UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

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TD AMERITRADE Holding Corporation

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement if other than Registrant)

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

February 25, 2010

 

The Annual Meeting of Stockholders of TD AMERITRADE Holding Corporation (the “Company”) will be held at the Hilton Omaha, 1001 Cass Street in Omaha, Nebraska on Thursday, February 25, 2010, at 9:00 a.m., Central Standard Time, for the following purposes:

 

1) To elect four nominees recommended by the board of directors to the board of directors;

 

2) To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2010; and

 

3) To consider and vote upon a proposal to approve the amendment and restatement of the Company’s Long-Term Incentive Plan.

 

Only stockholders of record at the close of business on December 28, 2009 will be entitled to notice of and to vote at the meeting.

 

We have adopted the U.S. Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing a Notice of Internet Availability of Proxy Materials (the “Internet Availability Notice”) to most of our stockholders instead of a paper copy of this proxy statement and our 2009 Annual Report. The Internet Availability Notice contains instructions on how to access and review those documents over the Internet. We believe that this process allows us to provide our stockholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. If you received an Internet Availability Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Internet Availability Notice.

 

Your vote is very important. Whether or not you plan to attend the Annual Meeting, please complete and return your proxy card or vote by telephone or via the Internet by following the instructions on your Internet Availability Notice. Returning a proxy card or otherwise submitting your proxy does not deprive you of your right to attend the Annual Meeting and vote in person. Proxies are being solicited on behalf of the board of directors.

 

By Order of the Board of Directors

 

Ellen L.S. Koplow, Secretary

 

Omaha, Nebraska

January 8, 2010

TABLE OF CONTENTS

 

TD AMERITRADE Holding Corporation
4211 South 102nd Street
Omaha, Nebraska 68127

 

PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS

 

This Proxy Statement is furnished in connection with the solicitation of proxies to be voted at the 2010 Annual Meeting of Stockholders of TD AMERITRADE Holding Corporation (the “Company”). The 2010 Annual Meeting will be held on Thursday, February 25, 2010 at 9:00 a.m., Central Standard Time, at the Hilton Omaha, 1001 Cass Street in Omaha, Nebraska. This Proxy Statement and the accompanying proxy card are first being sent to stockholders on or about January 8, 2010.

 

The Company has one class of common stock. Each share of common stock is entitled to one vote upon each matter to be voted on at the Annual Meeting. Stockholders do not have the right to cumulate votes in the election of directors. Only stockholders of record at the close of business on December 28, 2009 (the “Record Date”) will be entitled to vote at the Annual Meeting. As of the Record Date, there were 588,943,147 shares of common stock issued and outstanding.

 

This Proxy Statement relates only to the solicitation of proxies from the stockholders with respect to the election of four Class II directors recommended by the board of directors, ratification of the appointment of the Company’s independent registered public accounting firm and approval of the amendment and restatement of the Company’s Long-Term Incentive Plan. All shares of the Company’s common stock represented by properly executed and unrevoked proxies will be voted by the persons named as proxies in accordance with the directions given. Where no instructions are indicated on any such proxy, properly executed proxies will be voted “FOR” the proposals set forth in this Proxy Statement for consideration at the Annual Meeting. The directors expect that shares of the common stock held by executive officers and directors of the Company will be voted “FOR” such proposals. Such shares represent approximately 12% of the common stock outstanding as of the Record Date. At this time, we are unaware of any matters, other than described above in the Notice of Annual Meeting of Stockholders, that may properly come before the Annual Meeting. If any other matters come before the Annual Meeting, the proxies in the enclosed form will confer discretionary authority on the persons named as proxies to vote in their discretion with respect to such matters.

 

The accompanying proxy is solicited from the holders of the Company’s common stock on behalf of the board of directors of the Company. A proxy is revocable at any time by giving written notice of revocation to the secretary of the Company prior to the Annual Meeting or by executing and delivering a later-dated proxy via the Internet, telephone or mail prior to the Annual Meeting. Furthermore, the stockholders who are present at the Annual Meeting may revoke their proxies and vote in person.

 

A quorum consisting of at least a majority of shares of common stock issued and outstanding must be present at the meeting for any business to be conducted. Shares of common stock entitled to vote and represented by properly executed, returned and unrevoked proxies, including shares with respect to which votes are withheld, abstentions are cast or shares that are “broker non-votes,” will be considered present at the Annual Meeting for purposes of determining a quorum. Broker non-votes are shares held by brokers or nominees for which voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares and for which the broker or nominee does not have discretionary voting power under rules applicable to broker-dealers. If your broker holds your shares in its name and you do not instruct your broker how to vote, your broker will nevertheless have discretion to vote your shares on “routine” matters, including the ratification of the appointment of the Company’s

independent registered public accounting firm. Your broker will not have discretion to vote on “non-routine” matters absent direction from you, including the election of directors recommended by the board of directors and approval of the amendment and restatement of the Company’s Long-Term Incentive Plan.

 

In order to vote online or via telephone, go to the www.ProxyVote.com Web site or call the toll-free number on the proxy card or Internet Availability Notice and follow the instructions. If you choose not to vote by telephone or electronically, please complete and return the proxy card in the pre-addressed, postage-paid envelope provided.

 

If you received an Internet Availability Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Internet Availability Notice. If you would like to receive future stockholder materials electronically, please enroll at www.investordelivery.com. Please have the proxy card you received available when accessing the site.

 

The Company’s certificate of incorporation divides the Company’s board of directors into three classes, with four directors per class and with each class being elected to a staggered three-year term. J. Joe Ricketts, the Company’s founder, certain members of his family and trusts established for their benefit (collectively, the “Ricketts holders”) owned approximately 15% of our common stock as of the Record Date. The Toronto-Dominion Bank, a Canadian chartered bank, owned approximately 45% of our common stock as of the Record Date. References to “TD” or “TD Bank Financial Group” in this proxy statement refer to The Toronto-Dominion Bank and its subsidiaries. In connection with the Company’s acquisition of TD Waterhouse Group, Inc. (“TD Waterhouse”), the Ricketts holders, TD and the Company entered into a stockholders agreement (the “Stockholders Agreement”) effective June 22, 2005. Under the Stockholders Agreement, as amended, the Company’s board of directors consists of twelve members, up to five of whom may be designated by TD, up to three of whom may be designated by the Ricketts holders, one of whom is the chief executive officer of the Company, and three of whom are outside independent directors who are nominated by the Outside Independent Directors Committee and then approved by TD and the Ricketts holders. The right of each of TD and the Ricketts holders to designate directors is subject to their maintenance of specified ownership thresholds of Company common stock, as set forth in the Stockholders Agreement, as amended. See discussion under “Stockholders Agreement” for additional information regarding the terms of the Stockholders Agreement. As of the Record Date, based on their respective ownership positions in the Company, TD may designate five members of the board of directors and the Ricketts holders may designate two members. Because TD and the Ricketts holders collectively own more than 50% of the voting power of the outstanding common stock of the Company, the Company qualifies as a “controlled company” for purposes of Nasdaq Rule 4350(c) and therefore is exempt from specified director independence requirements of The Nasdaq Stock Market.

 

The board of directors has nominated the following persons as directors to be voted upon at the 2010 Annual Meeting: Marshall A. Cohen, William H. Hatanaka, J. Peter Ricketts and Allan R. Tessler, as Class II directors to serve terms ending at the 2013 Annual Meeting. Messrs. Cohen and Hatanaka are designees of TD, Mr. J. Peter Ricketts is a designee of the Ricketts holders and Mr. Tessler is an outside independent director. J. Joe Ricketts, Dan W. Cook III, Joseph H. Moglia and Wilbur J. Prezzano are Class III directors serving terms ending at the 2011 Annual Meeting. W. Edmund Clark, Mark L. Mitchell and Fredric J. Tomczyk are Class I directors serving terms

ending at the 2012 Annual Meeting. The board of directors has determined that Messrs. Cohen, Cook, Mitchell, Prezzano, and Tessler are independent as defined in Nasdaq Rule 4200.

 

The board of directors knows of no reason why any of Messrs. Cohen, Hatanaka, J. Peter Ricketts and Tessler might be unavailable to serve as directors, and each has expressed an intention to serve if elected. If any of Messrs. Cohen, Hatanaka, J. Peter Ricketts and Tessler is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute nominee as the board of directors may recommend. With the exception of the Stockholders Agreement, as amended, there are no arrangements or understandings between any of the persons nominated to be a Class II director and any other person pursuant to which any of such nominees was selected.

 

The election of a director requires the affirmative vote of a plurality of the shares of common stock present in person or represented by proxy at the meeting and voting, provided a quorum of at least a majority of the outstanding shares of common stock is represented at the meeting. If you abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this “non-routine” proposal, your broker does not have authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any other effect on the outcome of the election of directors. Proxies submitted pursuant to this solicitation will be voted “FOR” the election of each of Messrs. Cohen, Hatanaka, J. Peter Ricketts and Tessler as Class II directors, unless specified otherwise.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF MARSHALL A. COHEN, WILLIAM H. HATANAKA, J. PETER RICKETTS AND ALLAN R. TESSLER AS CLASS II DIRECTORS.

 

The tables below set forth certain information regarding the directors of the Company.

 

 

 

 

Marshall A. Cohen is counsel to Cassels Brock & Blackwell LLP, a law firm based in Toronto, Canada, which he joined in 1996. Prior to joining that firm, Mr. Cohen served as president and chief executive officer of The Molson Companies Limited from 1988 to 1996. Mr. Cohen is a director of Barrick Gold Corporation, Broadpoint.Gleacher Securities Group, Inc. and TriMas Corporation. Mr. Cohen holds a Bachelors degree from the University of Toronto, a law degree from Osgoode Hall Law School and a Masters Degree in Law from York University.

 

William H. Hatanaka is chairman and chief executive officer of TD Waterhouse Canada, Inc. (a wholly-owned subsidiary of TD) and group head, wealth management, for TD Bank Financial Group. He has over 30 years experience in the financial services industry. Prior to joining TD in 2003, Mr. Hatanaka was the chief operating officer for the wealth management arm of the Royal Bank of Canada. He has also held senior executive positions at brokerage firms RBC Dominion Securities, Richardson Greenshields Ltd., and Midland Walwyn Capital. Prior to

his career in the financial services industry, Mr. Hatanaka played professional football in the Canadian Football League and was a member of the 1976 Ottawa Rough Riders Grey Cup Championship team. Mr. Hatanaka is the former chairman of the board for the Investment Industry Association of Canada and is a member of the board of directors for the York University Foundation, currently co-chairing the University Capital Campaign. He is also chairman of the diversity leadership council for TD Bank Financial Group. He holds a B.A. with Honours in Sociology and Economics from York University and has completed the Advanced Management Program at the Harvard Business School.

 

J. Peter Ricketts is the founder of Drakon, LLC, an asset management company in Omaha, Nebraska. Mr. Ricketts previously served as a director of the Company from October 1999 to May 2006 before he resigned to campaign for election to the United States Senate for the State of Nebraska. From 1993 to 2005, Mr. Ricketts served in various leadership positions with the Company, including executive vice president and chief operating officer, corporate secretary, president of the private client division, senior vice president of strategy and business development, senior vice president of product development and senior vice president of marketing. Mr. Ricketts is the chairman of the Omaha board of Children’s Scholarship Fund. He is also a director of Chicago Baseball Holdings, LLC (the holding company for the Chicago Cubs Major League Baseball franchise), a director and president of the Platte Institute for Economic Research, Inc. and an advisory board member for the Alumni Capital Network, a private equity firm based in New York. He serves on the global advisory board for the University of Chicago Graduate School of Business, as a member of the board of directors of Bellevue University and as a member of the board of trustees for the American Enterprise Institute. Mr. Ricketts received an M.B.A. in marketing and finance and a B.A. in biology from the University of Chicago. J. Peter Ricketts is the son of J. Joe Ricketts, who serves as a director of the Company.

 

Allan R. Tessler has been chairman of the board and chief executive officer of International Financial Group, Inc., an international merchant banking firm, since 1987. He is also chairman of the board of Epoch Investment Partners, Inc., formerly J Net Enterprises. He has previously served as chief executive officer of J Net Enterprises, co-chief executive officer of Data Broadcasting Corporation, now known as Interactive Data Corporation, chairman of Enhance Financial Services Group, Inc. and chairman and principal shareholder of Great Dane Holdings. Mr. Tessler is the lead director and chair of the finance committee of Limited Brands, Inc. Mr. Tessler also serves as a director of EnerCrest. He serves as chairman of the board of trustees of the Hudson Institute and is a member of the board of governors of the Boys & Girls Clubs of America. Mr. Tessler holds a B.A. from Cornell University and an L.L.B. from Cornell University Law School.

 

 

 

J. Joe Ricketts served as chairman of the Company’s board of directors until September 2008. He also held the position of chief executive officer from 1981 through February 2001, except for the period from March 1999 to May 2000, during which he was co-chief executive officer, and the period from May 2000 to August 2000, during which he did not hold the position of chief executive officer. In 1975, Mr. Ricketts became associated with the Company and began serving as a director and officer. By 1981, he acquired majority control of the Company. Prior to 1975, Mr. Ricketts was a registered representative with a national brokerage firm, an investment advisor with Ricketts & Co. and a branch manager with The Dun & Bradstreet Corporation, a financial information firm. Mr. Ricketts is a former director of the Securities Industry Association, now known as the Securities Industry and Financial Markets Association. He served as a member of the district committee for District 4 of the NASD from 1996 to 1999. Mr. Ricketts received a B.A. in Economics from Creighton University. He is the father of J. Peter Ricketts, who serves as a director of the Company.

 

W. Edmund Clark is president and chief executive officer of TD Bank Financial Group. Mr. Clark has served in this position since December 2002. From July 2000 until his current appointment, Mr. Clark served as president and chief operating officer of TD Bank Financial Group. Prior to joining TD, Mr. Clark was president and chief executive officer of Canada Trust Financial Services. Mr. Clark is a director of The Toronto-Dominion Bank and TD Bank N.A. (a wholly-owned subsidiary of TD). Mr. Clark graduated from the University of Toronto with a Bachelor of Arts degree. He earned his Master’s degree and Doctorate in Economics from Harvard University.

 

Dan W. Cook III has been a senior advisor to MHT Partners, L.P., an investment banking firm, since 2001. Mr. Cook is a retired partner of Goldman Sachs & Co., a leading global investment banking firm. Mr. Cook was a general partner with Goldman Sachs from 1977 to 1992 and served as a senior director from 1992 to 1994. He serves on the executive board of the Edwin L. Cox School of Business at Southern Methodist University. Mr. Cook also serves as trustee or director of several charitable organizations. Mr. Cook received an M.B.A. from Harvard Business School and a B.A. from Stanford University.

 

Mark L. Mitchell served as a director of the Company from December 1996 until January 2006 and served as a member of the Company’s board of advisors in 1993. He was reelected as a director in November 2006. Mr. Mitchell is a principal at CNH Partners, LLC, an investment management firm, which he co-founded in 2001. He was a finance professor at Harvard University from 1999 to 2003 and was a finance professor at the University of Chicago from 1990 to 1999. Mr. Mitchell was a senior financial economist for the Securities and Exchange Commission from 1987 to 1990. He was a member of the Nasdaq quality of markets committee from 2003 to 2005. He was a member of the economic advisory board of NASD from 1995 to 1998. Mr. Mitchell received a Ph.D. in Applied Economics and an M.A. in Economics from Clemson University and received a B.B.A. (summa cum laude) in Economics from the University of Louisiana at Monroe.

 

Joseph H. Moglia was elected chairman of the Company’s board of directors effective October 1, 2008. From March 2001 through September 2008 he served as the Company’s chief executive officer. Mr. Moglia joined the Company from Merrill Lynch, where he served as senior vice president and head of the investment performance and product group for Merrill’s private client division. He oversaw all investment products, as well as the firm’s insurance and 401(k) businesses. Mr. Moglia joined Merrill Lynch in 1984 and, by 1988, was the company’s top institutional sales person. In 1992 he became head of global fixed income institutional sales and in 1995 ran the firm’s municipal division before moving to its private client division in 1997. Prior to entering the financial services industry, Mr. Moglia was the defensive coordinator for Dartmouth College’s football team. He coached various teams for 16 years, authored a book on football and wrote 11 articles that were published in national coaching journals. Mr. Moglia serves on the boards of directors of AXA Financial, Inc. and of its subsidiaries, The Equitable Life Assurance Society of the U.S, MONY Life Insurance Company and MONY Life Insurance Company of America. Mr. Moglia also serves on the board of trustees of the STRATCOM Consultation Committee and is a

director for Creighton University and for the National Italian American Foundation. Mr. Moglia received an M.S. in Economics from the University of Delaware and a B.A. in Economics from Fordham University.

 

Wilbur J. Prezzano was employed with Eastman Kodak Company for over 30 years and served in various positions during that time, including as vice chairman of Eastman Kodak Company and chairman and president of Kodak’s greater China region, the positions that he held at the time of his retirement in 1996. Mr. Prezzano received a Bachelor’s degree and Masters in Business Administration from the University of Pennsylvania. Mr. Prezzano serves as a director of The Toronto-Dominion Bank, EnPro Industries, Inc., Lance, Inc. and Roper Industries, Inc.

 

Fredric J. Tomczyk is president and chief executive officer of the Company. Mr. Tomczyk has served in this position since October 2008. From July 2007 until his current appointment, he served as the Company’s chief operating officer and was responsible for all operations, technology, retail sales functions and the registered investment advisor channel. He served on the Company’s board of directors from January 2006 until June 2007. From May 2002 until joining the Company, he served as the vice chair of corporate operations for TD Bank Financial Group. From March 2001 until May 2002, Mr. Tomczyk served as executive vice president of retail distribution for TD Canada Trust (a wholly-owned subsidiary of TD) and from September 2000 until March 2001 served as executive vice president and later as president and chief executive officer of wealth management for TD Canada Trust. Prior to joining TD Canada Trust, he was president and chief executive officer of London Life. Mr. Tomczyk serves on Cornell University’s undergraduate business program advisory council. Mr. Tomczyk graduated from Cornell University with a Bachelor of Science, Applied Economics & Business Management. He subsequently obtained his Chartered Accountant designation. In 2006, he was elected as a Fellow of the Institute of Chartered Accountants of Ontario.

 

The Company’s executive officers are as follows:

 

 

See “Directors Not Standing for Election” for information regarding the business experience of Joseph H. Moglia and Fredric J. Tomczyk.

 

J. Thomas Bradley, Jr. joined the Company upon its acquisition of TD Waterhouse in January 2006 and was appointed president of TD AMERITRADE Institutional. In November 2009, he was named executive vice president of the Company. In this role, he oversees all institutional business functions, including the Company’s independent investment advisor services, directed brokerage, self-directed 401(k) and retirement trust businesses. Prior to January 2006, he spent nearly 20 years at TD Waterhouse managing a variety of retail and institutional businesses. He was most recently responsible for the U.S. independent advisor services, correspondent clearing and capital markets businesses. Prior to joining TD Waterhouse, Mr. Bradley was a financial advisor with Northwestern Mutual Life and RW Baird & Co. Mr. Bradley has received several industry awards, including The National Association of Personal Financial Advisors’ Special Achievement Award (2006), the Texas Tech Lifetime Achievement Visionary Award (2008) and Investment Advisor Magazine’s Most Influential People (2006 and 2009). Mr. Bradley holds a B.S. degree in business administration, with a concentration in finance, from the University of Richmond, Robins School of Business. He also holds several financial services industry securities licenses.

John B. Bunch joined the Company upon its acquisition of TD Waterhouse in January 2006 and was appointed president of retail distribution in June 2007. In November 2009, he was named executive vice president of the Company. In his current role, he is responsible for the Company’s branch network, investor centers, guidance solutions teams and investor education businesses. From January 2006 until June 2007, he served as President of Retail Sales. From 2004 to 2006, he served as senior vice president of branch distribution for TD Waterhouse, where he oversaw the nationwide retail branch network of over 140 branches. Prior to joining TD Waterhouse, he held numerous management positions in a 14-year career with Charles Schwab & Co., including divisional senior vice president, senior vice president for advice marketing and product development and senior vice president of development and training. Mr. Bunch holds several financial services industry securities licenses.

 

William J. Gerber was appointed chief financial officer in October 2006. In this role, he oversees investor relations, certain treasury functions and finance operations, including accounting, business planning and forecasting, external and internal reporting, tax and procurement. He also oversees business development and corporate communications. From March 2000 until October 2006, he served as the Company’s managing director of finance, during which time he played a major role in evaluating merger and acquisition opportunities for the Company, including TD Waterhouse, Datek and NDB. Prior to joining the Company, he served as vice president of Acceptance Insurance Companies, Inc., where he was responsible for all aspects of mergers and acquisitions, investment banking activity, banking relationships, investor communications and portfolio management. Prior to joining Acceptance, Mr. Gerber spent eight years with Coopers & Lybrand, now known as PricewaterhouseCoopers, serving as an audit manager primarily focusing on public company clients. Mr. Gerber holds a B.B.A. in Accounting from the University of Michigan.

 

David M. Kelley was appointed chief operating officer effective October 1, 2008. In this role, he oversees all operations, technology and strategic project management initiatives, including back-office support for the Company’s retail client service, institutional and clearing business units. From October 2007 until his current appointment, he served as the Company’s chief information officer. Mr. Kelley joined the Company in June 2006 as senior vice president of the retail investor group. From January 2005 to June 2006, Mr. Kelley was an executive consultant. Prior to January 2005, Mr. Kelley spent 19 years at Merrill Lynch, serving in a number of senior executive positions of increasing responsibility in finance and technology, most recently as chief technology officer, corporate divisions, from July 2002 to January 2005. Mr. Kelley received his M.B.A. from Rider University, where he also received his B.S. in Commerce. Mr. Kelley is also a CPA in the State of New Jersey.

 

Ellen L.S. Koplow has served as general counsel since June 2001 and was named secretary in November 2005. She manages the Company’s legal and government relations departments. She joined the Company in May 1999 as deputy general counsel and was named acting general counsel in November 2000. Prior to joining the Company, Ms. Koplow was managing principal of the Columbia, Maryland office of Miles & Stockbridge P.C. Ms. Koplow graduated cum laude from the University of Baltimore Law School in 1983 where she was a member of the Heuisler Honor Society, a Scribes Award winner and a Comments Editor for the Law Review. Ms. Koplow also holds a B.A. in Government and Politics from the University of Maryland.

 

Peter J. Sidebottom joined the Company as executive vice president, product, marketing and client experience, in February 2009. In this role, he is responsible for the Company’s product strategy, marketing and overall client experience, providing leadership and guidance on client-facing initiatives related to product development, client communications and marketing. He has nearly 20 years of experience in the financial services industry. Prior to joining the Company, Mr. Sidebottom spent five years at Wachovia Corporation, most recently serving as the head of enterprise planning and strategic initiatives and as chief operating officer of the finance division. Throughout his tenure with Wachovia, his responsibilities included strategic and financial planning, internal consulting, offshoring governance and strategy, global supply chain and supplier management, merger implementation management and corporate mergers and acquisitions. Prior to joining Wachovia, he was a partner with the consulting firm McKinsey & Company, Inc. and served as the assistant director of government relations at Stanford University. Mr. Sidebottom holds a B.A. in public policy from Stanford University and an M.B.A. from Harvard Business School.

 

The board of directors conducts its business through meetings of the board, actions taken by written consent in lieu of meetings and by the actions of its committees. During the fiscal year ended September 30, 2009, the board of directors held eight meetings. During fiscal year 2009, each director attended at least 75% of the aggregate number of meetings of the board of directors and meetings of the committees of the board of directors on which he served. Although the Company does not have a formal policy regarding director attendance at our Annual Meeting of Stockholders, directors are encouraged to attend. All 12 directors attended the 2009 Annual Meeting of Stockholders.

 

The board of directors has established five standing committees: Audit, H.R. and Compensation, Corporate Governance, Outside Independent Directors and Non-TD Directors.

 

Audit Committee.  The functions performed by the Audit Committee are described in the Audit Committee charter and include (1) overseeing the Company’s internal accounting and operational controls, including assessment of strategic, financial, operational and compliance risk management, (2) selecting the Company’s independent registered public accounting firm and Managing Director of Corporate Audit and assessing their performance on an ongoing basis, (3) reviewing the Company’s financial statements and audit findings and overseeing the financial and regulatory reporting processes, (4) performing other oversight functions as requested by the board of directors and (5) reporting activities performed to the board of directors. The Audit Committee charter was adopted by unanimous written consent of the board of directors on September 5, 2002 and subsequently was adopted by the Audit Committee at the October 3, 2002 Audit Committee meeting. A revision to the charter was approved by the Audit Committee on February 18, 2009 and subsequently was approved by the board of directors on May 21, 2009. The charter has been reviewed and reaffirmed by the Audit Committee annually, with the most recent review and approval at the November 9, 2009 Audit Committee meeting. The Audit Committee charter is available on the Company’s Web site at www.amtd.com under the governance section and is attached to this proxy statement as Appendix A. The Audit Committee is currently composed of Messrs. Cohen, Prezzano and Tessler. Mr. Cohen serves as the Audit Committee’s chairman. All current Audit Committee members are “independent” as defined in the applicable listing standards of The Nasdaq Stock Market. The board of directors has determined that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the committee and has designated Mr. Tessler as an audit committee financial expert as defined by the Securities and Exchange Commission (“SEC”). The Company’s Audit Committee met 17 times during fiscal year 2009. The Report of the Audit Committee for the fiscal year ended September 30, 2009 appears under PROPOSAL NO. 2 — “RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.”

 

H.R. and Compensation Committee.  The H.R. and Compensation Committee, referred to in this proxy statement as the Compensation Committee, reviews and approves broad compensation philosophy and policy and executive salary levels, bonus payments and equity awards pursuant to the Company’s management incentive plans. The Compensation Committee also reviews the Compensation Discussion and Analysis, discusses it with management and makes a recommendation as to whether it should be included in each proxy statement. The Compensation Committee is currently composed of Messrs. Clark, Cook and Mitchell. Mr. Clark serves as the Compensation Committee’s chairman. The Compensation Committee charter is available on the Company’s Web site at www.amtd.com under the governance section. The Compensation Committee met five times during fiscal year 2009. The Compensation Committee Report appears under “EXECUTIVE COMPENSATION AND RELATED INFORMATION.”

 

Corporate Governance Committee.  The primary purpose of the Corporate Governance Committee is to ensure that the Company has and follows appropriate governance standards. To carry out this purpose, the committee develops and recommends to the board of directors corporate governance principles and leads and oversees the annual self-evaluation of the board of directors and its committees. The Corporate Governance Committee is currently composed of Messrs. Clark, Cohen, Cook, J. Joe Ricketts and Tessler. Mr. Tessler serves as the Corporate Governance Committee’s chairman. The Company’s Corporate Governance Committee met four times during fiscal year 2009. The Corporate Governance Committee charter is available on the Company’s Web site at www.amtd.com under the governance section.

Outside Independent Directors (“OID”) Committee.  The OID Committee’s purpose is to assist the board of directors in fulfilling the board’s oversight responsibilities by (1) identifying individuals qualified to serve on the board, (2) reviewing the qualifications of the members of the board and recommending nominees to fill board vacancies and (3) recommending a slate of nominees for election or reelection as directors by the Company’s stockholders at the Annual Meeting to fill the seats of outside independent directors whose terms are expiring. The OID Committee reviews and approves (or ratifies) any related person transaction that is required to be disclosed by the Company. The OID Committee is also responsible for approving transfers of voting securities by TD and the Ricketts holders not otherwise permitted by the Stockholders Agreement, approving qualifying transactions (as defined in the Stockholders Agreement) and determining the fair market value (or selecting an independent investment banking firm to determine the fair market value) of certain property in connection with the stock purchase and transfer rights of TD and the Ricketts holders set forth in the Stockholders Agreement. The members of the OID Committee are Messrs. Cook, Mitchell and Tessler. Mr. Cook serves as the OID Committee’s chairman. All current OID Committee members are “independent” as defined in the applicable listing standards of The Nasdaq Stock Market. In accordance with the Stockholders Agreement, the OID Committee will not include any director designated by TD or the Ricketts holders. The Company’s OID Committee met seven times during fiscal year 2009.

 

Written communications submitted by stockholders pursuant to the Company’s Stockholder Communications Policy recommending the nomination of a person to be a member of the Company’s board of directors will be forwarded to the chair of the OID Committee for consideration. The OID Committee will consider director candidates who have been identified by other directors or the Company’s stockholders, but it has no obligation to recommend such candidates for nomination, except as may be required by contractual obligation of the Company. Stockholders who submit director recommendations must include the following: (1) a detailed resume outlining the candidate’s knowledge, skills and experience, (2) a one-page summary of the candidate’s attributes, including a statement as to why the candidate is an excellent choice for the board, (3) a detailed resume of the stockholder submitting the director recommendation and (4) the number of shares held by the stockholder, including the dates such shares were acquired.

 

The OID Committee charter establishes the following guidelines for identifying and evaluating candidates for selection to the board of directors:

 

1. Decisions for recommending candidates for nomination are based on merit, qualifications, performance, character and integrity and the Company’s business needs and will comply with the Company’s anti-discrimination policies and federal, state and local laws.

 

2. The composition of the entire board will be taken into account when evaluating individual directors, including: the diversity, depth and breadth of knowledge, skills, experience and background represented on the board; the need for financial, business, financial industry, public company and other experience and expertise on the board and its committees; and the need to have directors work cooperatively to further the interests of the Company and its stockholders.

 

3. Candidates will be free of conflicts of interest that would interfere with their ability to discharge their duties as a director.

 

4. Candidates will be willing and able to devote the time necessary to discharge their duties as a director and shall have the desire and purpose to represent and advance the interests of the Company and stockholders as a whole.

 

5. Any other criteria as the OID Committee may determine.

 

Notwithstanding any provision to the contrary in the OID Committee charter, when the Company is legally required by contractual obligation to provide third parties with the ability to nominate directors (including pursuant to the Stockholders Agreement discussed below under the heading “Stockholders Agreement”) the selection and nomination of such directors is not subject to the committee’s review and recommendation process. The OID Committee charter is available on the Company’s Web site at www.amtd.com under the governance section.

Non-TD Directors Committee.  The Non-TD Directors Committee is composed of all of the directors not designated by TD. The purpose of this committee is to make determinations relating to any acquisition by the Company of a competing business held by TD. The Non-TD Directors Committee is currently composed of Messrs. Cook, Mitchell, Moglia, J. Joe Ricketts, J. Peter Ricketts, Tessler and Tomczyk. The Non-TD Directors Committee did not meet during fiscal year 2009.

 

The Company has a code of business conduct and ethics that applies to all employees and the board of directors. A copy of this code is publicly available as Exhibit 14 of the Company’s quarterly report on Form 10-Q filed with the SEC on May 6, 2004.

 

Stockholders may communicate with any member of the board of directors, including the chairperson of any committee, an entire committee or the independent directors or all directors as a group, by sending written communications to:

 

Corporate Secretary
TD AMERITRADE Holding Corporation
6940 Columbia Gateway Drive
Columbia, Maryland 21046

 

A stockholder must include his, her or its name and address in any such written communication and indicate whether he, she or it is a Company stockholder.

 

The corporate secretary will compile all communications, summarize lengthy, repetitive or duplicative communications and forward them to the appropriate director or directors. Complaints regarding accounting, internal controls or auditing will be forwarded to the chair of the Audit Committee. The corporate secretary will not forward non-substantive communications or communications that pertain to personal grievances to directors, but will instead forward them to the appropriate department within the Company for resolution. The corporate secretary will retain a copy of such communications for review by any director upon his or her request.

 

Communications from a Company employee or agent will be considered stockholder communications under this policy if made solely in his or her capacity as a stockholder. No communications from a Company director or officer will be considered stockholder communications under this policy. In addition, proposals submitted by stockholders for inclusion in the Company’s annual proxy statement, and proposals submitted by stockholders for presentation at the Company’s annual stockholders meeting, will not be considered stockholder communications under this policy. Written communications submitted by stockholders recommending the nomination of a person to be a member of the Company’s board of directors will be forwarded to the chair of the OID Committee.

 

Based solely upon the Company’s review of forms filed by directors, officers and certain beneficial owners of the Company’s common stock (the “Section 16(a) Reporting Persons”) pursuant to Section 16 of the Securities Exchange Act of 1934 (the “1934 Act”), the Company has identified William H. Hatanaka’s Form 4 filed on March 11, 2009 as a late filing by the Section 16(a) Reporting Person.

 

As of the Record Date, there were 588,943,147 shares of common stock issued and outstanding. The following table sets forth, as of the Record Date, the beneficial ownership of the Company’s common stock by each of the current executive officers named in the Summary Compensation Table, by directors and nominees, by each person believed by the Company to beneficially own more than 5% of the Company’s common stock, by all current

executive officers and directors of the Company as a group and by certain other Company stockholders. Shares of common stock subject to options that are exercisable within 60 days of the Record Date are deemed beneficially owned by the person holding such options and are treated as outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Restricted stock units held by our directors and officers do not have voting rights until the units vest and the underlying shares are distributed. Deferred stock units held by our directors do not have voting rights until the underlying shares are distributed to the holder pursuant to his or her deferral election. The business address of each of the Company’s directors and executive officers is: TD AMERITRADE Holding Corporation, 4211 South 102nd Street, Omaha, Nebraska 68127.

 

 

 

 

 

Concurrently with entering into the share purchase agreement related to the Company’s acquisition of TD Waterhouse, the Company, the Ricketts holders and TD entered into the Stockholders Agreement. The Stockholders Agreement contains certain governance arrangements and various provisions relating to board composition, stock ownership, transfers by TD and the Ricketts holders, voting and other matters.

 

Governance of TD AMERITRADE.  The Stockholders Agreement provides that the board of directors of the Company consists of twelve members, five of whom may be designated by TD, three of whom may be designated by the Ricketts holders, one of whom is the chief executive officer of the Company and three of whom are outside independent directors. The outside independent directors are nominated by the OID Committee and subject to the consent of TD and the Ricketts holders. The number of directors designated by TD and the Ricketts holders depends on their maintenance of specified ownership thresholds of common stock and may increase or decrease from time to time based on those ownership thresholds, but will never exceed five in the case of TD or three in the case of the Ricketts holders.

 

In order to accommodate both the election of Joseph H. Moglia as chairman of the board of directors and Fredric J. Tomczyk as chief executive officer, effective October 1, 2008, given the limitation of twelve members of the board of directors and other rights provided under the Stockholders Agreement, TD waived its right to designate one of its directors so long as Mr. Moglia serves as chairman of the board. On August 3, 2009, the Company entered

into Amendment No. 2 and Waiver (“Amendment No. 2”) to the Stockholders Agreement. Under Amendment No. 2: (a) the Company consented to the termination of the waiver by TD of its right to designate one of its five TD directors; (b) certain provisions of the Stockholders Agreement and the certificate of incorporation were waived to the extent necessary to permit Mr. Moglia to fill the board of director vacancy created by the resignation of one of the directors designated by the Ricketts holders as a result of the reduction in ownership of Company stock by the Ricketts holders and (c) in the event the Ricketts holders are entitled to fill a third seat on the board of directors during any time that Mr. Moglia serves as chairman of the board pursuant to his employment agreement, TD agrees to waive its right to designate one of its five directors to accommodate the continued service of Mr. Moglia as a director, and TD will cause one of its five designated directors to resign to permit a director designated by the Ricketts holders to join the board of directors. This waiver by TD of its right to designate one of its five directors would continue only so long as Mr. Moglia serves as chairman of the board pursuant to his employment agreement. Upon Mr. Moglia ceasing to be chairman of the board, the waiver would expire and TD would have the right to designate the full number of TD directors provided for in the Stockholders Agreement.

 

The Stockholders Agreement provides, subject to applicable laws and certain conditions and exceptions, that the Company shall cause each committee of its board of directors to consist of two of the directors designated by TD, one of the directors designated by the Ricketts holders and two of the outside independent directors. These levels of committee representation are subject to adjustment from time to time based on TD’s and the Ricketts holders’ maintenance of specified ownership thresholds. The parties to the Stockholders Agreement each agreed to vote their shares of common stock in favor of, and the Company agreed that it would solicit votes in favor of, each director nominated for election in the manner provided for in the Stockholders Agreement.

 

Share Ownership.  The Stockholders Agreement provides that TD may acquire shares of Company common stock only up to an aggregate beneficial ownership interest of 45% of the outstanding voting securities of the Company for the remaining term of the Stockholders Agreement. The Stockholders Agreement also provides that TD will not, subject to certain exceptions, solicit proxies with respect to common stock. Notwithstanding the limitations on TD’s ownership described above, the Stockholders Agreement permits TD to make a non-public proposal to the board of directors to acquire additional shares pursuant to a tender offer or merger for 100% of the outstanding voting securities of the Company and to complete such a transaction, subject to the approval of independent directors and holders of a majority of the outstanding shares of common stock not affiliated with TD. Under the Stockholders Agreement, the Ricketts holders may acquire additional shares of common stock only up to an aggregate ownership interest of 29% of the outstanding common stock.

 

Right to Purchase Securities.  TD and the Ricketts holders have the right to purchase up to their respective proportionate share of future issuances of common stock, other than in connection with the Company stock issued as consideration in an acquisition by the Company. If the Company proposes to issue shares as consideration in an acquisition, the Company will discuss in good faith with TD and the Ricketts holders alternative structures in which a portion of such shares would be sold to TD or the Ricketts holders, with the proceeds of such sale used to fund the acquisition.

 

The Stockholders Agreement further provides that if the Company engages in discussions with a third party that could result in the acquisition by such party of 25% of the voting securities or consolidated assets of the Company, the Company must offer TD the opportunity to participate in parallel discussions with the Company regarding a comparable transaction.

 

Transfer Restrictions.  The Stockholders Agreement generally prohibits TD and the Ricketts holders from transferring shares of common stock, absent approval of the independent directors, to any holder of 5% or more of the outstanding shares of the Company, subject to certain exceptions. As long as TD and the Company constitute the same audit client, TD may not engage the auditor of the Company, and the Company will not engage the auditors of TD, to provide any non-audit services.

 

Information Rights.  Subject to confidentiality and nondisclosure obligations and as long as it owns at least 15% of the outstanding shares of common stock, TD is entitled to access to information regarding the Company’s business, operations and plans as it may reasonably require to appropriately manage and evaluate its investment in the Company and to comply with its obligations under U.S. and Canadian laws.

Obligation to Repurchase Shares.  If the Company issues shares of its common stock pursuant to any compensation or similar program or arrangement, then the Company will, subject to certain exceptions, use its reasonable efforts to repurchase a corresponding number of shares of its common stock in the open market within 120 days after any such issuance.

 

Non-Competition Covenants.  Subject to specified exceptions, the Stockholders Agreement generally provides that neither TD nor J. Joe Ricketts (so long as he is a director of the Company) or their respective affiliates may participate in or own any portion of a business engaged in the business of providing securities brokerage services in the U.S. (or, solely in the case of Mr. Ricketts and his affiliates, in Canada) to retail traders, individual investors and registered investment advisors. If TD acquires indirectly a competing business as a result of its acquisition of a non-competing business, TD must offer to sell the competing business to the Company at its appraised fair value determined in accordance with the terms of the Stockholders Agreement. If the Company decides not to purchase the competing business, TD must use commercially reasonable efforts to divest the competing business within two years. Mr. Ricketts, TD and their affiliates are permitted under the terms of the Stockholders Agreement to own a passive investment representing less than 2% of a class of equity securities of a competing business so long as the class of equity securities is traded on a national securities exchange in the U.S. or the Toronto Stock Exchange. TD also is permitted to engage in certain activities in the ordinary course of its banking and securities businesses. In addition, the Company has agreed that it will not hold or acquire control of a bank or similar depository institution except (1) incidentally in connection with the acquisition of an entity not more than 75% of whose revenues are generated by commercial banks or (2) in the event that TD does not hold control of any bank or similar depository institution that is able to offer money market deposit accounts to clients of the Company as a designated sweep vehicle or TD has indicated that it is not willing to offer such accounts to clients of the Company through a bank or similar depository institution it controls.

 

Termination of the Stockholders Agreement.  The Stockholders Agreement will terminate (1) with respect to the Ricketts holders, when their aggregate ownership of common stock falls below approximately 4% and (2) upon the earliest to occur of (a) the consummation of a merger or tender offer where TD acquires 100% of the common stock, (b) the tenth anniversary of the consummation of the acquisition of TD Waterhouse, (c) the date on which TD’s ownership of common stock falls below approximately 4% of the outstanding voting securities of the Company, (d) the commencement by a third party of a tender offer or exchange offer for not less than 25% of common stock, unless the board recommends against the offer and continues to take steps to oppose the offer, (e) the approval by the board of a business combination that would result in another party owning more than 25% of the voting securities or consolidated assets of the Company or which would otherwise result in a change of control of the Company, or (f) the acquisition of more than 20% of the voting securities of the Company by a third party. For a period of up to one year following a termination under clause (2)(d), (2)(e) or (2)(f) above, TD and the Ricketts holders will be prohibited from acquiring shares of common stock that would cause, in the case of TD, its aggregate ownership to exceed 45% or, in the case of the Ricketts holders, 29%, except pursuant to a tender offer or merger for 100% of the outstanding shares of common stock approved by the holders of a majority of the Company’s outstanding shares of common stock (other than the Ricketts holders and TD). In addition, during that one-year period, the provisions of the Stockholders Agreement relating to the designation of directors and certain other provisions will remain in effect.

 

Compensation Discussion and Analysis

 

Introduction and Overview

 

The compensation arrangements with our senior executives are designed to implement the Company’s pay-for-performance philosophy by making a significant portion of total compensation based on the performance of the Company.

 

Changes in Management and Employment Terms

 

Effective October 1, 2008, upon the conclusion of the employment term specified in his employment agreement, J. Joe Ricketts retired as chairman of the board of directors. The Company’s board of directors elected Joseph H. Moglia as chairman and Fredric J. Tomczyk as president and chief executive officer, effective as of October 1, 2008. On September 4, 2008, David M. Kelley was appointed executive vice president and chief operating officer, also effective October 1, 2008.

 

On February 17, 2009, Mr. Sidebottom entered into an agreement to become the Company’s executive vice president of product, marketing and client experience. Mr. Sidebottom’s annual base salary is $400,000. In fiscal year 2009 his annual incentive target was $1.4 million, comprised of 70% cash and 30% equity, while in fiscal year 2010 it will be comprised of 50% cash and 50% equity. Upon the commencement of his employment with the Company, he received a special equity award of restricted stock units, or RSUs, valued at $1 million that vest in full on the third anniversary of the grant date.

 

Beginning March 1, 2009, the annual incentive target for Mr. Kelley for fiscal year 2009 was increased by $200,000 to $1.4 million. Accordingly, Mr. Kelley’s targeted overall compensation shown below is calculated based on $1.6 million for five months of fiscal 2009 and $1.8 million for seven months of fiscal 2009. For fiscal year 2010, Mr. Kelley’s targeted overall compensation is $2.0 million, comprised of $400,000 base salary, targeted annual cash incentive of $800,000 and targeted annual equity incentive of $800,000.

 

This discussion and the executive compensation tables below are based on the employment agreements of Messrs. Moglia, Tomczyk and Sidebottom, as well as the terms of our management incentive plan and long-term incentive plan. We refer you to those agreements and plan documents for the complete terms.

 

 

We have organized this report as follows:

 

 

 

The Compensation Committee establishes and administers the Company’s executive compensation programs. The Compensation Committee evaluates the performance of the chief executive officer and the chairman and determines their compensation in light of pre-established goals and objectives. The chief executive officer and the Compensation Committee together assess the performance of the other named executive officers and determine their compensation based on initial recommendations from the chief executive officer. Beginning in October 2005, the Compensation Committee retained Mercer Human Resources Consulting to advise the Compensation Committee on executive compensation practices and market compensation levels. Mercer and its affiliates also provide consulting services to the Company on its health and welfare plans.

 

The Compensation Committee is composed of three non-employee directors of the board. No member of the Compensation Committee during fiscal year 2009 was an employee of the Company or any of its subsidiaries at the time of his service on the Compensation Committee. Each member of the Compensation Committee during fiscal year 2009 qualified as a “non-employee director” under rule 16b-3 under the 1934 Act and as an “outside director” under section 162(m) of the Internal Revenue Code of 1986, as amended (“the Code”).

 

The Compensation Committee has delegated to the chief executive officer the authority to increase the compensation of, and grant equity awards to, any employee whose compensation is less than the tenth highest paid employee participating in the management incentive plan, or MIP, subject in each case to any increase or grant being (1) within the budget previously approved by the Compensation Committee and (2) in accordance with the terms of the applicable compensation plan.

 

In fiscal 2009, the Compensation Committee also delegated to the chief executive officer the authority to grant RSUs subject to guidelines approved by the Compensation Committee as described in the preceding paragraph, and subject to a vesting schedule that provides that the RSUs vest in full on the third anniversary of the grant date. Messrs. Kelley and Sidebottom, who received RSU awards with a value of $500,000 and $1.0 million, respectively, were the only named executive officers to receive such awards of discretionary RSUs during fiscal year 2009. Mr. Kelley’s award was made as part of his compensation for services during fiscal year 2008 but was granted in fiscal year 2009. Mr. Sidebottom’s grant was made in connection with the commencement of his employment with the Company.

 

 

The following guiding principles are used by the Company and the Compensation Committee when evaluating executive compensation policies and decisions:

 

 

 

 

The Company and the Compensation Committee have strived to design the compensation package of each senior executive to:

 

 

 

Targeted Overall Compensation

 

The Company operates in the highly competitive financial services sector, with a leadership position in retail securities brokerage services. The overall compensation program is designed to align the interests of executives with those of our stockholders and be competitive with the compensation practices of financial services companies with characteristics similar to the Company (identified below).

 

In 2009, the Company revised its executive compensation comparator group to provide a broader market perspective focused on firms with key business segments similar to the Company. The new comparator group consists of: E*TRADE Financial Corporation, The Charles Schwab Corporation, Ameriprise Financial, Inc., Blackrock, Inc., Franklin Resources, Inc., Legg Mason, Inc., MF Global Ltd., Northern Trust Corporation, optionsXpress Holdings Inc., Raymond James Financial Inc. and T. Rowe Price Group Inc. The criteria for determining the comparator group were industry, products, operations, market capitalization, total revenue and client assets/assets under management.

 

A targeted overall compensation level, including salary and incentive compensation — with incentive compensation being composed of annual cash and equity — is established for each executive position and is designed to be payable when annual and long-term performance goals are achieved.

 

These targeted total compensation levels are developed using market data from our comparator group and other financial services compensation data obtained from the following human resources consulting firms: McLagan, Mercer and Towers Perrin. This market data reflects compensation levels of corresponding positions for our named executive officers at similarly sized financial services companies.

Mercer, our outside independent compensation consultant, reviewed the market compensation information that was collected and confirmed its appropriateness as a point of reference in setting target total compensation levels for each of our named executive officers. The Company’s compensation philosophy is to target total compensation based on the market median of similar positions using the market data from our comparator group and other compensation data obtained by the Company. Actual compensation paid may be above or below the median based on individual and Company performance.

 

Each named executive officer had a base salary and target annual incentive award for fiscal year 2009 as follows:

 

 

 

 

Consistent with the Company’s overall principles, a large percentage of the total compensation package is paid only after an executive satisfies performance objectives. The Company has generally designed its compensation plans so that as total targeted compensation increases — reflecting each named executive officer’s expected contribution to the success of the Company — the percentage of performance-based compensation also increases, thereby establishing a progressively higher percentage of performance-based compensation. Within the targeted overall compensation package, the amount of total compensation subject to performance-based objectives for fiscal 2009 was:

 

 

Annual Incentive Award

 

The board of directors and the Compensation Committee believe that the Company’s annual diluted earnings per share, or EPS, is an important measure of the Company’s success. In fiscal year 2009, awards under the annual incentive plan for executive officers were initially based on the achievement of an EPS goal established by the Compensation Committee in order to align the short-term interests of executives with those of our stockholders. In addition, the following factors were considered in determining the annual incentive award of our executive officers:

 

 

The Compensation Committee has reserved the right to reduce the payouts initially determined by the achievement of EPS by up to 20% for failure to attain the CEO goals and up to an additional 20% for failure to attain individual performance goals. In addition, the Compensation Committee retains the ability to exercise further negative discretion to reduce incentive payments to executives.

 

The design of our annual incentive plan supports our pay-for-performance philosophy and more closely aligns each executive to the long-term growth of the Company and the business strategy for which each executive is most

responsible. The design also provides for an assessment of senior management performance using measures in addition to EPS, and, as described above, may result in a reduction to the annual incentive awards actually made to our executive officers.

 

To the extent a portion of the annual incentive award includes an equity component, the Company uses the 1996 Long-Term Incentive Plan, or the LTIP, to motivate, reward and retain key executives and to align their interests to those of stockholders by linking the performance of the Company to equity awards made to executives. If the Company grants RSUs as a component of the annual incentive, the RSUs will fully vest on the third anniversary of the grant date, so long as the executive is then employed by the Company. This vesting schedule aligns the long-term interests of executives with those of our stockholders.

 

These clear measures and specific targets ensure a strong, team-oriented, pay-for-performance philosophy and allow the full incentive payments to executive officers to qualify as performance-based compensation under section 162(m) of the Code.

 

Fiscal Year 2009

 

For fiscal year 2009, the Compensation Committee established an EPS target for the annual incentive award of $1.04, with the following range:

 

 

In fiscal year 2009, the Company achieved EPS of $1.10. Accordingly, under the terms of the annual incentive program for fiscal year 2009, the Compensation Committee approved annual incentive awards equal to 115% of the target annual incentive, subject to the exercise of up to 20% negative discretion for the CEO goals and up to 20% for individual performance goals. The CEO goals in fiscal year 2009 consisted of the following key corporate performance goals: market share, net new client assets, asset-based revenues, technology improvement and stockholder return. Incentive awards were then calculated based on the exercise of negative discretion in the amount of 5% on the CEO goals for all named executive officers and on the exercise of negative discretion ranging from 0% to 18.33% on the individual performance goals for each of the named executive officers. In exercising negative discretion, the Compensation Committee considered the overall achievement of the CEO goals and each named executive officer’s individual contribution in achieving the CEO goals, as well as his individual performance on a quantitative and qualitative basis. The Compensation Committee used its judgment to measure the performance of each named executive officer and to determine the amount of the negative discretion to employ. The Compensation Committee did not utilize a formula, as it does when it uses EPS, in determining the amount of negative discretion to apply.

 

Management was rewarded in fiscal year 2009 for successfully executing on a business strategy, in the face of extremely difficult operating conditions, that resulted in expanded leadership in trades, record new client accounts and net new client assets and strong stockholder returns. The 2009 annual incentive awards consisted of a cash component and an equity component. The amount of incentive compensation based on achieving individual performance goals was awarded solely in equity in order to increase the retention value of the compensation and to further align the interests of our executives to the long-term success of the Company. This had the effect of increasing the equity component of the annual incentive while decreasing the cash component, with no net effect on

the overall award. The following table sets forth the actual awards earned under the fiscal year 2009 annual incentive:

 

 

Except for a stock option grant made to Mr. Tomczyk, the equity component of the 2009 annual incentive award for each named executive officer was made solely in the form of RSUs. As described above, the RSUs will vest in full on the third anniversary of the grant date. The equity component of Mr. Tomczyk’s 2009 annual incentive award consisted of RSUs valued at $3.15 million, representing approximately 76% of the equity portion of his 2009 annual incentive award, and a stock option award valued at $1 million, representing approximately 24% of the equity portion of his 2009 annual incentive award. Mr. Tomczyk’s stock option vests in four equal installments on November 24, 2010, 2011, 2012 and 2013. The Compensation Committee determined that using a stock option for a portion of Mr. Tomczyk’s compensation instead of RSUs provided additional incentive for the achievement of future Company success and further aligned his financial interests with those of our stockholders.

 

Fiscal Year 2010

 

For fiscal year 2010, the Compensation Committee has established the following EPS range for annual incentive compensation:

 

 

For each $0.01 change in EPS for fiscal year 2010 between $1.80 and $0.60, the maximum payout will decrease by 1%. For each $0.01 change in EPS below $0.60, the maximum payout will decrease by 2%. As shown above, EPS of $0.80 would result in a 100% maximum payout. The Compensation Committee reduced the effect on the payout percentage for each $0.01 change in EPS in fiscal year 2010 to 1%, from a 2.5% effect on the payout percentage for each $0.01 change in EPS in fiscal year 2009, in order to decrease the emphasis of changes in EPS on the compensation plan and increase the focus on key longer-term strategic goals and the individual contribution and performance of each executive.

 

The Company’s achievement of EPS of $0.80 in fiscal year 2010 would not guarantee that an executive officer will receive a 100% payout because the Compensation Committee has reserved the right for fiscal 2010 to reduce the final payouts by up to 20% for failure to attain CEO goals and up to an additional 20% for failure to attain individual performance goals, thereby putting up to 40% of the annual incentive payout at risk. In addition, the Compensation Committee retains the ability to exercise further negative discretion to reduce incentive payments to executives.

 

For fiscal year 2010, the CEO goals consist of key corporate performance goals, such as market share, net new client assets, client experience, progress on strategic initiatives, associate engagement and delivering superior stockholder return. The individual performance goals for fiscal year 2010 consist of contribution to CEO goals, qualitative performance and relative performance to peers. In fiscal year 2010, incentive compensation for the CEO

will be comprised of 30% cash and 70% equity. For other executive officers with total target annual compensation of at least $1 million, incentive compensation will be comprised of equal amounts of cash and equity.

 

This strategic design supports our pay-for-performance philosophy and allows for each executive’s contribution to the Company’s achievement of key performance goals to be assessed individually and as a management team. The design also intentionally provides the opportunity for the exercise of judgment and discretion by the Compensation Committee in assessing management’s performance in executing the Company’s strategy in determining overall compensation.

 

 

The Compensation Committee and the board of directors strongly believe that senior executives should own a significant amount of Company common stock. This provides a direct and continuing alignment of financial interests between executives and stockholders.

 

The stock ownership guidelines are as follows:

 

 

None of these executive officers are permitted to sell any equity interest in the Company until the stock ownership requirements have been met, after which the chief executive officer must obtain approval from the Compensation Committee and all other senior executives must obtain prior approval from the chief executive officer. Mr. Tomczyk has agreed to maintain stock ownership under these guidelines for two years after he ceases to be an employee or director of the Company following his retirement. The Company considers any stock held without restrictions, unvested restricted stock units, vested but unexercised in-the-money stock options, deferred compensation that will settle in common stock and common stock held under the Company’s 401(k) plan in determining whether the stock ownership requirements have been met. All named executive officers, other than Mr. Sidebottom, have met the stock ownership guidelines.

 

 

Our senior executive team has been instrumental in successfully building the Company, and we believe it is important to provide certain benefits to them in the event of a change in control. We believe that the interests of our stockholders are best served if the interests of senior management are aligned with them, and providing change in control benefits should minimize any reluctance of senior management to pursue change in control transactions that may be in the best interest of our stockholders. Equity awards under the MIP continue to vest in accordance with their terms in the event of termination for any reason, other than for cause, within 24 months after a change in control. With the exception of Mr. Sidebottom’s special equity award of RSUs granted in connection with the commencement of his employment with the Company, our executive officers are not entitled to any other benefits upon a change in control. Rather, our employment arrangements with Messrs. Moglia, Tomczyk and Sidebottom all require a termination of employment without cause or resignation with good reason in connection with or following a change in control. We utilize this dual-trigger change of control provision because we believe that triggering payments simply upon a change of control is not in the Company’s or stockholders’ best interests.

 

 

The Compensation Committee designs certain components of executive compensation to preserve income tax deductibility under section 162(m) of the Code. Section 162(m) generally disallows a tax deduction to public corporations for non-performance-based compensation over $1 million paid for any fiscal year to each of the individuals who were, at the end of the fiscal year, the corporation’s chief executive officer and the four other most highly compensated executive officers.

 

The Company believes that the cash bonuses paid and stock-based awards granted to executive officers under the MIP are and will be fully deductible under section 162(m). In addition, the Company has adopted a general policy that all stock-based awards granted to its executive officers should generally only be made pursuant to plans

that the Company believes satisfy the requirements of section 162(m). The Compensation Committee retains discretion and flexibility in developing appropriate compensation programs and establishing compensation levels and, in some instances, may approve compensation that is not fully deductible.

 

 

The table below summarizes RSUs and stock options granted to our named executive officers for service during fiscal year 2009 as part of the annual incentive award program. Because these grants were made in fiscal year 2010, they are not included in the “Grants of Plan-based Awards” and “Outstanding Equity Awards at Fiscal Year-End” tables later in this section.

 

 

The number of RSUs granted was determined by dividing the dollar amount earned by $19.92, the average of the high and low price of the Company’s common stock for the 20 trading days ended October 29, 2009. These awards vest in full on the third anniversary of the grant date if the executive is then employed by the Company. The number of stock options granted to Mr. Tomczyk was determined by dividing the dollar amount earned by $9.11, the value per option based on a Black-Scholes valuation model using valuation assumptions approved by the Compensation Committee.

 

For fiscal 2010, Mr. Kelley’s annual target incentive compensation was increased from $1.4 million to $1.6 million following a review of the compensation paid to chief operating officers in the Company’s comparator group (as further identified above).

 

This report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or to the liabilities of Section 18 of the 1934 Act and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company under the Securities Act of 1933 or the 1934 Act.

 

The H.R. and Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” of this Proxy Statement with TD AMERITRADE’s management. Based on that review and those discussions, the H.R. and Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis section be included in this Proxy Statement and incorporated by reference into TD AMERITRADE’s Annual Report on Form 10-K for its 2009 fiscal year.

 

W. Edmund Clark, Chairman

Dan W. Cook III

Mark L. Mitchell

 

Messrs. Clark, Cook and Mitchell served as members of the Compensation Committee during fiscal 2009. During fiscal 2009, there were no Compensation Committee interlocks and no insider participation in Compensation Committee decisions that were required to be reported under the rules and regulations of the 1934 Act.

 

The following table provides information about compensation earned during fiscal 2009, 2008 and 2007 by Mr. Tomczyk, our chief executive officer, Mr. Gerber, our chief financial officer, and our other three most highly compensated executive officers who were serving as executive officers as of September 30, 2009. We refer to these individuals as our named executive officers. Mr. Sidebottom became an executive officer during fiscal 2009 and Messrs. Tomczyk and Kelley became named executive officers during fiscal 2008. In accordance with SEC rules, the compensation described in this table does not include medical or group life insurance received by the named executive officers that is available generally to all salaried employees of the Company and certain perquisites and other personal benefits received by the named executive officers that in the aggregate do not exceed $10,000.

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes equity awards granted to our named executive officers in fiscal year 2009 under our LTIP. Equity awards granted in fiscal year 2010 for services rendered in fiscal year 2009 are summarized in the Compensation Discussion and Analysis under the heading “Actions Since End of Fiscal Year 2009.”

 

 

 

 

The following table provides information on the current holdings of stock option and stock awards by our named executive officers. This table includes unexercised and unvested option awards and unvested RSUs and PRSUs. The vesting schedule is shown for each grant in the footnotes to the table. The market value of the stock awards is based on $19.63, the closing market price of the Company’s common stock on September 30, 2009 (the last business day of fiscal year 2009).

 

 

 

 

 

The following table summarizes stock option exercises and stock awards that vested for the named executive officers during fiscal year 2009.

 

 

The table below provides information on Mr. Moglia’s non-qualified deferred compensation in fiscal year 2009. The other named executive officers did not have non-qualified deferred compensation in fiscal year 2009.

 

 

 

 

Introduction and Overview

 

The Company has entered into employment agreements with each of its named executive officers other than Messrs. Gerber and Kelley. The employment agreements and certain compensation plans and award agreements require the Company to provide compensation and benefits to the executives in the event of a termination of employment, including in connection with a change in control of the Company. Except for Mr. Sidebottom’s special equity award of RSUs granted on the commencement of his employment with the Company, payments are not triggered simply upon the occurrence of a change in control. Rather, our executives will only receive change in control benefits if their employment is terminated in certain instances following a change in control.

 

Compensation Plans and Award Agreements

 

Under the MIP, in the event of death or disability prior to the payment of a scheduled award, compensation will be paid to the executive’s estate or other authorized person. Under the PRSU and RSU award agreements, the consequences of death, disability, retirement, termination without cause and change in control are:

 

Employment Agreements of Current Named Executive Officers

 

Chairman — Joseph H. Moglia

 

Effective June 11, 2008, the Company and Mr. Moglia entered into an amended and restated employment agreement in connection with his election as chairman of the board of directors. The agreement was further amended on September 29, 2008. Following is a brief summary of certain terms of his employment agreement, as amended.

 

Moglia Employment Agreement

 

 

Definitions Under Mr. Moglia’s Employment Agreement

 

“Good reason” means the occurrence of any of the following without Mr. Moglia’s express written consent:

 

 

 

The failure of the Company’s stockholders to elect or reelect Mr. Moglia to the board of directors will not constitute “good reason”.

 

“Cause” means Mr. Moglia’s conviction of, or plea of nolo contendere to, a criminal offense arising out of a breach of trust, embezzlement or fraud committed against the Company by him in the course of his employment with the Company.

 

“Severance period” means, if Mr. Moglia’s employment is terminated after the remaining original term, the period of time commencing on the date of the termination of Mr. Moglia’s employment and continuing for the remainder of the additional term.

 

President and Chief Executive Officer — Fredric J. Tomczyk

 

Effective May 16, 2008, the Company and Mr. Tomczyk entered into an amended and restated employment agreement in connection with his election as CEO of the Company. Following is a brief summary of certain terms of his employment agreement, as amended.

 

Tomczyk Employment Agreement

 

Tomczyk Employment Agreement (continued)

 

 

Definitions Under Mr. Tomczyk’s Employment Agreement

 

“Good reason” means the occurrence of any of the following without Mr. Tomczyk’s express written consent:

 

 

“Cause” means the occurrence of any of the following:

 

 

 

Executive Vice President, Product, Marketing and Client Experience — Peter J. Sidebottom

 

Effective February 17, 2009, the Company and Mr. Sidebottom entered into an agreement under which he serves as executive vice president, product, marketing and client experience of the Company. Following is a brief summary of certain terms of his employment agreement.

 

Sidebottom Term Sheet

 

 

Definitions Under Mr. Sidebottom’s Term Sheet

 

“Good reason” means the occurrence of any of the following:

 

 

 

“Cause” means the occurrence of any of the following:

 

 

Summary Table — Potential Payments Upon Termination or Change-in-Control

 

The following table summarizes potential payments upon termination or change in control for the named executive officers as of September 30, 2009. Each of the named executive officers will only be entitled to receive change in control benefits if his employment is terminated without cause or he resigns with good reason in connection with or following a change in control, except in the case of Mr. Sidebottom’s special equity award of RSUs granted in connection with the commencement of his employment with the Company, which will vest on a change of control of the Company (other than an acquisition of control by TD). Except as specifically indicated in the footnotes to the table below, we used the following assumptions in calculating the amounts included the table and discussion below: