- Additional Proxy Soliciting Materials (definitive) (DEFA14A)
01 April 2009 - 4:44AM
Edgar (US Regulatory)
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
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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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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(1)
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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(3)
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(1)
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Form, Schedule or Registration Statement No.:
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PIPER JAFFRAY COMPANIES
2009 Proxy Solicitation: Amended Incentive Plan
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this presentation that are not historical or current facts,
including statements about beliefs and expectations, are forward-looking statements.
These forward-looking statements cover, among other things, statements other than
historical information or statements of current condition and may relate to our future
plans and objectives and results. Forward-looking statements involve inherent risks
and uncertainties, and important factors could cause actual results to differ materially
from those anticipated, including those factors identified under "Risk Factors" in Part I,
Item 1A and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year
ended December 31, 2008, and as updated in our subsequent reports filed with the
SEC (available at our Web site at www.piperjaffray.com and at the SEC Web site at
www.sec.gov). Forward-looking statements speak only as of the date they are made,
and readers are cautioned not to place undue reliance on them. We undertake no
obligation to update forward-looking statements in light of new information or future
events.
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AMENDED INCENTIVE PLAN
Requesting additional 1.5 million shares.
No other changes to 2003 Annual and Long-Term Incentive
Plan.
Additional shares will be used primarily to make restricted
stock grants for our February 2010 annual incentive grants
pertaining to 2009 compensation.
Approximately 350,000 shares will be designated for additional
strategic hiring in 2009.
We have factored into the share request the volatility of our
stock price to provide for adequate shares through Feb. 2010.
As of Mar. 18 the 52-wk range of our stock price was
$18.51-$45.99 (close on Mar. 18: $27.01).
Stock price has a significant impact on the number of
shares required.
Overview
(in millions)
Plan shares available 0.4
(as of March 5, 2009)
2009 annual award (1.0)
2009 strategic hiring (0.4)
Net share shortage @ $20.00 (1.0)
Net share shortage @ $30.00 ( .5)
Net share shortage @ $15.00 (1.3)
Anticipated Share Usage
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BUILDING EMPLOYEE OWNERSHIP
BUILDING EMPLOYEE OWNERSHIP
We firmly believe that employee ownership drives shareholder value.
We have successfully increased employee ownership since our spin-off from U.S. Bancorp in
December 2003.
Principally through annual equity incentive awards, based on performance criteria.
10-50% of an employee's annual incentive is awarded in restricted stock; the more senior the
position, the higher the proportion of equity that is received.
2008 incremental performance-based grant of 362,037 shares to our executive Leadership
Team.
2008 incremental retention grants to key producers of 246,995 shares.
Ownership continues to lag our peers and is below our goal of a low-30% range
Equity is critical to our long-term strategy
PJC Employee Ownership
Comparative Employee Ownership1
1 From most recently available company SEC filings or management
presentations
2 Includes management ownership through FBR Group
2
Comparative Executive Ownership1
Average = 36%
Average = 10%
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ANNUAL INCENTIVE COMPENSATION
We reduced year-over-year headcount by 13%, net of significant strategic hiring.
Preserved senior, client-facing professionals.
In total, incentives were reduced by 49% year-over-year.
Guarantees largely matured at the end of 2008, providing a more variable
compensation model for 2009.
Our Compensation Committee determined, in conjunction with the CEO's
recommendation, that none of the eleven members of the Leadership Team would receive
a bonus for 2008.
Leadership Team incentive compensation is profitability-based. In 2009, our objective is to
shift individual performance and incentive goals for employees other than the Leadership
Team to a business unit profitability-based structure from a revenue-based model.
In 2009 we will also be evaluating longer term changes to our compensation
program, including reviewing base salaries and aligning incentive compensation with
firm profitability.
We took appropriate action in 2008 regarding compensation
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ANNUAL INCENTIVE COMPENSATION
Total compensation is comprised of base salary and an annualincentive.
Performance goals are established at the beginning of each year.
Incentive compensation is determined at the end of each year, based on
performance against the goals.
Performance-based incentive is divided between cash and equity. The equity grants have
three-year cliff vesting, which provides a retention element.
As total compensation increases, the equity portion of incentive compensation also
generally increases.
Leadership Team members historically have received approximately 40-50% of their
annual incentive compensation in equity awards.
Our Compensation Committee determined, in conjunction with the CEO's
recommendation, that none of the eleven members of the Leadership Team would
receive a bonus for 2008.
Over the past five years, we have granted equity awards, on average, to approximately
38% of our employees as part of their annual compensation.
Equity is in lieu of - not in addition to - annual cash incentive compensation
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HISTORIC STRATEGIC HIRING OPPORTUNITY
Extended public finance with team of 13 in CA.
Added presence in Connecticut and Virginia.
Added Media, Telecommunications and Entertainment (MET) sector with team of 10.
New head of Industrials and Financial Sponsor coverage.
Added to financial restructuring team (1).
New head of investment research.
Electronic equity trading, including new head (3).
Additional talent in equity and fixed income sales and trading (16).
Added equity research analysts in HC, Business Services, MET, and Clean Tech (8).
Strategic Hires
Institutional
Brokerage
Investment
Banking
Public
Finance
Recruited 47 senior professionals in 2008.
Used approximately 200,000 shares for key recruits.
We continue to see available highly qualified talent at attractive terms and have
designated an additional 250,000 in 2009 for key recruits.
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DILUTION
Potential dilution from the additional authorized shares would be 7.6% based on 1.5
million shares requested and 19,669,6011 shares issued and outstanding as of March
10, 2009.
We have more than offset dilution from past grants.
Our tangible book value per share has increased to $36.17 at Dec. 31, 2008 from
$18.93 at Dec. 31, 2003, the time of our spin-off.
We are cognizant of shareholder concerns about dilution
Shares Returned or Repurchased
1Includes February 2009 annual incentive grant related to 2008 performance
Year Shares Granted Under Incentive Plan Shares Returned to Plan or Repurchased
During Fiscal Year Shares Issued and Outstanding
at Fiscal Year End
2004 872,664 44,749 19,865,146
2005 1,420,271 1,487,228 19,782,621
2006 898,229 2,462,296 18,544,719
2007 829,859 1,903,715 17,483,635
2008 2,280,336 874,144 18,851,209
Total 6,301,339 6,772,132 N/A
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INCENTIVE PLAN
Our objective of achieving a meaningful level of employee ownership has resulted in our
current overhang and burn rate.
We compare favorably to our direct middle market peer firms.
Equity Plan Peer Comparison
Source: Piper Jaffray calculations using Dec. 31, 2008 10K data
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INCENTIVE PLAN AND AWARDS
Our executive Leadership Team members do not have employment agreements or
change of control agreements.
As we have disclosed in our proxy statement, perks for management are negligible
and commensurate with those available to other employees.
Leadership Team incentive compensation is directly related to performance against
established objectives and operating income-in 2008 no member of the Leadership
Team received annual incentive compensation.
Leadership Team historically has received 40-50% of their annual incentive
compensation in equity awards.
Key Compensation Practices
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INCENTIVE PLAN AND AWARDS
Vesting is determined by the Compensation Committee; historically all employee awards have
three-year cliff vesting.
Awards are subject to cancellation for, among other things, termination for cause or failing to
comply with certain post-termination restrictions.
Incentive Plan is the only equity plan that permits us to grant equity awards.
Directors and executive officers are subject to stock ownership guidelines.
Leadership Team: 7x base salary for the CEO and 2x-6x base salary for other members,
within five years after becoming subject to the guidelines. As of Jan. 2, 2009, all of the
members met the guidelines based on 2009 salary levels and the date of their appointment to
the Leadership Team.
Leadership Team is subject to a share retention policy requiring members to hold at least 50% of
the shares awarded to them through our incentive plan.
Currently, Leadership Team members hold 100% of all shares that have been awarded to
them.
Incentive Plan prohibits the grant of stock options at a price below fair market value and the
repricing of stock options without shareholder approval.
Review of key provisions
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APPENDIX
Additional Business Information
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SECURITIES FIRM FOUNDED IN 1895
Recent key milestones
Independent, public company.
Acquired by U.S. Bancorp in a cash
transaction valued at $730 million.
Became an independent, publicly held
company following a spin-off from U.S.
Bancorp
Sold Private Client Services to UBS
Financial Services. Redirected business
strategy to building the leading middle
market investment bank.
Acquired Goldbond Capital Holdings
Limited, a Hong Kong-based investment
bank. Acquired Fiduciary Asset
Management.
Public Finance
Corporate & Institutional Clients
Public Finance
Municipal Sales
Municipal Underwriting & Trading
Derivative Products
Real Estate Loan Syndications
Investment Banking
Institutional Equity Sales & Trading
Equity & Debt Capital Markets
Structured Products
Equity & Fixed Income Research
Services for:
Investment Management
Traditional Institutional Asset
Management (FAMCO)
Alternative Products (Private
Capital)
Merchant Banking
2007
2006
2003
1998
Prior
to 1998
2008
Sea change in capital markets landscape
yielding unprecedented opportunities for
middle market firms
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FOCUSED, HIGHLY EXPERIENCED MANAGEMENT TEAM
Piper Jaffray Leadership Team (Named Executive Officers)
Andrew Duff
Chairman and Chief Executive Officer
With the Firm since 1980
President of Piper Jaffray from 1996 to 2003 and Chairman and
CEO post spin-off from U.S. Bancorp
Bachelor's degree in economics from Tufts University and attended
the Advanced Executive Program at the J.L. Kellogg Graduate
School of Management.
Tom Schnettler
Vice Chairman and Chief Financial Officer
More than 20 years of experience with the Firm
Previously Head of Corporate and Institutional Services
Former investment banker and Head of Investment Banking; built
the Piper Jaffray Health Care Investment Banking group into one of
the largest in the U.S.
Graduate of St. John's University and Harvard Law School
Deb Schoneman
Chief Financial Officer
Joined the Firm in 1990
Served as Treasurer and held several senior finance management
positions, including finance director of both equity and fixed income
capital markets
Bachelors degree in finance from Minnesota State University in
Mankato and MBA from University of St. Thomas
Jon Salveson
Head of Investment Banking
More than 10 years of experience with the Firm
Previously a Health Care investment banker with Piper Jaffray and
was instrumental in beginning a west coast presence for Piper
Jaffray's Health Care practice
Graduate of St. Olaf College and received a MBA from the J.L.
Kellogg Graduate School of Management at Northwestern University
Bob Peterson
Head of Equities
More than 10 years of experience with the Firm
Previously Head of Private Client Services and, prior to that, was
Head of Equity Research
Joined the firm as an Equity Research Analyst
BBA from the University of St. Thomas
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FOCUSED, HIGHLY EXPERIENCED MANAGEMENT TEAM
Piper Jaffray Leadership Team (Cont.)
Brad Winges
Head of Fixed Income Services
More than 18 years with the Firm, all in municipal sales and trading
Now head of investment grade sales, trading, underwriting and high-
yield sales
Bachelor's degree in economics from University of Wisconsin
Madison
David Wilson
CEO, Piper Jaffray Ltd.
Joined the firm in 2001; named CEO of Piper Jaffray Ltd. in 2005
Responsible for European institutional sales, trading and investment
banking operations
Significant investment banking experience in the U.K. health care
sector; previously held senior investment banking positions at ING
Barings, BTAB/Deutsche Bank and UBS Warburg
Bachelor's degree from Cambridge University
Frank Fairman
Head of Public Finance Services
More than 20 years of experience with the Firm
Former investment banker responsible for a wide variety of bond
issues throughout the western United States
Bachelor's degree from Yale University and MBA from the Wharton
School of the University of Pennsylvania
Todd Firebaugh
Chief Administrative Officer
Previously, held product and general management positions at
Citigroup, JP Morgan Chase and, most recently, U.S. Bancorp
Bachelor's degree from Cornell University and MBA from New York
University
Jim Chosy
General Counsel
Previously, was vice president, associate general counsel and
secretary of U.S. Bancorp
Prior to joining U.S. Bancorp, was a lawyer for Deluxe Corporation
and the law firm of Dorsey & Whitney LLP
Bachelor's degree from the University of Wisconsin-Madison and
law degree from the University of Minnesota
Alex Ko
Head of Piper Jaffray Asia
Joined Piper Jaffray as part of the firm's 2007 acquisition of Hong
Kong-based Goldbond Capital Holdings Limited, which he founded
in 2003
More than 25 years of experience in banking and corporate finance
in China and Hong Kong; previously served as the chairman of
corporate finance business at BNP Paribas Peregrine Capital
Limited
Bachelor's degree from The Chinese University of Hong Kong
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FINANCIAL INFORMATION-CONTINUING OPERATIONS
Net Revenues
Pre-Tax Margin
1 See Slide 18 for a reconciliation of non-GAAP financial measures
Diluted EPS
Compensation Ratio
Compensation Ratio
1
1
1
1
1
1
1
Restated
Restated
Restated
Restated
Restated
Restated
Restated
Restated
1
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Net Revenues ($ in mm)
Pre-Tax Margin
Net Revenue Growth
Peer Summary
Peer Summary
2008 Peer Comparison (GAAP)
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18
In 2008, Piper Jaffray Companies recorded a $130.5 million goodwill impairment, a $33.9 million loss related to its tender option bond program, and a
$17.9 million restructuring charge. In 2006 the Company recognized a $21.3 million benefit from a reduction of a litigation reserve, and in 2005 it
recognized an $8.6 million restructuring charge. Management believes that excluding the impact of these items increases the comparability of period-to-
period results and allows for a more meaningful representation of results from continuing operations.
The following table sets forth a reconciliation of net income from continuing operations, earnings per diluted common share from continuing operations,
income from continuing operations before income tax expense, and the ratio of income from continuing operations before income tax expense to net
revenues, excluding the impact of the noted items in the relevant years.
FOOTNOTE
(1)
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