def14a
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to Section 240.14a-12
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PIPER JAFFRAY COMPANIES
(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):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
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state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11( a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1) |
Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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800 Nicollet Mall, Suite 800
Mail Stop J09N05
Minneapolis, Minnesota 55402
612 303-6000
March 16, 2006
Dear Shareholders:
You are cordially invited to join us for our 2006 annual meeting
of shareholders, which will be held on Tuesday, May 2,
2006, at 3:30 p.m., Central Time, in the Stars Room on the
50th Floor of the IDS Center, 80 South Eighth Street,
Minneapolis, Minnesota. For your convenience, a map showing the
location of the IDS Center is provided on the back of the
accompanying proxy statement. Holders of record of our common
stock as of March 6, 2006, are entitled to notice of and to
vote at the 2006 annual meeting.
The Notice of Annual Meeting of Shareholders and the proxy
statement that follow describe the business to be conducted at
the meeting. We also will report on matters of current interest
to our shareholders.
The proxy statement contains a proposal to approve an amended
and restated version of our Amended and Restated 2003 Annual and
Long-Term Incentive Plan. The Board of Directors believes that
the incentive plan is critical to creating meaningful employee
ownership over time and recommends that you vote for approval of
the amended and restated plan.
We hope you will be able to attend the meeting. However, even if
you plan to attend, please vote your shares promptly to ensure
they are represented at the meeting. You may submit your proxy
vote by Internet or telephone as described in the following
materials or by completing and signing the enclosed proxy card
and returning it in the envelope provided. If you decide to
attend the meeting and wish to change your proxy vote, you may
do so automatically by voting in person at the meeting.
If your shares are held in the name of a broker, bank, trust or
other nominee, you may be asked for proof of ownership to be
admitted to the meeting, as described under How can I
attend the meeting? on page 5 of the proxy statement.
We look forward to seeing you at the annual meeting.
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Sincerely, |
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Andrew S. Duff
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Chairman and Chief Executive Officer |
800 Nicollet Mall, Suite 800
Mail Stop J09N05
Minneapolis, Minnesota 55402
612 303-6000
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS |
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Date and Time: |
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Tuesday, May 2, 2006, at 3:30 p.m., Central Time |
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Place: |
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Stars Room
50th Floor, IDS Center
80 South Eighth Street
Minneapolis, MN 55402 |
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Items of Business: |
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1. The election of three directors, each for a three-year
term. |
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2. Approval of the Piper Jaffray Companies Amended and
Restated 2003 Annual and Long-Term Incentive Plan. |
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3. Ratification of the selection of Ernst & Young
LLP as the independent auditor of Piper Jaffray Companies for
the year ending December 31, 2006. |
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4. Consideration of a shareholder proposal requesting
declassification of the Board and annual election of all
directors. |
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5. Any other business that may properly be considered at
the meeting or any adjournment or postponement of the meeting. |
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Record Date: |
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You may vote at the meeting if you were a shareholder of record
at the close of business on March 6, 2006. |
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Voting by Proxy: |
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Whether or not you plan to attend the annual meeting, please
vote your shares by proxy to ensure they are represented at the
meeting. You may submit your proxy vote by Internet or
telephone, as described in the following materials, by no later
than 11:59 p.m. Eastern Daylight Time on Monday,
May 1, 2006, or by completing, signing and promptly
returning the enclosed proxy card by mail. We encourage you to
vote by Internet or telephone in order to reduce our mailing and
handling expenses. If you choose to submit your proxy by mail,
we have enclosed an envelope addressed to our vote tabulator,
ADP Investor Communication Services, Inc., for which no postage
is required if mailed in the United States. |
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By Order of the Board of Directors |
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James L. Chosy
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Secretary |
March 16, 2006
PROXY STATEMENT
TABLE OF CONTENTS
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ii
PROXY STATEMENT
2006 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 2006
The Board of Directors of Piper Jaffray Companies is soliciting
proxies for use at the annual meeting of shareholders to be held
on May 2, 2006, and at any adjournment or postponement of
the meeting. This proxy statement and the enclosed proxy card
are first being mailed or given to shareholders on or about
March 16, 2006.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters
outlined in the Notice of Annual Meeting of Shareholders. These
include the election of directors, approval of our Amended and
Restated 2003 Annual and Long-Term Incentive Plan, ratification
of the selection of our independent auditor for 2006 and
consideration of a shareholder proposal. Also, management will
report on matters of current interest to our shareholders and
respond to questions from our shareholders.
Who is entitled to vote at the meeting?
The Board has set March 6, 2006, as the record date for the
annual meeting. If you were a shareholder of record at the close
of business on March 6, 2006, you are entitled to vote at
the meeting. As of the record date, 20,722,849 shares of
common stock, representing all of our voting stock, were issued
and outstanding and, therefore, eligible to vote at the meeting.
What are my voting rights?
Holders of our common stock are entitled to one vote per share.
Therefore, a total of 20,722,849 votes are entitled to be cast
at the meeting. There is no cumulative voting.
How many shares must be present to hold the
meeting?
In accordance with our bylaws, shares equal to a majority of the
voting power of the outstanding shares of common stock entitled
to vote generally in the election of directors as of the record
date must be present at the annual meeting in order to hold the
meeting and conduct business. This is called a quorum. Shares
are counted as present at the meeting if:
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you are present and vote in person at the meeting; or |
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you have properly and timely submitted your proxy as described
below under How do I submit my proxy? |
What is a proxy?
It is your designation of another person to vote stock you own.
That other person is called a proxy. If you designate someone as
your proxy in a written document, that document also is called a
proxy or a proxy card. When you designate a proxy, you also may
direct the proxy how to vote your shares. We refer to this as
your proxy vote. Three executive officers have been
designated as proxies for our 2006 annual meeting of
shareholders. These executive officers are Andrew S. Duff, James
L. Chosy and Sandra G. Sponem.
What is a proxy statement?
It is a document that we are required to give you, in accordance
with regulations promulgated by the Securities and Exchange
Commission, when we ask you to designate proxies to vote your
shares of Piper Jaffray Companies common stock at a meeting of
our shareholders. The proxy statement includes information
regarding the matters to be acted upon at the meeting and
certain other information required by regulations promulgated by
the Securities and Exchange Commission and rules of the New York
Stock Exchange.
What is the difference between a shareholder of record and
a street name holder?
If your shares are registered directly in your name, you are
considered the shareholder of record with respect to those
shares. If your shares are held in a stock brokerage account or
by a bank, trust or other nominee, then the broker, bank, trust
or other nominee is considered to be the shareholder of record
with respect to those shares, while you are considered the
beneficial owner of those shares. In that case, your shares are
said to be held in street name. Street name holders
generally cannot vote their shares directly and must instead
instruct the broker, bank, trust or other nominee how to vote
their shares using the method described below under How do
I submit my proxy?
How do I submit my proxy?
If you are a shareholder of record, you can submit a proxy to be
voted at the meeting in any of the following ways:
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electronically, using the Internet; |
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over the telephone by calling a toll-free number; or |
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by completing, signing and mailing the enclosed proxy card. |
The Internet and telephone voting procedures have been set up
for your convenience. The procedures have been designed to
authenticate your identity, allow you to give voting
instructions, and confirm that those instructions have been
recorded properly. When you vote by Internet or telephone, you
reduce our mailing and handling expenses. If you are a
shareholder of record and would like to submit your proxy by
Internet or telephone, please refer to the specific instructions
provided on the enclosed proxy card. If you wish to vote using a
paper format, please return your signed proxy card promptly to
ensure we receive it before the annual meeting.
If you hold your shares in street name, you must vote your
shares in the manner prescribed by your broker, bank, trust or
other nominee. Your broker, bank, trust or other nominee has
enclosed or otherwise provided a voting instruction card for you
to use in directing the broker, bank, trust or other nominee how
to vote your shares. In many cases, you may be permitted to
submit your voting instructions by Internet or telephone.
How do I vote if I hold shares in the Piper Jaffray
Companies Retirement Plan or U.S. Bancorp 401(k) Savings
Plan?
If you hold shares of Piper Jaffray common stock in the Piper
Jaffray Companies Retirement Plan or U.S. Bancorp 401(k)
Savings Plan, your completed proxy card or the submission of
your proxy by Internet or telephone will serve as voting
instructions to the respective plans trustee. Your voting
instructions must be received at least five days prior to the
annual meeting in order to count. In accordance with the terms
of the Piper Jaffray Companies Retirement Plan and
U.S. Bancorp 401(k) Savings Plan, the trustee of each plan
will vote all of the shares held in the plan in the same
proportion as the actual proxy votes submitted by plan
participants at least five days prior to the annual meeting.
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What does it mean if I receive more than one set of proxy
materials?
If you receive more than one set of proxy materials or multiple
control numbers for use in submitting your proxy, it means that
you hold shares registered in more than one account. To ensure
that all of your shares are voted, sign and return each proxy
card or voting instruction card you receive or, if you submit
your proxy by Internet or telephone, vote once for each card or
control number you receive.
Can I vote my shares in person at the meeting?
If you are a shareholder of record, you may vote your shares in
person at the meeting by completing a ballot at the meeting.
Even if you currently plan to attend the meeting, we recommend
that you also submit your proxy as described above so your vote
will be counted if you later decide not to attend the meeting.
If you submit your vote by proxy and later decide to vote in
person at the annual meeting, the vote you submit at the meeting
will override your proxy vote.
If you are a street name holder, you may vote your shares in
person at the meeting only if you obtain and bring to the
meeting a signed letter or other form of proxy from your broker,
bank, trust or other nominee giving you the right to vote the
shares at the meeting.
If you are a participant in the Piper Jaffray Companies
Retirement Plan or U.S. Bancorp 401(k) Savings Plan, you
may submit voting instructions as described above, but you may
not vote your Piper Jaffray shares held in the Piper Jaffray
Companies Retirement Plan or U.S. Bancorp 401(k) Savings
Plan in person at the meeting.
How does the Board recommend that I vote?
The Board of Directors recommends a vote:
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FOR all of the nominees for director; |
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FOR the Piper Jaffray Companies Amended and Restated 2003
Annual and Long-Term Incentive Plan; |
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FOR the ratification of the selection of Ernst &
Young LLP as the independent auditor of Piper Jaffray for the
year ending December 31, 2006; and |
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AGAINST the shareholder proposal requesting
declassification of the Board and annual election of all
directors. |
What if I do not specify how I want my shares
voted?
If you are a shareholder of record and submit a signed proxy
card or submit your proxy by Internet or telephone but do not
specify how you want to vote your shares on a particular manner,
we will vote your shares:
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FOR all of the nominees for director; |
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FOR the Piper Jaffray Companies Amended and Restated 2003
Annual and Long-Term Incentive Plan; |
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FOR the ratification of the selection of Ernst &
Young LLP as the independent auditor of Piper Jaffray for the
year ending December 31, 2006; and |
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AGAINST the shareholder proposal requesting
declassification of the Board and annual election of all
directors. |
Your vote is important. We urge you to vote, or to instruct
your broker, bank, trust or other nominee how to vote, on all
matters before the annual meeting. If you are a street name
holder and fail to instruct the shareholder of record how you
want to vote your shares on a particular matter,
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those shares are considered to be uninstructed. New
York Stock Exchange rules determine the circumstances under
which member brokers of the New York Stock Exchange may exercise
discretion to vote uninstructed shares held by them
on behalf of their clients who are street name holders. These
rules generally permit member brokers to exercise voting
discretion with respect to uninstructed shares only on certain
routine matters, including the election of directors and the
ratification of the selection of a companys independent
auditor. The rules do not permit member brokers to
exercise voting discretion with respect to the approval of an
equity incentive plan, such as our Amended and Restated 2003
Annual and Long-Term Incentive Plan, or with respect to the
shareholder proposal included in the proxy materials. Therefore,
member brokers may not vote uninstructed shares on these
matters. An uninstructed share that is not voted by a broker,
bank or other nominee is sometimes referred to as a broker
non-vote. A broker non-vote will have the same effect as a
vote against a proposal. For more information regarding the
effect of broker non-votes on the outcome of the vote, see below
under How are votes counted?
Our broker-dealer subsidiary, Piper Jaffray & Co., is a
member broker of the New York Stock Exchange and is a
shareholder of record with respect to shares of our common stock
held in street name on behalf of Piper Jaffray & Co.
clients. Because Piper Jaffray & Co. is our affiliate,
New York Stock Exchange rules prohibit Piper Jaffray &
Co. from voting uninstructed shares even on routine matters.
Instead, Piper Jaffray & Co. may vote uninstructed
shares on such matters only in the same proportion as the shares
represented by the votes cast by all shareholders of record with
respect to such matters.
Can I change my vote after submitting my proxy?
Yes. You may revoke your proxy and change your vote at any time
before your proxy is voted at the annual meeting, in any of the
following ways:
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by submitting a later-dated proxy by Internet or telephone
before the deadline stated on the enclosed proxy card; |
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by submitting a later-dated proxy to the corporate secretary of
Piper Jaffray Companies, which must be received by us before the
time of the annual meeting; |
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by sending a written notice of revocation to the corporate
secretary of Piper Jaffray Companies, which must be received by
us before the time of the annual meeting; or |
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by voting in person at the meeting. |
What vote is required to approve each item of business
included in the notice of meeting?
The three director nominees who receive the most votes cast at
the meeting in person or by proxy will be elected. The
affirmative vote of the holders of a majority of the outstanding
shares of common stock present in person or represented by proxy
and entitled to vote at the annual meeting is required to ratify
the selection of our independent auditor and to approve the
shareholder proposal. With respect to the proposal to approve
our Amended and Restated 2003 Annual and Long-Term Incentive
Plan, the affirmative vote of the holders of a majority of the
outstanding shares of common stock present or represented by
proxy and entitled to vote at the annual meeting is required to
approve the proposal, provided that the total votes cast on the
proposal represent more than 50% of the outstanding shares of
common stock entitled to vote on the proposal.
How are votes counted?
You may either vote FOR or WITHHOLD
authority to vote for each director nominee. You may vote
FOR, AGAINST or ABSTAIN on
the other proposals. If you properly submit your proxy but
withhold authority to vote for one or more director nominees or
abstain from voting on one or more of the proposals, your shares
will be counted as present at the meeting for the purpose of
determining a quorum and for the purpose of calculating the vote
on the particular matter(s) with
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respect to which you abstained from voting or withheld authority
to vote. If you do not submit your proxy or voting instructions
and also do not vote by ballot at the annual meeting, your
shares will not be counted as present at the meeting for the
purpose of determining a quorum unless you hold your shares in
street name and the broker, bank, trust or other nominee has
discretion to vote your shares and does so. For more information
regarding discretionary voting, see the information above under
What if I do not specify how I want my shares voted?
If you withhold authority to vote for one or more of the
director nominees or you do not vote your shares on this matter
(whether by broker non-vote or otherwise), this will have no
effect on the outcome of the vote. For any other proposal before
the meeting, if you abstain from voting or do not vote your
shares, or, for shares held in street name, if you abstain from
voting or do not submit voting instructions and your broker,
bank, trust or other nominee also does not vote your shares,
this will have the same effect as a vote against the proposal.
Approval of our Amended and Restated 2003 Annual and Long-Term
Incentive Plan requires that the total votes cast on the
proposal represent more than 50% of the outstanding shares of
common stock entitled to vote on this proposal. Consequently,
your abstention or failure to vote on this matter could have the
effect of precluding the proposal from passing.
Will my vote be kept confidential?
Yes. We have procedures to ensure that, regardless of whether
you vote by Internet, telephone, mail or in person:
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all proxies, ballots and voting tabulations that identify
shareholders are kept permanently confidential, except as
disclosure may be required by federal or state law or expressly
permitted by a shareholder; and |
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voting tabulations are performed by an independent third party. |
How can I attend the meeting?
All of our shareholders are invited to attend the annual
meeting. You may be asked to present valid photo identification,
such as a drivers license or passport, before being
admitted to the meeting. If you hold your shares in street name,
you also may be asked to present proof of ownership to be
admitted to the meeting. A brokerage statement or letter from
your broker, bank, trust or other nominee are examples of proof
of ownership.
To help us plan for the meeting, please let us know whether you
expect to attend, by responding affirmatively when prompted
during Internet or telephone voting or by marking the attendance
box on the proxy card.
Who pays for the cost of proxy preparation and
solicitation?
Piper Jaffray pays for the cost of proxy preparation and
solicitation, including the reasonable charges and expenses of
brokerage firms, banks, trusts or other nominees for forwarding
proxy materials to street name holders. We have retained
Georgeson Shareholder Communications Inc. to assist in the
solicitation of proxies for the annual meeting for a fee of
approximately $10,000, plus reimbursement of
out-of-pocket expenses.
We are soliciting proxies primarily by mail. In addition, our
directors, officers and regular employees as well as our proxy
solicitor may solicit proxies by telephone or facsimile or
personally. Our directors, officers and regular employees will
receive no additional compensation for their services other than
their regular compensation.
Can I receive future proxy statements and annual reports
electronically instead of receiving paper copies through the
mail?
Yes. If you are a shareholder of record, you may request and
consent to electronic delivery of future proxy statements and
annual reports by accessing the Web site www.proxyvote.com and
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following the instructions to vote. After you have voted your
proxy, you will be prompted regarding electronic delivery. If
your shares are held in street name, please contact your broker,
bank, trust or other nominee and ask about the availability of
electronic delivery.
ITEM 1 ELECTION OF DIRECTORS
The number of directors currently serving on our Board of
Directors is eight. Our Board of Directors is divided into three
classes of approximately equal size. The members of each class
are elected to serve a three-year term with the term of office
for each class ending in consecutive years. At this years
annual meeting, the terms of our Class III directors will
expire. B. Kristine Johnson, Jean M. Taylor and Richard A. Zona,
who currently serve as Class III directors with terms
expiring at the 2006 annual meeting, have been nominated for
reelection to the Board to serve until our 2009 annual meeting
of shareholders or until their successors are elected and
qualified. Our Board initially elected Ms. Taylor as a
director on July 27, 2005. Our chief executive officer
identified Ms. Taylor as a potential candidate, and the
Nominating and Governance Committee recommended
Ms. Taylors election to the Board after evaluating
her qualifications in accordance with our Corporate Governance
Principles and our Director Nominee Section Policy. Each of
the nominees has agreed to serve as a director if elected. The
three nominees receiving a plurality of the votes cast at the
meeting in person or by proxy will be elected. Proxies may not
be voted for more than three directors. If, for any reason, any
nominee becomes unable to serve before the annual meeting
occurs, the persons named as proxies may vote your shares for a
substitute nominee selected by the Board of Directors.
The Board of Directors recommends a vote FOR the
election of the three director nominees. Proxies will be voted
FOR the election of the three nominees unless otherwise
specified.
Following is biographical information for each of the nominees
for election as director and for the directors whose terms of
office will continue after the meeting.
CLASS III DIRECTORS NOMINEES FOR TERMS
ENDING IN 2009
B. KRISTINE JOHNSON: Age 54, director since
December 31, 2003. Since 2000, Ms. Johnson has been
president of Affinity Capital Management, a Minneapolis-based
venture capital firm that invests primarily in seed and
early-stage health care companies in the United States.
Ms. Johnson served as a consultant to Affinity Capital
Management in 1999. Prior to that, she was employed for
17 years at Medtronic, Inc., a manufacturer of cardiac
pacemakers, neurological and spinal devices and other medical
products, serving most recently as senior vice president and
chief administrative officer from 1998 to 1999. Her experience
at Medtronic also includes service as president of the vascular
business and president of the tachyarrhythmia management
business, among other roles.
JEAN M. TAYLOR: Age 43, director since July 27,
2005. Since 2001, Ms. Taylor has been the president of
Taylor Corporation, a privately held group of approximately 80
affiliated entrepreneurial companies engaged in marketing,
fulfillment, personalization and printing services. These
businesses operate throughout North America, Europe and
Australia and together employ more than 15,000 employees.
Ms. Taylor joined Taylor Corporation in 1994 as vice
president and served as executive vice president from 1999 to
2001.
RICHARD A. ZONA: Age 61, director since
December 31, 2003. Since 2000, Mr. Zona has been chairman
and chief executive officer of Zona Financial LLC, a
Minneapolis-based business that provides financial advisory
services, including strategic alternatives, capital planning and
mergers and acquisitions. Mr. Zona is the former vice chairman
of U.S. Bancorp, a position he held from 1996 to 2000. From
1989 to 1996, Mr. Zona was chief financial officer of
U.S. Bancorps predecessor, First Bank System, Inc.
Prior to that, Mr. Zona spent 19 years with the
accounting firm of Ernst & Young LLP.
Mr. Zona also serves on the boards of directors of New
Century Financial Corporation and Polaris Industries, Inc.
6
CLASS I DIRECTORS TERMS ENDING IN 2007
ANDREW S. DUFF: Age 48, chairman and chief executive
officer since December 31, 2003. Mr. Duff became
chairman and chief executive officer of Piper Jaffray Companies
following completion of our spin-off from U.S. Bancorp on
December 31, 2003. He has served as chief executive officer
of our broker dealer subsidiary since 2000 and as president of
our broker dealer subsidiary since 1996. He has been with Piper
Jaffray since 1980. Prior to the spin-off from
U.S. Bancorp, Mr. Duff also was a vice chairman of
U.S. Bancorp from 1999 through 2003.
SAMUEL L. KAPLAN: Age 69, director since
December 31, 2003. Mr. Kaplan is a partner and
founding member of the law firm of Kaplan, Strangis and Kaplan,
P.A., Minneapolis, Minnesota, and has served as the firms
president continuously since the firm was founded in 1978.
Mr. Kaplan also is a member of the board of directors of
Vyyo Inc.
FRANK L. SIMS: Age 55, director since
December 31, 2003. Mr. Sims has been a corporate vice
president and a member of the management corporate center at
Cargill, Inc. since July 2000. Cargill is a marketer and
distributor of agricultural and industrial products and
services. Mr. Sims has responsibility for global
transportation and supply chain solutions and serves as a member
of the risk management and financial solutions platform.
Mr. Sims joined Cargill in 1972 and has served in a number
of executive positions, including president of Cargills
North American Grain Division from 1998 to 2000. Mr. Sims
also is chairman of the Federal Reserve Bank of Minneapolis and
a member of the board of directors of Tennant Company.
CLASS II DIRECTORS TERMS ENDING IN 2008
MICHAEL R. FRANCIS: Age 43, director since
December 31, 2003. Since 2003, Mr. Francis has served as
executive vice president, marketing for Target Corporation.
Target Corporation operates Target-brand general merchandise
discount stores and an online business, Target.com.
Mr. Francis began his career with Marshall Fields
department stores in 1985 and has been with Target Corporation
since its acquisition of Marshall Fields in 1990. He
previously served Target Corporation as senior vice president,
marketing from 2001 to 2003 and as senior vice president,
marketing and visual presentation of the department store
division from 1995 to 2001. Prior to that, he held a variety of
positions within Target Corporation.
ADDISON L. PIPER: Age 59, vice chairman since
December 31, 2003. Mr. Piper became vice chairman of
Piper Jaffray following completion of our spin-off from
U.S. Bancorp on December 31, 2003. He has worked for
Piper Jaffray since 1969, serving as assistant equity syndicate
manager, director of securities trading and director of sales
and marketing. He served as chief executive officer from 1983 to
2000 and as chairman from 1988 to 2003. Since 1998,
Mr. Piper also has had responsibility for our venture and
private capital fund activities. Mr. Piper also is a member of
the board of directors of Renaissance Learning Corporation.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
The Board of Directors conducts its business through meetings of
the Board and the following standing committees: Audit,
Compensation, and Nominating and Governance. Each of the
standing committees has adopted and operates under a written
charter, all of which are available on our Web site at
www.piperjaffray.com. Other corporate governance documents
available on our Web site include our Corporate Governance
Principles, Director Independence Standards, Director Nominee
Selection Policy, Procedures for Contacting the Board of
Directors, Codes of Ethics and Business Conduct, and Complaint
Procedures Regarding Accounting and Auditing Matters. All of
these documents also are available in print to any shareholder
who requests them.
7
Director Independence
Under applicable rules of the New York Stock Exchange, a
majority of the members of our Board of Directors must be
independent, and no director qualifies as independent unless the
Board of Directors affirmatively determines that the director
has no material relationship with Piper Jaffray. To assist the
Board with these determinations, the Board has adopted
categorical Director Independence Standards, which are available
on our Web site at www.piperjaffray.com. Under the Director
Independence Standards, a director will be deemed independent
for purposes of service on the Board if:
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(1) |
the director does not have any relationship described in
Rule 303A.02(b) of the New York Stock Exchange corporate
governance rules; |
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(2) |
in the event the director has a relationship that is not of a
type described in the Director Independence Standards or that
exceeds the limits of the relationships described in the
Director Independence Standards, the Board determines in its
judgment, after broad consideration of all relevant facts and
circumstances, that the relationship is not material; and |
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(3) |
the Board reviews all commercial, banking, consulting, legal,
accounting, charitable, familial and other relationships the
director has with Piper Jaffray that are not of a type described
in the Director Independence Standards and determines in its
judgment, after broad consideration of all relevant facts and
circumstances, that the relationship is not material. |
The Board has affirmatively determined, in accordance with our
Director Independence Standards, that none of our non-employee
directors (Michael R. Francis, B. Kristine Johnson, Samuel L.
Kaplan, Frank L. Sims, Jean M. Taylor and Richard A. Zona) has a
material relationship with Piper Jaffray and that each of our
non-employee directors is independent. None of the non-employee
directors has a relationship described in Rule 303A.02(b)
of the New York Stock Exchange rules, and with the exception of
one relationship between Piper Jaffray and Ms. Johnson,
every relationship between Piper Jaffray and the non-employee
directors is of a type described in the Director Independence
Standards and does not exceed the limits set forth in the
Director Independence Standards. Ms. Johnsons
brother, Paul V. Olson, is employed by us as a financial advisor
in the private client services business of our broker-dealer
subsidiary. The Board broadly considered all the relevant facts
and circumstances of this relationship, including the fact that
Mr. Olson is not an executive officer of our company or of
our broker-dealer subsidiary and the Boards determination
that in her role as a director, Ms. Johnson exercises
independent judgment that is not unduly influenced by management
or by the fact that her brother is an employee of the firm.
After this analysis, the Board affirmatively determined in its
judgment that this relationship is not material and that
Ms. Johnson is independent.
Messrs. Duff and Piper cannot be considered independent
directors because of their employment as executive officers of
Piper Jaffray.
Lead Director
The Board of Directors has appointed Mr. Kaplan to serve as
the lead director of the Board. The lead director has the
following duties and responsibilities, as described in our
Corporate Governance Principles:
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Presides at all meetings of the board at which the chairman is
not present, including executive sessions of the independent
directors, and coordinates the agenda for and moderates these
executive sessions; |
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Serves formally as a liaison between the chief executive officer
and the independent directors; |
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Monitors board meeting schedules and agendas to ensure that
appropriate matters are covered and that there is sufficient
time for discussion of all agenda items; |
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Monitors information sent to the board and advises the chairman
as to the quality, quantity and timeliness of the flow of
information; |
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Has authority to call meetings of the independent
directors; and |
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If requested by major shareholders, makes himself available for
consultation and direct communication. |
Meetings of the Independent Directors
At both the Board and committee levels, our independent
directors meet regularly in executive sessions in which our
employee directors (Messrs. Duff and Piper) and other
members of management do not participate. Mr. Kaplan, our
lead director, serves as the presiding director of executive
sessions of the Board, and the chairperson of each committee
serves as the presiding director at executive sessions of that
committee.
Committees of the Board
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Members: |
Richard A. Zona, Chairperson
B. Kristine Johnson
Frank L. Sims
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The Audit Committees purpose is to oversee the integrity
of our financial statements, the independent auditors
qualifications and independence, the performance of our internal
audit function and independent auditor, and compliance with
legal and regulatory requirements. The Audit Committee has sole
authority to retain and terminate the independent auditor and is
directly responsible for the compensation and oversight of the
work of the independent auditor. The Audit Committee meets with
management and the independent auditor to review and discuss the
annual audited and quarterly unaudited financial statements,
reviews the integrity of our accounting and financial reporting
processes and audits of our financial statements, and prepares
the Audit Committee Report included in the proxy statement. The
responsibilities of the Audit Committee are more fully described
in the Committees charter, which is included as
Appendix A to this proxy statement. The Audit Committee met
eight times during 2005.
The Board of Directors has determined that all members of the
Audit Committee are independent (as that term is defined in the
applicable New York Stock Exchange rules and in regulations of
the Securities and Exchange Commission), and that all members
are financially literate and have the accounting or related
financial expertise required by the applicable New York Stock
Exchange rules, and that each of Messrs. Zona and Sims is
an audit committee financial expert as defined by
applicable regulations of the Securities and Exchange Commission.
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Members: |
Michael R. Francis, Chairperson
Frank L. Sims
Richard A. Zona
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The Compensation Committee discharges the Boards
responsibilities relating to compensation of the executive
officers, oversees succession planning for the executive
officers jointly with the Nominating and Governance Committee
and ensures that our compensation and employee benefit programs
are aligned with our compensation and benefits philosophy. The
Committee reviews and evaluates our compensation philosophy,
goals and objectives, and it approves corporate goals related to
the compensation of the chief executive officer, evaluates the
chief executive officers performance and determines the
compensation of the chief executive officer based on this
evaluation. The Committee also reviews and approves compensation
and compensatory arrangements applicable to our other executive
officers and is responsible for recommending stock ownership
guidelines for the executive officers and directors, for
recommending the compensation and benefits to be provided to our
non-employee directors, for reviewing and recommending the
establishment of broad-based
9
incentive compensation, equity-based, retirement or other
material employee benefit plans, and for discharging any duties
under the terms of these plans. The responsibilities of the
Compensation Committee are more fully described in the
Committees charter. The Compensation Committee met six
times during 2005. The Board of Directors has determined that
all members of the Compensation Committee are independent (as
that term is defined in applicable New York Stock Exchange
rules).
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Nominating and Governance Committee |
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Members: |
Samuel L. Kaplan, Chairperson
Michael R. Francis
B. Kristine Johnson
Jean M. Taylor
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The Nominating and Governance Committee identifies and
recommends individuals qualified to become members of the Board
of Directors and recommends to the Board sound corporate
governance principles and practices for Piper Jaffray. In
particular, the Committee assesses the independence of all Board
members, identifies and evaluates candidates for nomination as
directors, responds to director nominations submitted by
shareholders, recommends the slate of director nominees for
election at the annual meeting of shareholders and candidates to
fill vacancies between annual meetings, recommends qualified
members of the Board for membership on committees, oversees the
director orientation and continuing education programs, reviews
the Boards committee structure, reviews and assesses the
adequacy of our Corporate Governance Principles, evaluates the
annual evaluation process for the executive officers, the Board
and Board committees, and oversees the succession planning
process for the executive officers jointly with the Compensation
Committee. The responsibilities of the Nominating and Governance
Committee are more fully described in the Committees
charter. The Nominating and Governance Committee met six times
during 2005. The Board of Directors has determined that all
members of the Nominating and Governance Committee are
independent (as that term is defined in applicable New York
Stock Exchange rules).
Meeting Attendance
Our Corporate Governance Principles provide that our directors
are expected to attend meetings of the Board and of the
committees on which they serve, as well as our annual meeting of
shareholders. Our Board of Directors held eight meetings during
2005. Each of our directors attended at least 75% of the
meetings of the Board of Directors and the committees on which
he or she served during 2005. Attendance at our Board and
committee meetings during 2005 averaged 96% for incumbent
directors as a group.
Procedures for Contacting the Board of Directors
The Board has established a process for shareholders and other
interested parties to send written communications to the Board
or to individual directors. Such communications should be sent
by U.S. mail to the attention of the Office of the
Secretary, Piper Jaffray Companies, 800 Nicollet Mall,
Suite 800, Mail Stop J09N05, Minneapolis, Minnesota 55402.
Communications regarding accounting and auditing matters will be
handled in accordance with our Complaint Procedures Regarding
Accounting and Auditing Matters. Other communications will be
collected by the secretary of the company and delivered, in the
form received, to the lead director or, if so addressed, to a
specified director.
Procedures for Selecting and Nominating Director
Candidates
The Nominating and Governance Committee will consider director
candidates recommended by shareholders and has adopted a policy
that contemplates shareholders recommending and nominating
director candidates. A shareholder who wishes to recommend a
director candidate for nomination by the Board at the annual
meeting of shareholders or for vacancies of the Board that arise
between
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shareholder meetings must timely provide the Nominating and
Governance Committee with sufficient written documentation to
permit a determination by the Board whether such candidate meets
the required and desired director selection criteria set forth
in our bylaws, our Corporate Governance Principles and our
Director Nominee Selection Policy described below. Such
documentation and the name of the director candidate must be
sent by U.S. mail to the Chairperson, Nominating and
Governance Committee, c/o the Office of the Secretary,
Piper Jaffray Companies, 800 Nicollet Mall, Suite 800, Mail
Stop J09N05, Minneapolis, Minnesota 55402.
Alternatively, shareholders may directly nominate a person for
election to our Board by complying with the procedures set forth
in Article II, Section 2.4 of our bylaws, and with the
rules and regulations of the Securities and Exchange Commission.
Under our bylaws, only persons nominated in accordance with the
procedures set forth in the bylaws will be eligible to serve as
directors. In order to nominate a candidate for service as a
director, you must be a shareholder at the time you give the
Board notice of your nomination, and you must be entitled to
vote for the election of directors at the meeting at which your
nominee will be considered. In accordance with our bylaws,
director nominations generally must be made pursuant to notice
delivered to or mailed and received at our principal executive
offices at the address above, not later than the 90th day,
nor earlier than the 120th day, prior to the first
anniversary of the prior years annual meeting of
shareholders. Your notice must set forth all information
relating to the nominee that is required to be disclosed in
solicitations of proxies for the election of directors in an
election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange
Act of 1934 and
Rule 14a-11
thereunder (including the nominees written consent to
being named in the proxy statement as a nominee and to serving
as a director if elected).
As required by our Corporate Governance Principles and our
Director Nominee Selection Policy, when evaluating the
appropriate characteristics of candidates for service as a
director, the Nominating and Governance Committee takes into
account many factors. At a minimum, director candidates must
demonstrate high standards of ethics, integrity and
professionalism, independence, sound judgment, community
leadership and meaningful experience in business, law or finance
or other appropriate endeavor. Candidates also must be committed
to representing the long-term interests of our shareholders. In
addition to these minimum qualifications, the Committee
considers other factors it deems appropriate based on the
current needs and desires of the Board, including specific
business and financial expertise currently desired on the Board,
experience as a director of a public company, geography, age,
gender and ethnic diversity. The Committee will reassess the
qualifications of a director, including the directors
attendance and contributions at Board and committee meetings,
prior to recommending a director for reelection.
Compensation Program for Non-Employee Directors
Directors who are not Piper Jaffray employees receive an annual
cash retainer of $50,000 for service on our Board and Board
committees. No separate meeting fees are paid. The lead director
and the chairperson of the Audit Committee each receives an
additional annual cash retainer of $8,000. The chairperson of
each other standing committee of the Board each receives an
additional annual cash retainer of $5,000. In addition to the
cash retainer, each non-employee director receives a grant of
stock options with a fair market value of $20,000 on the date of
the directors initial election to the Board. Non-employee
directors who will continue their service on the Board following
an annual meeting of shareholders receive a grant of stock
options valued at $50,000 on the date of the annual meeting. In
both cases, the number of shares underlying the grant of stock
options is determined using the Black-Scholes option-pricing
model, and the options are exercisable immediately, have a
10-year term and have
an exercise price equal to the closing price of our common stock
on the date of grant. The options are granted under our Amended
and Restated 2003 Annual and Long-Term Incentive Plan. These
equity awards are intended to further align the interests of our
directors with those of our shareholders. Non-employee directors
who join our Board after the first month of a calendar year are
11
paid pro rata annual retainers and awarded pro rata equity
awards based on the period during which they serve as directors
during the year.
Beginning in 2005, our non-employee directors became eligible to
participate in the Piper Jaffray Companies Deferred Compensation
Plan for Non-Employee Directors, which was designed to
facilitate increased equity ownership in the company by our
non-employee directors. The plan permits our non-employee
directors to defer all or a portion of the cash fees payable to
them for service as a director of Piper Jaffray for any calendar
year. Amounts deferred by a participating director are credited
to a recordkeeping account and deemed invested in shares of our
common stock as of the date the deferred fees otherwise would
have been paid to the director. This deemed investment is
measured in phantom stock, and no shares of common stock are
reserved, repurchased or issued pursuant to the plan. The fair
market value of all phantom stock credited to a directors
account will be paid out to the director (or, in the event of
the directors death, to his or her beneficiary) in a
single lump-sum cash payment following the directors
cessation of service as a non-employee director. The amount paid
out will be determined based on the fair market value of the
stock on the last day of the year in which the directors
service with us terminates. Directors who elect to participate
in the plan are not required to pay income taxes on amounts
deferred but will instead pay income taxes on the amount of the
lump-sum cash payment paid to the director (or his or her
beneficiary) at the time of such payment. Our obligations under
the plan are unsecured general obligations to pay in the future
the value of the participants account pursuant to the
terms of the plan.
Non-employee directors also may participate in our charitable
gift matching program, pursuant to which we will match an
employees or directors gifts to eligible
organizations dollar for dollar from a minimum of $50 up to an
aggregate maximum of $1,000 per year. In addition, our
non-employee directors are reimbursed for reasonable
out-of-pocket expenses
incurred in connection with their service on the Board and
committees of the Board. Employees of Piper Jaffray who also
serve as directors receive compensation for their services as
employees, but they do not receive any additional compensation
for their service as directors. No other compensation is paid to
our Board members in their capacity as directors. Non-employee
directors do not participate in our employee benefit plans.
The following table contains compensation information for our
non-employee directors for the year ended December 31, 2005.
Non-Employee Director Compensation for 2005
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Cash Fees Deferred | |
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Under the Deferred | |
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Compensation Plan | |
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for Non-Employee | |
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Option | |
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Directors | |
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Awards(3) | |
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($) | |
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($) | |
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($) | |
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($) | |
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Michael R. Francis
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105,000 |
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27,500 |
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27,500 |
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50,000 |
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B. Kristine Johnson
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100,000 |
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50,000 |
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50,000 |
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Samuel L. Kaplan
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108,463 |
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58,463 |
(1) |
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50,000 |
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Frank L. Sims
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100,000 |
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50,000 |
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50,000 |
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Jean M. Taylor
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63,288 |
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21,644 |
(2) |
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41,644 |
(4) |
Richard A. Zona
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108,000 |
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58,000 |
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50,000 |
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(1) |
Consists of the $50,000 annual cash retainer, the $5,000 annual
cash retainer for serving as chair of the Nominating and
Governance Committee and a pro rata amount of the additional
$8,000 annual cash retainer reflecting Mr. Kaplans
appointment as lead director effective July 27, 2005. |
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(2) |
Consists of a pro rata amount of the $50,000 annual cash
retainer reflecting Ms. Taylors election to the Board
of Directors effective July 27, 2005. |
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(3) |
Each non-employee director except Ms. Taylor holds
exercisable options to purchase 9,918 shares of our
common stock, and the value of the
in-the-money portion of
the options held by each director as of December 31, 2005
was $70,784. Ms. Taylor holds exercisable options to
purchase 4,001 shares of our common stock, all of
which are in-the-money
options, with an
in-the-money value at
December 31, 2005 of $28,007. As of the date of this proxy
statement, none of the options held by the non-employee
directors have been exercised. The value of the
in-the-money options at
fiscal year-end was calculated based on the difference between
the closing price of our common stock on December 30, 2005,
the last business day of our fiscal year, and the option
exercise price, multiplied by the number of shares underlying
each option. |
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(4) |
Consists of the $20,000 initial option grant and a pro rata
amount of the $50,000 annual option grant, each reflecting
Ms. Taylors election to the Board effective
July 27, 2005. |
Codes of Ethics and Business Conduct
We have adopted a Code of Ethics and Business Conduct applicable
to our employees, including our principal executive officer,
principal financial and accounting officer, controller and other
employees performing similar functions, and a separate Code of
Ethics and Business Conduct applicable to our directors.
Directors who also serve as officers of Piper Jaffray must
comply with both codes. Both codes are available on our Web site
at www.piperjaffray.com and are available in print to any
shareholder who requests them. We will post on our Web site at
www.piperjaffray.com any amendment to, or waiver from, a
provision of either of our Codes of Ethics and Business Conduct
within four business days following the date of such amendment
or waiver.
EXECUTIVE COMPENSATION
Report of the Compensation Committee
The Compensation Committee of the Board of Directors, which
consists entirely of independent directors, is responsible for
discharging the Boards responsibilities relating to
compensation of the companys executive officers,
overseeing the companys compensation plans and policies,
including administering the Piper Jaffray Companies Amended and
Restated 2003 Annual and Long-Term Incentive Plan, and ensuring
that the companys compensation and benefits philosophy is
reflected in its compensation and benefits programs. The
Committee also is responsible for reviewing and approving
corporate goals and objectives relevant to the compensation of
the chief executive officer, annually evaluating the performance
of the chief executive officer against these goals and
objectives, and determining the compensation for the chief
executive officer based on this evaluation. The Committees
charter reflects these responsibilities.
The companys executive compensation program is designed to
attract and retain motivated individuals who will lead Piper
Jaffray to achieve long-term success, as measured by increasing
shareholder value. The compensation program has the following
core objectives:
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Pay-for-Performance A substantial portion of
each executive officers total compensation is intended to
be variable and delivered on a pay-for-performance basis. The
amount of compensation paid is based first on the performance of
the company and each business unit as measured against internal
goals and peer performance, and second on individual
performance. Each of our executive officers is evaluated against
individualized goals reflecting his or her role in the
corporation and business unit and professional development
objectives. We apply this same pay-for-performance objective on
a company-wide basis. |
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Stock Ownership in Our Company We are
committed to utilizing the companys compensation program
to build an ownership culture among all of the companys
employees and to |
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expand the breadth and depth of employee ownership over time. We
believe that employee ownership directly aligns the interests of
employees and shareholders and will promote long-term
shareholder value creation. This is particularly true in a human
capital business of Piper Jaffrays size, where the
performance of individual employees can have a direct and
meaningful effect on financial performance and on the
companys culture. In addition, many of the companys
competitors have attained significant levels of employee
ownership over the years, and we believe that our ability to
create a similar ownership culture at Piper Jaffray is a
critical component of the companys long-term competitive
success. This philosophy is reflected in our compensation
program for executive officers as well as for employees
generally. |
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Approximately 84% of our employees maintain an ownership stake
in the company, achieved through one or more of the following
methods: |
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Each year, a substantial percentage of the companys
employees receive a portion of their annual incentive
compensation in the form of equity awarded under the
companys Amended and Restated 2003 Annual and Long-Term
Incentive Plan. Approximately 34% of our employees hold stock
option and/or restricted stock awards received as part of their
annual incentive compensation. |
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Substantially all of the companys employees are eligible
to participate in the 401(k) component of the companys
Retirement Plan and may voluntarily elect to invest in the Piper
Jaffray Companies stock fund within that plan. For the past two
years, the company has made its 401(k) matching contributions to
plan participants in the form of Piper Jaffray Companies common
stock. |
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For the past two years, the company has made discretionary
profit-sharing contributions to all employees in the form of
Piper Jaffray Companies stock allocated to employees
profit-sharing accounts in the Retirement Plan. |
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Recruiting and Retention Due to the intensely
competitive nature of the securities industry, we are committed
to providing compensation opportunities, contingent upon
performance, that are competitive with practices of other
similar organizations in our industry. The companys
recruiting and retention compensation practices reflect the
companys objective to achieve long-term success, as
measured by increasing shareholder value. |
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Compensation Program Elements |
The key components of the executive compensation program are
base salary, annual incentive compensation and long-term
incentive compensation.
The purpose of base salary is to provide a set amount of cash
compensation for each employee that is not variable in nature
and is competitive with market practices. Adjustments are made
effective March 1 each year and are based on each
employees performance for the prior year, his or her
experience, expertise and position within the company, and
compensation levels for comparable positions at comparable
public companies and other companies in the securities industry
with whom the company competes, as reported in external
compensation sources. Base salaries for the executive officers
are reviewed and set annually by the Compensation Committee.
Consistent with industry practice and our pay-for-performance
objective, the base salary for each of the companys
executive officers generally accounts for a relatively small
portion of his or her overall compensation. In 2005, base
salaries represented from approximately 8% percent to 21%
percent of the total cash and equity compensation of our chief
executive officer and the heads of our three principal
businesses (private client services, corporate and institutional
services, and public finance services), and base salaries
represented from 31% percent to 44% percent of the total cash
and equity compensation of our vice chairman and the heads of
our corporate support functions.
14
|
|
|
Annual Incentive
Compensation |
The annual incentive program is a key component of the
companys compensation strategy. The purpose of the annual
incentive program is to provide cash and equity compensation
that is variable based on the achievement of annual performance
goals. The program is administered by the Compensation Committee
under the Piper Jaffray Companies Amended and Restated 2003
Annual and Long-Term Incentive Plan.
In February 2005, the Committee established performance goals
applicable to the Companys executive officers under the
2005 annual incentive program, other than for Francis E.
Fairman, who did not become an executive officer until
July 1, 2005, and for whom an incentive program for the
second half of 2005 was established in August 2005. For 2005,
each executive officer was entitled to receive annual incentive
compensation based on the companys pre-tax operating
income for the year (except for Mr. Fairman, whose
incentive compensation was based on the companys pre-tax
operating income for the second half of the year), as adjusted
to eliminate certain compensation and benefits expenses and
certain other expenses, losses, income or gains that are unusual
in nature or infrequent in occurrence. Following the end of
fiscal year 2005, the Committee determined the amount of the
incentive awards to be paid to each executive officer based on
the companys pre-tax operating income. The amounts of the
awards were subject to dollar and share limits established under
the incentive program and included in the companys Amended
and Restated 2003 Annual and Long-Term Incentive Plan, and were
further adjusted downward from the maximum by the Committee
based on the officers respective performance against their
personal performance plans, reflecting specific corporate,
business unit and individual performance objectives. Such
objectives may include, for example, the achievement of
financial and operating plans, the implementation of strategic
initiatives, effective leadership, and progress against
organizational, management and personal development goals. When
determining the amount of the downward adjustments, the
Committee also took into account the competitive pay range for
individuals in similar positions at peer companies.
Consistent with our philosophy regarding employee ownership, the
executive officers annual incentive compensation for 2005
was paid out in a combination of cash and equity, in the form of
restricted stock and stock options, with the equity component
representing from 40% to 50% of the total annual incentive
payout, depending on the individuals position. The equity
component was paid out 85% in restricted stock and 15% in stock
options. Both the stock options and the restricted stock were
granted under the Amended and Restated 2003 Annual and Long-Term
Incentive Plan and will vest in full on February 21, 2009.
For 2006, annual incentive awards for the chief executive
officer and other executive officers also will be based on the
companys pre-tax operating income, adjusted as described
above. The 2006 annual incentive awards also will be paid out in
a combination of cash and equity.
|
|
|
Long-Term Incentive Awards |
Long-term incentives are intended to provide compensation
opportunities based on the creation of shareholder value and an
increase in the companys stock price. The equity
compensation awarded to our employees as part of the annual
incentive program has a significant long-term incentive
component, as a portion of the annual incentive compensation is
paid in the form of restricted stock and stock options. These
awards are subject to three-year cliff vesting, and the stock
options have a ten-year term. The upside potential of these
equity awards will not be realized by employees unless the
companys performance improves over the vesting period
and/or the term of the awards. The stock options will have no
value to employees unless the companys performance
improves in future years, and the restricted stock will lose
value if the companys performance declines. A substantial
portion of the total compensation paid to our executive officers
is in the form of equity, creating a long-term incentive for the
officers and strengthening their focus on the creation of
shareholder value. In 2005, the amount of equity awarded as a
percentage of each executive officers total compensation
(including
15
for this purpose base salary and incentive compensation)
represented from 22% to 41% of total compensation, depending on
the individuals position.
|
|
|
Executive Stock Ownership |
We have adopted stock ownership guidelines to ensure that each
executive officer maintains a meaningful equity stake in the
company, which serves as both a long-term incentive and also
strengthens retention. The guidelines provide for the executive
officers to hold Piper Jaffray Companies stock with a value
equal to seven times base salary for the chief executive
officer, and two to five times salary for the other executive
officers, depending on the individuals position, within
five years after becoming subject to the guidelines. In addition
to the ownership guidelines, we have adopted a share retention
policy requiring the executive officers to hold at least 50% of
the shares awarded to them through the companys incentive
plans, or acquired upon exercise of stock options awarded to
them, net of taxes and transaction costs, for a minimum period
of five years.
|
|
|
Chief Executive Officer
Compensation |
In determining Mr. Duffs incentive compensation for
2005 and his base salary for 2006, the Compensation Committee
took the following steps:
|
|
|
|
|
Reviewed the financial performance and the total relative
shareholder return of Piper Jaffray Companies, comparable public
companies and other companies in the securities industry with
which Piper Jaffray competes; |
|
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|
Analyzed data regarding the types and amount of compensation,
including incentive compensation, paid to the chief executive
officers of comparable public companies and other companies in
the securities industry with which Piper Jaffray competes; |
|
|
|
Reviewed historical compensation information for Mr. Duff,
including past grants of equity; |
|
|
|
Considered feedback from Mr. Duff, other members of
management, and the Board of Directors regarding
Mr. Duffs performance for 2005; and |
|
|
|
Independently evaluated Mr. Duffs performance as
chief executive officer against the 2005 performance goals and
objectives that had been established for him by the Compensation
Committee. |
After completing this process, the Compensation Committee
approved incentive compensation for Mr. Duff under the
annual incentive program in the amount of $1,800,000, consisting
of $900,000 in cash and $900,000 in equity. The equity component
consisted of $765,000 in restricted stock (a total of
15,988 shares) and $135,000 in stock options (a total of
6,098 shares). The allocation of Mr. Duffs
incentive compensation (50% in cash, 50% in equity) is
consistent with our compensation philosophy to pay a significant
portion of incentive compensation in equity in lieu of cash to
ensure an appropriate focus on shareholder value creation and
the long-term success of the company. The number of shares of
restricted stock was determined based on the closing price of
the companys common stock on February 21, 2006, and
the number of shares underlying the stock option was based on
the Black-Scholes value of the option on that date. The
restricted stock and option vest in full on February 21,
2009.
Mr. Duffs incentive compensation reflects our view of
his and the companys performance for 2005. The company
achieved strong results in the second half of the year driven by
increased advisory services revenue and a diligent focus on
expenses, but full-year results suffered from the lagging
performance of our private client business and the impact of
reduced revenues in our fixed income and equity institutional
sales and trading businesses. Mr. Duffs compensation
reflects this mixed performance. His compensation also reflects
our evaluation of his personal performance against
pre-established goals and objectives involving matters such as
leadership, tone at the top, the companys guiding
principles, inclusion, communications and decision making,
organizational development and
16
strategic initiatives. His annual incentive compensation
decreased by 33% from $2,700,000 in 2004 to $1,800,000 in 2005.
Mr. Duffs annual base salary for 2006 remains
unchanged at $380,000. We believe Mr. Duffs salary
continues to be appropriate based on market data, his experience
and his prior-year performance.
|
|
|
Policy on Qualifying
Compensation for Deductibility |
Section 162(m) of the Internal Revenue Code limits
deductions for non-performance-based annual compensation in
excess of $1.0 million paid to the companys chief
executive officer and its four other most highly paid executive
officers. Our policy is to maximize the tax deductibility of
compensation payments to our executive officers. Accordingly, in
2004 we sought and obtained shareholder approval for the Piper
Jaffray Companies Amended and Restated 2003 Annual and Long-Term
Incentive Plan, under which annual cash and equity incentives
are paid. The plan is designed and administered to qualify
compensation awarded thereunder as performance-based
to ensure that the tax deduction is available to the company.
From time to time we may, however, authorize payments to
executive officers that may not be fully deductible if we
believe such payments are in the interests of shareholders. We
did not do so in 2005.
Compensation Committee of the Board of Directors of Piper
Jaffray Companies
Michael R. Francis, Chairperson
Frank L. Sims
Richard A. Zona
Summary Compensation Table
The following table contains compensation information for our
chief executive officer and our four other most highly
compensated executive officers for the year ended
December 31, 2005. The information for 2003 included in
this table reflects compensation earned by the individuals for
service with us while Piper Jaffray was a subsidiary of
U.S. Bancorp and, for Mr. Duff, for his service as a
vice chairman of U.S. Bancorp, a position he held (in
addition to serving as an executive officer of our broker-dealer
subsidiary) from 1999 until our spin-off from U.S. Bancorp
on December 31, 2003.
Summary Compensation Table
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Long-Term Compensation Awards | |
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| |
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|
Annual Compensation | |
|
Awards | |
|
Payouts | |
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| |
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| |
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| |
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Total | |
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Restricted | |
|
Number of | |
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|
|
|
|
|
Compensation | |
|
|
|
Other Annual | |
|
Stock | |
|
Securities | |
|
All Other | |
Name and Principal |
|
|
|
Value | |
|
Salary | |
|
Bonus | |
|
Compensation | |
|
Award(4) | |
|
Underlying | |
|
Compensation(6) | |
Position |
|
Year | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
Options(5) | |
|
($) | |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
Andrew S. Duff
|
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|
2005 |
|
|
|
2,183,685 |
|
|
|
380,000 |
|
|
|
900,000 |
|
|
|
|
|
|
|
765,000 |
|
|
|
6,098 |
|
|
|
3,675 |
|
|
Chairman and CEO
|
|
|
2004 |
|
|
|
3,086,074 |
|
|
|
380,000 |
|
|
|
1,350,000 |
|
|
|
|
|
|
|
1,147,500 |
|
|
|
11,719 |
|
|
|
6,070 |
|
|
|
|
|
2003 |
|
|
|
8,396,600 |
|
|
|
379,700 |
|
|
|
2,266,250 |
(1) |
|
|
|
|
|
|
632,765 |
|
|
|
24,940 |
|
|
|
4,575,191 |
|
Francis E. Fairman
|
|
|
2005 |
|
|
|
897,294 |
|
|
|
190,000 |
|
|
|
385,000 |
|
|
|
|
|
|
|
267,750 |
|
|
|
2,135 |
|
|
|
7,275 |
|
|
Head of Public
|
|
|
2004 |
|
|
|
780,857 |
|
|
|
172,183 |
|
|
|
453,350 |
|
|
|
9,000 |
(2) |
|
|
112,618 |
|
|
|
1,391 |
|
|
|
9,586 |
|
|
Finance Services
|
|
|
2003 |
|
|
|
1,166,849 |
|
|
|
158,100 |
|
|
|
675,000 |
|
|
|
767 |
(2) |
|
|
150,000 |
|
|
|
3,632 |
|
|
|
103,950 |
|
Robert W. Peterson
|
|
|
2005 |
|
|
|
1,631,276 |
|
|
|
205,000 |
|
|
|
770,000 |
|
|
|
19,093 |
(3) |
|
|
535,500 |
|
|
|
4,269 |
|
|
|
7,167 |
|
|
Head of Private
|
|
|
2004 |
|
|
|
1,810,798 |
|
|
|
198,033 |
|
|
|
880,000 |
|
|
|
3,287 |
(3) |
|
|
612,000 |
|
|
|
6,250 |
|
|
|
9,478 |
|
|
Client Services
|
|
|
2003 |
|
|
|
2,042,711 |
|
|
|
163,200 |
|
|
|
922,500 |
|
|
|
8,625 |
(3) |
|
|
330,498 |
|
|
|
1,938 |
|
|
|
575,717 |
|
Addison L. Piper
|
|
|
2005 |
|
|
|
754,184 |
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
|
|
|
|
212,500 |
|
|
|
1,694 |
|
|
|
4,179 |
|
|
Vice Chairman
|
|
|
2004 |
|
|
|
756,289 |
|
|
|
249,700 |
|
|
|
250,000 |
|
|
|
|
|
|
|
212,500 |
|
|
|
2,171 |
|
|
|
6,574 |
|
|
|
|
|
2003 |
|
|
|
924,539 |
|
|
|
248,200 |
|
|
|
255,000 |
|
|
|
|
|
|
|
85,000 |
|
|
|
7,749 |
|
|
|
167,721 |
|
Thomas P. Schnettler
|
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|
2005 |
|
|
|
2,662,972 |
|
|
|
205,000 |
|
|
|
1,306,250 |
|
|
|
75,693 |
(3) |
|
|
908,438 |
|
|
|
7,241 |
|
|
|
7,275 |
|
|
Head of Corporate and
|
|
|
2004 |
|
|
|
3,469,902 |
|
|
|
198,033 |
|
|
|
1,787,500 |
|
|
|
12,271 |
(3) |
|
|
1,243,125 |
|
|
|
12,696 |
|
|
|
9,586 |
|
|
Institutional Services
|
|
|
2003 |
|
|
|
2,392,577 |
|
|
|
163,200 |
|
|
|
1,391,250 |
|
|
|
37,225 |
(3) |
|
|
498,452 |
|
|
|
1,938 |
|
|
|
260,279 |
|
|
|
(1) |
Consists of (a) a cash bonus of $1,766,250 and (b) a
discretionary cash award of $500,000 granted in connection with
our spin-off from U.S. Bancorp. The discretionary award is
payable in four equal |
17
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|
installments of $125,000 on each of March 31, 2004, 2005,
2006 and 2007, so long as Mr. Duff remains employed by
Piper Jaffray on each payment date. See Cash
Award Agreements in Connection with Our Spin-Off from
U.S. Bancorp below. |
|
|
(2) |
The 2004 amount consists of a one-time distribution of $9,000
relating to a deferred compensation investment. The 2003 amount
consists of tax reimbursement in connection with an award trip
attended by Mr. Fairman. |
|
(3) |
Consists of amounts paid under the U.S. Bancorp Piper
Jaffray Inc. Second Century Growth Deferred Compensation Plan
(As Amended and Restated Effective September 30, 1998) and
the U.S. Bancorp Piper Jaffray Inc. Second Century 2000
Deferred Compensation Plan. Certain key employees were eligible
to participate in these plans. Under the plans, participants
were granted a deferred bonus award, which was deemed invested
in certain measuring investments. Following a liquidity event
(as defined in the plans) for a particular measuring investment,
the participant receives a benefit payment based on the deemed
return to the participant with respect to the measuring
investment as well as payment of that portion of the
participants account that was deemed invested.
Participants may continue to receive payments under the plans
until a liquidity or bankruptcy event has occurred with respect
to each measuring investment in which deferred bonus awards are
deemed to be invested. Messrs. Peterson and Schnettler were
granted deferred bonus awards under these plans in 1996, 1997,
1998 and/or 2000, and received deferred bonus payouts of $19,093
and $48,580, respectively, in 2005. Mr. Schnettlers
2005 amount also includes a $27,113 distribution from a separate
deferred compensation investment that had a liquidity event in
2005. The liquidity event was a one-time event that will result
in two payments to Mr. Schnettler with the second payment
expected to occur in 2007. The amount of the second payment is
not currently determinable. |
|
(4) |
The 2005, 2004 and 2003 awards of restricted stock were granted
on February 21, 2006, February 22, 2005, and
February 12, 2004, respectively, as part of each executive
officers annual incentive compensation for the year
indicated. The awards will vest in full on February 21,
2009, February 22, 2008, and February 12, 2007,
respectively. The restricted stock is subject to forfeiture
prior to vesting in the event the officer is terminated for
cause or misappropriates confidential company information,
participates in a business similar to Piper Jaffray, accepts a
similar position with another company or solicits employees,
customers or clients of Piper Jaffray after certain terminations
of employment with Piper Jaffray. Recipients have the right to
receive dividends (if any) on and to vote the shares of Piper
Jaffray restricted stock they hold. The number of shares awarded
to each executive officer in each year was determined by
dividing specified dollar amounts representing a percentage of
the individuals total bonus compensation for that year by
(a) for 2005, $47.85, the closing price of our common stock
on February 21, 2006; (b) for 2004, $39.62, the
closing price of our common stock on February 22, 2005; and
(c) for 2003, $47.30, the average closing price of our
common stock for the five consecutive trading days ended
February 11, 2004. |
As required by the rules of the Securities and Exchange
Commission, the award value that is reported in the Summary
Compensation Table was determined by multiplying the closing
sales price of one share of Piper Jaffray common stock on the
grant date of the restricted stock by the number of shares
awarded. The value of each officers aggregate restricted
stock holdings at December 31, 2005 (as determined based on
a closing price of $40.40 for our common stock on
December 30, 2005, the last business day of our fiscal
year, and the number of restricted shares held as of
December 31, 2005) were: for Mr. Duff, $1,673,004 and
41,411 shares; for Mr. Fairman, $243,006 and
6,015 shares; for Mr. Peterson, $886,740 and
21,949 shares; for Mr. Piper, $289,345 and
7,162 shares; and for Mr. Schnettler, $1,663,753 and
41,182 shares.
|
|
(5) |
The 2005, 2004 and 2003 entries for the number of securities
underlying options reflect stock option awards granted to the
executive officers on February 21, 2006, February 22,
2005 and February 12, 2004, respectively. These awards were
part of the annual incentive compensation paid to the executive
officers for 2005, 2004 and 2003 and had a value at the time of
grant as follows: for Mr. Duff, $135,010, $202,504 and
$542,694, respectively; for Mr. Fairman, $47,269, $24,036
and $79,032, |
18
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respectively; for Mr. Peterson, $94,516, $108,000 and
$42,171, respectively; for Mr. Piper, $37,505, $37,515 and
$168,618, respectively; and for Mr. Schnettler, $160,316,
$219,387 and $42,171, respectively. |
|
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(6) |
All other compensation consists of the following: |
|
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|
Andrew S. | |
|
Francis E. | |
|
Robert W. | |
|
Addison L. | |
|
Thomas P. | |
Form of All Other Compensation |
|
Year | |
|
Duff | |
|
Fairman | |
|
Peterson | |
|
Piper | |
|
Schnettler | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Cash award replacing value lost as a
|
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|
2005 |
|
|
|
|
|
|
|
|
|
|
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|
|
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|
result of the expiration of |
|
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2004 |
|
|
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|
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|
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|
|
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|
|
|
|
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|
|
forfeiture of U.S. Bancorp stock |
|
|
2003 |
|
|
$ |
4,567,096 |
|
|
$ |
87,180 |
|
|
$ |
559,622 |
|
|
$ |
158,447 |
|
|
$ |
244,184 |
|
options and/or restricted stock in
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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connection with our spin-off
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) matching contributions made
|
|
|
2005 |
|
|
|
|
|
|
$ |
3,600 |
|
|
$ |
3,600 |
|
|
|
|
|
|
$ |
3,600 |
|
under the Piper Jaffray Companies
|
|
|
2004 |
|
|
|
|
|
|
$ |
3,516 |
|
|
$ |
3,516 |
|
|
|
|
|
|
$ |
3,516 |
|
Retirement Plan (for 2005 and 2004) or
|
|
|
2003 |
|
|
|
|
|
|
$ |
8,000 |
|
|
$ |
8,000 |
|
|
|
|
|
|
$ |
8,000 |
|
U.S. Bancorp 401(k) Savings Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(for 2003)
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|
|
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|
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|
|
|
|
|
|
|
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|
Profit-sharing contribution made
|
|
|
2005 |
|
|
$ |
2,730 |
|
|
$ |
2,730 |
|
|
$ |
2,730 |
|
|
$ |
2,730 |
|
|
$ |
2,730 |
|
under the Piper Jaffray Companies |
|
|
2004 |
|
|
$ |
5,125 |
|
|
$ |
5,125 |
|
|
$ |
5,125 |
|
|
$ |
5,125 |
|
|
$ |
5,125 |
|
Retirement Plan |
|
|
2003 |
|
|
$ |
7,825 |
|
|
$ |
7,825 |
|
|
$ |
7,825 |
|
|
$ |
7,825 |
|
|
$ |
7,825 |
|
Life insurance allowance
|
|
|
2005 |
|
|
$ |
270 |
|
|
$ |
270 |
|
|
$ |
162 |
|
|
$ |
774 |
|
|
$ |
270 |
|
|
|
|
2004 |
|
|
$ |
270 |
|
|
$ |
270 |
|
|
$ |
162 |
|
|
$ |
774 |
|
|
$ |
270 |
|
|
|
|
2003 |
|
|
$ |
270 |
|
|
$ |
270 |
|
|
$ |
270 |
|
|
$ |
774 |
|
|
$ |
270 |
|
Long-term disability insurance
|
|
|
2005 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
$ |
675 |
|
allowance |
|
|
2004 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
$ |
675 |
|
|
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For detail regarding payment of the cash awards, see
Cash Award Agreements in Connection with Our
Spin-Off from U.S. Bancorp below. |
Perquisites
The Summary Compensation Table does not include perquisites and
other personal benefits, securities or property received by the
executive officers because the aggregate amount of this
compensation for each of the executive officers named in the
table is the lesser of either $50,000 or 10% of the total annual
salary and bonus reported for each such officer, and therefore
is not required to be included under regulations of the
Securities and Exchange Commission. The perquisites received in
2005 by our executive officers named in the Summary Compensation
Table consist of reimbursement for the cost of a parking space
and, for some of our executive officers, reimbursement for a
portion of the dues paid by them for business-related club
membership. The companys cost for these perquisites in
2005 did not exceed $3,000 for parking and $10,000 for the
reimbursement of club dues for any individual executive officer.
All of our executive officers are eligible to participate in our
charitable gift matching program, which is open to all of our
employees and directors. Pursuant to this program, we will match
an employees or directors gifts to eligible
organizations dollar for dollar from a minimum of $50 up to an
aggregate maximum of $1,000 per year.
Option Grants in Last Fiscal Year
The following table provides information about options to
purchase shares of our common stock that were granted to our
chief executive officer and the other executive officers named
in the Summary
19
Compensation Table on February 22, 2005. The table does not
include options granted on February 21, 2006, that were
included in the Summary Compensation Table for 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of | |
|
|
|
|
|
|
|
|
Number of | |
|
Total Options | |
|
|
|
|
|
|
|
|
Securities | |
|
Granted to | |
|
Exercise Price | |
|
|
|
Grant Date | |
|
|
Underlying | |
|
Employees in | |
|
per Share | |
|
|
|
Present Value | |
Name |
|
Options Granted | |
|
Fiscal Year | |
|
($) | |
|
Expiration Date | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Andrew S. Duff
|
|
|
11,719 |
|
|
|
2.98 |
(1) |
|
|
39.62 |
(2) |
|
|
February 22, 2015 |
|
|
|
202,504 |
(3) |
Francis E. Fairman
|
|
|
1,391 |
|
|
|
0.35 |
(1) |
|
|
39.62 |
(2) |
|
|
February 22, 2015 |
|
|
|
24,036 |
(3) |
Robert W. Peterson
|
|
|
6,250 |
|
|
|
1.59 |
(1) |
|
|
39.62 |
(2) |
|
|
February 22, 2015 |
|
|
|
108,000 |
(3) |
Addison L. Piper
|
|
|
2,171 |
|
|
|
0.55 |
(1) |
|
|
39.62 |
(2) |
|
|
February 22, 2015 |
|
|
|
37,515 |
(3) |
Thomas P. Schnettler
|
|
|
12,696 |
|
|
|
3.22 |
(1) |
|
|
39.62 |
(2) |
|
|
February 22, 2015 |
|
|
|
219,387 |
(3) |
|
|
(1) |
Based on options granted to employees during 2005 to purchase a
total of 393,786 shares of our common stock. |
|
|
(2) |
The exercise price is the closing price of our common stock on
February 22, 2005. |
|
(3) |
The options granted on February 22, 2005, were valued using
a Black-Scholes option pricing method that assumed a risk-free
interest rate of 3.76%, a dividend yield of zero, a stock
volatility factor of 38.57% and an expected life of the options
of six years, resulting in an option value of $17.28. |
Year-End Option Values
The following table provides information about unexercised
options to purchase shares of our common stock held by our chief
executive officer and the other executive officers named in the
Summary Compensation Table as of December 31, 2005. In
2005, options were granted on February 22, 2005. The
options included in the Summary Compensation Table for 2005 were
granted on February 21, 2006, and therefore are not
included in the following table. Neither our chief executive
officer nor any other officer named in the Summary Compensation
Table held options to purchase shares of Piper Jaffray Companies
common stock that were exercisable as of December 31, 2005,
and, as a result, no options had been exercised as of
December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
Underlying Unexercised | |
|
In-the-Money Options | |
|
|
Options at Fiscal Year-End | |
|
at Fiscal Year-End(1) | |
|
|
| |
|
| |
Name |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
Andrew S. Duff
|
|
|
|
|
|
|
36,659 |
|
|
|
|
|
|
$ |
9,141 |
|
Francis E. Fairman
|
|
|
|
|
|
|
5,023 |
|
|
|
|
|
|
$ |
1,085 |
|
Robert W. Peterson
|
|
|
|
|
|
|
8,188 |
|
|
|
|
|
|
$ |
4,875 |
|
Addison L. Piper
|
|
|
|
|
|
|
9,920 |
|
|
|
|
|
|
$ |
1,693 |
|
Thomas P. Schnettler
|
|
|
|
|
|
|
14,634 |
|
|
|
|
|
|
$ |
9,902 |
|
|
|
(1) |
The value of unexercised
in-the-money options at
fiscal year-end was calculated based on the difference between
the closing price of our common stock on December 30, 2005
(the last business day of our 2005 fiscal year) and the option
exercise price, multiplied by the number of shares underlying
each option. |
Cash Award Agreements in Connection with Our Spin-Off from
U.S. Bancorp
In connection with our spin-off from U.S. Bancorp on
December 31, 2003, we established a cash award program
pursuant to which we granted cash awards to more than 2,300 of
our employees, including all of our executive officers, who were
employees of our business on December 15, 2003. These cash
awards were designed to aid in retaining highly skilled and
motivated employees and to provide fair treatment to our
employees whose U.S. Bancorp stock option and restricted
stock awards expired or were forfeited as a result of the
spin-off. The cash awards are not a part of our regular
20
compensation program. The cash award program was approved by
U.S. Bancorps board of directors prior to the
spin-off, and was approved by our Board both in advance of and
following the spin-off. The allocation and specific terms and
conditions of these cash awards were approved by our
Compensation Committee following the spin-off.
Each employee who was granted a cash award, including our chief
executive officer and the other four executive officers named in
the Summary Compensation Table above, has entered into a letter
agreement with us setting forth the terms and conditions of the
award. Pursuant to these agreements, Mr. Duff was granted a
discretionary cash award of $500,000 and Messrs. Duff,
Fairman, Peterson, Piper and Schnettler were granted other cash
awards replacing the lost value of U.S. Bancorp options and
restricted stock that expired or were forfeited as a result of
the spin-off.
Mr. Duffs discretionary cash award is payable in four
equal installments on each of March 31, 2004, 2005, 2006
and 2007. Mr. Duffs other cash award totaled
$4,567,096 and relates to the lost time value of
U.S. Bancorp stock options and restricted stock that
expired or were forfeited by Mr. Duff as a result of the
spin-off. Fifty percent of this other cash award was paid on
March 31, 2004, with the remaining 50% payable in four
equal installments on each of March 31, 2005, 2006, 2007
and 2008. Messrs. Fairman, Peterson, Piper and Schnettler
also are parties to cash award agreements relating to the lost
time value of U.S. Bancorp equity awards. Their cash award
amounts are $87,180, $559,622, $158,447 and $244,185,
respectively. Fifty percent of each cash award was paid on
March 31, 2004, with the remaining 50% payable in four
equal installments on each of March 31, 2005, 2006, 2007
and 2008. In all cases, the payments are conditioned on the
award recipients continued employment with Piper Jaffray
on the payment date, except that Piper Jaffray will continue to
pay the benefits if the recipients employment is
terminated by reason of death, disability or retirement, or is
terminated without cause during the
24-month period
following a change in control of Piper Jaffray.
Each award recipient acknowledged in the recipients cash
award agreement that (a) for purposes of any stock option
or other equity-based compensation award of U.S. Bancorp
held by the recipient, the completion of the spin-off
constituted a termination of employment with U.S. Bancorp,
and (b) with respect to any such options and awards that
terminated within 90 days following a termination of
employment, the recipient had no further rights whatsoever after
the expiration of the
90-day period following
the completion of the spin-off. The recipient generally waived
any and all claims relating to any stock option or other
equity-based compensation award of U.S. Bancorp. However,
the waiver did not apply to any rights relating to the exercise
of certain options within 90 days of the completion of the
spin-off, or with respect to any options or other equity-based
compensation awards of U.S. Bancorp that continued to vest
and remain exercisable beyond 90 days following a
termination of employment.
Retirement Plans and Payments
We maintain the Piper Jaffray Companies Retirement Plan, which
consists of a 401(k) component and a non-contributory
profit-sharing component. We match 100% of each participating
employees 401(k) contributions up to a maximum of 4% of
the employees total pay, subject to the social security
taxable wage base limit. In addition, under the profit-sharing
component, we have discretion to make contributions on behalf of
all of our employees on an annual basis. These contributions are
based on our financial performance.
Prior to 2002, our employees participated in the
U.S. Bancorp Cash Balance Pension Plan. The cash balance
pension plan consisted of a career average pay plan and a
defined benefit excess plan. Essentially, all full-time
employees of U.S. Bancorp and its subsidiaries were
eligible to participate in the career average pay plan. Under
the terms of the career average pay plan, a notional account
balance was maintained for each participating employee. The
defined benefit excess plan provided retirement benefits that
would have been provided under the career average pay plan if
not for certain provisions of the Internal Revenue Code that
limit deferral of compensation. In 2002, upon
21
establishing our non-contributory profit-sharing plan (now
included in the Piper Jaffray Companies Retirement Plan), Piper
Jaffray withdrew as a participating employer in the
U.S. Bancorp Cash Balance Pension Plan. Following our
spin-off from U.S. Bancorp, our employees with vested
benefits in the career average pay plan may withdraw those
benefits at the employees request. The liability for any
benefits payable to our employees under the career average pay
plan remains with U.S. Bancorp. In 2004, the following
officers named in the Summary Compensation Table withdrew their
vested balances from this plan as follows: Mr. Duff,
$31,981; Mr. Peterson, $31,981; Mr. Piper, $31,981 and
Mr. Schnettler, $32,734. Mr. Fairman has not withdrawn
his balance of $35,914 from the plan.
Following the spin-off, we assumed U.S. Bancorps
liability for the non-qualified benefits accrued to our
employees under the defined benefit excess plan. In 2004, we
established the Piper Jaffray Companies Non-Qualified Retirement
Plan to maintain and administer these benefits, which were
transferred to our Non-Qualified Retirement Plan following the
spin-off. Following the transfer, participation in our
Non-Qualified Retirement Plan was frozen and no new benefits may
be earned by participants in this plan. However, participating
employees will continue to receive investment credits on their
transferred plan balances in accordance with the terms of our
plan. Each employees plan balance will be payable by us
upon the employees retirement or termination of
employment. As of December 31, 2005, the Non-Qualified
Retirement Plan account balances for our named executive
officers were as follows: Mr. Duff, $408,905;
Mr. Fairman, $141,649; Mr. Peterson, $387,897;
Mr. Piper, $517,312; and Mr. Schnettler, $702,703.
Termination and
Change-in-Control
Arrangements
All of our executive officers are eligible to participate in the
Piper Jaffray Companies Severance Plan, a broad-based plan in
which all of our full-time,
U.S.-based employees
generally are eligible to participate. In the event of certain
involuntary terminations of employment resulting from an
employer-determined severance event, employees may receive
severance pay up to a maximum of their weekly base salary
multiplied by 52, subject to a maximum dollar amount of
$205,000. Employer-determined severance events may include,
depending on the circumstances, closure of a company facility, a
permanent reduction in our workforce or certain organizational
changes that result in the elimination of the employees
position.
Employment Arrangement with Addison L. Piper
We have established an employment arrangement with
Mr. Piper pursuant to which he serves as vice chairman and
as a member of our management committee (which is comprised of
all our executive officers). The employment arrangement provides
that Mr. Piper will be a full-time employee of our company
subject to the policies generally applicable to other executive
officers and will be paid an annual base salary of $250,000 and
a minimum annual bonus of $500,000 for serving in these
positions. The bonus amount will be paid in a combination of
cash and equity of our company. The percentage of
Mr. Pipers bonus that is to be paid in equity in any
given year will be determined in the same manner used to
determine the percentage of bonus to be paid in equity for our
other executive officers in accordance with then-applicable
compensation plans and programs. This arrangement will continue
through December 31, 2006.
22
STOCK PERFORMANCE GRAPH
The following graph compares the performance of an investment in
our common stock from January 2, 2004, the date our common
stock began regular-way trading on the New York Stock Exchange
following our spin-off from U.S. Bancorp, with the S&P
500 Index and the S&P 500 Diversified Financials Index. The
graph assumes $100 was invested on January 2, 2004, in each
of our common stock, the S&P 500 Index and the S&P 500
Diversified Financial Index and that all dividends were
reinvested on the date of payment without payment of any
commissions. Dollar amounts in the graph are rounded to the
nearest whole dollar. Based on these assumptions, the cumulative
total return for 2005 would have been $93.95 for our common
stock, $116.69 for the S&P 500 Index and $119.24 for the
S&P 500 Diversified Financials Index. For 2004, the
cumulative total return would have been $111.51 for our common
stock, $111.23 for the S&P 500 Index and $108.59 for the
S&P 500 Diversified Financials Index. The performance
shown in the graph represents past performance and should not be
considered an indication of future performance.
CUMULATIVE TOTAL RETURN FOR PIPER JAFFRAY COMMON STOCK, THE
S&P 500
INDEX AND THE S&P 500 DIVERSIFIED FINANCIALS INDEX
23
ITEM 2 APPROVAL OF THE PIPER JAFFRAY COMPANIES
AMENDED AND RESTATED 2003 ANNUAL AND LONG-TERM INCENTIVE
PLAN
We are asking shareholders to approve our Amended and Restated
2003 Annual and Long-Term Incentive Plan. The amended and
restated plan reflects amendments that have been approved by our
Board of Directors, upon the recommendation of the Compensation
Committee of the Board. The primary purpose of the amendments is
to increase the maximum number of shares to be issued under our
incentive plan by 400,000 shares to a total of
4,500,000 shares authorized for issuance under the plan. A
marked copy of the plan reflecting the amendments is attached as
Appendix B to this proxy statement.
Shareholder approval of this plan is imperative if we are to
continue to maintain an effective, competitive compensation
program. Other firms in our industry historically have
maintained high levels of employee ownership serving as both a
strong performance incentive and retention tool. Our competitors
have the benefit of having had a long time period over which to
develop significant employee ownership levels. In this regard,
we are at a disadvantage, as our employees had no ownership of
our stock at the time of our spin-off from U.S. Bancorp and
we have had just two years to build ownership since that time.
We believe that equity ownership attracts talented individuals
to our company and fosters a partnership culture within the
company that motivates employees to think and act like owners
through a focus on shareholder value creation and the long-term
success of the company. We have been working since the spin-off
to increase employee ownership levels, primarily through annual
incentive awards designed to reward employees performance
and to promote retention and an ownership culture among
employees. Our employee stock ownership has increased from
nothing at the time of the spin-off to approximately 2.95% as of
December 31, 2004, and to approximately 12.63% as of
March 6, 2006.
The plan as originally adopted in December 2003 authorized the
issuance of 2,000,000 shares, and we obtained shareholder
approval at our 2004 annual meeting of a
2,100,000-share
increase in the maximum number of shares to be issued under the
plan for a total of 4,100,000. We granted 1,420,271 shares
and 872,664 shares in 2005 and 2004, respectively, and we
anticipate that 2006 grant levels will be consistent with those
in 2005 as we continue to work towards our employee ownership
objectives. Depending on the companys performance, we
expect that all shares that remain available for grant will be
used in the next 12 months in connection with 2006
recruiting, retention, director compensation and annual
incentive compensation and that we will need additional shares
to complete our annual incentive grants to employees in February
2007. We currently expect that the
400,000-share increase
will cover our equity grants to employees through 2007. We
maintain no other incentive plan that permits us to grant equity
awards.
While we continue to strive to meet our employee ownership
objectives, we are mindful that our equity grants, coupled with
our three-year cliff vesting, have created an increased level of
stock overhang, which measures potential shareholder
dilution if all outstanding stock awards were to vest and be
exercised. In 2005, we countered the dilutive effects of this
overhang by repurchasing 1,300,000 shares of our
outstanding common stock. We anticipate that we will repurchase
additional shares during 2006, helping to offset shareholder
dilution resulting from the continued grant of stock-based
awards under our incentive plan.
In addition to increasing the number of shares authorized for
grant under the plan, the Board has approved amendments that:
|
|
|
|
|
eliminate promissory notes as a form of consideration that may
be accepted by us for payment of awards granted under the plan; |
|
|
|
eliminate the flexibility to grant below-market equity awards
under the plan; and |
|
|
|
effect certain other changes designed to ensure compliance with
new Section 409A of the Internal Revenue Code relating to
deferred compensation arrangements and the regulations
promulgated under Section 409A. |
24
The Board of Directors recommends that you vote FOR
approval of the Piper Jaffray Companies Amended and Restated
2003 Annual and Long-Term Incentive Plan. Proxies will be voted
FOR approval of the plan unless otherwise specified.
The following paragraphs provide more detail about the plan and
the proposed amendments.
Purpose
The purpose of our incentive plan is to promote the interests of
our company and our shareholders by giving us a competitive
advantage in attracting, retaining and motivating officers,
employees, directors and consultants, to offer these persons
incentives directly linked to the profitability of our
businesses and increases in our shareholder value, and to
provide these persons an opportunity to acquire a proprietary
interest in Piper Jaffray.
Eligible Individuals
Our current and prospective directors, officers, employees and
consultants, as well as those of our affiliates, are eligible to
participate in our incentive plan. As of February 27, 2006,
approximately 2,830 persons were eligible to participate in the
plan.
Administration
Our incentive plan is administered by the Compensation Committee
of our Board of Directors. The Committee is authorized to
delegate certain administrative responsibilities with respect to
the plan to directors and certain officers selected in the
Committees discretion. The Committee determines the
eligible individuals to whom and the time or times at which
awards will be granted, the number of shares subject to awards
to be granted to any eligible individual, the life of any award
and any terms and conditions of the grant that are not contained
in the incentive plan. Each grant under the plan is confirmed by
and subject to the terms of an award agreement.
Authorized Shares
The maximum number of shares of common stock that may be
delivered to participants and their beneficiaries under the plan
will be increased from 4,100,000 shares to
4,500,000 shares. Currently available shares are expected
to cover award grants to employees, officers and directors
through 2006 and to cover part, but not all, of our annual
equity grant to employees in February 2007 in connection with
2006 annual incentive compensation. The additional
400,000 shares are expected to cover award grants to
employees, officers and directors through 2007. With respect to
employees (including officers), we expect these grants to be
based on performance and retention objectives, in addition to
any other objectives that our Compensation Committee may
determine to be relevant. We do not currently have any
arrangements or understandings with our officers and employees
regarding specific amounts to be granted under the incentive
plan. With respect to our directors, these grants will be
compensatory and will be in the amounts described above under
Information Regarding the Board of Directors and Corporate
Governance Compensation Program for Non-Employee
Directors.
Shares that may be issued under the plan may be authorized but
unissued shares or shares reacquired and held in our treasury.
In general, we use treasury shares to the extent available
before issuing new shares in connection with awards. No more
than 250,000 shares of common stock may be subject to
qualified performance-based awards granted to any
eligible individual in any fiscal year of the company.
If an award entitles the holder to receive or purchase shares,
the number of shares covered by the award or to which the award
relates will be counted on the date of grant of the award
against the aggregate number of shares available for granting
awards under the plan. Any shares that are used by a participant
as full or partial payment to us of the purchase price relating
to an award, including in connection with the satisfaction of
tax obligations relating to an award, will again be available for
25
granting awards under the plan. In addition, if any shares
covered by an award or to which an award relates are not
purchased or are forfeited, or if an award otherwise terminates
without delivery of any shares, then the number of shares
counted against the aggregate number of shares available under
the plan to the extent of any such forfeiture or termination
will again be available for granting awards under the plan.
In the event of certain types of corporate transactions or
restructurings, such as stock splits, mergers, consolidations,
separations, spin-offs, liquidations, reorganizations or other
distributions of stock or property of our company, including an
extraordinary stock or cash dividend, the Committee or our Board
may make adjustments to the aggregate number and kind of shares
reserved for issuance under the plan, in the maximum share
limitations upon stock options, stock appreciation rights and
other awards to be granted to any individual, in the number,
kind and exercise price of outstanding stock options and stock
appreciation rights, in the number and kind of shares subject to
other outstanding awards granted under the plan and any other
equitable substitutions or adjustments that the Committee or
Board determines to be appropriate. However, under the amended
and restated plan, any adjustments made to an award that is
considered to be deferred compensation under Section 409A
of the Internal Revenue Code must comply with Section 409A.
Stock Options
The Committee may grant stock options to eligible individuals.
Only non-qualified stock options are permitted to be granted
under the plan. The exercise price per share purchasable under a
stock option will be determined by the Committee, but, under the
amended and restated plan, the exercise price of a stock option
cannot be less than 100% of the fair market value of a share of
our common stock on the date of grant of the option. The term of
each stock option will be fixed by the Committee at the time of
grant, but in no event may it be more than ten years from the
grant date. The Committee will determine the time or times at
which a stock option may be exercised in whole or in part and
the method or methods by which, and the form or forms in which,
payment of the exercise price may be made.
Stock Appreciation Rights
The Committee may grant stock appreciation rights to eligible
individuals. Each stock appreciation right will confer on the
holder upon exercise the right to receive, as determined by the
Committee, cash or a number of shares equal to the excess of
(a) the fair market value of one share of our common stock
on the date of exercise (or, if the Committee determines, at any
time during a specified period before or after the date of
exercise) over (b) the grant price of the stock
appreciation right as determined by the Committee. Under the
amended and restated plan, the grant price will not be less than
100% of the fair market value of one share on the date of grant
of the stock appreciation right. Subject to the terms of the
incentive plan, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and
conditions (including conditions or restrictions on the exercise
thereof) of any stock appreciation right will be as determined
by the Committee, but in no event may the term of a stock
appreciation right be longer than ten years.
Restricted Stock and Restricted Stock Units
Shares of restricted stock and restricted stock units (RSUs)
will be subject to restrictions as the Committee may impose,
which may lapse separately or in combination at such time or
times, in installments or otherwise as the Committee may deem
appropriate. The grant or vesting of restricted stock and RSUs
may be performance-based, time-based or both. Restricted stock
and RSUs may be qualified performance-based awards,
in which event the grant or vesting of such restricted stock or
RSUs will be conditioned upon the attainment of performance
goals. Except as otherwise determined by the Committee, upon a
participants termination of employment (as determined
under criteria established by the Committee) during the
restriction period, all shares of restricted stock and RSUs
subject to restriction will be forfeited and reacquired by the
company, except that the Committee may
26
waive in whole or in part any or all remaining restrictions with
respect to shares of restricted stock or RSUs.
If the grant is intended to be a qualified
performance-based award, the applicable performance goals
must be based on the attainment of specified levels of one or
more of the following measures: revenue growth; earnings before
interest, taxes, depreciation, and amortization; earnings before
interest and taxes; operating income; pre- or after-tax income;
earnings per share; cash flow; cash flow per share; return on
equity; return on tangible equity; return on invested capital;
return on assets; economic value added (or an equivalent
metric); share price performance; total shareholder return;
improvement in or attainment of expense levels; or improvement
in or attainment of working capital levels. These goals are
established by the Committee and may be established on a
company-wide basis or with respect to one or more business
units, divisions or subsidiaries and can be on an absolute or
relative basis. A qualified performance-based award
is a grant of restricted stock or RSUs designated as such by the
Committee at the time of grant based upon a determination that
(a) the recipient is or may be a covered
employee within the meaning of Section 162(m) of the
Internal Revenue Code in the year in which we would expect to be
able to claim a tax deduction with respect to such award and
(b) the Committee wishes such grant to qualify for the
exemption from the limitation on deductibility of compensation
with respect to any covered employee imposed by
Section 162(m) of the Internal Revenue Code.
The provisions of restricted stock and RSUs, including any
applicable performance goals, need not be the same with respect
to each participant. During the restriction period, the
Committee may require that any stock certificates evidencing
restricted shares be held by us. With respect to restricted
stock awards, other than restrictions on transfer and any other
restrictions the Committee may impose, the participant will have
all the rights of a shareholder holding the class or series of
stock that is the subject of the award.
Performance Awards
The Committee may grant performance awards to eligible
individuals. A performance award may be denominated or payable
in cash, shares, other securities, other awards or other
property and will provide the holder with the right to receive
payments, in whole or in part, upon the achievement of specified
performance goals. Subject to the terms of the plan, the
performance goals to be achieved, the length of any performance
period, the amount of any performance award granted, the amount
of any payment or transfer to be made pursuant to any
performance award and any other terms and conditions of any
performance award will be determined by the Committee. The
Committee may, prior to or at the time of the grant, designate
performance awards as qualified performance-based
awards, in which event it will condition the settlement of
the awards upon the attainment of one or more of the performance
goals described above under Restricted Stock
and Restricted Stock Units. Performance awards denominated
in cash that are payable to any individual participant with
respect to any calendar year are limited to a maximum of
$7.5 million.
Other Stock-Based Awards
Other awards of common stock and other awards that are valued by
reference to, or otherwise based upon, common stock, including
without limitation dividend equivalents and convertible
debentures, may also be granted under our incentive plan, either
alone or in conjunction with other awards.
Transferability of Awards
Awards are non-transferable other than by will or the laws of
descent and distribution. However, in the discretion of the
Committee, non-qualified stock options may be transferred to
members of the holders immediate family, directly or
indirectly or by means of a trust, partnership or otherwise.
Stock options and stock appreciation rights may be exercised
only by the initial holder, a permitted transferee or a
guardian, legal representative or beneficiary.
27
Change in Control
Notwithstanding any other provision of the plan, unless
otherwise provided by the Committee in any award agreement, in
the event of a change in control of Piper Jaffray any stock
options and stock appreciation rights outstanding as of the date
of such change in control, and which are not then exercisable
and vested, will become fully exercisable and vested; the
restrictions and deferral limitations applicable to any
restricted stock and RSUs will lapse, and such restricted stock
and RSUs will become free of all restrictions and become fully
vested; all performance awards will be considered to be earned
and payable in full; and any deferral or other restriction will
lapse and such performance awards will be settled in cash or
shares, as determined by the Committee, as promptly as is
practicable. All restrictions on other awards will lapse and
such awards will become free of all restrictions and fully
vested.
Amendments and Termination
Our Board of Directors may at any time amend, alter or
discontinue our incentive plan, but shareholder approval is
required for any amendment that could increase the number of
shares granted under the plan and as otherwise may be required
by applicable law or stock exchange rules.
The Committee generally may amend the terms of any outstanding
stock option or other award but may not decrease the exercise
price of an outstanding stock option or take any action that
would constitute a repricing of an outstanding stock
option unless the amendment is approved by shareholders as
required by applicable law or stock exchange rules. Further, the
Committee may not amend an award in a way that causes a
qualified performance-based award to cease to
qualify for the Section 162(m) exemption or that impairs
the rights of any holder without the holders consent.
In the event an award is granted to an individual who is
employed outside the United States and is not compensated from a
payroll maintained in the United States, the Committee may, in
its sole discretion, modify the provisions of the grant as they
pertain to such individual to achieve the purposes of our
incentive plan.
Term of the Plan
If the amended and restated plan is approved by shareholders,
the plan will terminate on May 2, 2016, which is the tenth
anniversary of the approval date of the plan, or on any earlier
date determined by our Board of Directors.
Registration
We have registered 4,100,000 shares of common stock that
may be issued under the current plan on two registration
statements on
Form S-8. If this
proposal is approved, we intend to register the additional
400,000 shares to be issued under our incentive plan on a
registration statement on
Form S-8.
Tax Consequences of Awards
The tax consequences of options granted under the plan are
complex and depend, in large part, on the surrounding facts and
circumstances. This section provides a brief summary of certain
significant federal income tax consequences of the plan under
existing U.S. law. This summary is not a complete statement
of applicable law and is based upon the Internal Revenue Code,
as well as administrative and judicial interpretations of the
Internal Revenue Code, as in effect on the date of this
description. If federal tax laws, or interpretations of such
laws, change in the future, the information provided here may no
longer be accurate. This section does not consider state, local
or foreign tax consequences, nor does it discuss the effect of
gift, estate or inheritance taxes.
No later than the date as of which an amount first becomes
includible in the gross income of a participant for federal
income tax purposes with respect to any award under the plan,
the participant must pay us, or make arrangements satisfactory
to us regarding the payment of, any federal, state, local or
foreign taxes of any kind required by law to be withheld with
respect to such amount. Our
28
obligations under the plan are conditional on such payment or
arrangements, and we will, to the extent permitted by law, be
entitled to take such action and establish such procedures as we
deem appropriate to withhold or collect all applicable payroll,
withholding, income or other taxes from a participant. In order
to assist a participant in paying all or a portion of the
federal, state, local and foreign taxes to be withheld or
collected upon exercise or receipt of (or the lapse of
restrictions relating to) an award, the Committee may permit a
participant to satisfy tax obligations by (a) electing to
have us withhold a portion of the shares or other property
otherwise to be delivered upon exercise or receipt of (or the
lapse of restrictions relating to) an award with a fair market
value equal to the amount of such taxes or (b) delivering
to us shares or other property other than shares issuable upon
exercise or receipt of (or the lapse of restrictions relating
to) such award with a fair market value equal to the amount of
such taxes. Any such election must be made on or before the date
that the amount of tax to be withheld is determined.
A participant will not recognize any taxable income and we will
not be entitled to a deduction at the time a non-qualified stock
option is granted. When a non-qualified stock option is
exercised, the excess of the fair market value of the shares
acquired on the exercise of the option over the exercise price
will be taxable to a participant as ordinary income. We, in
computing our U.S. federal income tax, will generally be
entitled to a deduction in an amount equal to the compensation
taxable to the participant, subject to certain limitations. When
a participant sells his or her shares of stock, the participant
generally will have a capital gain (or loss), depending on the
difference between the sale price and the fair market value of
the stock on the date the participant exercised his or her
option. The capital gain (or loss) is considered long
term or short term depending on how long the
participant has held the stock.
Unless a participant files an election to be taxed under
Section 83(b) of the Internal Revenue Code, the participant
will not realize income upon the grant of restricted stock. The
participant will realize ordinary income and Piper Jaffray will
be entitled to a corresponding deduction when the restrictions
lapse, and the amount of such ordinary income and deduction will
be the fair market value of the restricted stock on the date the
restrictions lapse. If the recipient files an election to be
taxed under Section 83(b) of the Internal Revenue Code, the
tax consequences to the participant and Piper Jaffray will be
determined as of the date the restricted stock is granted rather
than as of the date the restrictions lapse.
When a participant disposes of restricted stock, the difference
between the amount received upon disposition and the fair market
value of the shares on the date the recipient realizes ordinary
income will be treated as a capital gain or loss. The capital
gain (or loss) is considered long term or
short term depending on how long the participant has
held such stock after the date the restrictions are removed or
expire, or, if an election under Section 83(b) is filed,
after the date the restricted stock is granted.
New Plan Benefits
Future plan awards to be received by or allocated to particular
participants are not presently determinable.
Outstanding Equity Awards
The only equity plan we have established is our Amended and
Restated 2003 Annual and Long-Term Incentive Plan. The following
table summarizes, as of December 31, 2005, the number of
shares of our common stock to be issued upon exercise of
outstanding options granted under the plan, the
29
weighted-average exercise price of such options, and the number
of shares remaining available for future issuance under the plan
for all awards as of December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
|
|
Remaining | |
|
|
|
|
|
|
Available for Future | |
|
|
Number of Shares to | |
|
|
|
Issuance Under | |
|
|
be Issued Upon | |
|
|
|
Equity | |
|
|
Exercise of | |
|
Weighted-Average | |
|
Compensation | |
|
|
Outstanding | |
|
Exercise Price of | |
|
Plans (Excluding | |
|
|
Options, Warrants | |
|
Outstanding Options, | |
|
Shares in First | |
Plan Category |
|
and Rights | |
|
Warrants and Rights | |
|
Column) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by shareholders
|
|
|
643,032 |
|
|
$ |
42.29 |
|
|
|
2,039,042 |
(1) |
Equity compensation plans not approved by shareholders
|
|
|
None |
|
|
|
N/A |
|
|
|
None |
|
|
|
(1) |
The numbers in the third column are based on the
4,100,000 shares currently authorized for issuance under
the plan and do not reflect our proposal included in this proxy
statement to increase the number of authorized shares. In
addition to the 643,032 shares to be issued upon the
exercise of outstanding options to purchase our common stock,
1,417,444 shares of restricted stock issued under the plan
were outstanding as of December 31, 2005. All of the
2,039,042 shares available for future issuance under the
plan as of December 31, 2005, may be granted in the form of
restricted stock, RSUs, options or another equity-based award
authorized under the plan. |
SECURITY OWNERSHIP
Stock Ownership Guidelines
We believe it is important for our directors and executive
officers to maintain a meaningful equity interest in our
company, to ensure that their interests are aligned with the
interests of our shareholders. Our Board of Directors has
adopted stock ownership guidelines to establish its minimum
expectations for our directors and executive officers with
respect to this equity stake.
Our stock ownership guidelines provide for equity ownership by
our executive officers in an amount having a market value
ranging from two to seven times the individuals annual
base salary, depending upon the individuals position, to
be achieved within five years of the date the individual became
subject to the guidelines. Both common stock and restricted
stock count towards these guidelines. Each of our current
executive officers, other than Mr. Fairman, became subject
to these ownership guidelines in 2004, the year in which the
guidelines were initially adopted. Mr. Fairman became
subject to the guidelines at the time he became an executive
officer on July 1, 2005. The table below under
Beneficial Ownership of Directors, Nominees and Executive
Officers shows how many shares of stock were owned as of
March 6, 2006, by each of our executive officers named in
the Summary Compensation Table for purposes of measuring
compliance with the guidelines.
In addition to the ownership guidelines, our executive officers
are subject to retention guidelines providing that each
executive officer must retain for five years at least 50% of all
shares received by the officer upon vesting of a restricted
stock award and upon exercise of a stock option award.
Our stock ownership guidelines provide for equity ownership by
our non-employee directors in an amount equal to two times the
directors annual cash retainer, to be achieved within
three years after the directors initial election to the
Board. Both common stock and phantom stock (acquired under our
Deferred Compensation Plan for Non-Employee Directors) are
counted towards these ownership guidelines. The table below
under Beneficial Ownership of Directors, Nominees and
Executive Officers includes the number of shares of our
common stock and phantom stock that were deemed owned as of
March 6, 2006, by each of our non-employee directors for
purposes of measuring compliance with the guidelines.
30
Beneficial Ownership of Directors, Nominees and Executive
Officers
The following table shows how many shares of our common stock
were beneficially owned as of March 6, 2006, by each of our
directors, director nominees and executive officers named in the
Summary Compensation Table contained in this proxy statement,
and by all of our directors and executive officers as a group.
Unless otherwise noted, the shareholders listed in the table
have sole voting and investment power with respect to the shares
owned by them.
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|
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|
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|
|
|
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|
|
Phantom Shares | |
|
|
Shares of | |
|
Counted Towards | |
|
|
Piper Jaffray | |
|
Director Stock | |
|
|
Common | |
|
Ownership | |
Name of Beneficial Owner |
|
Stock* | |
|
Guidelines** | |
|
|
| |
|
| |
Andrew S. Duff
|
|
|
67,554(1) |
|
|
|
|
|
Francis E. Fairman
|
|
|
11,724(2) |
|
|
|
|
|
Michael R. Francis
|
|
|
10,918(3) |
|
|
|
584 |
|
B. Kristine Johnson
|
|
|
10,718(4) |
|
|
|
|
|
Samuel L. Kaplan
|
|
|
16,961(5) |
|
|
|
2,799 |
|
Robert W. Peterson
|
|
|
33,655(6) |
|
|
|
|
|
Addison L. Piper
|
|
|
13,236(7) |
|
|
|
|
|
Thomas P. Schnettler
|
|
|
60,637(8) |
|
|
|
|
|
Frank L. Sims
|
|
|
13,418(9) |
|
|
|
|
|
Jean M. Taylor
|
|
|
4,001(10) |
|
|
|
892 |
|
Richard A. Zona
|
|
|
12,507(11) |
|
|
|
2,637 |
|
All directors, director nominees and executive officers as a
group (14 persons)
|
|
|
279,333(12) |
|
|
|
6,912 |
|
|
|
|
|
* |
None of the individual beneficial owners identified in this
table owns more than 1% of Piper Jaffray common stock
outstanding as of March 6, 2006. As a group, our directors,
director nominees and executive officers hold 1.35% of Piper
Jaffray common stock as of March 6, 2006. The holders of
restricted stock identified in the footnotes below have no
investment power with respect to the restricted stock. |
|
|
|
|
** |
The shares of phantom stock may be settled solely in cash based
on the fair market value of our common stock on the last day of
the year in which the directors service as a director
terminates. The directors have no voting or investment power
with respect to the phantom stock. |
|
|
|
|
(1) |
Includes 12,448 shares of restricted stock that vest in
full on February 12, 2007, 28,963 shares of restricted
stock that vest in full on February 22, 2008,
15,988 shares of restricted stock that vest in full on
February 21, 2009, 9,349 shares of common stock held
directly and 806 shares of common stock held in the Piper
Jaffray Companies Retirement Plan. |
|
|
|
|
(2) |
Includes 3,172 shares of restricted stock that vest in full
on February 12, 2007, 2,843 shares of restricted stock
that vest in full on February 22, 2008, 5,596 shares
of restricted stock that vest in full on February 21, 2009,
32 shares of common stock held directly and 81 shares
of common stock held in the Piper Jaffray Companies Retirement
Plan. |
|
|
(3) |
Includes 1,000 shares of common stock held directly and
9,918 shares of common stock covered by options that are
currently exercisable. |
|
|
(4) |
Includes 800 shares of common stock held in an individual
retirement account and 9,918 shares of common stock covered
by options that are currently exercisable. |
|
|
|
|
(5) |
Includes 7,043 shares of common stock held in the Kaplan,
Strangis & Kaplan profit-sharing trust for the benefit
of Mr. Kaplan and 9,918 shares of common stock covered
by options that are currently exercisable. |
|
|
|
|
(6) |
Includes 6,502 shares of restricted stock that vest in full
on February 12, 2007, 15,447 shares of |
31
|
|
|
|
|
restricted stock that vest in full on February 22, 2008,
11,192 shares of restricted stock that vest in full on
February 21, 2009, 197 shares of common stock held
directly, 303 shares of common stock held in the Piper
Jaffray Companies Retirement Plan and 14 shares of common
stock held in an individual retirement account. |
|
|
(7) |
Includes 1,798 shares of restricted stock that vest in full
on February 12, 2007, 5,364 shares of restricted stock
that vest in full on February 22, 2008, 4,441 shares
of restricted stock that vest in full on February 21, 2009,
502 shares of common stock held directly, 129 shares
of common stock held in the Piper Jaffray Companies Retirement
Plan, 1,000 shares of common stock held in an individual
retirement account, and 2 shares of common stock held by
Mr. Pipers spouse as to which he shares voting and
investment power with his spouse. |
|
|
(8) |
Includes 9,805 shares of restricted stock that vest in full
on February 12, 2007, 31,377 shares of restricted
stock that vest in full on February 22, 2008,
18,986 shares of restricted stock that vest in full on
February 21, 2009, 166 shares of common stock held
directly and 303 shares of common stock held in the Piper
Jaffray Companies Retirement Plan. |
|
|
(9) |
Includes 3,500 shares of common stock held directly and
9,918 shares of common stock covered by options that are
currently exercisable. |
|
|
|
|
(10) |
Consists of shares of common stock covered by options that are
currently exercisable. |
|
|
|
|
(11) |
Includes 2,589 shares of common stock held directly and
9,918 shares of common stock covered by options that are
currently exercisable. |
|
|
(12) |
Includes 38,351 shares of restricted stock that vest in
full on February 12, 2007, 94,679 shares of restricted
stock that vest in full on February 22, 2008,
62,777 shares of restricted stock that vest in full on
February 21, 2009, 2,531 shares of common stock held
in the Piper Jaffray Companies Retirement Plan,
8,866 shares held in a retirement or profit-sharing plan or
account other than the Piper Jaffray Companies Retirement Plan,
18,538 shares of common stock held directly or by family
members, and 53,591 shares covered by options that are
currently exercisable. |
Beneficial Owners of More than Five Percent of Our Common
Stock
Based on filings made under Section 13(d) and
Section 13(g) of the Securities Exchange Act of 1934, as of
March 6, 2006, the only persons known by us to be
beneficial owners of more than 5% of our common stock were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
Shares of | |
|
|
|
|
Piper Jaffray | |
|
|
Name of Beneficial Owner |
|
Common Stock | |
|
Percent of Class | |
|
|
| |
|
| |
T. Rowe Price Associates, Inc.
|
|
|
1,598,465 |
(1) |
|
|
8.00 |
% |
|
100 E. Pratt Street
Baltimore, MD 21202 |
|
|
|
|
|
|
|
|
Dimensional Fund Advisors Inc.
|
|
|
1,183,809 |
(2) |
|
|
5.98 |
% |
|
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 |
|
|
|
|
|
|
|
|
Barclays Global Investors, N.A
|
|
|
1,064,241 |
(3) |
|
|
5.37 |
% |
|
45 Fremont Street
San Francisco, CA 94105 |
|
|
|
|
|
|
|
|
|
|
(1) |
This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 14, 2006, by
T. Rowe Price Associates, Inc. and T. Rowe Price Small-Cap Stock
Fund, Inc. T. Rowe Price Associates, Inc. reported that it has
sole voting power as to 207,200 shares and sole dispositive
power as to 1,598,465 shares. Of the 1,598,465 shares
over which T. Rowe Price Associates, Inc. has sole dispositive
power, T. Rowe Price Small-Cap Stock Fund, Inc. has sole voting
power as to 992,500 shares. As an investment advisor, T.
Rowe Price Associates, Inc. may be deemed to have beneficial
ownership of the shares owned by its advisory clients, but it
disclaims beneficial ownership of these shares. |
32
|
|
(2) |
This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 9, 2006, by
Dimensional Fund Advisors Inc. Dimensional reported that it has
sole voting and dispositive power with respect to all
1,183,809 shares reflected in the table. As an investment
advisor, Dimensional may be deemed to have beneficial ownership
of the shares owned by its advisory clients, but it disclaims
beneficial ownership of these shares. Dimensional reported that
none of its advisory clients was known by it to own more than
five percent of our common stock. |
|
(3) |
This information is based on a Schedule 13G filed with the
Securities and Exchange Commission on January 25, 2006, by
Barclays Global Investors, N.A. and a group of affiliated
entities, which reported sole voting and dispositive power as
follows: Barclays Global Investors, N.A., sole voting power as
to 462,348 shares and sole dispositive power as to
554,980 shares; Barclays Global Fund Advisors, sole
voting power as to 505,519 shares and sole dispositive
power as to 509,248 shares; and Barclays Global Investors,
Ltd., sole dispositive power as to 13 shares. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our executive officers and directors to file initial
reports of ownership of our securities and reports of changes in
ownership of our securities with the Securities and Exchange
Commission. Based on our knowledge and on written
representations from our executive officers and directors, we
believe that all Section 16(a) filing and disclosure
requirements applicable to our executive officers and directors
for 2005 have been satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Compensation Committee Interlocks and Insider
Participation
The Compensation Committee, comprised entirely of independent,
non-employee directors, is responsible for establishing and
administering our policies involving the compensation of our
executive officers. No employee of the company serves on the
Compensation Committee. The Committee members have no
interlocking relationships as defined by the Securities and
Exchange Commission.
Related Transactions Involving Our Directors and Executive
Officers
Tad W. Piper, an employee, is the son of Addison L. Piper, one
of our executive officers and a director, and was paid
compensation in excess of $60,000 for his services in 2005. Paul
V. Olson is the brother of B. Kristine Johnson, one of our
directors, and is employed by us as a financial advisor in our
private client services business and was paid compensation in
excess of $60,000 for such services in 2005.
During 2005, we paid approximately $1.8 million to
Faegre & Benson LLP for legal services provided to us
and our subsidiaries. The spouse of James L. Chosy, general
counsel and secretary of the company, is a partner with
Faegre & Benson. Mr. Chosys spouse has not
personally provided any legal services to us or our subsidiaries.
From time to time in the ordinary course of business, Piper
Jaffray, through our subsidiaries, engages in transactions with
other corporations or entities whose executive officers or
directors also are directors or executive officers of Piper
Jaffray or have an affiliation with our directors or executive
officers. Such transactions are conducted on an
arms-length basis and may not come to the attention of our
directors or executive officers or those of the other
corporations or entities involved. In addition, from time to
time our executive officers and directors and their affiliates
may engage in transactions in the ordinary course of business
involving goods and services provided by Piper Jaffray, such as
investment and financial advisory services. With respect to our
executive officers, such goods and services are provided on
terms comparable to those extended to employees of our company
generally. With respect to our non-employee directors and their
affiliates, such services are provided on
33
substantially the same terms as those prevailing at the time for
comparable transactions with non-employees.
From time to time, certain of our directors, executive officers
and other employees who are accredited investors may invest
their personal funds directly in funds managed by Piper Jaffray,
through our subsidiaries, on the same terms and with the same
conditions as the other investors in these funds, who may not be
our directors, executive officers or employees.
Messrs. Schnettler and Piper invested $100,000 and $80,000,
respectively, in one such fund in 2005.
To the extent permitted by the Sarbanes-Oxley Act of 2002, our
directors and executive officers and their affiliates from time
to time may be or may have been indebted to our broker-dealer
subsidiary in connection with margin account loans. Such
indebtedness is in the ordinary course of business, is on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons and does not involve more than a
normal risk of collectibility or present other unfavorable
features.
AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO OUR INDEPENDENT
AUDITOR
Audit Committee Report
The primary function of our Audit Committee is oversight of our
financial reporting process, publicly filed financial reports,
internal accounting and financial controls, and the independent
audit of the consolidated financial statements. The consolidated
financial statements of Piper Jaffray Companies for the year
ended December 31, 2005, were audited by Ernst &
Young LLP, independent auditor for the company.
As part of its activities, the Committee has:
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1. |
Reviewed and discussed with management and the independent
auditor the companys audited financial statements; |
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2. |
Discussed with the independent auditor the matters required to
be communicated under Statement on Auditing Standards
No. 61 (Communications with Audit Committees); |
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3. |
Received the written disclosures and letter from the independent
auditor required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit
Committees); and |
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4. |
Discussed with the independent auditor its independence. |
Management is responsible for the companys system of
internal controls and the financial reporting process.
Ernst & Young LLP is responsible for performing an
independent audit of the consolidated financial statements in
accordance with the standards of the Public Company Accounting
Oversight Board and issuing a report thereon. Our
Committees responsibility is to monitor and oversee these
processes.
Based on the foregoing review and discussions and a review of
the report of Ernst & Young LLP with respect to the
consolidated financial statements, and relying thereon, we have
recommended to the Board of Directors of Piper Jaffray Companies
the inclusion of the audited consolidated financial statements
in Piper Jaffrays Annual Report on
Form 10-K for the
year ended December 31, 2005, for filing with the
Securities and Exchange Commission.
Audit Committee of the Board of Directors of Piper Jaffray
Companies
Richard A. Zona, Chairperson
B. Kristine Johnson
Frank L. Sims
34
Auditor Fees
Ernst & Young LLP served as our independent auditor for
2005 and 2004. The following table presents fees for
professional audit services for the audit of our annual
consolidated financial statements for 2005 and 2004 as well as
fees for the review of our interim consolidated financial
statements for each quarter in 2005 and 2004 and for all other
services performed for 2005 and 2004 by Ernst & Young
LLP.
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|
|
|
|
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|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit Fees
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|
$ |
782,200 |
|
|
$ |
753,215 |
|
Audit-Related
Fees(1)
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|
|
118,800 |
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|
|
51,100 |
|
Tax
Fees(2)
|
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|
0 |
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|
386,000 |
|
All Other Fees
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Total
|
|
$ |
901,000 |
|
|
$ |
1,190,315 |
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(1) |
Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review
of our financial statements. Specifically, the services provided
for 2005 and 2004 primarily included services relating to IRA
Keogh agreed-upon procedures and employee benefit plan audits.
Audit-related services for 2005 also included the issuance of an
independent auditors report on controls placed in
operation and tests of operating effectiveness. |
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(2) |
Tax fees consist of tax compliance fees and tax consultation
fees. Tax compliance fees totaled $288,000 in 2004 and consisted
of services relating to federal, state and local estimated tax
calculations, federal and state partnership tax returns, and
foreign tax services performed for Piper Jaffray Ltd. Tax
consultation services in 2004 totaled $98,000 and consisted of
state value analysis, acquisition due diligence and transfer
pricing consultation. For 2005, we hired KPMG LLP to provide us
tax services, including tax compliance services and tax
consultation services. As a result, we did not incur fees for
tax services from Ernst & Young LLP for 2005. |
Auditor Services Pre-Approval Policy
The Audit Committee has adopted an auditor services pre-approval
policy applicable to services performed for us by our
independent auditor. In accordance with this policy, the Audit
Committees practice is to approve annually all audit,
audit-related and permissible non-audit services to be provided
by the independent auditor during the year. If a service to be
provided is not pre-approved as part of the annual process or if
it may exceed pre-approved fees levels, the service must receive
a specific and separate pre-approval by the Audit Committee,
which has delegated authority to grant such pre-approvals during
the year to the chairperson of the Audit Committee. Any
pre-approvals granted pursuant to this delegated authority are
reported to the Audit Committee at its next regular meeting.
Our Audit Committee has determined that the provision of the
non-audit services described in the table above was compatible
with maintaining the independence of our independent auditor.
The Audit Committee reviews each non-audit service to be
provided and assesses the impact of the service on the
auditors independence. On February 21, 2006, the
Audit Committee pre-approved certain services to be provided by
our independent auditor relating to engagements occurring on or
after February 21, 2006.
ITEM 3 RATIFICATION OF SELECTION OF INDEPENDENT
AUDITOR
The Audit Committee of our Board of Directors has selected
Ernst & Young LLP to serve as our independent auditor
for the year ending December 31, 2006. While it is not
required to do so, our Board of Directors is submitting the
selection of Ernst & Young LLP for ratification in
order to ascertain the views of our shareholders with respect to
the choice of audit firm. If the selection is not
35
ratified, the Audit Committee will reconsider its selection.
Representatives of Ernst & Young LLP are expected to be
present at the annual meeting, will be available to answer
shareholder questions and will have the opportunity to make a
statement if they desire to do so.
The Board of Directors recommends that you vote FOR
ratification of the selection of Ernst & Young LLP as
the independent auditor of Piper Jaffray Companies and our
subsidiaries for the year ending December 31, 2006. Proxies
will be voted FOR ratification of this selection unless
otherwise specified.
ITEM 4 SHAREHOLDER PROPOSAL
Mr. Gerald R. Armstrong, 820 Sixteenth Street,
No. 705, Denver, Colorado 80202-3227, (303) 355-1199,
the owner of 93 shares of Piper Jaffray Companies common
stock, has advised us that he plans to introduce the following
resolution:
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That the shareholders of PIPER JAFFRAY COMPANIES request
its Board of Directors to take those steps necessary to
eliminate the classification of terms for its Board of Directors
to require that all Directors stand for election
annually. The Board declassification shall be completed
in a manner that does not affect the unexpired terms of the
previously-elected Directors. |
The reasons given by the shareholder for such resolution follow
verbatim:
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The proponent of this resolution submitted the same
proposal a year ago only to have it deleted by management
through what it called an error. This is highly
unlikely as the proponent has a certified mail receipt showing
its timely delivery. |
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Since that time, the proponent has been treated with
disrespect by members of management. |
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The proponent believes that management and directors
should treat shareholders with the greatest respect as it is
their capital which has created the corporation employing them. |
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I believe the election of directors is the strongest way
that shareholders influence the directors of any corporation.
Currently, PIPER JAFFRAYS board is divided into three
classes with each class sering staggered three-year terms.
Because of this structure, shareholders may only vote for
one-third of the directors each year. This is not in the best
interests of shareholders because it reduces accountability and
is an unnecessary take-over defense. |
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PLEASE NOTE: AN ABSENCE OF ACCOUNTABILITY WAS SHOWN IN
LAST YEARS PROXY STATEMENT. |
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Many corporations have adopted one-year terms for their
directors including Dow Jones, Sprint, West Coast Bancorp,
Bristol-Myers Squibb, Pfizer, and North Valley Bancorp. |
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WEST COAST BANCORP stated in its 2003 proxy statement:
Annual election will facilitate the election of directors
who will, in the view of a majority of shareholders, manage the
company in the best interests of the company and its
shareholders. |
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PFIZER, INC. stated in its 2003 proxy statement: The
prposed amendment will allow shareholders to review and express
their opinions on the performance of all Directors each
year. |
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WISCONSIN ENERGY CORPORATION and XCEL ENERGY INC. adopted
one year terms for their directors in annual meetings held in
2004. The proxy statement of Wisconsin Energy noted, A
classified Board has the effect of making it more difficult....
for stockholders to change a majority of directors even when a
majority of stockholders are dissatisfied with the performance
of incumbent directors. |
36
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If you believe that one-year terms for directors will
cause greater accountability, please vote FOR this
proposal. |
The Board of Directors unanimously recommends a
vote AGAINST the foregoing proposal for the following
reasons:
During 2005, the directors discussed and weighed the potential
benefits and risks to shareholders of declassifying the Board.
They considered factors articulated in the shareholder proposal
as well as other common arguments against a classified (or
staggered) board. They also considered the results
of studies evidencing the increased takeover premiums that have
been associated with takeover defenses including a classified
board, the interaction of the classified board with other
takeover defenses we adopted at the time of our spin-off from
U.S. Bancorp, and the value to shareholders of having
stability, continuity and preservation of skill on the Board,
particularly in light of the complex nature of the securities
industry and the time required to identify and recruit new,
independent directors and to familiarize them with our business.
Ultimately, the Board concluded that the classified board
structure provides important benefits to shareholders that
outweigh the benefits of declassification. Accordingly, the
Board recommends that shareholders vote against the shareholder
proposal requesting declassification of the Board.
The longer director terms resulting from a classified board
allow directors to gain, over time, a deep understanding of our
business and ensure that a majority of directors always will be
familiar with our business. We believe that directors who serve
longer terms on the board have a greater incentive to focus on
the execution of long-term strategies for the growth of our
business. In addition, a classified board ensures that the Board
will have sufficient time to evaluate coercive proposals to take
over the company because a classified board cannot be replaced
in one election cycle. This also encourages potential acquirers
to engage in arms length negotiations with the Board and
management. We believe that all of these factors will help the
Board maximize the creation of value for our shareholders.
Approval of the shareholder proposal would not in itself
declassify the Board. Rather, approval would serve only as a
request that the Board take the necessary steps to eliminate the
classified board structure and replace it with the annual
election of directors. Declassifying the Board would require an
amendment to our certificate of incorporation, and the
affirmative vote of the holders of not less than 80% of our
outstanding shares of common stock is required to approve such
an amendment.
The affirmative vote of the holders of a majority of the shares
of our common stock present in person or represented by proxy at
the annual meeting and entitled to vote is necessary for
approval of the shareholder proposal requesting declassification
of the Board and the annual election of all directors.
The Board of Directors recommends that you vote AGAINST
the shareholder proposal. Proxies will be voted AGAINST the
shareholder proposal unless otherwise specified.
SHAREHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING
In order for a shareholder proposal, including a director
nomination, to be considered for inclusion in our proxy
statement for the 2007 annual meeting of shareholders, the
written proposal must be received at our principal executive
offices on or before November 16, 2006. The proposal should
be addressed to Piper Jaffray Companies, Attention: James L.
Chosy, Secretary, at 800 Nicollet Mall, Suite 800, Mail
Stop J09N05, Minneapolis, Minnesota 55402. The proposal must
comply with Securities and Exchange Commission regulations
regarding the inclusion of shareholder proposals in
company-sponsored proxy materials.
In accordance with our bylaws, in order to be properly brought
before the 2006 annual meeting, a shareholders notice of
the matter the shareholder wishes to present must be delivered
to our principal executive offices in Minneapolis, Minnesota, at
the address identified in the preceding paragraph, not less than
90 nor more than 120 days prior to the first anniversary of
the date of this
37
years annual meeting. As a result, any notice given by or
on behalf of a shareholder pursuant to these provisions of our
bylaws (and not pursuant to
Rule 14a-8 of the
Securities and Exchange Commission) must be received no earlier
than January 2, 2007, and no later than February 1,
2007.
ANNUAL REPORT TO SHAREHOLDERS AND
FORM 10-K
Our 2005 Annual Report to Shareholders, including financial
statements for the year ended December 31, 2005,
accompanies this proxy statement. Shareholders may obtain an
additional copy of our Annual Report and/or a copy of our
Form 10-K filed
with the Securities and Exchange Commission for the year ended
December 31, 2005, without charge by viewing these
documents on our Web site at www.piperjaffray.com or by writing
to Piper Jaffray Companies, Attention: Investor Relations, 800
Nicollet Mall, Suite 800, Mail Stop J09N05, Minneapolis,
Minnesota 55402.
OTHER MATTERS
We do not know of any other matters that may be presented for
consideration at the annual meeting. If any other business does
properly come before the meeting, the persons named as proxies
on the enclosed proxy card will vote as they deem in the best
interests of Piper Jaffray.
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James L. Chosy
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Secretary |
Dated: March 16, 2006
38
APPENDIX A
PIPER JAFFRAY COMPANIES
AUDIT COMMITTEE CHARTER
As Amended by the Board of Directors
on February 21, 2006
The Audit Committee (the Committee) is established
pursuant to the Bylaws of Piper Jaffray Companies (the
Company). The purpose of the Committee is to oversee
(1) the independent auditors qualifications and
independence, (2) the integrity of the Companys
financial statements, (3) the performance of the
Companys internal audit function and independent auditor
and (4) the Companys compliance with legal and
regulatory requirements, and to prepare an audit committee
report for inclusion in the Companys proxy statement for
its annual shareholders meeting.
The Committee shall consist of three or more members of the
Board appointed from time to time by the Board. All of the
members of the Committee shall be non-employee directors who
meet the independence and experience requirements of the New
York Stock Exchange (NYSE), Section 10A(m)(3)
of the Securities Exchange Act of 1934 (the Exchange
Act) and the rules and regulations of the Securities and
Exchange Commission (the SEC). Each of the members
of the Committee shall be financially literate or shall become
so within a reasonable period of time after his or her
appointment to the Committee. At least one member of the
Committee shall be an audit committee financial
expert as defined by SEC rules. The Committee Chairperson
shall be appointed by the Board. The Committee may appoint a
Secretary, who need not be a director. Committee members are
subject to removal at any time by a majority of the Board. Any
resulting vacancy may be filled by the Board.
The Committee shall meet as often as it determines, but not less
frequently than quarterly. The Committee may request any officer
or employee of the Company or external legal, accounting or
other advisors to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee. In
addition, the Committee shall have such other direct and
independent interaction with management, the internal auditor
and the independent auditor from time to time as the members of
the Committee deem appropriate.
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IV. |
Resources and Authority |
The Committee shall have the resources and authority appropriate
to discharge its responsibilities, including the authority to
use internal personnel and to obtain advice and assistance from
internal or external legal, accounting, tax or other advisors
and the funding to compensate any such external advisors. In
addition, the Committee shall have sole authority to retain and
terminate the independent auditor (subject to shareholder
ratification, if such ratification is required or sought) and to
approve the fees and other retention terms related to the
appointment of the independent auditor, who shall report
directly to the Committee. It is the sense of the Committee that
the Committee generally will recommend to the Board that the
selection of the independent auditor be submitted to
shareholders for ratification at the annual meeting of
shareholders.
The Committee may delegate its authority to subcommittees
established from time to time by the Committee, which
subcommittees shall consist of one or more members of the
Committee and shall report to the Committee; provided, however,
that in the event the Committee delegates to a subcommittee its
authority to pre-approve audit and permitted non-audit services,
any determination
A-1
by the subcommittee to grant such pre-approvals shall be
presented to the full Committee at its next scheduled meeting.
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V. |
Duties
and Responsibilities |
The Committee shall:
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Oversee the Relationship with the Independent Auditor |
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1. |
Appoint, determine the compensation and retention terms for, and
oversee the work of any independent auditor engaged for the
purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company. |
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2. |
Resolve disagreements between management and the independent
auditor regarding financial reporting. |
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3. |
At least annually, obtain and review a report by the independent
auditor describing (a) its internal quality-control
procedures, (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the
firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues, and
(c) all relationships between the independent auditor and
the Company, in order to assess the auditors independence. |
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4. |
Annually receive written notice from the independent auditor
regarding its independence as required in Independence Standards
Board Standard No. 1 and discuss with the independent
auditor its independence. |
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5. |
At least annually, evaluate the qualifications, performance and
independence of the independent auditor, considering
(a) whether the auditors quality controls are
adequate, (b) whether the provision of permitted non-audit
services is compatible with maintaining the auditors
independence, and (c) the opinions of the Companys
management and its internal auditor. The Committee shall present
its conclusions with respect to the independent auditor to the
Board. |
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6. |
Review and evaluate the lead partner of the independent auditor
team. |
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7. |
Ensure the regular rotation of the lead audit partner having
primary responsibility for the audit and the audit partner
responsible for reviewing the audit, as required by law. |
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8. |
Review the Companys hiring policies with respect to
employees and former employees of the independent auditor who
participated in any capacity in the audit of the Company to
ensure such hiring policies do not compromise the independence
of the independent auditor. |
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9. |
Confirm that none of the independent auditors audit
partners earn or receive compensation based on procuring
engagements with the Company for providing products or services,
other than audit review or attest services. |
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10. |
Meet with the independent auditor prior to the audit to discuss
the planning and staffing of the audit. |
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11. |
Pre-approve all audit and permitted non-audit services
(including the fees and terms thereof) to be performed for the
Company by the independent auditor, subject to the de minimis
exceptions for non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act that are approved
by the Committee prior to the completion of the audit,
considering whether the provision of any non-audit services is
compatible with maintaining the independent auditors
independence. |
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12. |
Discuss with the independent auditor issues on which the
national office was consulted by the Companys audit team
and matters of audit quality and consistency. |
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Oversee the Integrity of the Companys Financial
Statements and Disclosures |
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13. |
Meet to review and discuss with management and the independent
auditor the Companys annual audited financial statements,
including reviewing the Companys specific disclosures |
A-2
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under Managements Discussion and Analysis of
Financial Condition and Results of Operations, and
recommend to the Board whether the annual audited financial
statements should be included in the Companys
Form 10-K.
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14. |
Meet to review and discuss with management and the independent
auditor the Companys quarterly financial statements,
including reviewing the Companys specific disclosures
under Managements Discussion and Analysis of
Financial Condition and Results of Operations, prior to
the filing of the Companys
Form 10-Q.
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15. |
Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with
the preparation of the Companys financial statements,
including any significant changes in the Companys
selection or application of accounting principles. |
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16. |
Review and discuss with management and the independent auditor
any major issues as to the adequacy of the Companys
internal controls, any special steps adopted in light of
material control deficiencies and the adequacy of disclosures
about changes in internal control over financial reporting. |
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17. |
Review and discuss with management (including the senior
internal audit executive) and the independent auditor the
Companys internal controls report and the independent
auditors attestation of the report, prior to the filing of
the Companys
Form 10-K.
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18. |
Review and discuss with the independent auditor (a) all
critical accounting policies and practices to be used;
(b) all alternative treatments of financial information
within generally accepted accounting principles
(GAAP) that have been discussed with management,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent
auditor; and (c) other material written communications
between the independent auditor and management, such as any
management letter or schedule of unadjusted differences. |
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19. |
Discuss generally with management the types of information to be
disclosed and the types of presentations to be made with respect
to the Companys earnings press releases, including the use
of pro forma or adjusted non-GAAP
information, and any financial information and earnings guidance
provided to analysts and rating agencies. |
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20. |
Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the Companys financial statements. |
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21. |
Review disclosures made to the Committee by the Companys
chief executive officer and chief financial officer during their
certification process for the
Form 10-K and
Forms 10-Q about
any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud
involving management or other employees who play a significant
role in the Companys internal controls. |
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22. |
Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, and review with the
independent auditor any difficulties encountered in the course
of the audit work, including any restrictions on the scope of
the independent auditors activities or on its access to
requested information, and any significant disagreements with
management, and managements response to such problems or
difficulties. |
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Oversee the Companys Internal Audit Function |
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23. |
Review the appointment and replacement of the senior internal
audit executive. |
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24. |
Review the significant reports to management prepared by the
internal auditor and managements responses. |
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25. |
Discuss with the independent auditor and management the
responsibilities, budget and staffing of the Companys
internal audit function and the planned scope of the internal
audit. |
A-3
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Oversee the Companys Compliance with Legal and
Regulatory Requirements |
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26. |
Obtain from the independent auditor assurance that
Section 10A(b) of the Exchange Act has not been implicated. |
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27. |
Annually review the responsibilities, budget and staffing of the
Companys compliance department. |
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28. |
Review the Companys annual report to management regarding
supervisory systems and procedures required by the NYSE. |
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29. |
Annually review the budgeting and expense allocation process
with respect to the Companys investment research
operations to ensure that such budgeting and expense allocation
are performed by senior management of the Company without input
from the Companys investment banking professionals and
without regard to specific revenues or results derived from the
Companys investment banking operations, though revenues
and results of the Company as a whole may be considered in
determining the investment research budget and allocation of
investment research expenses. |
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30. |
Establish procedures for the receipt, retention and treatment of
complaints regarding the Companys accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by Company employees of concerns regarding
questionable accounting or auditing matters. |
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31. |
Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports that raise material issues regarding the
Companys financial statements or accounting policies. |
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32. |
Discuss with the Companys General Counsel legal matters
that may have a material impact on the financial statements or
the Companys compliance with legal or regulatory
requirements. |
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33. |
Produce an annual report for inclusion in the Companys
proxy statement for its annual shareholders meeting, in
accordance with applicable rules and regulations. |
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Other Duties and Responsibilities |
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34. |
Regularly discuss the Companys major financial risk
exposures, the steps management has taken to monitor and control
such exposures, and guidelines and policies to govern the
Companys risk assessment and risk management processes. |
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35. |
Regularly meet with management (including the chief financial
and accounting officer), the internal auditor and the
independent auditor in separate executive sessions. |
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36. |
Annually review and reassess the adequacy of this Charter and
recommend to the Board any proposed changes to this Charter. |
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37. |
Annually review and evaluate the Committees own
performance. |
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38. |
Report regularly to the Board on the Committees
activities, specifically including a review of any issues that
arise with respect to the quality or integrity of the
Companys financial statements, the Companys
compliance with legal or regulatory requirements, the
performance and independence of the Companys independent
auditor, or the performance of the Companys internal audit
function. |
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VI. |
Limitation of Committees Role |
The Committee is not responsible for preparing financial
statements, planning or conducting audits, or determining that
the Companys financial statements and disclosures are
complete and accurate and are in accordance with generally
accepted accounting principles and applicable legal and other
requirements. These are the responsibilities of management and
the independent auditor.
A-4
APPENDIX B
PIPER JAFFRAY COMPANIES
AMENDED AND RESTATED
2003 ANNUAL AND LONG-TERM INCENTIVE PLAN
(as amended and restated effective May 2,
2006)
Section 1.
Purpose
The purpose of the Plan is to promote the interests of the
Company and its stockholders by giving the Company a competitive
advantage in attracting, retaining and motivating employees,
officers, consultants and Directors capable of assuring the
future success of the Company, to offer such persons incentives
that are directly linked to the profitability of the
Companys businesses and increases in stockholder value,
and to afford such persons an opportunity to acquire a
proprietary interest in the Company.
Section 2.
Definitions
As used in the Plan, the following terms shall have the meanings
set forth below.
(a) Affiliate means any entity that,
directly or indirectly through one or more intermediaries, is
controlled by, controlling or under common control with the
Company.
(b) Award means any Stock Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Award, Dividend Equivalent, Other Stock Grant, Other
Stock-Based Award or Tax Offset Bonus granted under the Plan.
(c) Award Agreement means any written
agreement, contract or other instrument or document evidencing
any Award granted under the Plan. Each Award Agreement shall be
subject to the applicable terms and conditions of the Plan and
any other terms and conditions (not inconsistent with the Plan)
determined by the Committee.
(d) Board means the Board of Directors
of the Company.
(e) Code means the Internal Revenue Code
of 1986, as amended from time to time, and any regulations
promulgated thereunder.
(f) Change in Control has the meaning
set forth in Section 7.
(g) Committee means a committee of
Directors designated by the Board to administer the Plan, which
initially shall be the Compensation Committee of the Board. The
Committee shall be comprised of not less than such number of
Directors as shall be required to permit Awards granted under
the Plan to qualify under
Rule 16b-3 and
Section 162(m) of the Code, and each member of the
Committee shall be an Outside Director.
(h) Company means Piper Jaffray
Companies, a Delaware corporation.
(i) Covered Employee means a Participant
designated prior to the grant of Restricted Stock, Restricted
Stock Units or Performance Awards by the Committee who is or may
be a covered employee within the meaning of
Section 162(m)(3) of the Code in the year in which any such
Award is expected to be taxable to such Participant.
(j) Director means a member of the
Board, including any Outside Director.
(k) Dividend Equivalent means any right
granted under Section 6(e) of the Plan.
(l) Effective Date has the meaning set
forth in Section 11 of the Plan.
(m) Eligible Individual means any
employee, officer, Director or consultant providing services to
the Company or any Affiliate, and prospective employees and
consultants who have accepted offers
B-1
of employment or consultancy from the Company or any Affiliate,
whom the Committee determines to be an Eligible Individual.
(n) Exchange Act means the Securities
Exchange Act of 1934, as amended from time to time.
(o) Exercise Price has the meaning set
forth in Section 6(a) of the Plan.
(p) Fair Market Value means, with
respect to any property (including, without limitation, any
Shares or other securities), the fair market value of such
property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding
the foregoing and except as otherwise provided by the Committee,
the Fair Market Value of a Share as of a given date shall be the
closing sales price for one Share on the New York Stock Exchange
or such other national securities market or exchange as may at
the time be the principal market for the Shares, or if the
Shares were not traded on such national securities market or
exchange on such date, then on the next preceding date on which
the Shares are traded, all as reported by such source as the
Committee may select.
(q) Non-Qualified Stock Option means any
Stock Option that is not designated as, or is not intended to
qualify as, an incentive stock option within the
meaning of Section 422 of the Code.
(r) Outside Director means any Director
who qualifies as an outside director within the
meaning of Section 162(m) of the Code and as a
non-employee director within the meaning of
Rule 16b-3.
(s) Participant means an Eligible
Individual designated to be granted an Award under the Plan.
(t) Performance Award means any right
granted under Section 6(d) of the Plan.
(u) Performance Goals means the
performance goals established by the Committee in connection
with the grant of an Award. In the case of Qualified
Performance-Based Awards, (i) such goals shall be based on
the attainment of specified levels of one or more of the
following measures with respect to the Company or such
subsidiary, division or department of the Company for or within
which the Participant performances services: revenue growth;
earnings before interest, taxes, depreciation, and amortization;
earnings before interest and taxes; operating income; pre- or
after- tax income; earnings per share; cash flow; cash flow per
share; return on equity; return on tangible equity; return on
invested capital; return on assets; economic value added (or an
equivalent metric); share price performance; total shareholder
return; improvement in or attainment of expense levels;
improvement in or attainment of working capital levels and
(ii) such Performance Goals shall be set by the Committee
within the time period prescribed by Section 162(m) of the
Code and related regulations. Such Performance Goals also may be
based upon the attaining of specified levels of Company
performance under one or more of the measures described above
relative to the performance of other companies.
(v) Plan means this Piper Jaffray
Companies Amended and Restated 2003 Annual and Long-Term
Incentive Plan, as set forth herein and as hereinafter amended
from time to time.
(w) Qualified Performance-Based Award
means an Award of Restricted Stock, Restricted Stock Units or
Performance Awards designated as such by the Committee at the
time of grant, based upon a determination that (i) the
recipient is or may be a Covered Employee in the year in which
the Company would expect to be able to claim a tax deduction
with respect to such Restricted Stock or Performance Awards and
(ii) the Committee wishes such Award to qualify for the
Section 162(m) Exemption.
(x) Restricted Stock means any Share
granted under Section 6(c) of the Plan.
(y) Restricted Stock Unit means any unit
granted under Section 6(c) of the Plan evidencing the right
to receive a Share (or a cash payment equal to the Fair Market
Value of a Share) at some future date.
B-2
(z) Rule 16b-3
means Rule 16b-3,
as promulgated by the Securities and Exchange Commission under
Section 16(b) of the Exchange Act, as amended from time to
time.
(aa) Section 162(m) Exemption means
the exemption from the limitation on deductibility imposed by
Section 162(m) of the Code that is set forth in
Section 162(m)(4)(C) of the Code.
(bb) Share or Shares
means a share or shares of common stock, par value $.01 per
share, of the Company.
(cc) Stock Appreciation Right means any
right granted under Section 6(b) of the Plan.
(dd) Stock Option means a Non-Qualified
Stock Option granted under Section 6(a) of the Plan.
Section 3.
Administration
(a) Power and Authority of the Committee. The Plan
shall be administered by the Committee. Subject to the terms of
the Plan and to applicable law, the Committee shall have full
power and authority to:
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(i) designate Participants; |
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(ii) determine whether and to what extent any type (or
types) of Award is to be granted hereunder; |
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(iii) determine the number of Shares to be covered by (or
the method by which payments or other rights are to be
determined in connection with) each Award; |
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(iv) determine the terms and conditions of any Award or
Award Agreement; |
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(v) subject to Section 9 hereof, amend the terms and
conditions of any Award or Award Agreement and accelerate the
vesting and/or exercisability of any Stock Option or waive any
restrictions relating to any Award; provided, however,
that (A) except for adjustments pursuant to
Section 4(c) of the Plan, in no event may any Stock Option
granted under this Plan be (x) amended to decrease the
Exercise Price thereof, (y) cancelled in conjunction with
the grant of any new Stock Option with a lower Exercise Price,
or (z) otherwise subject to any action that would be
treated, for accounting purposes, as a repricing of
such Stock Option, unless such amendment, cancellation, or
action is approved by the stockholders of the Company to the
extent required by applicable law and stock exchange rules and
(B) the Committee may not adjust upwards the amount payable
to a Covered Employee with respect to a Qualified
Performance-Based Award or waive or alter the Performance Goals
associated therewith in a manner that would violate
Section 162(m) of the Code. |
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(vi) determine whether, to what extent and under what
circumstances the exercise price of Awards may be paid in cash,
Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended; |
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(vii) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards,
other property and other amounts payable with respect to an
Award under the Plan shall be deferred either automatically or
at the election of the holder thereof or the Committee; |
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(viii) interpret and administer the Plan and any instrument
or agreement, including an Award Agreement, relating to the Plan; |
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(ix) adopt, alter, suspend, waive or repeal such rules,
guidelines and practices and appoint such agents as it shall
deem advisable or appropriate for the proper administration of
the Plan; and |
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(x) make any other determination and take any other action
that the Committee deems necessary or desirable for the
administration of the Plan. |
B-3
Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other
decisions under or with respect to the Plan or any Award or
Award Agreement shall be within the sole discretion of the
Committee, may be made at any time and shall be final,
conclusive and binding upon all persons, including without
limitation, the Company, its Affiliates, subsidiaries,
shareholders, Eligible Individuals and any holder or beneficiary
of any Award.
(b) Action by the Committee; Delegation. Except to
the extent prohibited by applicable law or the applicable rules
of a stock exchange, the Committee may delegate all or any part
of its duties and powers under the Plan to one or more persons,
including Directors or a committee of Directors, subject to such
terms, conditions and limitations as the Committee may establish
in its sole discretion; provided, however, that the
Committee shall not delegate its powers and duties under the
Plan (i) with regard to officers or directors of the
Company or any Affiliate who are subject to Section 16 of
the Exchange Act or (ii) in a manner that would cause an
Award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m)
Exemption; and provided, further, that any such
delegation may be revoked by the Committee at any time.
(c) Power and Authority of the Board.
Notwithstanding anything to the contrary contained herein,
except to the extent that the grant or exercise of such
authority would cause any Award or transaction to become subject
to (or lose an exemption under) the short-swing profit recovery
provisions of Section 16 of the Exchange Act or cause an
Award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m)
Exemption, the Board may, at any time and from time to time,
without any further action of the Committee, exercise the powers
and duties of the Committee under the Plan. To the extent that
any permitted action taken by the Board conflicts with action
taken by the Committee, the Board action shall control.
Section 4.
Shares Available for Awards
(a) Shares Available. Subject to adjustment as
provided in Section 4(c) of the Plan, the aggregate number
of Shares that may be issued under the Plan shall be
4,100500,000. Shares that may be issued
under the Plan may be authorized but unissued Shares or Shares
re-acquired and held in treasury. Notwithstanding the
foregoing, the number of Shares available for granting
Restricted Stock and Restricted Stock Units shall not exceed
4,100,000, subject to adjustment as provided in
Section 4(c) of the Plan.
(b) Accounting for Awards. For purposes of this
Section 4, if an Award entitles the holder thereof to
receive or purchase Shares, the number of Shares covered by such
Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of
Shares available for granting Awards under the Plan. Any Shares
that are used by a Participant as full or partial payment to the
Company of the purchase price relating to an Award, including in
connection with the satisfaction of tax obligations relating to
an Award, shall again be available for granting Awards under the
Plan. In addition, if any Shares covered by an Award or to which
an Award relates are not purchased or are forfeited, or if an
Award otherwise terminates without delivery of any Shares, then
the number of Shares counted against the aggregate number of
Shares available under the Plan with respect to such Award, to
the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan.
(c) Adjustments. In the event of any change in
corporate capitalization (including, but not limited to, a
change in the number of Shares outstanding), such as a stock
split or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company (including any
extraordinary cash or stock dividend), any reorganization
(whether or not such reorganization comes within the definition
of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may
make such substitution or adjustments in the aggregate number
and kind of shares reserved for issuance under the Plan, and the
maximum limitation upon Stock Options and Stock Appreciation
Rights and other Awards to be granted to any Participant, in the
number, kind and Exercise Price of
B-4
shares subject to outstanding Stock Options and Stock
Appreciation Rights, in the number and kind of shares subject to
other outstanding Awards granted under the Plan and/or such
other equitable substitution or adjustments as it may determine
to be appropriate in its sole discretion (including, without
limitation, the provision of an amount in cash in consideration
for any such Awards); provided, however, that the number
of shares subject to any Award shall always be a whole number.
Without limiting the generality of the foregoing, in connection
with any Disaffiliation of a subsidiary of the Company, the
Committee shall have the authority to arrange for the assumption
or replacement of Awards with new awards based on shares of the
affected subsidiary or by an affiliate of an entity that
controls the subsidiary following the Disaffiliation. For
purposes hereof, Disaffiliation of a subsidiary
shall mean the subsidiarys ceasing to be a subsidiary of
the Company for any reason (including, without limitation, as a
result of a public offering, spin-off, sale or other
distribution or transfer by the Company of the stock of the
subsidiary). Notwithstanding the foregoing, to the extent
that any Award is otherwise considered to be deferred
compensation under Section 409A of the Code, any adjustment
to such Award will comply with Section 409A of the Code
(including current and future guidance issued by the Department
of Treasury and or the Internal Revenue Service).
(d) Award Limitations. No more than
250,000 shares of Common Stock may be subject to Qualified
Performance-Based Awards granted to any Eligible Individual in
any fiscal year of the Company.
Section 5.
Eligibility
Any Eligible Individual shall be eligible to be designated a
Participant. In determining which Eligible Individuals shall
receive an Award and the terms of any Award, the Committee may
take into account the nature of the services rendered by the
respective Eligible Individuals, their present and potential
contributions to the success of the Company or such other
factors as the Committee, in its discretion, shall deem relevant.
Section 6.
Awards
(a) Stock Options. The Committee is hereby
authorized to grant Stock Options (which may only be
Non-Qualified Stock Options) to Eligible Individuals with the
following terms and conditions and with such additional terms
and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
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(i) Exercise Price. The purchase price per Share
purchasable under a Stock Option (the Exercise
Price) shall be determined by the Committee; provided,
however, that, unless otherwise determined by the
Committee, such Exercise Price shall not be less than
100% of the Fair Market Value of a Share on the date of grant of
such Stock Option. |
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(ii) Option Term. The term of each Stock Option
shall be fixed by the Committee at the time of grant, but in no
event shall be more than 10 years from the date of grant. |
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(iii) Time and Method of Exercise. The Committee
shall determine the time or times at which a Stock Option may be
exercised in whole or in part and the method or methods by
which, and the form or forms (including, without limitation,
cash, Shares, other securities, other Awards or other property,
or any combination thereof, having a Fair Market Value on the
exercise date equal to the applicable Exercise Price) in which,
payment of the Exercise Price with respect thereto may be made
or deemed to have been made. |
B-5
(b) Stock Appreciation Rights. The Committee is
hereby authorized to grant Stock Appreciation Rights to Eligible
Individuals subject to the terms of the Plan. Each Stock
Appreciation Right granted under the Plan shall confer on the
holder upon exercise the right to receive, as determined by the
Committee, cash or a number of Shares equal to the excess of
(A) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise)
over (B) the grant price of the Stock Appreciation Right as
determined by the Committee, which grant price shall not be less
than 100% of the Fair Market Value of one Share on the date of
grant of the Stock Appreciation Right, unless otherwise
determined by the Committee. Subject to the terms of
the Plan, the grant price, term, methods of exercise, dates of
exercise, methods of settlement and any other terms and
conditions (including conditions or restrictions on the exercise
thereof) of any Stock Appreciation Right shall be as determined
by the Committee, provided that in no event shall the
term of a Stock Appreciation Right be longer than ten years.
(c) Restricted Stock and Restricted Stock Units. The
Committee is hereby authorized to grant Restricted Stock and
Restricted Stock Units to Eligible Individuals with the
following terms and conditions and with such additional terms
and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine:
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(i) Restrictions. Shares of Restricted Stock and
Restricted Stock Units shall be subject to such restrictions as
the Committee may impose (including, without limitation,
limitation on transfer, forfeiture conditions, limitation on the
right to vote a Share of Restricted Stock or the right to
receive any dividend or other right or property with respect
thereto), which restrictions may lapse separately or in
combination at such time or times, in such installments or
otherwise as the Committee may deem appropriate. The grant or
vesting of Restricted Stock and Restricted Stock Units may be
performance-based or time-based or both. Restricted Stock and
Restricted Stock Units may be Qualified Performance-Based
Awards, in which event the grant or vesting, as applicable, of
such Restricted Stock or Restricted Stock Units shall be
conditioned upon the attainment of Performance Goals. |
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(ii) Stock Certificates; Delivery of Shares. |
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(A) Any Restricted Stock granted under the Plan shall be
evidenced in such manner as the Committee may deem appropriate,
including book-entry registration or issuance of one or more
stock certificates. Any certificate issued in respect of shares
of Restricted Stock shall be registered in the name of such
Participant and shall bear an appropriate legend referring to
the applicable Award Agreement and possible forfeiture of such
shares of Restricted Stock. The Committee may require that the
certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in
blank, relating to the Shares covered by such Award. |
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(B) In the case of Restricted Stock Units, no Shares or
other property shall be issued at the time such Awards are
granted. Upon the lapse or waiver of restrictions and the
restricted period relating to Restricted Stock Units (or at such
later time as may be determined by the Committee), Shares or
other cash or property shall be issued to the holder of the
Restricted Stock Units and evidenced in such manner as the
Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. |
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(iii) Forfeiture. Except as otherwise determined by
the Committee, upon a Participants termination of
employment (as determined under criteria established by the
Committee) during the applicable restriction period, all
applicable Shares of Restricted Stock and Restricted Stock Units
at such time subject to restriction shall be forfeited and
reacquired by the Company; provided, however, that the
Committee may, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to Shares of Restricted
Stock or Restricted Stock Units. |
B-6
(d) Performance Awards. The Committee is hereby
authorized to grant Performance Awards to Eligible Individuals
subject to the terms of the Plan. A Performance Award granted
under the Plan (i) may be denominated or payable in cash,
Shares (including, without limitation, Restricted Stock and
Restricted Stock Units), other securities, other Awards or other
property and (ii) shall confer on the holder thereof the
right to receive payments, in whole or in part, upon the
achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms
of the Plan, the performance goals to be achieved during any
performance period, the length of any performance period, the
amount of any Performance Award granted, the amount of any
payment or transfer to be made pursuant to any Performance Award
and any other terms and conditions of any Performance Award
shall be determined by the Committee. The Committee may, prior
to or at the time of the grant, designate Performance Awards as
Qualified Performance-Based Awards, in which event it shall
condition the settlement thereof upon the attainment of
Performance Goals. Performance Awards denominated in cash that
are payable to any individual Participant with respect to any
calendar year will be limited to a maximum of $7,500,000.
(e) Dividend Equivalents. The Committee is hereby
authorized to grant Dividend Equivalents to Eligible Individuals
under which the Participant shall be entitled to receive
payments (in cash, Shares, other securities, other Awards or
other property as determined in the discretion of the Committee)
equivalent to the amount of cash dividends paid by the Company
to holders of Shares with respect to a number of Shares
determined by the Committee. Subject to the terms of the Plan,
such Dividend Equivalents may have such terms and conditions as
the Committee shall determine.
(f) Other Stock Grants. The Committee is hereby
authorized, subject to the terms of the Plan, to grant to
Eligible Individuals Shares without restrictions thereon as are
deemed by the Committee to be consistent with the purpose of the
Plan.
(g) Other Stock-Based Awards. The Committee is
hereby authorized to grant to Eligible Individuals, subject to
the terms of the Plan, such other Awards that are denominated or
payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as are deemed
by the Committee to be consistent with the purpose of the Plan.
Shares or other securities delivered pursuant to a purchase
right granted under this Section 6(g) shall be purchased
for such consideration, which may be paid by such method or
methods and in such form or forms (including, without
limitation, cash, Shares, other securities, other Awards or
other property or any combination thereof), as the Committee
shall determine, the value of which consideration, as
established by the Committee, shall not be less than 100% of the
Fair Market Value of such Shares or other securities as of the
date such purchase right is granted, unless otherwise
determined by the Committee.
(h) Tax Offset Bonus. The Committee may grant to a
Participant, at the time of granting an Award or at any time
thereafter, the right to receive a cash payment in an amount
specified by the Committee, to be paid at such time or times (if
ever) as the Award results in compensation income to the
Participant, for the purpose of assisting the Participant to pay
the resulting taxes, all as determined by the Committee and on
such other terms and conditions as the Committee shall determine
(a Tax Offset Bonus).
(i) General.
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(i) Consideration for Awards. Awards may be granted
for no cash consideration or for any cash or other consideration
as determined by the Committee and required by applicable law. |
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(ii) Awards May Be Granted Separately or Together.
Awards may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with or in
substitution for any other Award or any award granted under any
plan of the Company or any Affiliate. Awards granted in addition
to or in tandem with other Awards or in addition to or in tandem
with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards. |
B-7
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(iii) Forms of Payment Under Awards. Subject to the
terms of the Plan, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or settlement
of an Award may be made in such form or forms as the Committee
shall determine (including, without limitation,
cash, Shares, promissory notes (, other
securities, other Awards or other property or any combination
thereof); provided, however, that the
acceptance of such notes
doespayments or transfers shall not
conflict with Section 402 of the Sarbanes Oxley Act of
2002), other securities, other Awards or other property or any
combination thereof), andbe in the form of
promissory notes. Such payments or transfers may be made in
a single payment or transfer, in installments or on a deferred
basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may
include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents with
respect to installment or deferred payments. |
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(iv) Limits on Transfer of Awards. No Award (other
than Other Stock Grants) and no right under any such Award shall
be transferable by a Participant otherwise than by will or by
the laws of descent and distribution and the Company shall not
be required to recognize any attempted assignment of such rights
by any Participant; provided, however, that, if so
determined by the Committee, a Participant may, in the manner
established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant and
receive any property distributable with respect to any Award
upon the death of the Participant; and provided, further,
that, if so determined by the Committee, a Participant may
transfer a Non-Qualified Stock Option to any Family Member (as
such term is defined in the General Instructions to
Form S-8 (or
successor to such Instructions or such Form)) at any time that
such Participant holds such Stock Option, whether directly or
indirectly or by means of a trust or partnership or otherwise,
provided that the Participant may not receive any
consideration for such transfer, the Family Member may not make
any subsequent transfers other than by will or by the laws of
descent and distribution and the Company receives written notice
of such transfer. Except as otherwise determined by the
Committee, each Award or right under any such Award shall be
exercisable during the Participants lifetime only by the
Participant or, if permissible under applicable law, by the
Participants guardian or legal representative. Except as
otherwise determined by the Committee, no Award or right under
any such Award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or
other encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate. |
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(v) Term of Awards. Subject to Section 6(a)(ii)
of the Plan, the term of each Award shall be for such period as
may be determined by the Committee. |
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(vi) Restrictions. All Shares or other securities
delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan,
applicable federal or state securities laws and regulatory
requirements, and the Committee may direct appropriate stop
transfer orders and cause other legends to be placed on the
certificates for such Shares or other securities to reflect such
restrictions. |
Section 7.
Change in Control
(a) Impact of Event. Notwithstanding any other provision of
the Plan to the contrary, unless otherwise provided by the
Committee in any Award Agreement, in the event of a Change in
Control:
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(i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date of such Change in Control, and which
are not then exercisable and vested, shall become fully
exercisable and vested. |
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(ii) The restrictions and deferral limitations applicable
to any Restricted Stock and Restricted Stock Units shall lapse,
and such Restricted Stock and Restricted Stock Units shall
become free of all restrictions and become fully vested. |
B-8
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(iii) All Performance Awards shall be considered to be
earned and payable in full, and any deferral or other
restriction shall lapse and such Performance Awards shall be
settled in cash or Shares, as determined by the Committee, as
promptly as is practicable. |
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(iv) All restrictions on other Awards shall lapse and such
Awards shall become free of all restrictions and become fully
vested. |
(b) Definition of Change in Control. For purposes of
the Plan, a Change in Control shall mean the
happening of any of the following events:
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(i) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a Person) of beneficial ownership
(within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either
(1) the then outstanding shares of common stock of the
Company (the Outstanding Company Common Stock) or
(2) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in
the election of directors (the Outstanding Company Voting
Securities); excluding, however, the following:
(1) Any acquisition directly from the Company, other than
an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself
acquired directly from the Company, (2) Any acquisition by
the Company, (3) Any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company
or any entity controlled by the Company, or (4) Any acquisition
pursuant to a transaction which complies with clauses (1),
(2) and (3) of subsection (iii) of this
Section 7(b); or |
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(ii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board
(such Board shall be hereinafter referred to as the
Incumbent Board) cease for any reason to constitute
at least a majority of the Board; provided, however, for
purposes of this Section 7(b), that any individual who
becomes a member of the Board subsequent to the Effective Date,
whose election, or nomination for election by the Companys
shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided, further, that
any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or |
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(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (Corporate
Transaction); excluding, however, such a Corporate
Transaction pursuant to which (1) all or substantially all
of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or
indirectly, more than 50% of, respectively, the outstanding
shares of common stock, and the combined voting power of the
then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all
of the Companys assets either directly or through one or
more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
(2) no Person (other than the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Corporate Transaction) will beneficially
own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power of
the outstanding voting securities of such corporation entitled
to vote generally in the election of |
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directors except to the extent that such ownership existed prior
to the Corporate Transaction, and (3) individuals who were
members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or |
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(iv) The approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company. |
Section 8.
Income Tax Withholding
No later than the date as of which an amount first becomes
includible in the gross income of a Participant for federal
income tax purposes with respect to any Award under the Plan,
the Participant shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. The obligations
of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and its Affiliates
shall, to the extent permitted by law, be entitled to take such
action and establish such procedures as it deems appropriate to
withhold or collect all applicable payroll, withholding, income
or other taxes from such Participant. In order to assist a
Participant in paying all or a portion of the federal, state,
local and foreign taxes to be withheld or collected upon
exercise or receipt of (or the lapse of restrictions relating
to) an Award, the Committee, in its discretion and subject to
such additional terms and conditions as it may adopt, may permit
the Participant to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the
Shares or other property otherwise to be delivered upon exercise
or receipt of (or the lapse of restrictions relating to) such
Award with a Fair Market Value equal to the amount of such taxes
or (ii) delivering to the Company Shares or other property
other than Shares issuable upon exercise or receipt of (or the
lapse of restrictions relating to) such Award with a Fair Market
Value equal to the amount of such taxes, provided that,
in either case, not more than the legally required minimum
withholding may be settled with Shares. Any such election must
be made on or before the date that the amount of tax to be
withheld is determined.
Section 9.
Amendment and Termination
(a) Amendments to the Plan. The Board may amend,
alter, suspend, discontinue or terminate the Plan at any time;
provided, however, that, notwithstanding any other
provision of the Plan or any Award Agreement, without the
approval of the stockholders of the Company, no amendment,
alteration, suspension, discontinuation or termination shall be
made that, absent such approval:
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(i) requires stockholder approval under the rules or
regulations of the New York Stock Exchange, any other securities
exchange or the National Association of Securities Dealers, Inc.
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(ii) increases the number of Shares authorized under the
Plan as specified in Section 4(a) of the Plan. |
(b) Amendments to Awards. The Committee may waive
any conditions of or rights of the Company under any outstanding
Award, prospectively or retroactively. Except as otherwise
provided herein or in an Award Agreement, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding
Award, prospectively or retroactively, if such action would
adversely affect the rights of the holder of such Award, without
the consent of the Participant or holder or beneficiary thereof
or such amendment would cause a Qualified Performance-Based
Award to cease to qualify for the Section 162(m) Exemption.
(c) Correction of Defects, Omissions and
Inconsistencies. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in the Plan
or any Award in the manner and to the extent it shall deem
desirable to carry the Plan into effect.
B-10
Section 10.
General Provisions
(a) No Rights to Awards. No Eligible Individual or
other person shall have any claim to be granted any Award under
the Plan, and there is no obligation for uniformity of treatment
of Eligible Individuals or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be
the same with respect to any Participant or with respect to
different Participants.
(b) Award Agreements. No Participant will have
rights under an Award granted to such Participant unless and
until an Award Agreement shall have been duly executed on behalf
of the Company and, if requested by the Company, signed by the
Participant. In the event that any provision of an Award
Agreement conflicts with or is inconsistent in any respect with
the terms of the Plan as set forth herein or subsequently
amended, the terms of the Plan shall control.
(c) No Rights of Stockholders. Except with respect
to Shares of Restricted Stock as to which the Participant has
been granted the right to vote, neither a Participant nor the
Participants legal representative shall be, or have any of
the rights and privileges of, a stockholder of the Company with
respect to any Shares issuable to such Participant upon the
exercise or payment of any Award, in whole or in part, unless
and until such Shares have been issued in the name of such
Participant or such Participants legal representative
without restrictions thereto.
(d) No Limit on Other Compensation Plans or
Arrangements. Nothing contained in the Plan shall prevent
the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable
only in specific cases.
(e) No Right to Employment. The Plan shall not
constitute a contract of employment, and adoption of the Plan or
the grant of an Award shall not be construed as giving a
Participant the right to be retained as an employee of the
Company or an Affiliate, or a non-employee Director to be
retained as a Director, nor shall it affect in any way the right
of the Company or an Affiliate to terminate such employment at
any time, with or without cause. In addition, the Company or an
Affiliate may at any time dismiss a Participant from employment
free from any liability or any claim under the Plan or any
Award, unless otherwise expressly provided in the Plan or in any
Award Agreement.
(f) Governing Law. The Plan and all Awards granted
and actions taken thereunder shall be governed by and construed
in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws thereof.
(g) Severability. If any provision of the Plan or
any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan
or any Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform
to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee,
materially altering the purpose or intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(h) Application to Participants Outside the United
States. In the event an Award is granted to a Participant
who is employed or providing services outside the United States
and who is not compensated from a payroll maintained in the
United States, the Committee may, in its sole discretion, modify
the provisions of the Plan as they pertain to such individual to
comply with applicable foreign law.
(i) No Trust or Fund Created. Neither the Plan
nor any Award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between
the Company or any Affiliate and an Eligible Individual or any
other person. To the extent that any person acquires a right to
receive payments from the Company or any Affiliate pursuant to
an Award, such right shall be no greater than the right of any
unsecured general creditor of the Company or any Affiliate.
B-11
(j) Other Benefits. No compensation or benefit
awarded to or realized by any Participant under the Plan shall
be included for the purpose of computing such Participants
compensation under any compensation-based retirement,
disability, or similar plan of the Company unless required by
law or otherwise provided by such other plan.
(k) No Fractional Shares. No fractional Shares shall
be issued or delivered pursuant to the Plan or any Award, and
the Committee shall determine whether cash shall be paid in lieu
of any fractional Shares or whether such fractional Shares or
any rights thereto shall be canceled, terminated or otherwise
eliminated.
(l) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material
or relevant to the construction or interpretation of the Plan or
any provision thereof.
(m) Section 16 Compliance; Section 162(m)
Administration. The Plan is intended to comply in all
respects with
Rule 16b-3 or any
successor provision, as in effect from time to time, and in all
events the Plan shall be construed in accordance with the
requirements of
Rule 16b-3. If any
Plan provision does not comply with
Rule 16b-3 as
hereafter amended or interpreted, the provision shall be deemed
inoperative. The Board, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan with respect to persons who are
officers or directors subject to Section 16 of the Exchange
Act without so restricting, limiting or conditioning the Plan
with respect to other Eligible Individuals. The Company intends
that all Stock Options and Stock Appreciation Rights granted
under the Plan to individuals who are or who the Committee
believes will be Covered Employees will constitute
qualified performance-based compensation within the
meaning of Section 162(m) of the Code.
(n) Conditions Precedent to Issuance of Shares.
Shares shall not be issued pursuant to the exercise or payment
of the Exercise Price or purchase price relating to an Award
unless such exercise or payment and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities
Act of 1933, as amended from time to time, the Exchange Act, the
rules and regulations promulgated thereunder, the requirements
of any applicable stock exchange and the Delaware General
Corporation Law. As a condition to the exercise or payment of
the Exercise Price or purchase price relating to such Award, the
Company may require that the person exercising or paying the
Exercise Price or purchase price represent and warrant that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation and
warranty is required by law.
(o) Conformance to Section 409A of the
Code. To the extent that any Performance Awards
otherwise constitute deferred compensation subject to
Section 409A of the Code, the acceleration of the payment
of such awards upon a Change in Control of the Company as
provided under the Plan shall occur only if the Change in
Control satisfies the definition in effect under
Section 409A of the Code, as determined in the good-faith
opinion of the Committee. Furthermore, to the extent that any
other payment under the Plan is considered to be deferred
compensation subject to Section 409A of the Code, if the
provisions of the plan fail to satisfy the requirements of
Section 409A(2), (3) or (4) of the Code with
respect to such payment, such provisions shall be applied in
operation in a manner that, in the good-faith opinion of the
Committee, bring the provision into compliance with those
requirements while preserving as closely as possible the
original intent of the provision. The Company (including any
successor) shall provide subsequent amendments to the Plan if
and as necessary to conform the terms of the Plan to any such
operational modifications with the intent being to adopt all
necessary amendments by December 31, 2006, or such other
date required under guidance issued under Section 409A of
the Code.
B-12
Section 11.
Effective Date of Plan
Upon its adoption by the Board, the Plan shall be submitted for
approval by the stockholders of the Company and shall be
effective as of the date of such approval (the
Effective Date).
Section 12.
Term of the Plan
The Plan will terminate on the tenth anniversary of the
Effective Date or any earlier date of discontinuation or
termination established pursuant to Section 9 of the Plan.
However, unless otherwise expressly provided in the Plan or in
an applicable Award Agreement, any Award theretofore granted may
extend beyond such date, and the authority of the Committee
provided for hereunder with respect to the Plan and any Awards,
and the authority of the Board to amend the Plan, shall extend
beyond the termination of the Plan.
B-13
LOCATION OF PIPER JAFFRAY COMPANIES ANNUAL MEETING OF
SHAREHOLDERS
Tuesday, May 2, 2006, at 3:30 p.m.
Stars Room
50th Floor, IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Beneficial owners of common stock held in street name by a
broker, bank, trust or other nominee may need proof of ownership
to be admitted to the meeting. A brokerage statement or letter
from the broker, bank, trust or other nominee are examples of
proof of ownership.
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 2, 2006
3:30 p.m. (Central Daylight Time)
Stars Room
50th Floor, IDS Center
80 South Eighth Street
Minneapolis, MN 55402
PIPER JAFFRAY COMPANIES
PROXY FOR THE 2006 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I appoint Andrew S. Duff, James L. Chosy and Sandra G. Sponem, together and separately, as
proxies to vote all shares of common stock that I have power to vote at the annual meeting of
shareholders to be held on May 2, 2006 at Minneapolis, Minnesota, and at any adjournment or
postponement thereof, in accordance with the instructions on the reverse side of this card and with
the same effect as though I were present in person and voting such shares. The proxies are
authorized in their discretion to vote upon such other business as may properly come before the
meeting and they may name others to take their place.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(continued, and to be signed and dated on reverse side)
800 NICOLLET MALL, SUITE 800
MAIL STOP J09N05
MINNEAPOLIS, MN 55402
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information until 11:59 p.m. Eastern Daylight Time
on Monday, May 1, 2006. Have your proxy card in
hand when you access the Web site and follow the
instructions to obtain your records and to create
an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
If you would like to reduce the costs incurred by
Piper Jaffray Companies in mailing proxy materials,
you can consent to receiving all future proxy
statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign
up for electronic delivery, please follow the
instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive
or access shareholder communications electronically
in future years.
VOTE BY PHONE 1-800-690-6903 (from the U.S. and Canada)
Use any touch-tone telephone to transmit your
voting instructions until 11:59 p.m. Eastern
Daylight Time on Monday, May 1, 2006. Have your
proxy card in hand when you call and then follow
the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it
in the postage-paid envelope we have provided or
return it to Piper Jaffray Companies, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.
IF YOU VOTE BY PHONE OR INTERNET,
PLEASE DO NOT MAIL YOUR PROXY CARD
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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PIPER1 KEEP THIS PORTION FOR YOUR RECORDS |
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PIPER JAFFRAY COMPANIES
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR PROPOSALS 1, 2 AND 3. |
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Vote on Directors |
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Election of Directors: |
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B. Kristine Johnson |
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02 |
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Jean M. Taylor |
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03 |
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Richard A. Zona |
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For All |
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Withhold All |
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For All Except |
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To withhold authority to vote for any individual
nominee(s), mark For All Except and write
the nominees number on the line below. |
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Vote on Proposals |
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Abstain |
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2.
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Approval of the Amended and Restated
2003 Annual and Long-Term Incentive Plan
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3.
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Ratification of the selection of Ernst &
Young LLP as the independent auditor for
the year ended December 31, 2006
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THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST PROPOSAL 4.
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Abstain |
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4.
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Shareholder proposal requesting
declassification of the board of directors
and annual election of all directors
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This proxy will be voted as directed. If no direction is made, it will be voted FOR
Proposals 1, 2 and 3, and AGAINST Proposal 4.
PLEASE SIGN exactly as name appears hereon. Joint owners each should sign. Executors,
administrators, trustees, etc. should so indicate when signing. If signer is a corporation, please
sign full name by duly authorized officer.
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For address changes and/or comments, please check this
box and write them on the back where indicated. |
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Please indicate if you plan to attend the meeting. |
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Yes |
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Signature [PLEASE SIGN WITHIN BOX] |
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Signature (Joint Owners) |
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[E-mail notice regarding electronic delivery of proxy materials sent by ADP to Piper Jaffray
Companies employee-shareholders and to non-employee shareholders who have elected to receive proxy
materials by electronic delivery]
PROXYVOTE.COM
You are receiving this e-mail because you are either an
employee-shareholder of Piper Jaffray Companies, with
access to company e-mail, or you are a non-employee shareholder who previously elected to receive
your proxy card and other proxy materials by electronic delivery. You will not receive a proxy
card or other proxy materials by mail. Instead, this e-mail contains instructions on how to access
the 2005 Annual Report and the 2006 Proxy Statement for Piper Jaffray Companies and how to vote your shares
via the Internet. Please read the instructions carefully before proceeding.
This is a
NOTIFICATION of the:
Piper Jaffray Companies 2006 Annual Meeting of
Shareholders
RECORD
DATE: March 6, 2006
MEETING DATE: May 2, 2006
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CUSIP NUMBER:
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CONTROL NUMBER:
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This e-mail represents all
shares in the following account(s):
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NAME:
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Please review the Piper Jaffray Companies 2005 Annual Report and 2006 Proxy Statement before voting.
The Proxy Statement discusses the proposals to be voted on, information about the annual meeting
and voting, and other information about the company. You can view the Piper Jaffray Companies 2005
Annual Report and 2006 Proxy Statement and enter your voting instructions at the following site. If
your browser supports secure transactions you will be automatically directed to a secure site.
www.proxyvote.com
Note: If
your e-mail software supports it, you can simply click on the above link.
To view the documents below, you may need the Adobe Acrobat Reader. To download the Adobe Acrobat
Reader, click the URL address below:
http://www.adobe.com/products/acrobat/readstep2.html
The relevant supporting documentations can also be found at the following Internet site(s):
www.piperjaffray.com
To access ProxyVote.com, you will need your four digit PIN:
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Your PIN is the last four digits of your
Social Security number. |
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If you have forgotten your PIN
number, please follow the instructions on www.proxyvote.com. |
Internet voting is accepted up to 11:59 p.m. (EDT) the day before the
meeting.
If you would like to cancel your enrollment, or change your e-mail address or PIN, please go to
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