting. Revocation by notice to the Secretary of the Company, or by submission
of a later proxy, will not affect a vote on any matter which is taken by the
Company prior to the receipt of the notice or later proxy. The mere presence at
the Annual Meeting of the stockholder appointing the proxy will not revoke the
appointment. If not revoked, the proxy will be voted at the Annual Meeting in
accordance with the instructions indicated on the proxy by the stockholder. If
no instructions are indicated, the proxy will be voted FOR the slate of
directors described herein; FOR the approval of amendments to The Bear Stearns
Companies Inc. Performance Compensation Plan as described herein and, as to any
other matter of business that may be brought before the Annual Meeting, in
accordance with the judgment of the person or persons voting on the matter.
The Company has adopted a policy of encouraging stockholder participation
in corporate governance by ensuring the confidentiality of stockholder votes.
The Company has designated an independent third party, Mellon Investor Services
LLC, the Company's transfer agent, to receive and to tabulate stockholder proxy
votes. The manner in which any stockholder votes on any particular issue will be
kept confidential and will not be disclosed to the Company or any of its
officers or employees except (i) where disclosure is required by applicable law,
(ii) where disclosure of a vote of a stockholder is expressly requested by such
stockholder, or (iii) where the Company concludes in good faith that a bona fide
dispute exists as to the authenticity of one or more proxies, ballots or votes,
or as to the accuracy of any tabulation of such proxies, ballots or votes.
However, aggregate vote totals may be disclosed to the Company from time to time
and publicly announced at the Annual Meeting. The policy of ensuring
confidentiality of stockholder votes will also apply to shares of Common Stock
held in customer accounts at the Company's subsidiary, Bear, Stearns Securities
Corp. Holders of Common Stock whose shares are held in such accounts will be
requested to give instructions with respect to the manner in which their shares
are to be voted to Automatic Data Processing, Inc., which has been directed not
to disclose such instructions to the Company.
This solicitation is being made by the Company. All expenses of the
Company in connection with this solicitation will be borne by the Company.
Directors, officers and other employees of the Company also may solicit proxies,
without additional compensation, by telephone, in person or otherwise. The
Company also will request that brokerage firms, nominees, custodians, and
fiduciaries forward proxy materials to the beneficial owners of shares held of
record by such persons and will reimburse such persons and the Company's
transfer agent for reasonable out-of-pocket expenses incurred by them in
forwarding such materials.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 21, 1985. The Company succeeded to the business of Bear, Stearns & Co., a
New York limited partnership (the "Partnership"), on October 29, 1985. As used
in this Proxy Statement, all references to "Bear Stearns", "BSB", "BSSC" and
"BSIL" are to Bear, Stearns & Co. Inc., Bear Stearns Bank plc, Bear, Stearns
Securities Corp., and Bear, Stearns International Limited, respectively, the
principal operating subsidiaries of the Company.
References to fiscal 2002, 2001 and 2000 refer to the fiscal years ended
November 30, 2002, November 30, 2001 and November 30, 2000, respectively.
VOTING SECURITIES
Holders of record of Common Stock at the close of business on February 14,
2003, are entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. Each outstanding share of Common Stock
entitles the holder thereof to one vote. Shares of Common Stock represented by
CAP Units (as defined under "Executive Compensation - Compensation Committee
Report - Equity Ownership and Capital Accumulation Plan") credited pursuant to
the Capital Accumulation Plan and restricted stock units (as discussed under
"Equity Compensation Plan Information") are not outstanding and are not entitled
to vote at the Annual Meeting.
On February 14, 2003, 99,243,757 shares of Common Stock were outstanding.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of such shares shall constitute a quorum.
Assuming the presence of a quorum at the Annual Meeting, the affirmative
vote of a plurality of the votes cast by holders of shares of Common Stock is
required for the election of directors. The affirmative vote of a majority of
the shares of Common Stock represented at the meeting and entitled to vote is
required for the approval of the amendments to The Bear Stearns Companies Inc.
Performance Compensation Plan. An abstention with respect to any proposal will
be counted as present for purposes of determining the existence of a quorum, but
will have the practical effect of a negative vote as to that proposal. Brokers
(other than Bear Stearns and BSSC) who do not receive stockholder's instructions
are entitled to vote on the election of directors. The New York Stock Exchange,
Inc. (the "NYSE") determines whether brokers who do not receive instructions
will be entitled to vote on the other proposal contained in this Proxy
Statement. Under the rules of the NYSE, if Bear Stearns and BSSC do not receive
a stockholder's instructions, and other brokers are entitled to vote on a
proposal, Bear Stearns and BSSC are also entitled to vote such shares of Common
Stock, but only in the same proportion as the shares represented by votes cast
by all other record holders with respect to such proposal. In the event of a
broker non-vote with respect to any proposal coming before the meeting caused by
the beneficial owner's failure to authorize a vote on such proposal, the proxy
will be counted as present for the purpose of determining the existence of a
quorum, but will not be deemed present and entitled to vote on that proposal for
the purpose of determining the total number of shares of which a majority is
required for adoption, having the practical effect of reducing the number of
affirmative votes required to achieve a majority vote for such matter by
reducing the total number of shares from which a majority is calculated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 14, 2003, there were no persons, entities or groups (other
than the Company's employees as a group) known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock. This
determination was based on a review of all statements filed with respect to the
Company since the beginning of the past fiscal year with the Securities and
Exchange Commission (the "SEC") pursuant to Section 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended.
-2-
SECURITY OWNERSHIP OF MANAGEMENT
The following information with respect to the outstanding shares of Common
Stock beneficially owned by each director of the Company, each nominee for
director of the Company, each executive officer named in the Summary
Compensation Table under "Executive Compensation" and all directors, nominees
and executive officers of the Company as a group, is furnished as of January 31,
2003. Also set forth below as of such date is certain information with respect
to the number of shares of Common Stock represented by CAP Units credited to the
accounts of such persons pursuant to the Capital Accumulation Plan
(notwithstanding that shares underlying CAP Units generally are not deemed to be
beneficially owned for this purpose because the named persons have neither the
present ability to direct the vote nor the ability to dispose of such shares and
will not have such rights within the next 60 days) and Common Stock represented
by Restricted Stock Units.
PERCENTAGE OF
AMOUNT COMMON STOCK OUTSTANDING
AND NATURE OF PERCENT OF REPRESENTED BY COMMON STOCK,
COMMON STOCK COMMON STOCK CAP UNITS AND CAP UNITS AND
BENEFICIALLY BENEFICIALLY RESTRICTED STOCK RESTRICTED STOCK
NAME AND ADDRESS(1) OWNED(2)(3) OWNED UNITS UNITS COMBINED
------------------- -------------- ------------ ---------------- ----------------
James E. Cayne (5) 4,804,995 4.80% 2,418,349 4.89%
Carl D. Glickman (6) 360,323 (4) 803 (4)
Alan C. Greenberg 27,459 (4) 986,953 (4)
Donald J. Harrington, C.M 266 (4) -- (4)
William L. Mack 22,050 (4) 803 (4)
Samuel L. Molinaro Jr. 25,746 (4) 169,474 (4)
Frank T. Nickell 33,501 (4) 803 (4)
Paul A. Novelly (7) -- (4) -- (4)
Frederic V. Salerno 421 (4) 803 (4)
Alan D. Schwartz 789,482 (4) 1,776,133 1.74%
Warren J. Spector (8) 133,502 (4) 3,516,027 2.47%
Vincent Tese 1,102 (4) 803 (4)
Fred Wilpon 1,337 (4) 803 (4)
All directors, nominees and
executive officers as a
group (16 individuals) (9) 6,620,771 6.62% 9,440,120 10.88%
--------------------------------------------------------------------------------
(1) The address in each case is 383 Madison Avenue, New York, New York 10179.
(2) Nature of Common Stock beneficially owned is sole voting and investment
power, except as indicated in subsequent notes. Includes an aggregate of
3,378 shares of Common Stock owned by directors, nominees and executive
officers through The Bear Stearns Companies Inc. Employee Stock Ownership
Plans (the "ESOPs"). Shares owned by the ESOPs that are allocated to
employees' accounts are voted on a "pass through" basis by the employees
to whose accounts such shares are allocated. Shares not allocated to
employees' accounts, and allocated shares for which voting directions have
not been received, are voted by the trustee of the ESOPs in proportion to
the manner in which allocated shares are directed to be voted by the
employees.
(3) Does not include shares underlying CAP Units credited under the Capital
Accumulation Plan, except for the following number of shares currently
expected to be distributed during March 2003 to the following persons:
Mr. Cayne--35,663, Mr. Greenberg--17,459, Mr. Molinaro--821,
Mr. Schwartz-- 27,491, Mr. Spector--33,343 and 13,491 shares to be
distributed to executive officers included in the group of sixteen
individuals above.
(4) Less than one percent.
(5) Includes 45,669 shares of Common Stock owned by Mr. Cayne's wife, as to
which shares Mr. Cayne disclaims beneficial ownership. Includes 258,215
shares of Common Stock held by a charitable trust, as to which shares
Mr. Cayne disclaims beneficial ownership. Does not include 224,204 shares
of Common Stock held by trusts established for Mr. Cayne's children, as to
which shares Mr. Cayne disclaims beneficial ownership. Does not include
8,048 shares of Common Stock owned by a child of Mr. Cayne, as to which
shares Mr. Cayne disclaims beneficial ownership.
(6) Does not include 3,427 shares of Common Stock owned by Mr. Glickman's
wife, as to which shares Mr. Glickman disclaims beneficial ownership.
(7) Does not include 9,877 shares of Common stock held by the Novelly Exempt
Trust, as to which shares Mr. Novelly disclaims beneficial ownership.
(8) Does not include 636 shares of Common Stock owned by Mr. Spector's wife,
as to which shares Mr. Spector disclaims beneficial ownership.
(9) In addition to the shares as to which beneficial ownership is disclaimed
in footnotes (5) through (8), also excludes an aggregate of 25,697 shares
of Common Stock as to which beneficial ownership is disclaimed.
-3-
I. ELECTION OF DIRECTORS
The Board of Directors has nominated and recommends the election of each
of the nominees set forth below as a director of the Company to serve until the
next Annual Meeting of Stockholders or until his successor is duly elected and
qualified. Each nominee is currently a director of the Company. Each nominee who
is elected or re-elected to the Board of Directors will hold office until the
next Annual Meeting of Stockholders, in accordance with the By-laws of the
Company. Should any nominee become unable or unwilling to accept nomination or
election, it is intended that the persons named in the enclosed proxy will vote
the shares that they represent for the election of a substitute nominee
designated by the Board of Directors, unless the Board of Directors reduces the
number of directors. At present, it is anticipated that each nominee will be a
candidate.
The affirmative vote of a plurality of the votes cast by holders of shares
of Common Stock is required for the election of directors. Officers serve at the
discretion of the Board of Directors.
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
JANUARY 31, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 2003 AND DIRECTORSHIPS HELD THE COMPANY
---- ----------- ------------------------------------------- ------------
James E. Cayne......... 68 Chairman of the Board and Chief Executive 1985
Officer of the Company and Bear Stearns,
member of the Executive Committee (as
hereinafter defined); Director, New York
Stock Exchange, Inc.
Carl D. Glickman....... 76 Private Investor; Trustee, Chairman of the 1985
Executive Committee, Lexington Corporate
Property Trust
Alan C. Greenberg...... 75 Chairman of the Executive Committee 1985
Donald J. Harrington... 57 President, St. John's University; Director, 1993
The Reserve Fund, Reserve Institutional
Trust, Reserve Tax-Exempt Trust, Reserve
New York Tax-Exempt Trust and Reserve
Special Portfolios Trust
William L. Mack........ 62 Founder and Managing Partner, The Apollo 1997
Real Estate Investment Funds; President
and Senior Managing Partner, The Mack
Organization; Chairman of the Board of
Mack-Cali Realty Corporation and
Metropolis Realty Trust, Inc.; Director,
Vail Resorts, Inc. and Wyndham
International, Inc.
Frank T. Nickell....... 55 President and Chief Executive Officer of 1993
Kelso & Company; Director, BlackRock Inc.,
Earle M. Jorgensen Company, Peebles Inc.,
NYU Hospitals Center Board of Trustees and
New York University School of Medicine
Foundation Board
Paul A. Novelly........ 59 Chairman of the Board and Chief Executive 2002
Officer of Apex Oil Company, Inc.; Deputy
Chairman of the Board, Liquid Funding,
Ltd.; Director, Intrawest Corporation,
Boss Holdings, Inc. and Coastcast
Corporation
Frederic V. Salerno.... 59 Former Vice Chairman and Chief Financial 1992
Officer of Verizon Communications; Chairman
of the Board, Lynch Interactive Corp.;
Director, Avnet, Inc., Viacom, Inc.,
Consolidated Edison Company, Akamai
Technologies, Inc. and Dun & Bradstreet
-4-
[TABLE CONTINUED]
YEAR FIRST
ELECTED TO
AGE AS OF SERVE AS
JANUARY 31, PRINCIPAL OCCUPATION DIRECTOR OF
NAME 2003 AND DIRECTORSHIPS HELD THE COMPANY
---- ----------- ------------------------------------------- ------------
Alan D. Schwartz....... 52 President and Co-Chief Operating Officer 1987 (1)
of the Company and Bear Stearns, member
of the Executive Committee; Director,
Champps Entertainment, Inc.
Warren J. Spector...... 45 President and Co-Chief Operating Officer 1990 (1)
of the Company and Bear Stearns, member
of the Executive Committee
Vincent Tese........... 59 Chairman and Director of Wireless Cable 1994
International Inc.; Director, Bowne & Co.
Inc., Cablevision Inc., Custodial Trust
Company (a wholly owned subsidiary of the
Company), Mack-Cali Realty Corp., National
Wireless Holdings Inc. and Lynch Interactive
Corp.
Fred Wilpon............ 66 Chairman of the Board of Directors 1993
of Sterling Equities, Inc.; Director, Loews
Corporation; Chairman of the Board of
Directors and Chief Executive Officer of
the New York Mets
--------------------------------------------------------------------------------
(1) Did not serve as director during 1997 and 1998.
Mr. Cayne became Chairman of the Board on June 25, 2001. Mr. Cayne has
been Chief Executive Officer of the Company and Bear Stearns for more than the
past five years and prior to June 25, 2001, was President of the Company and
Bear Stearns for more than the past five years.
Mr. Glickman has been a private investor for more than the past five
years. Mr. Glickman is also currently Chairman of the Compensation Committee of
the Board of Directors of the Company.
Mr. Greenberg has been Chairman of the Executive Committee for more than
the past five years and prior to June 25, 2001, was Chairman of the Board of the
Company for more than the past five years.
Father Harrington has been the President of St. John's University for more
than the past five years.
Mr. Mack has been Managing Partner of the Apollo Real Estate Investment
Funds for more than the past five years. He has been President and Senior
Managing Partner of The Mack Organization (a national owner, developer and
investor in office and industrial buildings and other real estate) for more than
the past five years. Mr. Mack is Chairman of the Board of Mack-Cali Realty
Corporation (a publicly traded real estate investment trust). He is also
Chairman of the Board of Metropolis Realty Trust, Inc. (the owner of high rise
office buildings).
Mr. Nickell has been President of Kelso & Company, a privately held
merchant banking firm, for more than the past five years. Mr. Nickell was
appointed Chief Executive Officer of Kelso & Company in 1998.
Mr. Novelly became a director of the Company on June 20, 2002. Mr. Novelly
has been Chairman of the Board and Chief Executive Officer of Apex Oil Company,
Inc., a privately held company engaged in wholesale sale, storage and
distribution of petroleum products, for more than the past five years.
Mr. Novelly was appointed Deputy Chairman of the Board of Liquid Funding, Ltd.
on November 9, 2001.
Mr. Salerno was the Vice Chairman and Chief Financial Officer of Verizon
Communications (formerly Bell Atlantic Corporation) until his retirement on
September 30, 2002. Mr. Salerno became Chairman of the Board of Lynch
Interactive Corp. on December 9, 2002. Prior to June 2000, Mr. Salerno was the
Senior Executive Vice President and Chief Financial Officer/Strategy and
Business Development of Bell Atlantic Corporation. Prior to the merger of NYNEX
Corp. ("NYNEX") and Bell Atlantic Corporation, Mr. Salerno was the Vice Chairman
of the Board of NYNEX for more than five years.
Mr. Schwartz became President and Co-Chief Operating Officer of the
Company and Bear Stearns on June 25, 2001. From June 30, 1999 to June 24, 2001,
Mr. Schwartz was an Executive Vice President of Bear Stearns. Prior to June 30,
1999, Mr. Schwartz was an Executive Vice President of the Company and of Bear
Stearns for more than the past five years.
-5-
Mr. Spector became President and Co-Chief Operating Officer of the Company
and Bear Stearns on June 25, 2001. From June 30, 1999 to June 24, 2001, Mr.
Spector was an Executive Vice President of Bear Stearns. Prior to June 30, 1999,
Mr. Spector was an Executive Vice President of the Company and of Bear Stearns
for more than the past five years.
Mr. Tese has been Chairman of Wireless Cable International Inc. since
April 1995. Mr. Tese was Chairman of Cross Country Wireless Inc. from October
1994 to July 1995 and was a corporate officer and a general partner of Cross
Country Wireless Inc.'s predecessors, Cross Country Wireless Cable-I, L.P. and
Cross Country Wireless Cable West, L.P., from 1990 until October 1994. Mr. Tese
was the Director of Economic Development for the State of New York from June
1987 to December 1994. Mr. Tese is currently Chairman of the Audit Committee of
the Board of Directors of the Company.
Mr. Wilpon has been Chairman of the Board of Directors of Sterling
Equities, Inc., a privately held entity, and certain affiliates thereof, which
are primarily real estate development/owner management companies, for more than
the past five years. Mr. Wilpon became Chairman of the Board of Directors of the
New York Mets baseball team on August 23, 2002. Mr. Wilpon has been Chief
Executive Officer of the New York Mets baseball team for more than the past five
years and prior to August 23, 2002, was President of the New York Mets baseball
team for more than the past five years.
There is no family relationship among any of the directors or executive
officers of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held seven meetings (exclusive of committee
meetings) during the preceding fiscal year. In addition, the Board of Directors
has established four committees whose functions and current members are noted
below. The Audit Committee, Compensation Committee and the Nominating Committee
(collectively, the "Board Committees") are committees of the Board of Directors
and consist solely of members of the Board of Directors. The Executive Committee
includes individuals who are not members of the Board of Directors, but may
function in a manner comparable to that of the Board Committees under certain
circumstances as described below. Each current director attended 75% or more of
the aggregate number of meetings of the Board of Directors and Board Committees
(including for this purpose, the Executive Committee) on which he served that
were held during his period of service.
Executive Committee. During the last fiscal year, the Executive Committee
of the Company (the "Executive Committee") consisted of Messrs. Cayne, Greenberg
(Chairman), Lehman, Molinaro, Schwartz and Spector. The Executive Committee met
once each week and more frequently, as required, having held 78 meetings during
fiscal 2002. The Executive Committee has the authority between meetings of the
Board of Directors to take action with respect to a variety of matters delegated
by the Board of Directors that are considered to be in the ordinary course of
the Company's business and, to take all actions with respect to the management
of the Company's business that require action of the Board of Directors, so long
as the action is also approved by a majority of the members who are also
directors of the Company, except with respect to certain matters that by law and
the provisions of the Certificate of Incorporation must be approved by the Board
of Directors.
Audit Committee. The Audit Committee of the Board of Directors (the "Audit
Committee") consists of Messrs. Glickman, Mack, Salerno and Tese (Chairman).
Each of the foregoing is a director who is not employed by the Company or
affiliated with management. This Committee is responsible for reviewing and
helping to ensure the integrity of the Company's financial statements. Among
other matters, the Audit Committee, with management and independent and internal
auditors, reviews the adequacy of the Company's internal accounting controls
that could significantly affect the Company's financial statements and is
directly and solely responsible for the appointment, compensation, oversight and
termination of the Company's independent accountants. The Audit Committee held
seven meetings during fiscal 2002.
Compensation Committee. The Compensation Committee of the Board of
Directors (the "Compensation Committee") consists of Messrs. Glickman
(Chairman), Harrington, Nickell and Tese. Each of the foregoing is a director
who is not employed by the Company or affiliated with management. The
Compensation Committee establishes the compensation policies used in determining
the compensation of all executive officers and other Senior Managing Directors,
including members of the Board of Directors who are employees of the Company
("employee directors"). The Compensation Committee administers the Performance
Compensation Plan pursuant to which the salary and bonus compensation of certain
Senior Managing Directors (including certain executive officers) of the Company
is determined. The Compensation Committee also approves the salary and bonus
compensation of other executive officers and other Senior Managing Directors
based upon recommendations made by the Executive Committee and the Bear Stearns
and Co. Inc. Management and Compensation Committee (the "Management and
Compensation Committee") applying criteria established by the Compensation
Committee. The Compensation Committee also administers certain aspects of the
Capital Accumulation Plan, the Stock Award Plan and the Restricted Stock Plan.
The Compensation Committee held seven meetings during fiscal 2002.
-6-
Nominating Committee. The Nominating Committee of the Board of Directors
(the "Nominating Committee") consists of Messrs. Mack (Chairman), Salerno and
Tese. Each of the foregoing is a director who is not employed by the Company or
affiliated with management. The Nominating Committee considers and makes
recommendations to the Board of Directors with respect to the size and
composition of the Board of Directors and the identification of potential
candidates to serve as directors. It also solicits and considers nominees
recommended by stockholders of the Company. Stockholders wishing to submit
recommendations for the 2004 Annual Meeting should write to the Corporate
Secretary, The Bear Stearns Companies Inc., 383 Madison Avenue, 6th Floor, New
York, New York 10179. The Company's Restated Certificate of Incorporation
contains time limitations, procedures and requirements relating to such
stockholder recommendations. The Nominating Committee held one meeting during
fiscal 2002.
-7-
AUDIT COMMITTEE REPORT
The members of the Audit Committee (the "Committee") have been appointed
by the Board of Directors (the "Board"). The Committee is governed by a charter
(attached as Exhibit A) which has been approved and adopted by the Board and is
reviewed and reassessed annually by the Committee. The Committee is comprised of
four directors who meet the independence and experience requirements of the New
York Stock Exchange.
The following Audit Committee Report does not constitute soliciting
material and shall not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Audit Committee Report by reference therein.
The Committee assists the Board in monitoring (1) the integrity of the
financial statements of the Company, (2) the compliance by the Company with
legal and regulatory requirements, (3) the qualifications, performance and
independence of the Company's independent external auditors and (4) the
performance of the Company's internal audit function.
Management is responsible for the preparation and integrity of the
Company's financial statements. The Committee reviewed the Company's audited
financial statements for the year ended November 30, 2002 and met with both
management and the Company's external auditors to discuss those financial
statements, including the critical accounting policies on which the financial
statements are based. Management and the external auditors have represented to
the Committee that the financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America.
The Committee has received from and discussed with the external auditors
their written disclosure and letter regarding their independence from the
Company as required by Independence Standards Board Standard No. 1. The
Committee also discussed with the external auditors any matters required to be
discussed by Statement on Auditing Standards No. 61.
Based upon these reviews and discussions, the Committee has recommended to
the Board that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended November 30, 2002.
AUDIT COMMITTEE
Carl D. Glickman
William L. Mack
Frederic V. Salerno
Vincent Tese, Chairman
* * *
-8-
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee is empowered by the Board of Directors and the
stockholders to oversee the compensation programs of the Company with particular
attention to the compensation of the executive officers of the Company. The
compensation philosophy of the Company has been strongly influenced by the
principle that the compensation of the executive officers should be structured
to link their financial reward to the achievement of annual and long-term
performance goals. Thus, executives would both share in the success of the
Company as a whole and be adversely affected by poor Company performance,
thereby aligning their interests with the interests of the stockholders. In
making decisions with respect to the compensation of executive officers, the
Compensation Committee follows certain guidelines:
o Total compensation must be comparable to that of the Company's
primary competitors, so that the Company may recruit and
retain talented executive officers who are key to the
Company's long-term success.
o Executive compensation should be directly linked to the
Company's financial performance as measured annually,
primarily through return on equity.
o A significant portion of the total compensation paid to
executive officers should be delivered in the form of
equity-based awards. The value of equity-based awards cannot
be realized immediately and depends upon the future
performance of the Company and growth in the market value of
its stock.
To implement the foregoing philosophy, the salary and bonus compensation
of executive officers is determined principally by the operation of the
Performance Compensation Plan (the "Performance Compensation Plan").
PERFORMANCE COMPENSATION PLAN
Under the Performance Compensation Plan, executive officers, including the
executive directors named in the Summary Compensation Table, and key employees
receive a base salary of $200,000 per annum and a share of a performance-based
bonus pool. The Compensation Committee determines the formula for calculating
one or more bonus pools within 90 days after the beginning of each fiscal year
based upon one or more of the following criteria, individually or in
combination, adjusted in such manner as the Compensation Committee shall
determine: (a) pre-tax or after-tax return on common equity; (b) earnings per
share; (c) pre-tax or after-tax net income; (d) business unit or departmental
pre-tax or after-tax income; (e) book value per share; (f) market price per
share; (g) relative performance to peer group companies; (h) expense management;
and (i) total return to stockholders.
The share of one or more of the bonus pools to be allocated to each
executive officer in any fiscal year is determined by the Compensation Committee
in its sole discretion. However, under no circumstance may the aggregate amount
of the bonuses paid under the Performance Compensation Plan exceed 100% of any
of the applicable bonus pools computed under the formula designated by the
Compensation Committee.
For fiscal 2002, the Compensation Committee created a separate
performance-based pool which consisted of six participants, the Company's
Chairman of the Board, Chairman of the Executive Committee, Presidents, Chief
Financial Officer and General Counsel (the "Executive Committee Pool").
The Compensation Committee established a formula for calculating the
Executive Committee Pool based on the Company's adjusted after-tax return on
common equity. The maximum amount allocable to the Executive Committee Pool is
$150,000,000, of which the maximum percentage of any individual participant was
30% of such pool. During fiscal 2002, the formulaic calculation of the Executive
Committee Pool totaled $98,217,000. However, in recognition of the difficult
operating environment which confronted the Company throughout 2002, the
Executive Committee recommended to the Compensation Committee that the pool be
reduced by approximately 20% to $80,000,000. The Compensation Committee approved
such reduction and compensation was delivered to the participants in a
combination of cash, CAP Units (as defined below under "Equity Ownership and
Capital Accumulation Plan") and stock options (see "Stock Award Plan"). The
allocation of compensation from the pool to the participants was 52.2% in cash
and 47.8% in equity-based awards.
EQUITY OWNERSHIP AND CAPITAL ACCUMULATION PLAN
A focus on performance and growth and the direct alignment of employee and
stockholder interests flows from the substantial ownership of Common Stock and
CAP Units by senior executives of the Company. The six current members of the
Executive Committee beneficially own 10.19% of the outstanding Common Stock, CAP
Units and restricted stock units combined.
-9-
All executive officers receive a substantial portion of their annual
compensation in awards made pursuant to the Capital Accumulation Plan. Stock
units ("CAP Units") awarded pursuant to the CAP Plan vest at the end of three
years. After a five-year period, each officer will be entitled to receive from
the Company a number of freely transferable shares of Common Stock equal to the
number of CAP Units then credited to such officer's Capital Accumulation
Account.
STOCK AWARD PLAN
The Stock Award Plan was established in 1999 and provides the Company the
ability to award key employees stock options as a component of their annual
compensation. The determination of recipients of stock options, the terms and
conditions of such options within the parameters of the Stock Award Plan, and
the number of shares covered by each option is determined by the Compensation
Committee, based on management's recommendation.
In aggregate, 285,000 ten-year options were granted to members of the
Executive Committee relating to their performance in fiscal 2002. These options
were granted with exercise prices equal to the fair market value of the Common
Stock on the date of grant and become exercisable after three years. The
Compensation Committee believes that the award of stock options is an important
component in the compensation of executive officers, as the ultimate economic
value of such awards can only be achieved as a result of share price growth. As
a result, the interests of executive officers are directly aligned with those of
the stockholders.
Section 162(m) of the Internal Revenue Code limits deductibility for
federal income tax purposes of compensation in excess of $1,000,000 annually
paid to individual executive officers named in the Summary Compensation Table
unless certain exceptions, including compensation based on performance goals,
are satisfied. The Performance Compensation Plan and the Stock Award Plan have
been established and maintained in an effort to comply with the
performance-based exception to limits on deductibility of executive officer
compensation. However, while the Compensation Committee currently seeks to
maximize the deductibility of compensation paid to executive officers, it will
maintain the flexibility to take actions which may be based upon other
considerations.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The total compensation of Mr. Cayne, the Company's Chief Executive
Officer, along with other members of the Executive Committee, is determined in
all respects by the Performance Compensation Plan. Pursuant to the terms of the
Performance Compensation Plan for fiscal 2002, Mr. Cayne received a base salary
of $200,000 and shared in a bonus pool based on the Company's fiscal 2002
after-tax return on common equity. Mr. Cayne's proportionate share of the fiscal
2002 bonus pool (as well as that of the other members of the Executive
Committee) was determined by the Compensation Committee in February 2002. Given
the difficult operating environment confronting the Company in fiscal 2002,
Mr. Cayne recommended to the Compensation Committee that his compensation be
reduced by approximately 20% from the agreed-upon formulaic calculation of such
compensation. This represented the second year that Mr. Cayne and the other
Executive Committee members voluntarily reduced their bonus pool as they had
agreed to a 50% reduction in fiscal 2001. The Compensation Committee approved
such reduction and Mr. Cayne received total compensation in fiscal 2002 of
$19,640,000 consisting of the following components:
BASE SALARY CASH BONUS CAP UNITS STOCK OPTIONS TOTAL
----------- ----------- ---------- ------------- -----------
$200,000 $10,006,750 $7,982,583 $1,450,667 $19,640,000
The total compensation of Mr. Cayne represents a significant increase over
that paid in fiscal 2001 reflecting the Company's improved operating
performance, as measured by pre-tax earnings, profit margins, net income and
return on equity. In addition, fiscal 2001 compensation for Mr. Cayne as well as
the other members of the Executive Committee was reduced by the voluntary 50%
reduction previously discussed. The Compensation Committee believes that
Mr. Cayne's fiscal 2002 compensation was fair given the Company's absolute
performance and also its performance compared to its key competitors during very
difficult market conditions. Due to the substantial portion of Mr. Cayne's
compensation being delivered in the form of stock units and stock options, the
ultimate realization of benefits from his current bonus will depend on the
future performance of the Company and the value of its Common Stock.
-10-
CONCLUSION
The Compensation Committee believes that the Company performed well in a
very challenging business environment. The Company's performance as measured by
profit margins and earnings per share increased significantly from the prior
year and return on common equity was the highest of its key competitors.
Therefore, the compensation paid to the Company's executive officers reflects
the Company's strong absolute and relative performance during a very challenging
year. Attracting and retaining talented and motivated management and employees
is essential to creating long-term stockholder value. Offering a competitive
performance-based compensation program with a significant equity component helps
to achieve this objective. The Compensation Committee believes that the
Performance Compensation Plan, the Capital Accumulation Plan and the Stock Award
Plan provide appropriate incentives to senior management of the Company and are
fair and reasonable methods for determining the compensation of executive
officers, including the Chief Executive Officer. The compensation program of the
Company properly serves to align the interests of executives and stockholders.
COMPENSATION COMMITTEE
Carl D. Glickman, Chairman
Donald J. Harrington
Frank T. Nickell
Vincent Tese
* * *
-11-
COMPENSATION TABLES AND OTHER INFORMATION
The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company (other than the Chief Executive Officer) for the fiscal years ended
November 30, 2002, 2001 and 2000:
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
RESTRICTED SECURITIES
NAME AND FISCAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) AWARDS (2)(3)(4) OPTIONS (#) COMPENSATION (5)
------------------------------------------------------------------------------------------------------------------------------------
James E. Cayne 2002 $200,000 $10,006,750 $7,982,583 68,000 $10,178,600
Chairman of the Board 2001 200,000 4,972,150 2,001,025 30,581 8,014,650
and Chief Executive Officer 2000 200,000 11,665,172 9,577,402 108,856 10,060,813
Alan C. Greenberg 2002 $200,000 $5,995,000 $4,591,667 40,000 $4,224,231
Chairman of the Executive 2001 200,000 2,998,200 1,175,200 18,702 3,472,587
Committee 2000 200,000 10,373,868 2,517,611 66,475 4,957,838
Samuel L. Molinaro Jr. 2002 $200,000 $4,332,500 $3,027,500 30,000 $406,524
Executive Vice President 2001 200,000 2,544,250 959,875 15,605 249,378
and Chief Financial Officer 2000 200,000 2,068,914 2,332,629 21,878 203,609
Alan D. Schwartz 2002 $200,000 $9,537,500 $7,475,833 65,000 $7,452,512
President and Co-Chief 2001 200,000 4,766,890 1,886,515 28,934 5,850,488
Operating Officer 2000 200,000 9,326,046 7,556,577 86,354 7,119,890
Warren J. Spector 2002 $200,000 $9,493,592 $7,519,741 65,000 $13,921,316
President and Co-Chief 2001 200,000 4,748,550 1,900,925 29,141 9,946,755
Operating Officer 2000 200,000 11,150,606 9,142,933 104,062 13,214,403
--------------------------------------------------------------------------------
(1) Represents amounts payable under the Performance Compensation Plan. See
"Executive Compensation--Compensation Committee Report--Performance
Compensation Plan."
(2) Represents the portion of the named executive officer's bonus deferred
pursuant to the Capital Accumulation Plan. See "Executive
Compensation--Compensation Committee Report--Equity Ownership and Capital
Accumulation Plan."
(3) As of November 30, 2002, the value and the aggregate number of CAP Units
in the accounts of each named person (based on the closing price of the
Common Stock on the Consolidated Transaction Reporting System on November
29, 2002) was: Mr. Cayne--$157,056,845 (2,454,013 units);
Mr. Greenberg--$64,282,372 (1,004,412 units); Mr. Molinaro--$9,858,209
(154,035 units); Mr. Schwartz--$115,431,958 (1,803,624 units); and
Mr. Spector--$227,159,746 (3,549,371 units).
(4) On December 11, 2000, Mr. Molinaro received restricted stock units as part
of his compensation pursuant to the Performance Compensation Plan.
Mr. Molinaro's grant was $788,021, which represents 15,879 restricted
stock units. Dividend equivalents of additional restricted stock units are
payable by the Company on all such holdings from the date of grant. These
restricted stock units will vest 33 1/3% per annum commencing June 30,
2003.
(5) Represents preferential earnings paid in the form of CAP Units pursuant to
the Capital Accumulation Plan that exceed cash dividends paid on the
equivalent shares of Common Stock.
-12-
OPTION GRANTS IN LAST FISCAL YEAR(1)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE(2) PRESENT VALUE(3)
---------------------- --------------- ------------------ --------- ---------- -----------------
James E. Cayne 68,000 1.60% $64.00 11/29/12 $1,450,667
Alan C. Greenberg 40,000 0.94% 64.00 11/29/12 853,333
Samuel L. Molinaro Jr. 30,000 0.71% 64.00 11/29/12 640,000
Alan D. Schwartz 65,000 1.53% 64.00 11/29/12 1,386,667
Warren J. Spector 65,000 1.53% 64.00 11/29/12 1,386,667
--------------------------------------------------------------------------------
(1) Represents awards made in November 2002 for performance in fiscal year
2002.
(2) All stock options become exercisable three years after grant date.
(3) Valued using a modified Black-Scholes option pricing model. The exercise
price of each stock option ($64.00) is equal to the closing price on the
Consolidated Transaction Reporting System of a share of Common Stock on
November 29, 2002, the date of the grant. The assumptions used for the
variables in the model were: 33% volatility (a projection of the
volatility of the Common Stock over the 120 month term of the options); a
4.21% risk-free rate of return (based on the USD Interest Rate Swap Curve,
expressed as a zero-coupon rate over the 120 month term); a 1.06% dividend
yield (which was an estimated projected dividend yield on the date of
grant); and a ten year option term (which is the maximum term of the
options). A discount of 25% was applied to the option value yielded by the
model to reflect the non-marketability of the options. The actual gain, if
any, that executives will realize on their stock options will depend on
the future price of the Common Stock and cannot be accurately forecasted
by application of an option pricing model.
AGGREGATED STOCK OPTION EXERCISES MADE IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
----------------------------- --------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------- ----------- -------- -------------- ------------- ----------- -------------
James E. Cayne -- -- 72,427 207,437 $1,828,782 $1,782,542
Alan C. Greenberg -- -- 44,240 125,177 1,117,060 1,088,736
Samuel L. Molinaro Jr. -- -- 5,571 67,482 140,668 425,589
Alan D. Schwartz -- -- 57,500 180,288 1,451,875 1,447,349
Warren J. Spector -- -- 69,197 198,203 1,747,224 1,703,375
--------------------------------------------------------------------------------
(1) This valuation represents the difference between $64.00, the closing price
of a share of Common Stock reported on the Consolidated Transaction
Reporting System on November 29, 2002 and the exercise prices of those
stock options outstanding at November 30, 2002 multiplied by the number of
options outstanding at each exercise price. The actual value, if any, that
executives will realize upon the exercise of any option will depend upon
the difference between the exercise price of the option and the market
price of the Common Stock on the date the option is exercised.
(2) Includes options that vested and became exercisable on January 10, 2003.
-13-
PERFORMANCE GRAPH
The following performance graph compares the performance of an investment
in the Company's Common Stock over the last five fiscal years with its Peer
Group, the S&P 500 Diversified Financial Services Index and the S&P 500 Index.
The entities included in the Company's peer group (the "Peer Group") consist of
Merrill Lynch & Co., Inc., Morgan Stanley, The Goldman Sachs Group, Inc. and
Lehman Brothers Holdings Inc. The performance graph assumes the value of the
investment in the Company's Common Stock and each index was $100 on November 28,
1997, and that all dividends have been reinvested. There can be no assurance
that the Company's future stock performance will correlate with past stock
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
Assumes $100 invested on November 30, 1997 in the Company's Common Stock; Peer
Group; S&P 500 Diversified Financial Services Index and the S&P 500 Index and
that all dividends have been reinvested.
1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
The Bear Stearns Companies Inc. $100.00 $107.43 $109.36 $126.86 $160.51 $180.50
Peer Group (1) 100.00 123.14 180.50 209.56 190.87 167.17
S&P 500 Diversified Financial Services Index (2) 100.00 132.63 169.83 201.69 187.02 163.87
S&P 500 Index 100.00 126.71 152.46 143.19 125.69 104.93
--------------------------------------------------------------------------------
(1) Peer Group calculation assumes conversion of Morgan Stanley Group Inc.
shares into newly formed company, Morgan Stanley, in June 1997. In fiscal
year 2000, The Goldman Sachs Group Inc. was added to the peer group. The
Goldman Sachs Group Inc. is not included in results for 1997, 1998 and
1999.
(2) S&P 500 Diversified Financial Services Index was selected as a replacement
of S&P Financial Diversified Index which was discontinued.
COMPENSATION OF DIRECTORS
In fiscal 2002, each director who was not an employee of the Company
received an annual retainer of $50,000, plus $1,500 for each meeting of the
Board of Directors attended, and reasonable expenses relating to attendance at
such meetings. No increases have been proposed for fiscal 2003. Directors who
are members of the Audit Committee, Compensation Committee and Nominating
Committee receive additional compensation at the rate of $1,500 for each meeting
of the Audit Committee, Compensation Committee and Nominating Committee
attended, with the exception of telephone conference committee meetings for
which the compensation paid for participation is $200.
-14-
Pursuant to the provisions of the Non-Employee Directors' Stock Option and
Stock Unit Plan (the "Directors' Plan"), each of the directors of the Company
who is not an officer or employee of the Company or any of its subsidiaries (the
"Non-Employee Directors") as of the date of an annual meeting of stockholders
and whose service will continue after such meeting is granted an option to
purchase shares of Common Stock and a number of restricted stock units. The
exercise price of an option is equal to the closing price of the Common Stock on
the NYSE on the date the grant is made. The number of shares covered by the
option and the number of restricted stock units is equal to the quotient of an
amount determined by the Executive Committee divided by the average closing
price of the Common Stock for the five trading days immediately preceding the
date of such meeting, subject to adjustment as provided in the Directors' Plan.
The options have a ten-year term, are exercisable six months from the date of
grant and are subject to termination upon the occurrence of certain events as
provided in the Directors' Plan.
Pursuant to the annual grant provisions of the Directors' Plan, all of the
Company's Non-Employee Directors at March 26, 2002 received stock options valued
at $42,500 in fiscal 2002. Current Non-Employee Directors will be granted stock
options valued at $42,500 immediately following the Annual Meeting. In addition,
each Non-Employee Director at March 26, 2002 received restricted stock units
valued at $42,500 in fiscal 2002. Current Non-Employee Directors will receive
restricted stock units valued at $42,500 immediately following the Annual
Meeting. The Directors' Plan also permits Non-Employee Directors to elect to
receive options or shares of Common Stock in exchange for up to one-half of the
annual cash retainer paid by the Company for services rendered as a director.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CERTAIN TRANSACTIONS
The Company, in the ordinary course of business, has extended credit to
certain of its directors, officers and employees in connection with their
purchase of securities. Such extensions of credit have been made on
substantially the same terms (including as to interest rates and collateral
requirements) as those prevailing at the time for comparable transactions with
non-affiliated persons, except that for some credit products, the interest rates
charged were equivalent to the lowest of the interest rates charged to other
persons or were the same as those charged to Company employees and did not
involve more than the normal risk of collectability or have unusual terms or
conditions which are disadvantageous to the Company. To the extent officers and
employees of the Company and members of their immediate families wish to
purchase securities in brokerage transactions, they ordinarily are required to
do so through Bear Stearns, which offers them a discount from its standard
commission rates that could be substantial depending on various factors,
including the size of the transaction. Bear Stearns periodically in the ordinary
course of its business, enters into transactions, as principal, involving the
purchase or sale of securities and commercial paper (including different forms
of repurchase transactions) with directors, officers, employees of the Company
and members of their immediate families. Such purchases and sales of securities
or commercial paper on a principal basis are effected on substantially the same
terms as similar transactions with unaffiliated third parties.
The Company, from time to time, has made loans to its officers and other
employees. Interest is generally charged by the Company on such loans at the
same rate of interest charged by BSSC on loans to purchase securities. The
Company currently requires that any such loan in excess of $7,500 made to
officers and other employees be approved by the Management and Compensation
Committee. During the fiscal year ended November 30, 2002, the maximum aggregate
amount of month-end loans outstanding was $32,398,133.
The Company has formed several limited partnerships, The BSC Employee
Fund, L.P., The BSC Employee Fund II, L.P., The BSC Employee Fund III, L.P., The
BSC Employee Fund IV, L.P., The Bear Stearns Health Innoventures Employee Fund,
L.P. and The Bear Stearns Multi-Strategy Employee Fund, L.P. which provide
investment opportunities for the Company's key employees. The total amounts
loaned in excess of $60,000 were outstanding to the following directors or
executive officers, in the aggregate for all the funds set forth after each of
their respective names at November 30, 2002: James E. Cayne ($288,803), Alan D.
Schwartz ($288,803), Warren J. Spector ($959,621), Mark E. Lehman ($155,499),
Samuel L. Molinaro Jr. ($137,730), Michael Minikes ($137,730) and Marshall J
Levinson ($75,530).
The BSC Employee Fund, L.P. (the "Fund") provides an investment
opportunity for the Company's Senior Managing Directors and Managing Directors
that are accredited investors. The Fund has committed to invest $62,000,000 in a
diversified group of closed-end acquisition and leveraged buyout funds that are
managed by highly regarded private equity firms. As of November 30, 2002, 336
participants in the Fund have purchased a total of 1,016 limited partnership
interests. Each limited partnership interest represents a commitment by the
participant to invest $50,000, of which $25,000 is funded by the participant and
$25,000 is in the form of a nonrecourse, interest-bearing loan from the Company
to the Fund participant. The loans bear interest at the London Interbank Offered
Rate ("LIBOR") plus 1.0%. Capital calls since June 12, 1997 have totaled 100% of
each participant's equity commitment. The total amount loaned to the
participants in the Fund at November 30, 2002 was $5,532,124. The aggregate
amount of the loans outstanding to all directors and executive officers as a
group on such date was $839,816.
-15-
The BSC Employee Fund II, L.P. ("Fund II"), provides an investment
opportunity for certain key employees of the Company that are accredited
investors. Fund II has committed to invest $60,850,000 in a diversified group of
private equity funds, sponsored and managed by well-regarded private equity
firms. As of November 30, 2002, 181 participants in Fund II have purchased a
total of 524 limited partnership interests. Each limited partnership interest
represents a commitment by the participant to invest $100,000, of which $50,000
is funded by the participant and $50,000 is in the form of a nonrecourse,
interest-bearing loan from the Company to the participant. The loans bear
interest at LIBOR plus 1.0%. Capital calls since September 28, 2000 have totaled
40.0% of each participant's equity commitment. The total amount loaned to the
participants in Fund II at November 30, 2002 was $8,680,000.
The BSC Employee Fund III, L.P. ("Fund III"), provides an investment
opportunity for certain key employees of the Company. Fund III has committed to
invest $60,017,271 alongside Bear Stearns Merchant Banking Partners II, L.P.
(the "Merchant Banking Fund"), which will invest by making private equity and
equity-related investments in leveraged buyouts, recapitalizations and growth
capital opportunities and may make investments in preferred stock and debt
having equity components. Fund III will invest as side-by-side funds, alongside
the Merchant Banking Fund. As of November 30, 2002, 140 participants in Fund III
have purchased a total of 223 limited partnership interests. Each limited
partnership interest represents a commitment by the participant to invest
$80,000, of which $20,000 is funded by the participant and $60,000 is in the
form of an advance from the Company to the participant. The advances bear
interest at LIBOR plus 1.75%. Capital calls since October 20, 2000 have totaled
70% of each participant's equity commitment. The total amount loaned to the
participants in Fund III at November 30, 2002 was $8,718,633.
The BSC Employee Fund IV, L.P. ("Fund IV"), provides an investment
opportunity for Senior Managing Directors of the Company that are accredited
investors. Fund IV has committed to invest $106,649,395 alongside the Merchant
Banking Fund. The Merchant Banking Fund will invest in private equity and
equity-related investments in leveraged buyouts, recapitalizations and growth
capital opportunities and may make investments in preferred stock and debt
having equity components. In addition, Fund IV has committed to invest
$37,500,000 alongside Constellation Venture Partners II, L.P. (the
"Constellation Fund"), which will invest in equity and equity related securities
in early and mid-stage media, communications and technology based companies. As
of November 30, 2002, 185 participants in Fund IV have purchased a total of 459
limited partnership interests. Each limited partnership interest represents a
commitment by the participant to invest $80,000 in the Merchant Banking Fund (of
which $20,000 is funded by the participant and $60,000 is in the form of an
advance from the Company to the participant) and $30,000 to the Constellation
Fund (of which $15,000 is funded by the participant and $15,000 is in the form
of an advance from the Company to the participant). The advances bear interest
at LIBOR plus 1.75%. Capital calls since October 20, 2000 have totaled 70% of
each participant's equity commitment. The total amount loaned to the
participants in Fund IV at November 30, 2002 was $14,426,352. The aggregate
amount of the loans outstanding to all directors and executive officers as a
group on such date was $932,996.
The Bear Stearns Health Innoventures Employee Fund, L.P. ("Health
Innoventures Fund"), provides an investment opportunity for certain key
employees of the Company that are accredited investors. Health Innoventures Fund
has committed to invest $19,951,818 alongside Bear Stearns Health Innoventures,
L.P. in technology-based health care companies in emerging high growth markets.
As of November 30, 2002, 46 participants in Fund II have purchased a total of 74
limited partnership interests. Each limited partnership interest represents a
commitment by the participant to invest $250,000, of which $125,000 is funded by
the participant and $125,000 is in the form of a nonrecourse, interest-bearing
loan from the Company to the participant. The loans bear interest at LIBOR plus
1.0%. Capital calls since April 16, 2001 have totaled 26.33% of each
participant's equity commitment. The total amount loaned to the participants in
Health Innoventures Fund at November 30, 2002 was $3,208,648. The aggregate
amount of the loans outstanding to all directors and executive officers as a
group on such date was $270,905.
The Bear Stearns Multi-Strategy Employee Fund, L.P. ("Multi-Strategy
Fund"), provides an investment opportunity for certain key employees of the
Company that are accredited investors. Multi-Strategy Fund has committed to
invest $6,137,626 in a diversified group of private investment funds or managed
accounts, managed by or offered through Bear Stearns Asset Management Inc. and
its affiliates. As of November 30, 2002, 24 participants in Fund II have
purchased a total of 49 limited partnership interests. Each limited partnership
interest represents a commitment by the participant to invest $125,000, all of
which is funded by the participant. Capital calls since August 1, 2001 have
totaled 100% of each participant's equity commitment. There were no loans
outstanding to the participants in Multi-Strategy Fund at November 30, 2002.
Sterling BSC Inc. ("Sterling BSC") and Hines BSC, LLC ("Hines BSC"), as a
joint venture (the "Joint Venture"), have formed Bradirk 383 Associates LLC
("Bradirk"), of which Sterling BSC owns a 60% interest and Hines BSC owns a 40%
interest. Through the Joint Venture, Sterling BSC and Hines BSC have acted as a
consultant to the Company on certain real estate matters. The Company entered
into an agreement with Bradirk to assist in the development of the Company's new
world headquarters at 383 Madison Avenue. Under this agreement the Company
agreed to pay a development fee of $12 million and to reimburse Bradirk for
certain direct administrative costs associated with the project. During fiscal
2002, the Company paid $3.4 million related to the development agreement. In
addition, pursuant to a Management Agreement between Gregory/Madison Avenue, LLC
("Gregory"), an affiliate of the Company, and Bradirk, Gregory has agreed to pay
a management fee to Bradirk of $750,000 per year and to reimburse Bradirk for
certain direct expenses related to managing the property. This agreement
commenced on July 1, 2001 and continues for a minimum of 27 months. During
fiscal 2002, the Company paid Bradirk $2.8 million in aggregate relating to this
agreement. Fred Wilpon, a director of the Company, is Chairman, Chief Executive
Officer and a 33.75% stockholder of Sterling BSC. Fred Wilpon and members of his
family own approximately 85% of the outstanding stock of Sterling BSC.
-16-
Effective February 1, 2002, a wholly owned subsidiary of the Company sold
its 6.25% ownership interest in a Citation X executive jet to Gracie Aviation
Corp. ("Gracie Aviation"), a corporation of which Warren J. Spector, the
President and Co-Chief Operating Officer of the Company is the sole stockholder.
Gracie Aviation paid a purchase price of $857,672, the fair market value of the
ownership interest, as determined by Executive Jet Sales Inc., less the
Company's pro rata share of an applicable termination fee. The purchase price
represents $29,391 more than the Company would have received had it exercised a
contractual right to require repurchase of the ownership interest by Executive
Jet. In connection with the sale, the Company assigned to Gracie Aviation, and
Gracie Aviation assumed, all of the Company's rights and obligations under the
related agreements and documentation.
Paul A. Novelly, a director of the Company, is Chairman of the Board,
Chief Executive Officer and the controlling stockholder of Apex Oil Company,
Inc., a privately held company ("Apex Oil"). Apex Oil is the beneficial owner of
a 5% equity interest (with 8 1/3% of voting rights) in Liquid Funding, Ltd.
("LFL") at a cost of $600,000. Mr. Novelly serves as Deputy Chairman of the
Board of Directors of LFL. The Company has a 40% non-voting equity interest in
LFL. In addition, Clark Oil Trading Company, an affiliate of Apex Oil, maintains
a commodity trading account with a subsidiary of the Company, which includes a
$15 million line of credit to finance initial margin requirements on futures
contracts. The line of credit bears interest at 1% over the Company's broker
call rate. The largest aggregate amount of indebtedness outstanding under the
line of credit during fiscal 2002 was $15,000,000; no indebtedness has been
outstanding since October 3, 2002.
Other than as described in this Proxy Statement, no director or executive
officer of the Company was indebted to the Company during fiscal 2002 for any
amount in excess of $60,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Glickman, Harrington, Nickell and Tese, none of whom is or has been an officer
or an employee of the Company. There were no "Compensation Committee Interlocks"
during fiscal year 2002.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and any persons who own more than 10% of
the Company's Common Stock, to file reports of initial ownership of the
Company's Common Stock and subsequent changes in that ownership with the SEC and
furnish the Company with copies of all forms they file pursuant to Section
16(a). Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Form
5's were required, the Company believes that during fiscal 2002 all Section
16(a) filing requirements were complied with.
-17-
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of November 30, 2002 with
respect to the Company's common shares that may be issued under its existing
equity compensation plans: The table shows the number of securities to be issued
under compensation plans that have been approved by stockholders and those that
have not been so approved. The footnotes and other information following the
table are intended to provide additional detail on the compensation plans. The
Company currently plans to mitigate the dilutive effect to stockholders through
the repurchase of Common Stock, pursuant to the Company's share repurchase
program, subject to market conditions.
NUMBER OF
SECURITIES
NUMBER OF REMAINING
SECURITIES AVAILABLE FOR
TO BE FUTURE ISSUANCE
ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE COMPENSATION
OUTSTANDING OF OUTSTANDING PLANS (EXCLUDING
OPTIONS, OPTIONS, SECURITIES
WARRANTS WARRANTS AND REFLECTED IN
PLAN CATEGORY AND RIGHTS RIGHTS (1) COLUMN (A))
------------------------------- -------------- ---------------- -----------------
(a) (b) (c)
Equity compensation plans
approved by security holders 59,928,806 (2) $53.12 (2) 14,284,926 (3)
Equity compensation plans not
approved by security holders 10,397,432 (4) N/A 3,295,029 (5)
-------------- -----------------
Total 70,326,238 17,579,955
-------------- -----------------
--------------------------------------------------------------------------------
(1) This column contains information regarding stock options only; there are
no warrants or rights outstanding.
(2) Includes stock options to purchase 20,454,067 shares of Common Stock at a
weighted-average exercise price of $53.12 and 39,470,584 of CAP units as
well as 4,155 restricted stock units under the Directors' Plan.
(3) Equity compensation plans approved by security holders include the Stock
Award Plan, Directors' Plan and Capital Accumulation Plan. The material
features of each of these plans are described in Note 11, "Stock
Compensation Plans," to the Company's Consolidated Financial Statements.
- Includes stock options to purchase 14,049,788 shares of Common
Stock available under the Stock Award Plan as well as stock
options to purchase 235,138 shares of Common Stock available
under the Directors' Plan.
- Units available for future issuance under the Capital
Accumulation Plan, which was approved by security holders, are
not included. Pursuant to the terms of the Capital
Accumulation Plan, the total number of CAP units that may be
issued under the Capital Accumulation Plan during any fiscal
year may not exceed 15% of the sum of issued and outstanding
shares of Common Stock and CAP units outstanding determined as
of the last day of the current fiscal year.
(4) Equity compensation plans not approved by security holders include the
Restricted Stock Unit Plan, the Long-Term Incentive Stock Award, and AE
Investment and Deferred Compensation Plan. The material features of these
arrangements are described below as required by the SEC rules.
(5) There are 3,295,029 securities remaining available for future issuance
under the Restricted Stock Unit Plan.
--------------------------------------------------------------------------------
The table above does not include equity compensation plans that meet the
qualification requirements of Section 401(a) of the Internal Revenue Code,
namely the Profit Sharing Plan, 401(k) Savings Plan and the Employee Stock
Ownership Plan. The material features of the Company's equity compensation plans
which have not been approved by security holders are, as required by the SEC
rules, described below. These descriptions do not purport to be complete and are
qualified in their entirety by reference to the plan documents which are
included as exhibits to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 2002.
-18-
RESTRICTED STOCK UNIT PLAN
The Restricted Stock Unit Plan ("RSU Plan") provides for the annual award
of restricted stock units ("RSUs") for employees. The Company measures
compensation cost of RSUs based on the fair market value of its Common Stock at
the award date. Under the RSU Plan, RSUs granted to employees have various
vesting provisions and generally convert to Common Stock within four years. Such
units are restricted from sale, transfer or assignment until the end of the
restricted period. Holders of restricted stock units generally may forfeit
ownership of a portion of their award if employment is terminated before the end
of the vesting period. Holders of RSUs are entitled to receive a dividend in the
form of additional RSUs, based on dividends declared on the Company's Common
Stock. The total number of RSUs that may be granted under the RSU Plan may not
exceed 10,000,000. As of November 30, 2002 the total number of RSUs outstanding
was 6,490,784.
AE INVESTMENT AND DEFERRED COMPENSATION PLAN
The AE Investment and Deferred Compensation Plan is a non-qualified
defined contribution retirement plan covering substantially all account
executives. The plan allows participants to defer a portion of their annual
compensation in a variety of self-directed investment options. One of these
options allows the participants to invest in the Common Stock of the Company.
Such investments are restricted from sale, transfer or assignment until the end
of the restricted period which is predetermined prior to the original deferral.
As of November 30, 2002 the total number of such units outstanding was 524,245.
LONG-TERM INCENTIVE STOCK AWARD
On November 30, 2000, the Company issued a one time award of RSUs to
certain existing employees. Such award covered 3,381,903 units outstanding at
November 30, 2002 that vest over a four and one half year period.
-19-
II. APPROVAL OF AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN
GENERAL
The Performance Compensation Plan was adopted by the Compensation
Committee on September 10, 1996 and was originally approved by stockholders at
the 1996 Annual Meeting. The Performance Compensation Plan was amended
thereafter on a number of occasions by the Compensation Committee, both with and
without stockholder approval, as required. The purpose of the Performance
Compensation Plan is to compensate Senior Managing Directors of the Company and
its subsidiaries for significant contributions to the Company and to stimulate
their efforts by giving them a direct interest in the performance of the
Company.
PROPOSED AMENDMENTS TO PERFORMANCE COMPENSATION PLAN
On February 24, 2003, the Compensation Committee adopted amendments to the
Performance Compensation Plan, subject to stockholder approval at the Annual
Meeting. The proposed amendments to the Performance Compensation Plan would
amend Section 2 to extend the term of the Performance Compensation Plan for an
additional period commencing as of July 1, 2003 and terminating on November 30,
2008. In addition, Section 5.5 is proposed to be amended to increase the maximum
amount allocable by the Compensation Committee to the annual bonus pool related
to participants who are members of the executive committee of Bear, Stearns &
Co. Inc. in the aggregate for any fiscal year from $150,000,000 to $165,000,000.
The maximum amount allocable to any individual participant who is not a member
of such executive committee shall remain at $15,000,000.
The amendments to the Performance Compensation Plan are being submitted to
stockholders in an effort to meet the requirements for deductibility by the
Company under Section 162(m) of the Internal Revenue Code for Senior Managing
Directors who are or may become members of the executive committee of Bear
Stearns in the future. (See "Executive Compensation - Compensation Committee
Report - Stock Award Plan" for a discussion of Section 162(m) of the Internal
Revenue Code.)
Set forth below is the text of the revised Section 2 and Section 5.5 of
the Performance Compensation Plan containing the amendments being proposed at
the Annual Meeting. The amendments are qualified in its entirety by reference to
such text.
"Section 2. Term. The Plan became effective as of July 1, 1998 (the
"Effective Date"). The Plan shall be extended and shall be applicable for an
additional period commencing July 1, 2003 and ending November 30, 2008, unless
earlier terminated by the Company pursuant to Section 9."
"Section 5.5, The maximum amount allocable by the Compensation Committee
to the Annual Bonus Pool related to Participants who are members of the
executive committee of Bear, Stearns & Co. Inc. in the aggregate for any fiscal
year shall not exceed $165,000,000. The maximum amount allocable to any
individual Participant who is not a member of such executive committee shall not
exceed $15,000,000."
DESCRIPTION OF THE PERFORMANCE COMPENSATION PLAN, AS AMENDED AND RESTATED
Stockholders are encouraged to review the Performance Compensation Plan
carefully. This summary of the material terms of the Performance Compensation
Plan is qualified in its entirety by reference to Exhibit B.
The Performance Compensation Plan is administered by the Compensation
Committee. Subject to the provisions of the Performance Compensation Plan, the
Compensation Committee shall have the power to interpret the Performance
Compensation Plan, to determine all questions arising thereunder, and to adopt
and amend such rules and regulations as it may deem desirable. Any decision of
the Compensation Committee in the administration of the Performance Compensation
Plan shall be final and conclusive.
The Performance Compensation Plan, as extended, is applicable for an
additional period ending November 30, 2008. All of the Company's Senior Managing
Directors (approximately 680 individuals), including executive officers, are
eligible to participate in the Performance Compensation Plan. The Compensation
Committee is required to designate those Senior Managing Directors who are
participating in the Performance Compensation Plan (the "Participants") within
90 days after the beginning of each fiscal year. Under the terms of the
Performance Compensation Plan, each of the Participants receives a base salary
of $200,000 per annum and also shares in one or more performance-based bonus
pools. The Compensation Committee determines the formula for calculating one or
more bonus pools within 90 days after the beginning of each fiscal year based
upon one or more of the following criteria, individually or in combination,
adjusted in such manner as the Compensation Committee shall determine: (a)
pre-tax or after-tax return on equity; (b) earnings per share; (c) pre-tax or
after-tax net income; (d) business unit or departmental pre-tax or after-tax
income; (e) book value per share; (f) market price per share; (g) relative
performance to peer group companies; (h) expense management; and (i) total
return to stockholders.
-20-
The share of one or more of the bonus pools to be allocated to each
Participant in any fiscal year will be determined by the Compensation Committee,
in its sole discretion. However, under no circumstance may the aggregate amount
of the bonuses paid under the Performance Compensation Plan exceed 100% of the
bonus pools computed under the formula designated by the Compensation Committee
as described above. The Compensation Committee, in its sole discretion, may
reduce the amount of the bonus of any Participant. Pursuant to the proposed
amendments to the Performance Compensation Plan, the maximum amount allocable by
the Compensation Committee to the annual bonus pool related to Participants who
are members of the executive committee of Bear Stearns in the aggregate for any
fiscal year shall not exceed $165,000,000. The maximum bonus that may be
allocated to a Participant who is not a member of such executive committee in
any fiscal year shall not exceed $15,000,000. The Performance Compensation Plan
may be amended, or terminated in whole or in part, by the Compensation
Committee, provided that no such action may retroactively impair or otherwise
adversely affect the rights of any Participant prior to the date of such action.
Since the amounts payable under the Performance Compensation Plan in
future years will be based on future performance, such amounts are not
determinable at the present time. However, the proposed amendments would have
had no effect on compensation paid pursuant to the 2002 Plan. The following
table reflects the amounts that were paid to the named individuals and groups
under the Performance Compensation Plan for the fiscal year ended November 30,
2002.
PERFORMANCE COMPENSATION PLAN
GROUP OR INDIVIDUAL DOLLAR VALUE ($)(1)
------------------- -------------------
James E. Cayne, Chairman of the Board and Chief Executive Officer.............. 19,440,000
Alan C. Greenberg, Chairman of the Executive Committee......................... 11,440,000
Samuel L. Molinaro Jr., Executive Vice President and Chief Financial Officer... 8,000,000
Alan D. Schwartz, President and Co-Chief Operating Officer..................... 18,400,000
Warren J. Spector, President and Co-Chief Operating Officer.................... 18,400,000
All current executive officers as a group (8 persons).......................... 84,150,000
All current directors who are not executive officers as a group................ 0
All employees (who are not executive officers) as a group...................... 13,650,000
--------------------------------------------------------------------------------
(1) Includes amounts that would have been payable as bonuses under the
Performance Compensation Plan and bonus compensation that would have been
deferred pursuant to the Capital Accumulation Plan. See "Summary
Compensation Table - Annual Compensation - Bonus, and Long Term
Compensation Awards - Restricted Stock Awards and Securities Underlying
Options."
For information with respect to securities authorized for issuance under
the Company's equity compensation plans, see "Equity Compensation Plan
Information."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE PERFORMANCE COMPENSATION PLAN.
-21-
INDEPENDENT AUDITORS
The Audit Committee has appointed Deloitte & Touche LLP as the Company's
independent auditors to conduct the audit of the Company's books and records for
the fiscal year ended November 30, 2003. Deloitte & Touche LLP also served as
the Company's independent auditors for the previous fiscal year. Representatives
of Deloitte & Touche LLP are expected to be present at the Annual Meeting to
respond to questions and to make a statement should they so desire.
Audit and Audit Related Fees aggregated $9.2 million and $8.4 million for
the years ended November 31, 2002 and 2001, respectively and were composed of
the following:
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte & Touche"), which includes Deloitte Consulting, for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended November 30, 2002, for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year, other statutory and regulatory filings and comfort letters and
consents related to registration statements filed with the SEC for the 2002
fiscal year were $5.7 million. The comparative amount for the fiscal year ended
November 30, 2001 was $4.6 million.
AUDIT RELATED FEES
In addition to Audit Fees, Deloitte & Touche has billed the Company $3.5
million, in the aggregate, for Audit Related Fees related to assurance and
related services. These services include, among others, reports in connection
with accounting consultations and data verification relating to securitization
activities as well as services to the Company's triple-A rated derivative
subsidiaries. The comparative amount for the fiscal year ended November 30, 2001
was $3.8 million.
Other fees were composed of the following:
TAX FEES
Deloitte & Touche has billed the Company $2.5 million, in the aggregate,
for services rendered to the Company for tax compliance, tax planning and advice
related to debt structures and transactions. Deloitte & Touche billed $4.3
million for similar services in the 2001 fiscal year.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche for services rendered to
the Company, other than the services described above under Audit Fees, Audit
Related Fees and Tax Fees, for the fiscal year ended November 30, 2002 and 2001
were approximately $0.2 million and $3.0 million, respectively. The aggregate
fees billed by Deloitte & Touche for All Other Fees in fiscal 2002 included
advice on property insurance and other consulting. The aggregate fees billed by
Deloitte & Touche for All Other Fees in fiscal 2001 included $1.8 million of
fees billed by Deloitte Consulting for system design and implementation and $0.9
million for due diligence services related to mergers and acquisitions advice.
There were no fees paid to Deloitte Consulting in fiscal 2002. Deloitte & Touche
has announced its intent to separate Deloitte Consulting from the firm.
FUND AND OTHER RELATED FEES
The Company offers investment products, including money market, equity and
fixed income funds ("Funds"). Deloitte & Touche provides audit and other sevices
to certain of these Funds. The aggregate fees billed by Deloitte & Touche for
such services in fiscal 2002 and 2001 were approximately $1.8 million and $1.4
million, respectively.
In connection with its merchant banking activities, the Company has
significant investments in two entities audited by Deloitte & Touche. Total
aggregate fees paid to Deloitte & Touche by these entities approximated $1.8
million and $0.4 million for fiscal 2002 and 2001, respectively.
---------------------------
All work performed by Deloitte & Touche as described above under the
captions Audit Fees, Audit Related Fees, Tax Fees and All Other Fees since July
29, 2002 has been approved by the Audit Committee and all work subsequent to
October 9, 2002 has been pre-approved pursuant to the provisions of Section 1.4
(C)(3) of the Audit Committee charter attached as Exhibit A. The Audit Committee
has considered and concluded that the provision of non-audit services is
compatible with maintaining the principal accountant's independence.
-22-
OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of any
business other than that described above that will be presented at the Annual
Meeting. If any other business should properly come before the Annual Meeting in
connection therewith, it is intended that the persons named in the enclosed
proxy will have discretionary authority to vote the shares which they represent.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
In accordance with rules promulgated by the SEC, any stockholder who
wishes to submit a proposal for inclusion in the proxy material to be
distributed by the Company in connection with the 2004 Annual Meeting must do so
no later than October 31, 2003.
In addition, in accordance with Article VI, Section 2 of the Restated
Certificate of Incorporation, in order to be properly brought before the 2004
Annual Meeting, a matter must have been (i) specified in a written notice of
such meeting (or any supplement thereto) given to the stockholders by or at the
direction of the Board of Directors (which would be accomplished if a
stockholder proposal were received by the Secretary of the Company as set forth
in the preceding paragraph), (ii) brought before such meeting at the direction
of the Board of Directors or the Chairman of the meeting, or (iii) specified in
a written notice given by or on behalf of a stockholder of record on the record
date for such meeting or a duly authorized proxy for such stockholder, which
conforms to the requirements of Article VI, Section 2 of the Restated
Certificate of Incorporation and is delivered personally to, or mailed to and
received by, the Secretary of the Company at the address below not less than 10
days prior to the first anniversary of the date of the notice accompanying this
Proxy Statement; provided, however, that such notice need not be given more than
75 days prior to the 2004 Annual Meeting. Accordingly, any written notice given
by or on behalf of a stockholder pursuant to the foregoing clause (iii) in
connection with the 2004 Annual Meeting must be received no later than February
18, 2004.
STOCKHOLDERS SHARING AN ADDRESS
Certain of the Company's stockholders, who own their shares through a
bank, broker or other holder of record, who share a single address and who have
so consented, are receiving only a single copy of our annual report and proxy
statement. This practice, known as "householding," is designed to reduce the
Company's printing and mailing costs. Stockholders may request or discontinue
householding, or may request a separate copy of the annual report or proxy
statement, by following the instructions below:
o Stockholders owning their shares through a bank, broker or other
holder of record who wish to either discontinue or begin
householding should contact ADP Investor Communication Services at
(800) 542-1061 or by writing to them at Householding Department, 51
Mercedes Way, Edgewood, New York 11717.
o Any householded stockholder may request prompt delivery of a copy of
the Company's annual report or proxy statement by contacting the
Company at (212) 272-2000 or by writing to the Investor Relations
Department of the Company at 383 Madison Avenue, New York, New York
10179.
ELECTRONIC VOTING AND ACCESS TO PROXY MATERIALS
Stockholders who own their shares through a bank, broker or other holder
of record and who have so consented, may receive the Company's annual report and
proxy statement over the Internet, and may provide voting instructions with
respect to such shares to the record holder over the Internet or by telephone.
Stockholders owning shares through a bank, broker or other holder of record
should contact the record holder for information regarding electronic delivery
of materials and electronic voting. An election to receive materials will remain
in effect for all future annual meetings unless revoked. Stockholders consenting
to electronic delivery or voting may incur costs, such as telephone and Internet
access charges, that must be borne by the stockholder. Stockholders who elect to
access proxy materials on the Internet may request prompt delivery of the
Company's annual report or proxy statement by contacting the Company at (212)
272-2000 or by writing to the Investor Relations Department of the Company at
383 Madison Avenue, New York, New York 10179.
-23-
REPORTS
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2002, AS FILED
WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. REQUESTS
FOR COPIES OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE DIRECTED TO THE INVESTOR
RELATIONS DEPARTMENT OF THE COMPANY AT THE ADDRESS BELOW. This Proxy Statement
and the Company's 2002 Annual Report to Stockholders and Annual Report on Form
10-K are also available on the Company's website at http://www.bearstearns.com.
The 2002 Annual Report to Stockholders, Annual Report on Form 10-K and
information on the website other than the Proxy Statement, are not part of the
Company's proxy soliciting materials.
By order of the Board of Directors
Kenneth L. Edlow,
Secretary
The Bear Stearns Companies Inc.
383 Madison Avenue
New York, New York 10179
February 28, 2003
-24-
EXHIBIT A
THE BEAR STEARNS COMPANIES INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
This charter replaces the prior charter of the Audit Committee (the "Committee")
and its provisions supersede any contrary provisions in any prior resolutions
adopted by either the Board of Directors (the "Board") of The Bear Stearns
Companies Inc. (the "Corporation") or any committee of the Board.
Purpose
The Committee shall assist the Board in the Board's oversight of (1) the
integrity of the financial statements of the Corporation, (2) the
compliance of the Corporation with legal and regulatory requirements, (3)
the Independent External Auditor's (the "Auditor") qualifications,
performance and independence, and (4) the performance of the Corporation's
internal audit function.
1.1 Authority
The Committee has the authority to engage counsel and other consultants
and advisors that it deems necessary and cause the Corporation to pay such
counsel, consultants and advisors.
The Committee has the authority to delegate to one or more members of the
Committee the authority to approve audit and non-audit services. Such
members must report grants of approval to the full Committee at each of
its scheduled meetings.
1.2 Composition
The Committee shall consist of at least three directors who shall be
elected by the Board. Each member of the Committee shall be an
"independent director" of the Corporation as that term is defined by the
Sarbanes-Oxley Act of 2002 (the "Act"), the rules of the New York Stock
Exchange (the "NYSE") and any other law, rule or regulation applicable to
the Company. In accordance with existing NYSE requirements, at least one
Committee member shall have "accounting or related financial management
expertise" and all Committee members must be financially literate, as
determined by the Board. At least one member of the Committee shall
qualify as a "financial expert" upon the later of the effective date of,
or date required by, the rules to be promulgated, or interpretations to be
issued, by the Securities and Exchange Commission (the "SEC") pursuant to
Section 407 of the Act.
1.3 Meetings
The Committee shall meet at least four times annually and shall make
regular reports to the Board.
The Committee shall meet, as necessary, with management to review the
Corporation's major financial risk exposures and the steps management has
taken to monitor and control such exposures.
The Committee shall meet separately, periodically with management, those
responsible for the internal audit function and the Auditor(s).
1.4 Responsibilities
In fulfilling its responsibilities the Committee shall:
(A) Financial Statements
A-1
1. Review with management and the Auditor(s):
(a) Significant financial reporting issues and judgments
made in connection with preparation of the Corporation's
financial statements.
(b) The adequacy of internal controls that could
significantly affect the Corporation's financial
statements.
2. Review major changes to the Corporation's accounting principles
and practices as brought to its attention by the Auditor(s),
internal auditors, management or as required by professional or
regulatory pronouncements and actions.
3. Review and discuss with management and the Auditor(s) the annual
audited financial statements and the quarterly financial statements,
including major issues, if any, regarding accounting principles and
the Corporation's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
4. Review with the Auditor(s), as deemed necessary, any accounting
adjustments noted or proposed by the Auditor(s), any auditing or
accounting issues and any "management" or "internal control" letters
issued, or proposed to be issued, by the audit firm to the
Corporation.
5. Ensure review by the Auditor(s) of the Corporation's interim
financial information prior to the filing of its quarterly report on
Securities and Exchange Commission Form 10-Q.
6. Request that the Auditor(s) performing the Corporation's audit
timely report to the Committee the following:
(a) all critical accounting policies and practices to be
used;
(b) all alternative treatments of financial information
within generally accepted accounting principles that
have been discussed with the Corporation's management,
ramification of their use, and the treatment preferred
by the Auditor(s);
(c) other material written communications between the
Auditor(s) and the Corporation's management, such as any
management letter or schedule of unadjusted differences;
and
(d) significant disagreements with management, if any.
7. Discuss with the Auditor(s) the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of
the audit. Such review should include:
(a) Any difficulties encountered in the course of the audit
work, including any restrictions on the scope of
activities or access to required information.
(b) Any changes required in the planned scope of the audit.
(c) Any matters communicated by the Auditor(s) to management
which the Auditor views are material weaknesses and
reportable conditions of material inadequacies as those
terms are defined by the accounting profession or
regulators.
8. Review with the Corporation's General Counsel legal matters that
may have a material impact on the financial statements, the
Corporation's compliance policies and any material reports or
inquiries received from regulators or governmental agencies.
(B) Internal Audit
1. Review the appointment and retention of the senior internal
auditing executive.
2. Review, as necessary, with the senior internal auditing executive
the Internal Audit Department's responsibility, budget and staffing.
3. Review with the Auditor(s) the responsibilities, budget and
staffing of the Corporation's internal audit function.
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4. Review significant reports to management prepared by the internal
auditing department and management's responses thereto, if any.
(C) Independent External Auditor
1. The Committee shall be directly and solely responsible for the
appointment, compensation, oversight and termination of the
Corporation's independent auditor(s) (the "Auditor(s)") engaged to
prepare or issue an audit report or related work, subject to
shareholder ratification, if applicable. The Auditor(s) shall report
directly to the Committee. The Committee shall be responsible for
resolutions of disagreements between management and the Auditor(s)
regarding financial reporting. The Committee shall prepare the
report required by the rules of the SEC to be included in the
Corporation's annual proxy statement.
2. Meet with the Auditor(s) prior to the audit to review the
planning and staffing of the audit.
3. Review and pre-approve all audit and non-audit services that are
not prohibited under Section 201 of the Act, as such prohibitions
are interpreted pursuant to applicable rules and regulations of the
SEC (except those excluded from requiring pre-approval based upon
the de minimus exception set forth in Section 202(i)(1)(b) of the
Act) to be provided by the Auditor(s), including fees and other
terms of such engagement. The Committee may delegate to one or more
members of the Committee the authority to grant preapprovals of
audit and permitted non-audit services, provided that the
preapprovals of such Committee member(s) are reported to the full
Committee at its next scheduled meeting.
4. Timely report any non-audit service(s) that have been approved to
be performed by the Auditor(s) to the Controller so that such
information may be disclosed in the periodic reports required to be
filed with the SEC by Section 13(a) of the Exchange Act.
5. At least annually, obtain and review a report by the Auditor(s)
describing: (a) the Auditor's internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the Auditor(s), or by any
inquiry or investigation by governmental or professional authorities
within the preceding five years, regarding one or more audits
carried out by the Auditor(s) and any steps taken to deal with such
issues.
6. At least annually, review reports from the Auditor(s) regarding
the Auditor's independence, including all relationships between the
Auditor(s) and the Corporation, as well as evaluate the
qualifications, performance and independence of the Auditor(s),
including the lead partner of the audit, after gathering information
from management, the Internal Audit Department and other Board
members, and, if necessary, take appropriate action regarding the
Auditor(s), including removal and replacement.
7. Periodically review the Auditor(s) to assure that all partners
who perform audit services for the Company have not performed audit
services for the Company in any of the years prohibited by
applicable laws and regulations and, if necessary, take appropriate
action regarding the Auditor(s), including removal and replacement.
8. Establish clear hiring policies for employees or former employees
of the Auditor(s).
9. Confirm that the Corporation's chief executive officer,
controller, chief financial officer, chief accounting officer, or
any person serving in an equivalent position of the Corporation,
were not previously employed by the Auditor(s) or if previously
employed by the Auditor, such person did not participate in any way
in the Corporation's external audit during the one-year period
preceding the date of the initiation of the audit and, if necessary,
take appropriate action regarding the Auditor(s), including removal
and replacement.
(D) Reporting
Prepare the report required by the rules of the SEC to be included
in the Corporation's annual proxy statement.
(E) Other
1. Review and reassess the adequacy of this Charter annually,
recommend any proposed changes to the Board for approval and ensure
inclusion of the Charter in the Corporation's annual proxy statement
at least once every three years.
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2. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters and for the
confidential, anonymous submission of such complaints and/or
concerns by employees.
3. Request that the officers certifying the Corporation's periodic
reports filed under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), disclose
quarterly to the Auditor(s) and the Committee all significant
deficiencies and material weaknesses in the design or operation of
internal controls, any fraud that involves management or other
employees who have a significant role in the Corporation's internal
controls, any significant changes in internal controls or in other
factors that could significantly affect internal controls and any
corrective actions taken with regard to such deficiencies and
weaknesses, so that they may certify as to same in the reports.
4. Discuss with management the conformity of the Corporation's
subsidiaries and controlled affiliated entities with applicable
significant legal and Regulatory requirements and the Corporation's
Code of Conduct and advise the Board of such compliance.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are presented fairly in
accordance with generally accepted accounting principles. This is the
responsibility of management as to the Corporation's financial statements and
the Auditor(s) as to the plan, extent and execution of the audit. Nor is it the
duty of the Committee to assure compliance with laws and regulations and the
Corporation's Code of Conduct.
Approved and adopted by the Audit Committee on February 24, 2003
Approved and adopted by the Board of Directors on February 24, 2003
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EXHIBIT B
THE BEAR STEARNS COMPANIES INC.
PERFORMANCE COMPENSATION PLAN
(Amended and Restated as of February 24 , 2003)
Section 1. Purpose. The purposes of The Bear Stearns Companies Inc.
Performance Compensation Plan, as amended and restated (the "Plan") are (i) to
compensate certain Senior Managing Directors of The Bear Stearns Companies Inc.
and its subsidiaries (the "Company") on an individual basis for significant
contributions to the Company and (ii) to stimulate the efforts of such persons
by giving them a direct interest in the performance of the Company.
Section 2. Term. The Plan became effective as of July 1, 1998 (the
"Effective Date"). The Plan shall be extended and shall be applicable for an
additional period commencing July 1, 2003 and ending November 30, 2008, unless
earlier terminated by the Company pursuant to Section 9.
Section 3. Coverage. For purposes of the Plan, the term "Participant"
shall include for each fiscal year each Senior Managing Director so designated
by the Compensation Committee within 90 days following the first day of such
fiscal year.
Section 4. Base Salary.
4.1. Each Participant shall receive a salary of $200,000 per annum ("Base
Salary"). The Base Salary of the Participants may be increased from time to time
by the Compensation Committee of the Board (the "Compensation Committee") by
amendment of the Plan pursuant to Section 9.
4.2. Notwithstanding the provisions of Section 4.1 above, in the event a
Participant is not a Senior Managing Director for an entire fiscal year, his
Base Salary for such fiscal year shall be computed by multiplying such Base
Salary as computed under Section 4.1 by a fraction, the numerator of which is
the number of days in such fiscal year during which such Participant was a
Senior Managing Director and the denominator of which is the number of days in
the fiscal year. Any Base Salary shall be in addition to any base salary payable
with respect to periods during the fiscal year in which a Participant was not a
Senior Managing Director.
Section 5. Annual Bonus Pools.
5.1. For each fiscal year of the Company, each Participant shall be
entitled to receive an award of a bonus (the "Bonus"), payable from one or more
annual bonus funds (the "Annual Bonus Pools") in an amount not to exceed the
amount provided for in Section 6. A Bonus under the Plan shall be the sole bonus
payable with respect to a fiscal year to each Participant ("Full Year
Participant") who was a Senior Managing Director on the date that proportionate
shares of the Annual Bonus Pools for such fiscal year were determined by the
Compensation Committee and who remains a Senior Managing Director at all times
thereafter during such fiscal year. For each fiscal year, each Participant who
was not a Full Year Participant shall be entitled to such a Bonus, if any, for
the portion of such fiscal year not covered by the Plan, determined in
accordance with the procedures applicable to employees who are not Senior
Managing Directors, in addition to the Bonus, if any, payable pursuant to the
Plan.
5.2. For each fiscal year, the formula for calculating the Annual Bonus
Pools shall be determined by the Compensation Committee in writing, by
resolution of the Compensation Committee or other appropriate action, not later
than 90 days after the commencement of such fiscal year. Such formula shall be
based upon one or more of the following criteria, individually or in
combination, adjusted in such manner as the Compensation Committee shall
determine: (a) pre-tax or after-tax return on equity; (b) earnings per share;
(c) pre-tax or after-tax net income; (d) business unit or departmental pre-tax
or after-tax income; (e) book value per share; (f) market price per share; (g)
relative performance to peer group companies; (h) expense management; and (i)
total return to stockholders.
5.3. As a condition to the right of a Participant to receive any Bonus
under this Plan, the Compensation Committee shall first be required to certify
in writing, by resolution of the Compensation Committee or other appropriate
action, that the Bonus has been accurately determined in accordance with the
provisions of this Plan.
5.4. The Compensation Committee shall have the right to reduce the Bonus
of any Participant in its sole discretion at any time and for any reason prior
to the certification of the Bonus otherwise payable to such Participant pursuant
to Section 5.3 hereof.
5.5. The maximum amount allocable by the Compensation Committee to the
Annual Bonus Pool related to Participants who are members of the executive
committee of Bear, Stearns & Co. Inc. in the aggregate for any fiscal year shall
not exceed $165,000,000. The maximum amount allocable to any individual
Participant who is not a member of such executive committee shall not exceed
$15,000,000.
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Section 6. Allocations.
6.1. Prior to the commencement of each fiscal year, or not later than 90
days after the commencement of each fiscal year, the Compensation Committee
shall determine in writing, by resolution of the Compensation Committee or other
appropriate action, each Participant's proportionate share of the Annual Bonus
Pools for such fiscal year, which shall not exceed in respect of any Participant
who is a member of such executive committee 30% of the amount of such Annual
Bonus Pool.
6.2. Notwithstanding anything in Section 6.1 to the contrary, any
Participant who ceases to be a Senior Managing Director for any reason prior to
the end of such fiscal year shall be entitled to a Bonus computed as follows: A
Bonus first shall be computed as if such Participant had been a Senior Managing
Director for the full fiscal year, and such Bonus then shall be multiplied by a
fraction the numerator of which shall be the number of days in the fiscal year
through the date the Participant ceased to be a Senior Managing Director and the
denominator of which shall be the number of days in the fiscal year; provided,
however, that if the application of the preceding clause would cause the total
Bonuses payable under the Plan to exceed the Annual Bonus Pools, the Bonuses
payable to each Participant shall be reduced pro rata, so that the total of all
Bonuses shall equal the Annual Bonus Pools. If a Participant ceases to be a
Senior Managing Director after the end of the fiscal year in respect of which
such Bonus is payable, the amounts thereof nonetheless shall be payable to him
or his estate, as the case may be.
6.3. Except as hereinafter provided, Bonuses for a fiscal year shall be
payable as soon as practicable following the certification thereof by the
Compensation Committee for such fiscal year. In its discretion, the Compensation
Committee may authorize, prior to the final determination of Participants'
Bonuses for such fiscal year, payments on account of Bonuses payable hereunder
to one or more Participants entitled to such Bonuses, (a) during the last month
of such fiscal year, in an amount not exceeding 95% of the aggregate amount that
would be payable to such Participant or Participants hereunder as determined by
the Controller or Chief Accounting Officer of the Company (so long as he is not
a Participant) on the basis of his good faith estimate, (b) during the last ten
calendar days of such fiscal year or after the end of such fiscal year, in an
amount not to exceed 98% of the aggregate amount that would be payable to such
Participant or Participants hereunder as determined by the Controller or Chief
Accounting Officer of the Company (so long as he is not a Participant) on the
basis of his good faith estimate, and (c) at any time during such fiscal year or
after the end of such fiscal year to a Participant who ceases to be a Senior
Managing Director for any reason prior to the end of such fiscal year. Within
the limitations set forth in the preceding sentence, the Compensation Committee
may authorize one or more such "on account" payments, but the aggregate amount
of any such on account payments shall not exceed the aggregate amount permitted
to be paid pursuant to the Plan with respect to the same fiscal year. In
connection with any such "on account" payments, the Compensation Committee shall
require an undertaking or other assurance by or on behalf of the Participant
receiving such payment to repay the Company the amount, if any, by which such
"on account" payment exceeds the actual amount determined to be due to such
person under the Plan in respect of such fiscal year. Any "on account" payments
received prior to the end of a fiscal year shall be discounted to reasonably
reflect the time value of money from the date of payment to the date 30 days
after the end of the fiscal year.
6.4. The Compensation Committee may determine that payment of a portion
of the Bonuses shall be deferred, the periods of such deferrals and any
interest, not to exceed a reasonable rate, to be paid in respect of deferred
payments. The Compensation Committee may also define such other conditions of
payments of Bonuses as it may deem desirable in carrying out the purposes of the
Plan.
6.5. In any fiscal year, any balance in the Annual Bonus Pools for any
reason, including the limitation contained in Section 6.1, the forfeiture of a
Bonus under Section 6.2, the reduction of a Bonus under Section 5.4, or
otherwise, shall not be distributed to other Participants and shall not be
carried forward or be available for distribution as Bonuses under the Plan in a
future year or years.
Section 7. Administration and Interpretation. The Plan shall be
administered by the Compensation Committee, which shall have the sole authority
to interpret and to make rules and regulations for the administration of the
Plan. The Compensation Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan in the manner and to the extent the
Compensation Committee deems necessary or desirable to carry it into effect. Any
decision of the Compensation Committee in the interpretation and administration
of the Plan, as described herein, shall lie within its sole and absolute
discretion and shall be final, conclusive and binding on all parties concerned.
No member of the Compensation Committee and no officer of the Company shall be
liable for anything done or omitted to be done by him or her, by any other
member of the Compensation Committee or by any officer of the Company in
connection with the performance of duties under the Plan, except for his or her
own willful misconduct or as expressly provided by statute. The Compensation
Committee may request advice or assistance or employ such persons (including,
without limitation, legal counsel and accountants) as it deems necessary for the
proper administration of the Plan.
Section 8. Administrative Expenses. Any expense incurred in the
administration of the Plan shall be borne by the Company out of its general
funds and not charged against the Annual Bonus Pools, except insofar as such
expenses shall be taken into account in determining the components of the Annual
Bonus Pools hereunder.
Section 9. Amendment or Termination. The Compensation Committee of the
Company may from time to time amend the Plan in any respect or terminate the
Plan in whole or in part, provided that no such action shall retroactively
impair or otherwise adversely affect the rights of any Participant to benefits
under the Plan which have accrued prior to the date of such action.
B-2
Section 10. No Assignment. The rights hereunder, including without
limitation rights to receive a Base Salary or Bonus, shall not be sold,
assigned, transferred, encumbered or hypothecated by an employee of the Company
(except by testamentary disposition or intestate succession), and, during the
lifetime of any recipient, any payment of Base Salary or a Bonus shall be
payable only to such recipient.
Section 11. The Company. For purposes of this Plan, the "Company" shall
include the successors and assigns of the Company, and this Plan shall be
binding on any corporation or other person with which the Company is merged or
consolidated, or which acquires substantially all of the assets of the Company,
or which otherwise succeeds to its business.
Section 12. Stockholder Approval. The Plan was approved by the
stockholders of the Company at the 1998 Annual Meeting of Stockholders. The
extension of the Plan pursuant to Section 2 and the increase in the maximum
aggregate amount of the bonus pool that can be paid to executive committee
members pursuant to Section 5.5 shall be subject to approval by the affirmative
vote of a majority of the shares cast in a separate vote of the stockholders of
the Company at the 2003 Annual Meeting of Stockholders, and such stockholder
approval shall be a condition to the right of a Participant to receive any Bonus
hereunder.
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PROXY
THE BEAR STEARNS COMPANIES INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 26, 2003 AT 5:00 P.M.
The undersigned stockholder of The Bear Stearns Companies Inc. (the "Company")
hereby appoints James E. Cayne and Alan C. Greenberg, and each of them, as
attorneys and proxies, each with power of substitution and revocation, to
represent the undersigned at the Annual Meeting of Stockholders of the Company
to be held in the Bear Stearns Auditorium at 383 Madison Avenue, 2nd Floor, New
York, New York 10179, at 5:00 P.M. New York City time, on March 26, 2003, and at
any adjournments or postponements thereof, with authority to vote all shares of
Common Stock of the Company held or owned by the undersigned on February 14,
2003, in accordance with the directions indicated herein.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR ITEMS 1 AND 2, AND PURSUANT TO ITEM 3.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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Address Change (Mark the corresponding box on the reverse side)
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^ FOLD AND DETACH HERE ^
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED HEREIN
AND "FOR" APPROVAL OF AMENDMENTS TO THE PERFORMANCE COMPENSATION PLAN.
Please mark here ___
for address | |
change |___|
SEE REVERSE SIDE
Please mark ___
your votes as | X |
indicated in |___|
this example
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED BELOW TO VOTE FOR
(EXCEPT AS MARKED TO ALL NOMINEES
THE CONTRARY BELOW) LISTED BELOW
ITEM 1. ELECTION OF DIRECTORS ___ ___
| | | |
01 James E. Cayne |___| |___|
02 Carl D. Glickman
03 Alan C. Greenberg
04 Donald J. Harrington
05 William L. Mack
06 Frank T. Nickell
07 Frederic V. Salerno
08 Paul A. Novelly
09 Alan D. Schwartz
10 Warren J. Spector
11 Vincent Tese
12 Fred Wilpon
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE NAMED
ABOVE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME)
FOR AGAINST ABSTAIN
ITEM 2. APPROVAL OF ___ ___ ___
AMENDMENTS TO | | | | | |
THE PERFORMANCE |___| |___| |___|
COMPENSATION PLAN:
ITEM 3. In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any adjournments
or postponements thereof.
_______________________________
Signature
Dated: __________________, 2003
_______________________________
Signature
Dated: __________________, 2003
(Please date and sign exactly as name appears hereon. When signing as attorney,
administrator, trustee, custodian or guardian, give full title as such. Where
more than one owner, all should sign. Proxies executed by a partnership or
corporation should be signed in the full partnership or corporate name by a
partner or authorized officer.)
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^ FOLD AND DETACH HERE ^