SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
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/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
LABRANCHE & CO INC.
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(Name of Registrant as Specified In Its Charter)
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LABRANCHE & CO INC.
ONE EXCHANGE PLAZA
NEW YORK, NEW YORK 10006
April 9, 2001
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders to be
held on Tuesday, May 15, 2001 at 9:00 a.m., Eastern Standard Time, at the Regent
Hotel, 55 Wall Street, New York, New York 10005.
The formal Notice of Meeting and the accompanying Proxy Statement set forth
proposals for your consideration this year. You are being asked to elect three
directors and to ratify the appointment of Arthur Andersen LLP as our
independent public accountants.
At the meeting, the Board of Directors will be pleased to report on our
affairs, and a discussion period will be provided for questions and comments of
general interest to stockholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you are able to be with us at
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign, date and mail, at your earliest convenience, the enclosed
proxy in the envelope provided for your use.
Thank you for your cooperation.
Very truly yours,
/s/ GEORGE M.L. LABRANCHE, IV
George M. L. LaBranche, IV
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
LABRANCHE & CO INC.
ONE EXCHANGE PLAZA
NEW YORK, NEW YORK 10006
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2001
------------------------
Notice Is Hereby Given that the Annual Meeting of Stockholders of
LaBranche & Co Inc. will be held on Tuesday, May 15, 2001 at 9:00 a.m., Eastern
Standard Time, at the Regent Hotel, 55 Wall Street, New York, New York 10005 for
the following purposes:
(1) To elect three Class II directors, each of whom is to serve for a
term of three years;
(2) To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as our independent public accountants for the fiscal
year ending December 31, 2001; and
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 23, 2001 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting in person,
each stockholder is urged to complete, date and sign the enclosed form of proxy
and return it promptly in the envelope provided. No postage is required if the
proxy is mailed in the United States. Stockholders who attend the Annual Meeting
may revoke their proxy and vote their shares in person.
By Order of the Board of Directors
/s/ WILLIAM J. BURKE, III
WILLIAM J. BURKE, III
SECRETARY
New York, New York
April 9, 2001
LABRANCHE & CO INC.
ONE EXCHANGE PLAZA
NEW YORK, NY 10006
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PROXY STATEMENT
---------------------
GENERAL INFORMATION
GENERAL
This Proxy Statement (first mailed to stockholders on or about April 10,
2001) is furnished to the holders of the common stock, par value $.01 per share,
of LaBranche & Co Inc. in connection with the solicitation by our Board of
Directors of proxies for use at the Annual Meeting of Stockholders, or at any
adjournment thereof (the "Annual Meeting"), pursuant to the accompanying Notice
of Annual Meeting of Stockholders. The Annual Meeting will be held on Tuesday,
May 15, 2001 at 9:00 a.m., Eastern Standard Time, at the Regent Hotel, 55 Wall
Street, New York, New York 10005.
It is proposed that at the Annual Meeting: (i) three Class II directors be
elected to serve for a term of three years and (ii) the appointment of Arthur
Andersen LLP as our independent public accountants for the fiscal year ending
December 31, 2001 be ratified.
Management currently is not aware of any other matters which will come
before the Annual Meeting. If any other matters properly come before the Annual
Meeting, the persons designated as proxies intend to vote in accordance with
their best judgment on such matters.
Proxies for use at the Annual Meeting are being solicited by and on behalf
of our Board of Directors, primarily through the use of the mails. We have
retained Morrow & Co., Inc., a professional proxy solicitation firm, to assist
in the solicitation of proxies and will pay Morrow & Co., Inc. a fee of
approximately $3,500. In addition, our officers, directors, employees and other
agents, none of whom will receive additional compensation therefor, may solicit
proxies by telephone, telegram or other personal contact. We will bear the cost
of the solicitation of proxies, including postage, printing and handling and
will reimburse the reasonable expenses of brokerage firms and others for
forwarding material to beneficial owners of shares of our common stock.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting and a return envelope for the
proxy are enclosed. Unless otherwise indicated on the form of proxy, shares of
our common stock represented by any proxy in the enclosed form, assuming the
proxy is properly executed and received by us prior to the Annual Meeting, will
be voted with respect to the following items on the agenda: (i) the election of
each of the nominees for Class II director as shown on the form of proxy; and
(ii) the ratification of the appointment of Arthur Andersen LLP as our
independent public accountants.
Stockholders may revoke the authority granted by their execution of a proxy
at any time prior to the effective exercise of the powers conferred by that
proxy by filing with our Secretary a written notice of revocation or a duly
executed proxy bearing a later date or by voting in person at the meeting.
Shares of our common stock represented by executed and unrevoked proxies will be
voted in accordance with the instructions specified in such proxies. If no
specifications are given, the proxies intend to vote the shares represented
thereby "FOR" the election of each of the nominees for director as shown on the
form of proxy and "FOR" the ratification of the appointment of Arthur Andersen
LLP as our independent public accountants and in accordance with their best
judgment on any other matters which may properly come before the meeting.
RECORD DATE AND VOTING RIGHTS
On March 23, 2001, there were 57,363,060 shares of our common stock
outstanding, each of which shares is entitled to one vote upon each of the
matters to be presented at the Annual Meeting. Only stockholders of record at
the close of business on March 23, 2001 are entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof. The holders of a majority of the
outstanding shares of our common stock, present in person or by proxy and
entitled to vote, will constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence or
absence of a quorum but will not be counted with respect to the specific matter
being voted upon. "Broker non-votes" are shares held by brokers or nominees
which are present in person or represented by proxy, but which are not voted on
a particular matter because instructions have not been received from the
beneficial owner.
The affirmative vote of the holders of a plurality of the shares of our
common stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required for the election of directors. The affirmative
vote of the holders of a majority of the shares of our common stock present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required for the ratification of the appointment of Arthur Andersen LLP as our
independent public accountants.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY
CERTAIN STOCKHOLDERS AND MANAGEMENT
The following table sets forth information as of March 23, 2001 regarding
the beneficial ownership of our common stock by: (i) each person known by us to
own beneficially more than five percent of the outstanding common stock;
(ii) each of our directors and nominees for director; (iii) each executive
officer named in the Summary Compensation Table (see "Executive Compensation"
below); and (iv) all our directors and executive officers as a group.
All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated. Unless otherwise indicated, the address
of each beneficial owner is: c/o One Exchange Plaza, New York, New York 10006.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock issuable pursuant to
options, to the extent such options are currently exercisable or convertible
within 60 days of March 23, 2001, are treated as outstanding for purposes of
computing the percentage of the person holding such securities but are not
treated as outstanding for purposes of computing the percentage of any other
person.
NAME AND ADDRESS SHARES BENEFICIALLY PERCENTAGE OF SHARES
OF BENEFICIAL OWNER(1) OWNED BENEFICIALLY OWNED
---------------------- ------------------- --------------------
George M. L. (Michael) LaBranche, IV(2).................... 3,677,761 6.4%
George E. Robb, Jr......................................... 3,556,008 6.2
Robert M. Murphy(3)........................................ 1,500,000 2.6
James G. Gallagher(4)...................................... 2,285,433 4.0
Alfred O. Hayward, Jr.(5).................................. 1,941,401 3.4
S. Lawrence Prendergast(6)................................. 107,000 *
E. Margie Filter........................................... 1,871 *
Thomas E. Dooley........................................... 451 *
Harvey S. Traison.......................................... 4,000 *
Michael J. Naughton........................................ 1,958,066 3.4
All executive officers and directors as a group (10
persons)(7).............................................. 15,031,991 25.9
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* Less than 1%
(1) Each of our managing directors at the time of our initial public offering in
August 1999 entered into a stockholders' agreement pursuant to which he or
she agreed to vote his or her shares as
2
determined by a majority of Messrs. LaBranche, Gallagher and Hayward.
Messrs. LaBranche, Gallagher and Hayward beneficially own an aggregate of
7,904,595 shares of common stock, constituting approximately 13.7% of the
outstanding shares of our common stock. As a result of the stockholders'
agreement, Messrs. LaBranche, Gallagher and Hayward, acting together as a
group, may be deemed to beneficially own an aggregate of 34,844,776 shares
of common stock (including the 7,904,595 shares beneficially owned by them
individually), constituting approximately 59.9% of the outstanding shares of
our common stock. Each of Messrs. LaBranche, Gallagher and Hayward disclaims
beneficial ownership of any and all shares of common stock held by any
person or entity other than him.
(2) Includes options to purchase 166,667 shares of our common stock which are
exercisable within 60 days.
(3) Includes fully-vested options to purchase 493,890 shares of our common
stock.
(4) Includes options to purchase 83,333 shares of our common stock which are
exercisable within 60 days.
(5) Includes options to purchase 33,333 shares of our common stock which are
exercisable within 60 days.
(6) Includes options to purchase 100,000 shares of our common stock which are
exercisable within 60 days.
(7) Includes options to purchase 877,223 shares of our common stock which are
exercisable within 60 days.
PROPOSAL NO. 1--ELECTION OF CLASS II DIRECTORS
Three Class II directors are to be elected at the Annual Meeting. Unless
otherwise specified, the enclosed proxy will be voted in favor of the persons
named below (each of whom is currently one of our directors). Our Board of
Directors has been classified pursuant to our Amended and Restated Certificate
of Incorporation. In accordance with the provisions of the Certificate of
Incorporation, we divided our directors into three classes, designated Class I,
Class II and Class III. Each class consists, as nearly as possible, of one-third
of the total number of directors constituting our entire Board of Directors.
Class I directors will serve until the 2003 annual meeting of our stockholders,
Class II directors will serve until this Annual Meeting and Class III directors
will serve until the 2002 annual meeting of our stockholders. At each annual
meeting of our stockholders, successors to the directors whose terms expire at
that annual meeting will be elected for a three-year term. The Annual Meeting is
our second annual meeting since our initial public offering in August 1999.
Michael LaBranche, Alfred O. Hayward, Jr. and Robert M. Murphy currently
serve as Class I directors for a term expiring at the 2003 annual meeting of our
stockholders or at a special meeting held in lieu thereof; James G. Gallagher,
S. Lawrence Prendergast and George E. Robb, Jr. currently serve as Class II
directors for a term expiring at this Annual Meeting or at a special meeting
held in lieu thereof; and E. Margie Filter, Thomas E. Dooley and Harvey S.
Traison currently serve as Class III directors for a term expiring at the annual
meeting of our stockholders to be held in 2002 or at a special meeting held in
lieu thereof. Messrs. Robb and Murphy became Class II and Class I directors,
respectively, in connection with our acquisition of ROBB PECK McCOOEY Financial
Services, Inc. on March 15, 2001. In accordance with the provisions of our
certificate of incorporation, each of James G. Gallagher, S. Lawrence
Prendergast and George E. Robb, Jr. has been nominated for election as a
Class II director at the Annual Meeting. If any of these nominees becomes
unavailable for any reason, or if a vacancy should occur before the election,
the shares represented by the proxy will be voted for the person, if any, who is
designated by our Board of Directors to replace the nominee or to fill the
vacancy. All three of the current nominees have consented to be named and have
indicated their intent to serve if elected. Our Board of Directors has no reason
to believe that any of the nominees will be unable to serve or that any vacancy
on the Board of Directors will occur.
3
Our nominees, their respective ages, the year in which each first became one
of our directors and their principal occupations or employment during the past
five years are as follows:
YEAR FIRST PRINCIPAL OCCUPATION
NOMINEE AGE BECAME DIRECTOR DURING PAST FIVE YEARS
------- -------- --------------- ----------------------
James G. Gallagher........................ 53 1999 James G. Gallagher has been our
Executive Vice President and a
director since our initial public
offering in August 1999. Mr.
Gallagher has served as a member of
the Managing Committee of LaBranche &
Co. LLC since July 1998. From 1980 to
July 1998, Mr. Gallagher was a
specialist and Managing Partner with
Fowler, Rosenau & Geary, LLC. Mr.
Gallagher is currently a NYSE Senior
Floor Official, and has also served
for seven years as a NYSE Floor
Governor.
S. Lawrence Prendergast................... 59 1999 S. Lawrence Prendergast has been our
Executive Vice President, Finance and
a director since our initial public
offering in August 1999. From May
1997 to August 1999, Mr. Prendergast
was the Chairman and CEO of AT&T
Investment Management Corp, a money
management subsidiary of AT&T
Corporation. Prior to 1997, Mr.
Prendergast was the Vice President
and Treasurer of AT&T for 14 years.
Mr. Prendergast currently is a
director of AT&T Investment
Management Corp.
George E. Robb, Jr........................ 44 2001 George E. Robb, Jr. has been a
director since March 2001. From
February 1976 to March 2001, Mr. Robb
was employed by ROBB PECK McCOOEY
Financial Services, Inc. ("RPM") as a
specialist, and from 1985 to March
2001, Mr. Robb was a member of the
Executive Committee of RPM's Board of
Directors and a director of RPM's
subsidiary, ROBB PECK McCOOEY
Specialist Corporation.
During the fiscal year ended December 31, 2000, our Board of Directors held
eight meetings and acted five times by unanimous written consent in lieu of a
meeting.
During the fiscal year ended December 31, 2000, each of our directors
attended 75% or more of the total number of meetings of our Board of Directors
(held during the period for which he or she was a director).
4
BOARD COMMITTEES
Our Board of Directors has an audit committee and a compensation committee.
The audit committee of our Board of Directors was established on March 17,
2000 and currently is composed of E. Margie Filter and Thomas E. Dooley. The
audit committee charter adopted by the Board of Directors requires that the
number of directors comprising the audit committee must be increased to three by
June 1, 2001. The audit committee reviews, acts on and reports to our Board of
Directors with respect to various auditing and accounting matters, including the
recommendation of our auditors, the scope of our annual audits, fees to be paid
to our auditors, the performance of our independent auditors and our accounting
practices. The audit committee is comprised solely of independent directors.
The compensation committee of our Board of Directors was established on
March 17, 2000 and is composed of E. Margie Filter, Thomas E. Dooley and Michael
LaBranche. The compensation committee recommends, reviews and oversees salaries,
bonuses, benefits and equity incentives for our employees, consultants and
directors. The compensation committee also administers our incentive
compensation plans. The compensation committee is comprised of a majority of
independent directors.
Prior to March 17, 2000, the duties described above were fulfilled by our
Board of Directors.
DIRECTOR COMPENSATION
We have appointed three non-employee directors. Each of our non-employee
directors currently receives an annual retainer of $28,000 and attendance fees
of $1,500 per board meeting and $1,000 per committee meeting attended. The
attendance fees are paid after the end of each year in shares of our common
stock under our Equity Incentive Plan. Our employee directors do not receive any
additional compensation for serving on our Board of Directors or any committee
of our board.
VOTE REQUIRED
The three nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote for them
will be elected as Class II directors. Only votes cast for a nominee will be
counted, except that the accompanying proxy will be voted for all nominees in
the absence of instructions to the contrary. Abstentions, broker non-votes and
instructions on the accompanying proxy card to withhold authority to vote for
one or more nominees will not be counted as a vote for any such nominee.
OUR BOARD OF DIRECTORS DEEMS THE ELECTION AS CLASS II DIRECTORS OF THE THREE
NOMINEES TO BE IN THE BEST INTERESTS OF LABRANCHE AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THESE NOMINEES.
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DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
NAME AGE POSITION
---- -------- --------
Michael LaBranche......................... 45 Chairman, Chief Executive Officer and President
Robert M. Murphy.......................... 44 Director and Chief Executive Officer of LaBranche &
Co. LLC
James G. Gallagher........................ 53 Executive Vice President and Director
Alfred O. Hayward, Jr..................... 52 Executive Vice President and Director
S. Lawrence Prendergast................... 59 Executive Vice President, Finance and Director
Harvey S. Traison......................... 61 Senior Vice President, Chief Financial Officer and
Director
E. Margie Filter.......................... 61 Director
Thomas E. Dooley.......................... 45 Director
George E. Robb, Jr........................ 44 Director
MICHAEL LABRANCHE has been our Chairman, Chief Executive Officer and
President since our initial public offering in August 1999. Mr. LaBranche has
served as Chairman of the Managing Committee of LaBranche & Co. LLC since 1996,
as a member of the Managing Committee of LaBranche & Co. LLC since 1988 and as a
specialist with LaBranche & Co. LLC since 1977. He currently is a Governor of
the NYSE and is a member of the NYSE's Market Performance Committee.
ROBERT M. MURPHY became a member of our Board of Directors on March 16,
2001, when we acquired RPM, and has been the Chief Executive Officer of
LaBranche & Co. LLC since March 16, 2001. From 1985 to March 2001, Mr. Murphy
was an Executive Vice President and director of RPM and served as Vice Chairman,
President and Chief Executive Officer of ROBB PECK McCOOEY Specialist
Corporation. Mr. Murphy is a member of the board of directors of the NYSE. He
also serves on the NYSE's Market Performance Committee, Finance and Audit
Committee, Committee for Review, Technology Planning and Oversight Committee and
subcommittee on Floor Facilities. Previously, he was a NYSE governor and floor
official.
JAMES G. GALLAGHER has been our Executive Vice President and a director
since our initial public offering in August 1999. Mr. Gallagher has served as a
member of the Managing Committee of LaBranche & Co. LLC since 1998. From 1980 to
July 1998, Mr. Gallagher was a specialist and Managing Partner with Fowler,
Rosenau & Geary, LLC. Mr. Gallagher is currently a NYSE Senior Floor Official,
and has also served for seven years as a NYSE Floor Governor.
ALFRED O. HAYWARD, JR. has been our Executive Vice President and a director
since our initial public offering in August 1999. Mr. Hayward has been a
specialist with LaBranche & Co. LLC since 1983 and has served as a member of the
Managing Committee of LaBranche & Co. LLC since 1994. He currently sits on the
NYSE Arbitration Panel and is involved with NYSE education programs.
Mr. Hayward has served as a NYSE Floor Official and has also served as the
Chairman of the NYSE's Allocation Committee.
S. LAWRENCE PRENDERGAST has been our Executive Vice President, Finance and a
director since our initial public offering in August 1999. From May 1997 to
August 1999, Mr. Prendergast was the Chairman and CEO of AT&T Investment
Management Corp. Prior to 1997, Mr. Prendergast was the
6
Vice President and Treasurer of AT&T for 14 years. Mr. Prendergast currently is
a director of AT&T Investment Management Corp., a money management subsidiary of
AT&T.
HARVEY S. TRAISON has been our Senior Vice President and Chief Financial
Officer and a director since March 2000. As of December 31, 1999, Mr. Traison
retired from the position of Vice President, Treasurer and as a member of the
Board of Directors of DaimlerChrysler North America Holding Corporation and
DaimlerChrysler Canada Finance Inc. Mr. Traison joined Daimler-Benz (a
predecessor of DaimlerChrysler) in 1984.
E. MARGIE FILTER has been a director of LaBranche since October 1999.
Ms. Filter joined Xerox Corporation in 1973, and is currently Vice President,
Treasurer and Secretary of Xerox Corporation and President and Chief Executive
Officer of Xerox Credit Corporation. Ms. Filter is also a director of Baker
Hughes Inc. and Briggs and Stratton Corporation.
THOMAS E. DOOLEY has been a director of LaBranche since March 2000.
Mr. Dooley is Co-Chairman and Chief Executive Officer of DND Capital Partners, a
venture capital and investment advisory firm that specializes in the media and
telecommunications markets. Prior to forming DND Capital Partners in June 2000,
Mr. Dooley was Deputy Chairman of Viacom Inc. He was also a member of Viacom's
Executive Committee, its Board of Directors and held the title of Executive Vice
President, Finance, Corporate Development and Communications. Mr. Dooley
currently is a director of the International Radio & Television Society, and is
a member of the Cable and Telecommunications Association for Marketing (CTAM),
the Museum of Television and Radio and the American Management Association.
GEORGE E. ROBB, JR. became a member of our Board of Directors on March 16,
2001, when we acquired RPM. From 1976 to March 2001, Mr. Robb was employed by
RPM as a specialist, and since 1985 to March 2001, was a member of the Executive
Committee of RPM's board of directors and President and a director of RPM's
specialist subsidiary, ROBB PECK McCOOEY Specialist Corporation. He became a
specialist in 1977, and has over 25 years of experience in the specialist
business.
There are no family relationships among any of our directors and executive
officers.
7
EXECUTIVE COMPENSATION
Prior to our reorganization transactions in August 1999, many of our
managing directors were members of LaB Investing Co. L.L.C., the former general
partner of our specialist subsidiary, LaBranche & Co. LLC (when it was a
partnership). The aggregate amount of compensation received by all our managing
directors generally approximated LaB Investing Co. L.L.C.'s interest in
LaBranche & Co. LLC's income before managing directors' compensation. These
payments of compensation were allocated among our managing directors based on
the managing directors' respective percentage interests in the profits of LaB
Investing Co. L.L.C. Since our reorganization from partnership to corporate
form, our managing directors, including our executive officers, receive
compensation in the form of salary plus participation in our Equity Incentive
Plan and our Annual Incentive Plan.
The following table sets forth the annual compensation we paid during fiscal
2000 and 1999 to our Chief Executive Officer and our four other highest paid
executive officers named in the table whose total salary for fiscal 2000 and
1999 exceeded $100,000 for services rendered in all capacities. The amounts for
1999 reflect the amounts paid to these individuals under the compensation
arrangements in effect prior to our reorganization in August 1999, plus amounts
paid under the restructured compensation plan following our reorganization. As a
result, these amounts may not be indicative of amounts to be paid to the named
executive officers in future years.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------- PRE-REORGANIZATION
ANNUAL ------------------
POST-REORGANIZATION COMPENSATION SECURITIES
---------------------- ------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) STOCK OPTIONS COMPENSATION(2)
--------------------------- -------- -------- ------------ ------------- ------------------
Michael LaBranche
Chairman, Chief Executive
Officer and President........... 2000 $250,000 $3,450,000 -- $ --
1999 93,750 815,460 500,000 4,226,312
James G. Gallagher
Executive Vice President........ 2000 250,000 1,075,000 -- --
1999 93,750 375,625 250,000 2,826,863
Alfred O. Hayward, Jr.
Executive Vice President........ 2000 250,000 1,950,000 -- --
1999 93,750 500,460 100,000 2,831,843
Vincent J. Flaherty
Senior Vice President,
Floor Operations................ 2000 229,167 900,000 -- --
1999 93,750 300,460 50,000(3) 4,010,514
Michael J. Naughton
Senior Vice President,
Specialist Operations........... 2000 250,000 700,000 -- --
1999 93,750 250,460 100,000(4) 2,831,843
------------------------
(1) Reflects bonus amount earned in such fiscal year.
(2) Reflects managing directors' compensation from our partnership paid to our
named executive officers before our reorganization.
(3) Mr. Flaherty forfeited options to purchase 33,333 shares of common stock due
to his retirement from LaBranche on November 30, 2000.
(4) Mr. Naughton forfeited options to purchase 66,667 shares of common stock due
to his retirement from LaBranche on March 30, 2001.
8
The following table sets forth certain summary information concerning
individual grants of stock options made during the year ended December 31, 2000
to each of our named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any options to our named executive officers during the year
ended December 31, 2000. The following table sets forth the number of options
and value of unexercised options held by each of our named executive officers at
December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT YEAR END MONEY OPTIONS AT YEAR END
--------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ------------- -------------
Michael LaBranche.................. 166,667 333,333 $2,760,422 $5,520,828
James G. Gallagher................. 83,333 166,667 1,380,203 2,760,422
Alfred O. Hayward, Jr.............. 33,333 66,667 552,078 1,104,172
Michael J. Naughton................ 33,333 66,667 552,078 1,104,172
Vincent J. Flaherty, our former Senior Vice Pesident, Floor Operations,
retired on November 30, 2000. On December 28, 2000, Mr. Flaherty exercised
options to purchase 16,667 shares of our common stock. The aggregate value of
the common stock acquired by Mr. Flaherty upon this exercise was $465,925. Upon
his retirement, Mr. Flaherty forfeited his right to exercise the remainder of
his options.
EMPLOYMENT AGREEMENTS AND NONCOMPETITION AGREEMENTS
As part of the reorganization of our firm from partnership to corporate form
in anticipation of our initial public offering, our managing directors at that
time, all of whom were members of LaB Investing Co. L.L.C. prior to the initial
public offering, exchanged their membership interests in LaB Investing Co.
L.L.C. for shares of our common stock. We entered into employment agreements,
pledge agreements and agreements regarding noncompetition and other covenants
with managing directors. We have also entered into an employment agreement and
noncompetition agreement with S. Lawrence Prendergast, our Executive Vice
President, Finance, and an employment agreement with Harvey S. Traison, our
Senior Vice President and Chief Financial Officer, which contains comparable
provisions regarding noncompetition. The material terms of the employment,
noncompetition and pledge agreements are described below.
THE EMPLOYMENT AGREEMENTS
Each employment agreement, other than the employment agreements with
Messrs. Prendergast and Traison, has an initial term of at least one but not
more than five years, requires the employee to devote his entire working time to
our business and affairs, contains various restrictive covenants and is
terminable on 90 days' notice by either party. The employment agreement with
Mr. Prendergast had an initial term of one year, and was automatically renewable
for additional one-year periods and terminable on 30 days' notice by either
party. Mr. Prendergast's employment agreement requires him to devote his time as
is reasonably necessary for him to perform his duties and responsibilities. The
employment agreement with Mr. Traison has an initial term of three years
expiring on March 17, 2003, requires him to devote substantially all his
business time to the performance of his duties and responsibilities, is
terminable on 90 days' notice by either party and provides for automatic
one-year renewals, subject to notice of termination.
9
THE NONCOMPETITION AGREEMENTS
Each noncompetition agreement contains the following provisions:
CONFIDENTIALITY. The managing director or executive officer who is a party
to the agreement is required to protect and use "confidential information" in
accordance with the restrictions which we place on its use and disclosure.
NONCOMPETITION. During employment and until the later of 12 months
following termination of employment with us or the fifth anniversary of our
initial public offering, the managing director or executive officer who is a
party to the agreement may not:
- form, or acquire a 5% or greater ownership, voting or profit participation
interest in, any competitive enterprise; or
- associate with any competitive enterprise and in connection with such
association engage in, or directly or indirectly manage or supervise
personnel engaged in, any business activity that is related to his or her
activities with us.
For this purpose, a "competitive enterprise" is any business enterprise that
engages in activity, or owns or controls a significant interest in an entity
that engages in activity that competes directly or indirectly, with any activity
in which we are engaged. These activities include, without limitation,
specialist services and/or securities brokerage, sales, lending, custody,
clearance, settlement or trading.
NONSOLICITATION. During employment and until the later of 12 months
following termination of employment with us or the fifth anniversary of our
initial public offering, the managing director or executive officer who is a
party to the agreement may not, directly or indirectly:
- solicit any of our listed companies;
- interfere with or damage any relationship between us and any of our listed
companies or prospective listed companies; or
- solicit any of our employees to apply for, or accept employment with, any
competitive enterprise.
TRANSITION ASSISTANCE. Each noncompetition agreement also provides that the
managing director or executive officer who is a party to the agreement will take
all actions and do all things reasonably requested by us during a 90-day
transition period following termination of employment to maintain the business,
goodwill and business relationships in which or with which he or she was
previously involved on our behalf.
LIQUIDATED DAMAGES. If a managing director breaches the noncompetition or
nonsolicitation provisions of the noncompetition agreement before the later of
12 months following termination of employment with us or the fifth anniversary
of the date of our initial public offering, then he or she will be liable for
liquidated damages in an amount equal to 75% of the aggregate value of the
common stock and cash received by that managing director from us in exchange for
his or her membership interest in LaB Investing Co. L.L.C. Neither the
noncompetition agreement with our Executive Vice President, Finance nor the
noncompetition provisions of the employment agreement with our Senior Vice
President/Chief Financial Officer provides for the payment of liquidated
damages.
THE PLEDGE AGREEMENTS
Under the pledge agreements, the liquidated damages obligations under the
noncompetition agreements are secured by a pledge of common stock with an
initial value equal to 100% of the liquidated damages amount. A managing
director's pledge agreement will terminate on the earliest to occur of:
- the death of the managing director;
10
- the fifth anniversary of the date of the completion of our initial public
offering; or
- payment in cash or other satisfaction by the managing director of all
liquidated damages incurred.
NONEXCLUSIVITY AND ARBITRATION
The liquidated damages and pledge arrangements discussed above are not
exclusive of any injunctive relief to which we may be entitled for a breach of a
covenant against competition or solicitation. Prior to and after the expiration
of the pledge agreements, we will be entitled to all available remedies for a
breach of the noncompetition agreements. The employment and noncompetition
agreements generally provide that any disputes thereunder will be resolved by
binding arbitration.
INCENTIVE AWARDS TO LABRANCHE'S EMPLOYEES
THE EQUITY INCENTIVE PLAN
As of December 31, 2000, there were outstanding, under our Equity Incentive
Plan, (1) options granted to our executive officers to purchase an aggregate of
1,150,000 shares of our common stock at a purchase price of $14.00,
(2) restricted stock units for 950,262 shares of common stock granted to our
employees, (3) 300,000 shares of restricted stock issued to three floor brokers
at our Henderson Brothers subsidiary and (4) 368 shares of unrestricted stock
issued to one of our independent directors as compensation for her attendance at
board meetings in 1999. Subject to continuing service with the firm and certain
other conditions, the options already granted generally are exercisable in three
equal annual installments commencing on the first anniversary of the date of the
grant. The outstanding restricted stock units generally will vest in three equal
annual installments commencing on August 24, 2002 (the third anniversary of our
August 24, 1999 initial public offering). The 300,000 shares of restricted
stock, which were granted to three floor brokers of our Henderson Brothers
subsidiary in August and September 2000, vest in three annual installments on
the anniversary of the date they were granted, subject to their continued
employment with Henderson Brothers.
TYPES OF AWARDS. The Equity Incentive Plan provides for grants of options
to purchase shares of common stock, including options intended to qualify as
incentive stock options ("ISOs") (within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended), and options which do not qualify as
ISOs ("NQSOs"), restricted shares of our common stock, restricted stock units,
the value of which is tied to shares of our common stock, and other equity-based
awards related to our common stock.
AVAILABLE SHARES. A maximum of 4,687,500 shares of our common stock has been
reserved for issuance under the Equity Incentive Plan. The number, class and
exercise price per share will be adjusted proportionately or as otherwise
appropriate to reflect any increase in, decrease in, or exchange of the
outstanding shares of our common stock through merger, consolidation,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend or similar corporate transaction. These shares may be authorized but
unissued shares of our common stock or issued shares of our common stock held in
our treasury or otherwise acquired for the purposes of the Equity Incentive
Plan. New awards may be granted under the Equity Incentive Plan with respect to
shares of our common stock covered by any award that terminates or expires by
its terms (by cancellation or otherwise) or with respect to shares of our common
stock that are withheld or surrendered to satisfy a recipient's income tax or
other withholding obligations or tendered to pay the purchase price of any
award. As of December 31, 2000, there were available 2,192,701 shares of our
common stock with respect to which awards may be granted under the Equity
Incentive Plan.
The maximum number of shares of our common stock with respect to which
options, restricted stock, restricted stock units or other equity-based awards
may be granted under the Equity Incentive
11
Plan during any calendar year to any employee may not exceed 500,000 shares,
subject to adjustment upon certain corporate transactions (as described above).
ELIGIBILITY. Awards under the Equity Incentive Plan may be granted to any
of our directors, officers, managing directors or other employees, including any
prospective employee, and to any of our advisors or consultants selected by the
compensation committee of our Board of Directors.
ADMINISTRATION. The Equity Incentive Plan is administered by the
compensation committee of our board of directors. The compensation committee has
full discretion and authority to make awards under the Equity Incentive Plan, to
apply and interpret the provisions of the Equity Incentive Plan and to take such
other actions as may be necessary or desirable in order to carry out the
provisions of the Equity Incentive Plan. The determinations of the compensation
committee on all matters relating to the Equity Incentive Plan and the options,
restricted stock, restricted stock units and other equity-based awards granted
thereunder are final, binding and conclusive.
STOCK OPTIONS. The compensation committee may authorize the grant of ISOs
and NQSOs in such amounts and subject to such terms and conditions as it may
determine. The exercise price of an option granted under the Equity Incentive
Plan may not be less than the fair market value of our common stock on the date
of grant (as determined under the plan). Unless sooner terminated or exercised,
options will generally expire ten years from the date of grant. Payment for
shares acquired upon the exercise of an option may be made (as determined by the
compensation committee) in cash and/or such other form of payment as may be
permitted from time to time, which may include previously-owned shares of our
common stock or pursuant to a broker's cashless exercise procedure. Except as
otherwise permitted by the compensation committee, no option may be exercised
more than 30 days after termination of the optionee's service (or, if the
optionee's service is terminated by reason of disability or death, one year
thereafter). If an optionee's employment is terminated for cause, the options
held by such optionee immediately terminate. An optionee has none of the rights
of a stockholder with respect to shares subject to an option until the issuance
of such shares.
RESTRICTED STOCK. The compensation committee may grant restricted shares of
our common stock in amounts, and subject to terms and conditions (such as time
and/or performance-based vesting criteria), as it may determine. Generally,
prior to vesting, the recipient has the rights of a stockholder with respect to
the restricted stock, subject to any restrictions and conditions as the
compensation committee may include in the award agreement.
RESTRICTED STOCK UNITS. The compensation committee may grant restricted
stock units, the value of which is tied to shares of our common stock, in
amounts, and subject to terms and conditions, as the compensation committee may
determine. Recipients of restricted stock units have only the rights of general
unsecured creditors and no rights as a stockholder until the common stock
referenced by the restricted stock units is delivered to the recipient.
OTHER EQUITY-BASED AWARDS. The compensation committee may grant other types
of equity-based awards related to our common stock under the Equity Incentive
Plan, including the grant of unrestricted shares of our common stock and stock
appreciation rights, in amounts and subject to terms and conditions as the
compensation committee may determine. These awards may involve the transfer of
actual shares of common stock or the payment in cash or otherwise of amounts
based on the value of shares of our common stock.
CHANGE IN CONTROL. The compensation committee may provide, in any award
agreement, for provisions relating to a "change in control" of us or any of our
subsidiaries or affiliates, including, without limitation, the acceleration of
the exercisability of, or the lapse of restrictions with respect to, the award.
NONASSIGNABILITY. Except to the extent otherwise provided in an award
agreement or approved by the compensation committee with respect to NQSOs, no
award granted under the Equity Incentive
12
Plan will be assignable or transferable other than by will or by the laws of
descent and distribution and all awards will be exercisable during the life of a
recipient only by the recipient or his or her legal representative.
AMENDMENT AND TERMINATION. The Equity Incentive Plan may be amended or
terminated at any time by our board of directors, subject, however, to
stockholder approval in the case of certain material amendments, such as an
increase in the number of shares available under the Equity Incentive Plan or a
change in the class of individuals eligible to participate in the Equity
Incentive Plan.
U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description
of the material U.S. federal income tax consequences generally applicable to
awards granted under the Equity Incentive Plan.
The grant of an option will have no income tax consequences to the recipient
or to us. Upon the exercise of an option, other than an ISO, the recipient
generally will recognize ordinary income equal to the excess of the fair market
value of the shares of common stock subject to the option on the date of
exercise over the exercise price for such shares (i.e., the option spread), and
we generally will be entitled to a corresponding tax deduction in the same
amount. Upon the sale of the shares of our common stock acquired pursuant to the
exercise of an option, the recipient will recognize capital gain or loss equal
to the difference between the selling price and the sum of the exercise price
plus the amount of ordinary income recognized on the exercise.
A recipient generally will not recognize ordinary income upon the exercise
of an ISO (although, on exercise, the option spread is an item of tax preference
potentially subject to the alternative minimum tax), and we will not receive any
deduction. If the stock acquired upon exercise of an ISO is sold or otherwise
disposed of within two years from the grant date or within one year from the
exercise date, then gain realized on the sale generally is treated as ordinary
income to the extent of the ordinary income that would have been realized upon
exercise if the option had not been an ISO, and we generally will be entitled to
a corresponding deduction in the same amount. Any remaining gain is treated as
capital gain.
If the shares acquired upon the exercise of an ISO are held for at least two
years from the grant date and one year from the exercise date and the recipient
is employed by us at all times beginning on the grant date and ending on the
date three months prior to the exercise date, then all gain or loss realized
upon the sale will be capital gain or loss and we will not receive any
deduction.
In general, an individual who receives an award of restricted stock will
recognize ordinary income at the time such award vests in an amount equal to the
difference between the value of the vested shares and the purchase price for
such shares, if any, and we generally will be entitled to a deduction in an
amount equal to the ordinary income recognized by the recipient at such time.
The recipient of an award of restricted stock units generally will recognize
ordinary income upon the issuance of the shares of common stock underlying such
restricted stock units in an amount equal to the difference between the value of
such shares and the purchase price for such units and /or shares, if any, and we
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the recipient at such time.
13
With respect to other equity based awards, upon the payment of cash or the
issuance of shares or other property that is either not restricted as to
transferability or not subject to a substantial risk of forfeiture, the
participant generally will recognize ordinary income equal to the cash or the
fair market value of shares or other property delivered, less any amount paid by
the participant for such award. Generally, we will be entitled to a deduction in
an amount equal to the ordinary income recognized by the participant.
THE ANNUAL INCENTIVE PLAN
We adopted the LaBranche & Co Inc. Annual Incentive Plan at the time of our
initial public offering in August 1999. Our managing directors and other
employees selected by the compensation committee of our board of directors are
eligible to participate in the Annual Incentive Plan. Under this plan, a
compensation pool of up to 30% of our pre-tax income, or such lesser percentage
determined by the compensation committee, is set aside for our managing
directors and other employees selected by the compensation committee to
participate in this plan. In determining the 30% compensation pool, each
managing director's salary of $250,000 per year and the compensation expenses
relating to the awards under our Equity Incentive Plan are deducted. Under the
plan, no individual participant may receive more than 25% of the compensation
pool for any fiscal year. The amounts payable under the Annual Incentive Plan to
our plan participants are reviewed on an annual basis and are based on such
factors and considerations as the compensation committee deems appropriate in
individual cases and on our operating results and the overall performance of
these participants. An award by the compensation committee to our managing
directors and other employees is completely discretionary. The Annual Incentive
Plan may be amended or terminated at any time by our board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of our Board of Directors was established on
March 17, 2000 and currently is composed of E. Margie Filter, Thomas E. Dooley
and Michael LaBranche. The compensation committee recommends, reviews and
oversees salaries, bonuses, benefits and equity incentives for our employees,
consultants and directors. The compensation committee also administers our
incentive compensation plans. The compensation committee is comprised of a
majority of independent directors.
Prior to March 17, 2000, the duties described above were performed by our
Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report of our compensation committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate this information by reference, and shall not otherwise
be deemed filed under such Acts.
The compensation committee was established on March 17, 2000 and currently
is composed of E. Margie Filter, Thomas E. Dooley and Michael LaBranche. The
compensation committee administers our executive compensation programs, monitors
corporate performance and its relationship to compensation of executive
officers, and makes appropriate recommendations and decisions concerning matters
of executive compensation.
COMPENSATION PHILOSOPHY. We believe that executive compensation should be
closely related to increased stockholder value. One of the strengths
contributing to our success is a strong management team. Our compensation
program is designed to enable us to attract, retain and reward capable employees
who can contribute to our continued success, principally by linking compensation
with the attainment of key business objectives. Equity participation and a
strong alignment to stockholders'
14
interests are key elements of our compensation philosophy. Accordingly, our
executive compensation program is designed to provide competitive compensation,
support our strategic business goals and reflect our performance.
The compensation program reflects the following principles:
- Compensation should encourage increased stockholder value;
- Compensation programs should support our short- and long-term strategic
business goals and objectives;
- Compensation programs should reflect and promote our values and reward
individuals for outstanding contributions toward business goals; and
- Compensation programs should enable us to attract and retain highly
qualified professionals.
PAY MIX AND MEASUREMENT. Our executive compensation is comprised of two
components, base salary and incentives, each of which is intended to serve the
overall compensation philosophy.
BASE SALARY. Our salary levels are intended to be consistent with
competitive pay practices and levels of responsibility, with salary increases
reflecting competitive trends, our overall financial performance and resources,
general economic conditions as well as a number of factors relating to the
particular individual, including the performance of the individual executive,
and level of experience, ability and knowledge of the job. The salary levels for
2000 were determined by our compensation committee.
INCENTIVES. For 2000, incentives consisted of cash awards under our Annual
Incentive Plan. The granting of cash awards was discretionary and was dependent
principally on our overall performance and the performance of each individual
employee. We expect to continue to grant annual cash awards consistent with our
performance. We also are authorized to grant equity-based awards. The equity-
based awards typically consist of stock options and restricted stock units
granted to our executives and other employees pursuant to our Equity Incentive
Plan. We did not grant any stock options during the year ended December 31,
2000. During August and September 2000, we issued to certain newly hired
employees an aggregate of 200,000 and 100,000 shares of restricted stock,
respectively, each with an issue cost of $.01 per share and a fair market value
of $26.50 and $30.13 per share, respectively. The restricted stock, which is
subject to continuing service with the Company, will vest in three annual
installments on each anniversary of the grant date. In addition, during 2000,
36,891 shares of common stock underlying restricted stock units were forfeited
as a result of a failure to meet vesting requirements, and 77,502 shares vested
as part of severance arrangements.
In the future, in addition to cash awards, we may from time to time grant
additional equity-based incentives. We believe that the equity-based awards
provide our employees with an opportunity to increase their ownership of our
common stock and potentially gain financially from increases in the price or our
common stock. By this approach, the best interests of stockholders, executives
and employees will be closely aligned. The equity-based awards were, and we
expect will continue to be, based primarily on an employee's potential
contribution to our growth and profitability. Generally, these grants vest over
a period of time, and executives and other employees must continue to be
employed by us in order for such grants to vest.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31,
2000. In August 1999, Mr. LaBranche entered into an employment agreement with
LaBranche. This employment agreement currently provides for an annual base
salary of $250,000, plus a bonus to be determined by the compensation committee.
We deem the employment arrangements with Mr. LaBranche to be appropriate
considering our overall performance and that of Mr. LaBranche.
15
TAX EFFECTS. Section 162(m) of the Internal Revenue Code generally denies a
federal income tax deduction for certain compensation exceeding $1,000,000 paid
to the Chief Executive Officer or any of the four other highest paid executive
officers, excluding (among other things) certain performance-based compensation.
Non-deductibility would result in additional tax cost to us. Through
December 31, 2000, this provision did not affect our tax deductions, but we will
continue to monitor the potential impact of Section 162(m) on our ability to
deduct executive compensation.
GENERAL. We believe that linking executive compensation to corporate
performance results in a better alignment of compensation with corporate
business goals and stockholder value. We further believe that our compensation
practices are directly tied to stockholder returns and linked to the achievement
of our annual and longer-term financial and operational results on behalf of our
stockholders. In view of our performance and achievement of goals and
competitive conditions, we believe that compensation levels during fiscal 2000
adequately reflect our compensation goals and policies.
March 23, 2001 Compensation Committee Members
Michael LaBranche
E. Margie Filter
Thomas Dooley
16
REPORT OF OUR AUDIT COMMITTEE
The audit committee of our Board of Directors was established on March 17,
2000 and currently is composed of E. Margie Filter and Thomas E. Dooley. On
May 30, 2000, our Board of Directors adopted the audit committee charter, a copy
of which is annexed to this proxy statement as ANNEX A. The audit committee
reviews, acts on and reports to our Board of Directors with respect to various
auditing and accounting matters, including the recommendations of our auditors
regarding staffing needs, the scope of our annual audits, fees to be paid to our
auditors, the performance of our independent auditors and our accounting
practices. The audit committee is comprised solely of independent directors.
In accordance with the audit committee charter, the audit committee assists
the Board in fulfilling its responsibility for oversight of the quality and
integrity of our accounting, auditing and financial reporting practices. During
the year ended December 31, 2000, the audit committee met four times, and the
chairman, as representative of the audit committee, discussed the interim
financial information contained in each quarterly earnings announcement with the
chief financial officer, controller and independent auditors prior to public
release.
In discharging its oversight responsibility as to the audit process, the
audit committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and LaBranche that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1--"Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. The
audit committee also discussed with management, the internal auditors and the
independent auditors the quality and adequacy of LaBranche's internal controls
and the internal function's organization responsibilities, budget and staffing.
The audit committee reviewed with both the independent and the internal auditors
their audit plans, audit scope and identification of audit risks.
The audit committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as
amended--"Communication with Audit Committees" and with and without management
present, discussed and reviewed the results of the independent auditors'
examination of the financial statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the audit committee recommended to the Board that
LaBranche's audited financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, for filing with the
Securities and Exchange Commission. The audit committee also recommended the
reappointment, subject to stockholder approval, of the independent auditors and
the Board concurred in such recommendation.
March 23, 2001 Audit Committee Members
E. Margie Filter
Thomas Dooley
17
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors and persons who beneficially own more than
ten percent of our common stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than ten percent beneficial owners are required
by the SEC to furnish us with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to us and written
representations from our executive officers and directors, we believe that
during fiscal 2000 all Section 16(a) filing requirements applicable to our
executive officers, directors and greater than ten percent beneficial owners
were complied with on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE PAYMENT ON MEMBERSHIPS
Some of our executive officers have contributed the use of their NYSE
memberships to LaBranche & Co. LLC and receive lease payments from LaBranche &
Co. LLC based on the market value of the memberships. For 2000, the named
executive officers listed below received payments from LaBranche & Co. LLC in
the amounts set forth opposite their names:
NAME LEASE INCOME
---- ------------
Michael LaBranche........................................... $276,000
James G. Gallagher.......................................... 276,000
Michael J. Naughton......................................... 276,000
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INTEREST ON INDEBTEDNESS
A family member of Mr. Flaherty, who retired in November 2000, holds
$600,000 of subordinated indebtedness due August 31, 2001, which currently bears
interest at an annual rate of 10.0% payable on a quarterly basis.
Mr. LaBranche's spouse holds $1.3 million of secured subordinated indebtedness
due March 2, 2002, which currently bears interest at an annual rate of 8.0%
payable on a quarterly basis. The agreements relating to this debt have
automatic rollover provisions which extend the maturity for an additional year,
unless the lender provides notice at least seven months prior to maturity. The
interest income in 2000 for Mr. Flaherty's family member was $60,000 and the
interest income in 2000 for Mr. LaBranche's spouse was $108,333.
COMPARATIVE PERFORMANCE BY LABRANCHE
The SEC requires us to present a chart comparing the cumulative total
stockholder return on our common stock with the cumulative total stockholder
return of (i) a broad equity market index and (ii) a published industry index or
peer group. Although the chart would normally be for a five-year period, our
common stock began trading publicly on August 19, 1999 and, as a result, the
following chart commences as of such date. This chart compares our common stock
with (i) the NYSE Composite Index and (ii) the NYSE Financials Index. The chart
assumes (a) $100 was invested on August 19, 1999 in each of our common stock,
the stocks comprising the NYSE Composite Index and the stock comprising the NYSE
Financials Index and (b) the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
NYSE COMPOSITE INDEX NYSE FINANCIALS INDEX LAB
8/19/99 100 100 100
8/31/99 98.71 96.37 98.28
9/30/99 95.56 91.25 77.16
10/31/99 100.82 103.36 92.24
11/30/99 101.74 99.38 74.57
12/31/99 104.83 98.43 87.93
1/31/00 100.22 95.39 94.83
2/29/00 95.53 87.19 83.62
3/31/00 104.41 100.81 87.07
4/30/00 103.84 98.04 82.33
5/31/00 103.75 103 84.48
6/30/00 103.64 99.1 99.14
7/31/00 103.27 107.88 140.52
8/31/00 108.73 117.07 207.76
9/30/00 106.88 119.04 230.17
10/31/00 107.36 118.86 273.28
11/30/00 101.52 112.86 160.34
12/31/00 105.89 123.27 210.78
19
PROPOSAL NO. 2--RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The stockholders will be asked to ratify the appointment of Arthur Andersen
LLP as our independent public accountants for the fiscal year ending
December 31, 2001. Arthur Andersen LLP audited our consolidated financial
statements for the fiscal year ended December 31, 2000. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting, will have
an opportunity to make a statement if he or she desires to do so and is expected
to be available to respond to appropriate questions from stockholders.
AUDIT FEES
The aggregate fees billed for professional services rendered for the audit
of our audited financial statements for the year ended December 31, 2000 and
reviews of the financial statements for the first three fiscal quarters of 2000
was $250,000.
ALL OTHER FEES
The aggregate fees billed by Arthur Andersen during the year ended
December 31, 2000 for other services totaled $806,676. These services included
acquisition-related services, tax planning and compliance, and the audit of our
retirement plan.
Our audit committee has determined that the services described above that
were rendered by Arthur Andersen are compatible with the maintenance of Arthur
Andersen's independence from our management.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of our
common stock present or represented and entitled to vote is required for the
ratification of the appointment of Arthur Andersen LLP as our independent public
accountants. Abstentions and broker non-votes have the same legal effect as
votes cast against this proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
LABRANCHE AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
20
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at our annual
meeting of stockholders to be held in 2002 must be received by us no later than
November 30, 2001 for inclusion in our proxy statement and form of proxy
relating to that meeting.
Stockholder proxies obtained by our Board of Directors in connection with
our annual meeting of stockholders to be held in 2002 will confer on the proxies
discretionary authority to vote on any matters presented at the meeting which
were not included in the proxy statement, unless notice of the matter to be
presented at the meeting is provided to our Secretary before February 9, 2002.
OTHER BUSINESS
Our Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the Annual
Meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
/s/ WILLIAM J. BURKE, III
William J. Burke, III
SECRETARY
Dated: April 9, 2001
A COPY OF OUR ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT CHARGE TO ANY
STOCKHOLDER REQUESTING IT IN WRITING FROM: LABRANCHE & CO INC., ATTENTION:
SECRETARY, ONE EXCHANGE PLAZA, NEW YORK, NEW YORK 10006.
21
ANNEX A
AUDIT COMMITTEE CHARTER
LABRANCHE & CO INC.
The Board of Directors (the "Board") of LaBranche & Co Inc. (the "Company")
hereby constitutes and establishes a Audit Committee (the "Committee") with
authority, responsibility and specific duties described below.
* * * * * * *
COMPOSITION
The Committee shall initially consist of two Directors. The number of
Directors shall be increased to at least three Directors no later than June 1,
2001. These Audit Committee Directors are (i) independent (as defined by the New
York Stock Exchange) and (ii) financially literate (as interpreted by the Board
of Directors in its business judgment), or must become financially literate
within a reasonable period after his or her appointment. At least one member of
the committee shall have accounting or related financial management expertise,
as interpreted by the Board of Directors in its business judgment. The Board of
Directors shall also appoint a Chairperson of the Committee. The Secretary of
the Company, or in his or her absense such person as may be designated by the
Chairperson of the Committee, shall act as secretary and keep the minutes of all
meetings of the Committee.
AUTHORITY
The Committee shall provide oversight on matters relating to accounting,
financial reporting, internal control, auditing and regulatory compliance
matters, consistent with legal and regulatory requirements as hereinafter set
forth and such other matters as the Board of Directors shall from time to time
direct, and shall periodically report to the Board with respect thereto.
RESPONSIBILITY
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditor is responsible for
auditing those financial statements. The Committee, in carrying out its
responsibilities, believes its policies and procedures should take the
appropriate actions to set the overall corporate "tone" for quality financial
reporting, sound business risk practices and ethical behavior.
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
1. Recommend to the Directors the selection, retention and, when necessary,
the replacement of the independent accountants to audit the consolidated
financial statements of the Company.
2. Meet with the independent accountants, internal auditor(*) and
management to review the scope of the proposed audit for the current year
and any non-audit services performed. Review the compensation paid to the
independent accountants for all services provided to ensure that the
independence of the accountants has not been impaired. Discuss with
Company management their satisfaction with the quality of all services
provided by the independent accountants.
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* Until such time as an Internal Auditor is designated, the Company's
Compliance Director will assume the responsibility.
A-1
3. Ensure the independence of the independent accountants by monitoring and
reviewing, and discussing with the Board, if necessary, any relationships
between the independent accountants and the Company or any other
relationships that may adversely affect the independence of the
accountants.
4. Review with the Company's financial management, independent accountants
and internal auditor the adequacy and effectiveness of the internal
auditing function of the Company's (a) systems of internal accounting,
operating and financial reporting controls, and computerized information
systems controls and security; and (b) internal audit procedures,
including the adequacy of internal audit staffing and budget.
5. Review the expense account and perquisites of officers, including their
use of corporate assets, with the internal auditor.
6. Discuss the proposed internal audit plan for the coming year with the
internal auditor and the independent accountants to ensure internal and
external audit efforts have been coordinated and directed toward
maximizing audit effectiveness.
7. Review a summary of internal audit findings, inquire whether appropriate
corrective actions have been taken on significant audit findings and
review the current status of the annual internal audit plan and
explanations of any significant deviations from the original plan.
8. Review matters relating to changes in accounting principles as well as
important developments emanating from the accounting and auditing
professions, the SEC, NYSE, NASD and other authorities. The Committee
will review the Company's quarterly and annual reports on Forms 10-Q and
10-K, respectively, including a discussion of any items required to be
communicated by the auditors under SAS 61 and generally accepted
accounting standards. The Chairperson of the Committee may represent the
entire Committee for the purposes of this review.
9. Meet with each of the independent accountants, internal auditor and
members of management to discuss the evaluation of the Company's
financial and other management and independent accountants, and whether
there was full, free and unrestricted access to all Company records,
property, personnel and business transactions during the audit(s).
10. Inquire about any disagreement with management, which, if not resolved
to the independent accountants' satisfaction, would have caused them to
issue a qualified reprt on the Company's financial statements.
"Disagreements" for this purpose shall be those contemplated by Item 304
of SEC regulation S-K or successor rule.
11. Review with the Company's outside legal counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received from
regulators or government agencies.
12. Submit minutes of all Committee meetings to the Board of Directors.
13. Recommend to the Board of Directors any changes in the authority,
responsibility or duties of the Committee, and/or this Charter.
In carrying out its responsibilities, the Committee must remain flexible in
order to react to changing conditions and to assure the Directors and
stockholders that corporate accounting and reporting practices are functioning
in accordance with all requirements and are of the highest quality.
A-2
LABRANCHE & CO INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2001
George M.L. (Michael) LaBranche, IV and Harvey S. Traison, each of them,
as the true and lawful attorneys, agents and proxies of the undersigned, with
full power of substitution, are hereby authorized to represent and to vote all
shares of Common Stock of LaBranche & Co Inc. held of record by the undersigned
on March 23, 2000 at the Annual Meeting of Stockholders to be held on 9:00 a.m.
(New York time) on May 15, 2000, at the Regent Hotel, 55 Wall Street, New York,
New York 10005 and any adjournment thereof. Any and all proxies heretofore given
are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE
NOMINEES FOR PROPOSAL 1 AND FOR PROPOSAL 2.
THE BELOW-SIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND THE PROXY STATEMENT FURNISHED THEREWITH.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
LABRANCHE & CO INC. 2001 ANNUAL MEETING
Proposal No. 1. ELECTION OF CLASS II DIRECTORS:
1 - JAMES G. GALLAGHER |_| FOR all nominees |_| WITHHOLD AUTHORITY
2 - S. LAWRENCE PRENDERGAST listed to the left to vote for all nominees
3 - GEORGE E. ROBB, JR. (except as specified listed to the left.
below)
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
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Proposal No. 2. Proposal to ratify the appointment of |_| FOR |_| AGAINST |_| ABSTAIN
Arthur Andersen LLP as LaBranche's
Independent public accountants for
the year ending December 31, 2001.
Discretionary authority is hereby granted with respect to such other matters as
may properly come before the meeting.
Check appropriate box
Indicate changes below: Date _______________________, 2001
Address Change? |_| Name Change? |_|
NO. OF SHARES
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SIGNATURE(S) IN BOX
Important: Please sign exactly as
name appears on this card. Each
joint owner should sign. Executors,
administrators, trustees, etc.
should give full title as such. If
signor is a corporation, please
give full corporate name by duly
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.