NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

March 9, 2006

 

The Annual Meeting of Stockholders of TD Ameritrade Holding Corporation (the “Company”) will be held at the Joslyn Art Museum, 2200 Dodge Street in Omaha, Nebraska on Thursday, March 9, 2006, at 10:30 a.m., Central Standard Time, for the following purposes:

 

1) To elect five directors to the Board of Directors;

 

2) To ratify the appointment of Ernst & Young LLP as independent auditors for the Company for the fiscal year ending September 29, 2006;

 

3) To consider and vote upon a proposal to amend and restate the Company’s 1996 Long-Term Incentive Plan;

 

4) To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

 

Only stockholders of record at the close of business on January 26, 2006 will be entitled to notice of and to vote at the meeting.

 

Stockholders, whether or not they expect to be present at the meeting, are requested to sign and date the enclosed proxy, which is solicited on behalf of the Board of Directors, and return it promptly in the envelope enclosed for that purpose. If you elected to receive the Annual Report and Proxy Statement electronically over the Internet, you will not receive a paper proxy card, unless you request one, and we encourage you to vote online. If you did not elect to receive the materials through the Internet, you may still vote your shares electronically over the Internet or telephonically by following the procedures described in the Proxy Statement. Your vote is very important. Whether or not you plan to attend the Annual Meeting, please submit your proxy promptly by telephone or via the Internet in accordance with the instructions on the enclosed proxy card or by completing, dating and returning your proxy card in the enclosed envelope. Returning the proxy card or otherwise submitting your proxy does not deprive you of your right to attend the Annual Meeting and vote in person.

 

By Order of the Board of Directors

 

Ellen L.S. Koplow, Secretary

 

Omaha, Nebraska

January 30, 2006

 

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 2006 Annual Meeting of Stockholders of TD Ameritrade Holding Corporation (the “Company”). The 2006 Annual Meeting will be held on Thursday, March 9, 2006 at 10:30 a.m., Central Standard Time, at the Joslyn Art Museum, 2200 Dodge Street in Omaha, Nebraska. This Proxy Statement and the accompanying proxy card are first being sent to stockholders on or about February 3, 2006.

 

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 January 26, 2006 (the “Record Date”) will be entitled to vote at the Annual Meeting. As of the Record Date, there were 603,496,440 shares of Common Stock issued and outstanding.

 

All shares of the Company’s Common Stock represented by properly executed and unrevoked proxies will be voted by the Board of Directors of the Company in accordance with the directions given therein. Where no instructions are indicated, properly executed proxies will be voted “FOR” the proposals set forth in this Proxy Statement for consideration at the Annual Meeting. At this time, we are unaware of any matters, other than set forth above, that may properly come before the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote in accordance with their judgment with respect to such matters. The directors expect shares of the Common Stock held by executive officers and directors of the Company will be voted “FOR” such proposals. Such shares represent approximately 16 percent of the Common Stock outstanding as of the Record Date.

 

The accompanying proxy is solicited from the holders of the Common Stock on behalf of the Board of Directors of the Company and 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 there are broker non-votes, will be considered present at the Annual Meeting for purposes of determining a quorum.

 

In order to vote online or via telephone, go to the www.ProxyVote.com Web site or call the toll-free number on the enclosed proxy card, and follow the instructions. If you would like to receive future stockholder materials electronically, please enroll at www.investordelivery.com. Please have the proxy card you received in hand when accessing the site.

 

Please refer to the proxy card enclosed herewith or to the e-mail announcement that you may have received for voting instructions. If you choose not to vote electronically, please complete and return the paper proxy card in the pre-addressed, postage-paid envelope provided herewith.

If you elected to receive this Proxy Statement electronically over the Internet and would now like to receive a paper copy of this Proxy Statement so that you may submit a paper proxy in lieu of an electronic proxy, please notify the Secretary of the Company of this request in writing at the address set forth at the top of this page.

 

Broker “non-votes” are shares held by brokers or nominees as to which voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares and the broker or nominee does not have discretionary voting power under rules applicable to broker-dealers. Under these rules, the proposal to approve the amendment and restatement of the Company’s 1996 Long-Term Incentive Plan is not an item on which brokerage firms may vote in their discretion on behalf of their clients if such clients have not furnished voting instructions within ten days of the Annual Meeting. Any broker “non-votes” submitted by brokers or nominees in connection with the Annual Meeting will not be counted for purposes of determining the number of votes cast on the proposal related to the amendment and restatement of the Company’s 1996 Long-Term Incentive Plan, but will be treated as present for quorum purposes. The proposal to approve the amendment and restatement of the Company’s 1996 Long-Term Incentive Plan is required to be approved by the holders of a majority of the shares of Company Common Stock present or represented by proxy and voting on the applicable matter and therefore abstentions and broker “non-votes” will have no effect on this proposal.

PROPOSAL 1

ELECTION OF DIRECTORS

 

The Company’s restated 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 Chairman and Founder, certain members of his family and trusts established for their benefit (collectively, the “Ricketts holders”) owned approximately 18 percent of our Common Stock as of the Record Date. The Toronto-Dominion Bank, a Canadian chartered bank (“TD”) owned approximately 32.5 percent of our Common Stock as of the Record Date. In connection with the acquisition of TD Waterhouse, the Ricketts holders and TD entered into a stockholders agreement (the “Stockholders Agreement”), effective June 22, 2005. Under the Stockholders Agreement, the Company’s Board of Directors consists of twelve members, five of whom are designated by TD, three of whom are designated by the Ricketts holders, one of whom is the chief executive officer of TD Ameritrade, and three of whom are outside independent directors, who are designated by the existing outside independent directors of TD Ameritrade, subject to the consent of 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 TD Ameritrade Common Stock as set forth in the Stockholders Agreement. Because TD and the Ricketts holders collectively own more than 50 percent of the voting power of the outstanding Common Stock of the Company, the Company qualifies as a “controlled company” for purposes of NASD Rule 4350(c) and, as such, 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 2006 Annual Meeting: W. Edmund Clark, Michael D. Fleisher, Joseph H. Moglia and Thomas S. Ricketts as Class I directors to serve terms ending at the 2009 Annual Meeting and Glenn H. Hutchins, who is presently a Class I director, as a Class II director to serve a term ending at the 2007 Annual Meeting. Mr. Clark is a designee of TD, Messrs. Fleisher and Hutchins are outside independent directors, Mr. Moglia is the chief executive officer of the Company, and Mr. Thomas Ricketts is a designee of the Ricketts holders.

 

J. Peter Ricketts, Marshall A. Cohen and Daniel A. Marinangeli are Class II directors serving terms ending at the 2007 Annual Meeting. J. Joe Ricketts, Dan W. Cook III, Wilbur J. Prezzano and Fredric J. Tomczyk are Class III directors serving terms ending at the 2008 Annual Meeting. The Board of Directors has determined that Messrs. Cohen, Cook, Fleisher, Hutchins and Prezzano are independent as defined in NASD Rule 4200.

This Proxy Statement relates only to the solicitation of proxies from the stockholders with respect to the election of four Class I directors and one Class II director to be elected by them and the other matters described herein. The Board of Directors knows of no reason any of Messrs. Clark, Fleisher, Hutchins, Moglia and Thomas Ricketts might be unavailable to serve as directors, and each has expressed an intention to serve, if elected. If any of Messrs. Clark, Fleisher, Hutchins, Moglia and Thomas Ricketts 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, there are no arrangements or understandings between any of the persons nominated to be a Class I or 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 entitled to vote; provided that a quorum of at least a majority of the outstanding shares of Common Stock are represented at the meeting. Shares of Common Stock held by stockholders electing to abstain from voting and “broker non-votes” will be counted towards the presence of a quorum but will not be considered present and voting. Therefore, abstentions and “broker non-votes” will have no impact on the election of directors. Proxies submitted pursuant to this solicitation will be voted for the election of each of Messrs. Clark, Fleisher, Moglia and Thomas Ricketts as Class I directors and Mr. Hutchins as a Class II director, unless specified otherwise.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF W. EDMUND CLARK, MICHAEL D. FLEISHER, JOSEPH H. MOGLIA AND THOMAS S. RICKETTS AS CLASS I DIRECTORS AND FOR THE ELECTION OF GLENN H. HUTCHINS AS A CLASS II DIRECTOR.

 

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

 

 

W. Edmund Clark is currently President and Chief Executive Officer of TD Bank Financial Group. Mr. Clark has served in such 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. Mr. Clark is a director of The Toronto-Dominion Bank, TD Banknorth, Inc. and TD Banknorth, N.A.

 

Michael D. Fleisher is currently Warner Music Group’s (WMG) Executive Vice President and Chief Financial Officer. Mr. Fleisher is responsible for WMG’s worldwide financial operations. Mr. Fleisher previously served as the Chairman and CEO of Gartner, Inc., a leading technology research company. Mr. Fleisher joined Gartner, Inc. in 1993, leading the company’s initial public offering, as well as the company’s move to the New York Stock Exchange. At Gartner, Mr. Fleisher completed more than 30 acquisitions and investments. As head of the Gartner Events organization, Mr. Fleisher developed Gartner Symposium/ITxpo into a premier IT strategic planning event. Mr. Fleisher was appointed Chief Financial Officer in 1998, became Chief Executive Officer in 1999, and was elected Chairman of the Board in 2001. Mr. Fleisher’s previous business experience includes working from 1990 to

1993 as an associate at Bain Capital, a venture capital and buy-out firm. He was a consultant at Bain & Company, a strategy-consulting firm, from 1987 to 1990. Mr. Fleisher holds a bachelors degree in economics from the Wharton School of Business.

 

Glenn H. Hutchins is a Managing Director of Silver Lake Partners, a private equity firm he co-founded in January 1999. From 1994 to 1999, Mr. Hutchins was a Senior Managing Director of The Blackstone Group, where he focused on private equity investing. Mr. Hutchins is a director of The Nasdaq Stock Market, Inc. and Seagate Technology. He is also a director of several private companies and non-profit organizations. Mr. Hutchins holds an A.B. from Harvard University, an M.B.A from Harvard Business School and a J.D. from Harvard Law School.

 

Joseph H. Moglia joined the Company as Chief Executive Officer in March 2001. 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 subsidiary, The Equitable Life Assurance Society of the U.S. Mr. Moglia received an M.S. in economics from the University of Delaware and a B.A. in economics from Fordham University.

 

Thomas S. Ricketts is the Chairman and Chief Executive Officer of Incapital LLC, a company he co-founded in 1999. Incapital is a technologically oriented investment bank focused exclusively on the underwriting and distribution of fixed income products to individual investors. Incapital underwrites for several major U.S. corporations through its InterNotes^sm product platform. From 1996 to 1999, Mr. Ricketts was a Vice President and an investment banker for the brokerage division of ABN AMRO. From 1995 to 1996, he was a Vice President at Mesirow Financial. From 1988 to 1994, Mr. Ricketts was a market maker on the Chicago Board Options Exchange. Mr. Ricketts holds an M.B.A. and a B.A. from the University of Chicago. Thomas S. Ricketts is the son of J. Joe Ricketts and the brother of J. Peter Ricketts.

 

 

J. Joe Ricketts is currently Chairman of the Company’s Board of Directors. 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 served

as a director and officer. By 1981, Mr. Ricketts 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 director of Securities Industry Association (SIA). Mr. Ricketts served as a member of the District Committee for District 4 of the NASD from 1996 to 1999. Mr. Ricketts serves on the board of directors of the American Enterprise Institute. Mr. Ricketts received a B.A. in economics from Creighton University. Mr. Ricketts is the father of J. Peter Ricketts and Thomas S. Ricketts.

 

Marshall A. Cohen is Counsel at Cassels Brock & Blackwell LLP, a law firm based in Toronto, Canada. Prior to joining that firm in 1996, from 1988 to 1996, Mr. Cohen served as President and Chief Executive Officer of The Molson Companies Limited. Mr. Cohen is a director of Barrick Gold Corporation, American International Group, Inc., Lafarge North America Inc. (retiring April 24, 2006), The Toronto-Dominion Bank (retiring March 30, 2006), Metaldyne Corp., Collins & Aikman Corporation and The Goldfarb Corporation (retiring March 9, 2006).

 

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 2000. Mr. Cook serves on the board of directors of Centex Corporation. He also serves on the Executive Board of the Edwin L. Cox School of Business at Southern Methodist University. Mr. Cook received an M.B.A. from Harvard Business School and a B.A. from Stanford University.

 

Daniel A. Marinangeli was Executive Vice President and Chief Financial Officer of TD Bank Financial Group from June 1999 until October 2005. Since November 1, 2005, Mr. Marinangeli has served as Executive Vice President of Corporate Development for TD Bank Financial Group. Mr. Marinangeli serves as a director of Truscan Properties Limited and Truscan Property Corporation.

 

Wilbur J. Prezzano was employed with Eastman Kodak Company for over 30 years and served in various positions with such company during that time, including as Vice Chairman of Eastman Kodak Company and Chairman and President of Kodak’s Greater China Region, the positions which 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, Lance, Inc., Roper Industries, Inc., TD Banknorth Inc. and Banknorth, N.A.

 

J. Peter Ricketts is currently a candidate for the U.S. Senate representing 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. He has served as a director of the Company since 1999. 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 and the brother of Thomas S. Ricketts.

 

Fredric J. Tomczyk is currently Vice Chair of Corporate Operations for TD Bank Financial Group, a position he has held since May 2002. From March 2001 until his current appointment, Mr. Tomczyk served as Executive Vice President of Retail Distribution for TD Canada Trust 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. Mr. Tomczyk is a director of Symcor Inc., Meloche Monnex Inc., Primmum Insurance Company, Security National Insurance Company, Truscan Properties Limited, Truscan Property Corporation and Robarts Research Institute.

 

The Company’s executive officers are as follows:

 

 

See “Directors Not Standing For Election” for information regarding the business experience of J. Joe Ricketts and “Nominees to Board of Directors” for information regarding the business experience of Joseph H. Moglia.

 

T. Christian Armstrong became Executive Vice President, Sales and Marketing upon the closing of the Company’s acquisition of TD Waterhouse Group, Inc. on January 24, 2006. He is also one of four members of the executive management team serving in the Office of the Chief Executive. Immediately prior to the closing, he served as Acting President and Chief Executive Officer of TD Waterhouse. Previously he was Vice Chair, Sales and Marketing of TD Waterhouse and Chairman, President and Chief Executive Officer of TD Waterhouse Bank, N.A. Mr. Armstrong joined TD Bank Financial Group in 2000 after more than ten years experience in financial services marketing. Mr. Armstrong received his B.A. degree from University of Virginia and earned an MBA with honors from American University.

 

Raymond J. (Jerry) Bartlett, Jr. has served as Chief Information Officer since September 2005. He oversees all information technology initiatives, including business technology planning, application development, product development, information and physical security as well as IT infrastructure and architecture. Previously, he served as the Vice President of Application and Development. He also served as the Director of Application Development where he oversaw the overall application integration following the Datek merger. He has over 17 years of experience leading application development groups in the financial, insurance and healthcare industries. From 1995 until joining the Company in 1999, he led large applications development and database organizations for St. Paul Company. Prior to that, he managed systems development with the American Red Cross. Recently, he was recognized as on of Computerworld’s 2005 Premier 100 IT Leaders based on his leadership in managing risk and execution during the Datek integration. He holds a B.S. in technology and management from the University of Maryland.

 

Michael D. Chochon was appointed Treasurer of the Company in November 2005. He is responsible for capital structure, liquidity, balance sheet management, risk reporting and external banking and rating agency relations for the Company. Previously, Mr. Chochon served as Assistant Treasurer since joining the Company in 2003. He has 15 years experience in treasury, tax and accounting, including six years in the financial services industry. From 1999 until joining the Company, he worked in the Treasury department and served as Division Chief Financial Officer for E*Trade Group. Mr. Chochon also serves on the Securities Industry Association Treasury Steering Committee. He graduated from the University of Nebraska-Lincoln with a bachelor’s degree in Accounting.

 

Bryce B. Engel has served as Chief Brokerage Operations Officer since March 2005. He oversees the Company’s Client Service and Support as well as Clearing operations. Mr. Engel was previously Vice President and Managing Director of Clearing since February 2003 where he oversaw all clearing operations including order routing, processing and settlement. Mr. Engel has served in a variety of roles during his 10-year tenure at the

Company, including the leadership of call center operations and Ameritrade Clearing. He also played a lead role in the integrations of Datek Online Holdings Corporation and National Discount Brokers Corporation into the Company. He graduated with a B.A. in Finance from the University of Nebraska-Lincoln.

 

Phylis M. Esposito joined the Company as Chief Strategy Officer in July 2001. Ms. Esposito is responsible for corporate strategy, focusing on industry and market issues to develop corporate business initiatives that mitigate risks and maximize opportunities for profitable long-term growth. Ms. Esposito also oversees Investor Relations. Ms. Esposito has over 25 years of financial markets experience. From 1998 until joining the Company, she served as senior partner and project manager for Mathias & Company, Management Consultants. In that role, she provided strategic advice and business plan implementation to global financial institutions, professional financial service firms and multi-national corporations. Prior to that, she was a Senior Managing Director for Bear Stearns & Company. She was also a founding Partner and Chief Financial Officer for Artemis Capital Group, and a Vice President for Goldman Sachs. Ms. Esposito received an M.B.A. from Columbia University and holds a B.A. from Fordham University.

 

Laurine M. Garrity was appointed Chief Marketing Officer in December 2005. In this role, she oversees the Company’s marketing strategy including television, print and online advertising, brand management, client marketing, and database management and acquisition. Previously, Ms. Garrity led the Company’s Marketing Program Development Group. Ms. Garrity has over 21 years of marketing experience including 14 years in the financial services arena. Prior to joining the Company in January 2005, Ms. Garrity served as Executive Vice President in the Marketing Division of the Dreyfus Corporation in New York from 2002 until joining the Company, Senior Vice President and Director of Marketing at Founders Asset Management LLC in Denver from 1995 through 2001 and as a marketing manager with INVESCO Funds Group in Denver. Prior to entering the financial services industry, she held media planning and account management positions at leading advertising agencies in Denver and New York. Garrity is a graduate of Barnard College, Columbia University in New York.

 

Asiff S. Hirji oversees the technology, operations, and business development functions at the Company. He is also one of four members of the executive management team serving in the Office of the Chief Executive. Joining the Company in April 2003, Hirji has nearly twenty years experience at the nexus of financial services and technology. Prior to becoming Chief Operating Officer in July 2005, he served as the Company’s Chief Information Officer and led the technology integration through the Datek merger. From July 2002 until joining the Company, he served as Vice President, Partner of Bain & Company where he was a leader of their IT Strategy practice. From July 2001 to June 2002, he served as President of Meralix, Inc., a firm specializing in turning around troubled portfolio companies for private equity funds. Prior to that, Mr. Hirji was President and Chief Technology Officer for Netfolio, Inc., an online investment advisor that he took through the entire lifecycle from initial inception to growth and sale. He was also a founding member and Partner of the Mitchell Madison Group, which he helped grow into the second largest financial services strategic consultancy in the world before its sale for a then record sum. Mr. Hirji received an M.B.A with honors from The University of Western Ontario and a B.S. in Computer Science from The University of Calgary.

 

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 Compliance departments and administers Corporate Audit. 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 and has a B.A. in Government and Politics from the University of Maryland.

 

John R. (Randy) MacDonald has served as Chief Financial Officer since March 2000 and Chief Administrative Officer since August 2005. He oversees all financial operations of the Company, including developing and planning financial transactions and Company-wide fiscal management. He is also responsible for all administrative functions, including human resources, facilities, corporate communications, risk management, regulatory reporting and business reporting. He served as a key leader in the Company’s seven previous acquisitions and is currently leading the integration planning for the acquisition of TD Waterhouse Group, Inc. He is also one of four members of the Company’s executive management team serving in the Office of the Chief Executive. Prior to joining the

Company in March 2000, Mr. MacDonald served in a similar capacity with the New York City-based Investment Technology Group, Inc., a leading provider of technology-based equity-trading services and transaction research to institutional investors and brokers. Mr. MacDonald has also held executive positions at Salomon Brothers and Deloitte & Touche. He graduated cum laude from Boston College with a B.S. in accounting. Mr. MacDonald has been nominated for election to the Board of Directors for GFI Group, Inc.

 

Lawrence J. Szczech was named Chief Client Officer in March 2005, and is responsible for the Client Group’s strategic direction while also overseeing client segment activities in addition to the delivery of client driven products and services aimed to provide a superior, value-priced experience. Mr. Szczech previously served as Managing Director of Client and Product Strategy at the Company, where he managed the integration of product lines through the Company’s merger with Datek Online Holdings Corporation. He joined the Company in 2002 from Datek, where he was Senior Vice President of Product. Prior to joining Datek, Szczech spent 16 years with the New York Stock Exchange, Inc., and Mincron SBC Corporation. Szczech graduated with a B.A. from the University of Dayton.

 

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, 2005, the Board of Directors held 26 meetings and took action by written consent five times. During fiscal year 2005, each director attended at least 75 percent 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, we encourage directors to attend. Six of the eight directors attended the 2005 Annual Meeting of Stockholders.

 

The Board of Directors has established four standing committees: Audit, Compensation, Outside Independent Directors and Non-TD Directors. On February 9, 2005, the Board of Directors decided to form an independent Special Committee to review, evaluate, investigate and negotiate the terms of a possible transaction with TD, and any alternative transaction, and to determine whether the transaction with TD, or an alternative transaction, was fair to, and in the best interests of, the Company and its stockholders. The Board of Directors appointed Messrs. Fleisher and Mark L. Mitchell, both of whom the Board of Directors determined to be independent directors with respect to the potential transaction, to serve as members of the Special Committee. Following the 2005 Annual Meeting of Stockholders on February 16, 2005, the Board of Directors held a regularly scheduled meeting at which it appointed Mr. Cook, a newly elected director, who the Board of Directors determined to be independent with respect to the potential transaction, to the Special Committee to serve with Messrs. Fleisher and Mitchell. The Special Committee held 11 meetings during the fiscal year ended September 30, 2005.

 

Audit Committee.  The functions performed by the Audit Committee are described in the Audit Committee Charter and include (i) overseeing the Company’s internal accounting and operational controls as well as its financial and regulatory reporting, (ii) selecting the Company’s independent auditors and managing director of corporate audit, and assessing their performance on an ongoing basis, (iii) reviewing the Company’s financial statements and audit findings, and taking any action considered appropriate by the Audit Committee and the Board of Directors, (iv) performing other oversight functions as requested by the full Board of Directors and (v) reporting activities performed to the full Board of Directors. The Audit Committee Charter was adopted by unanimous written consent of the Board of Directors on September 5, 2002 and subsequently adopted by the Audit Committee at the October 3, 2002 Audit Committee meeting. The Charter was reviewed and reaffirmed by the Audit Committee at the November 15, 2005 Audit Committee meeting. The Audit Committee Charter is available on the Company’s Web site at www.amtd.com and is attached to this proxy statement as Appendix A. The Audit Committee is currently composed of Messrs. Fleisher, Prezzano and Cohen. Mr. Fleisher 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. The Board of Directors has also designated Mr. Fleisher as an audit committee financial expert as defined by the SEC. The Company’s Audit Committee met 16 times during fiscal year 2005. The Report of the Audit Committee for the

fiscal year ended September 30, 2005 appears under PROPOSAL 2 — “RATIFICATION OF APPOINTMENT OF AUDITOR.”

 

Compensation Committee.  The Compensation Committee reviews and approves broad compensation philosophy and policy and changes in executive salary levels, bonus payments and equity awards pursuant to the Company’s management incentive plans as outlined below. The Compensation Committee is currently composed of Messrs. Hutchins, Cook and Tomczyk. Mr. Hutchins serves as the Compensation Committee’s chairman. The Compensation Committee Charter is available on the Company’s Web site at www.amtd.com. The Company’s Compensation Committee met three times during fiscal year 2005. The Report of the Compensation Committee on Executive Compensation appears under “EXECUTIVE COMPENSATION.”

 

Nominations Committee.  The Nominations Committee’s purpose was 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 vacancies on the board; and (3) recommending a slate of nominees for election or reelection as directors by the corporation’s stockholders at the Annual Meeting to fill the seats of outside independent directors whose terms are expiring. In connection with the acquisition of TD Waterhouse Group, Inc., the Board of Directors constituted the Outside Independent Directors Committee, which will take the place of the Nominations Committee. The Nominations Committee’s Charter provided that its members were to be independent as defined under applicable Nasdaq Stock Market listing standards and were not to include any director designated by investment funds affiliated with Silver Lake Partners and TA Associates or the Ricketts holders pursuant to a stockholders agreement. The Nominations Committee was composed of Messrs. Cook, Fleisher, and Mark L. Mitchell. All Nominations Committee members were “independent” as defined in the applicable listing standards of The Nasdaq Stock Market. Mr. Mitchell served as the Nominations Committee’s chairman. The Company’s Nominations Committee met three times during fiscal year 2005.

 

Outside Independent Directors (“OID”) Committee.  On January 19, 2006, in accordance with the provisions of the Stockholders Agreement and effective as of the closing of the acquisition of TD Waterhouse Group, the Board of Directors constituted the OID Committee. The OID Committee will take the place of the Nominations Committee and generally will serve the same purpose as the Nominations Committee served. The members of the OID Committee are Messrs. Cook, Fleisher, and Hutchins. 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.

 

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: (a) a detailed resume outlining the candidate’s knowledge, skills and experience, (b) a one-page summary of the candidate’s attributes, including a statement as to why the candidate is an excellent choice for the board, (c) a detailed resume of the stockholder submitting the director recommendation and (d) the number of shares held by the stockholder, including the dates such shares were acquired. The Company has retained a professional search firm to assist in identifying candidates, performing background research and conducting the interview process.

 

The Nominations Committee Charter, which will serve as the basis for the OID Committee Charter, establishes guidelines for identifying and evaluating candidates for selection to the board as follows:

 

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

 

2. The composition of the entire board shall 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 shall be free of conflicts of interest that would interfere with their ability to discharge their duties as a director.

 

4. Candidates shall 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. The OID Committee may determine any other criteria.

 

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 shall not be subject to the committee’s review and recommendation process.

 

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 TD Ameritrade of a competing business held by TD. The Non-TD Directors Committee is currently composed of Messrs. J. Joe Ricketts, Cook, Fleisher, Hutchins, Moglia, J. Peter Ricketts and Thomas Ricketts. This committee has not yet met.

 

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:

 

Chief Administrative Officer

TD Ameritrade Holding Corporation

4211 South 102nd Street

Omaha, Nebraska 68127

 

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 Chief Administrative Officer 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 Chief Administrative Officer 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 Chief Administrative Officer will retain a copy of such communications for review by any director upon his or her request.

 

The Company maintains the Ameritrade Holding Corporation 1996 Directors Incentive Plan (the “Directors Plan”), administered by the Compensation Committee, pursuant to which non-employee directors are granted various equity awards and may make elections with respect to the payment of their retainers and fees. Specifically, the Directors Plan provides that, upon a non-employee director’s election to the board for his or her first term, the director will receive (a) a stock option to purchase such number of shares of the Company’s Common Stock as determined by the Chairman of the board and approved by the board and (b) an award of restricted stock, the fair market value of which is equal to approximately $20,000 or such other amount determined by the Chairman of the Board and approved by the board from time to time. Non-employee directors may also be awarded stock options other than upon their initial election to the board as determined from time to time by the board. Awards made pursuant to the Directors Plan will generally vest in substantially equal annual installments over a period of three years, beginning with the first anniversary of the grant date. The exercise price of options granted under the Directors Plan may not be less than the fair market value of a share of the Company’s Common Stock on the date of

the grant of the option. The expiration date with respect to an award under the Directors Plan is the earlier of the ten-year anniversary of the date on which the award is granted or the one-year anniversary of the date on which the non-employee director’s service as a director of the Company terminates for cause. Options are not exercisable after the expiration date. Restricted stock that is not vested on the expiration date is forfeited.

 

Employee directors do not receive compensation for services provided as a director. Non-employee directors receive an annual retainer payable in advance. For fiscal year 2005, the annual retainer was $25,000. Fifty percent of the retainer is payable in cash and fifty percent is payable in the form of Common Stock, provided that, if a director has met the Company’s equity ownership guidelines, the director may elect to receive all or any portion of the stock retainer in cash. Non-employee directors receive payments of $1,500 for quarterly meetings and $1,000 for committee meetings, all payable quarterly in arrears in the form of cash or Common Stock at the election of the director. The foregoing elections and payments are made pursuant to the Directors Plan. Awards for periods of less than 12 months are calculated and determined by the board.

 

Pursuant to the Directors Plan, non-employee directors may elect to defer receipt of all or a portion of the retainer and meeting and committee fees otherwise payable to the non-employee director, including those amounts that would otherwise be payable to the non-employee director in the form of Common Stock. Amounts deferred pursuant to a non-employee director’s election are credited to a bookkeeping account, which consists of a “Cash Subaccount” reflecting amounts that would otherwise have been payable to the non-employee director in cash and a “Stock Subaccount” reflecting amounts that would otherwise have been payable to the non-employee director in Common Stock. As of the first day of each fiscal quarter, the Cash Subaccount is adjusted to reflect contributions and distributions during the preceding fiscal quarter and is credited with interest computed at the prime rate as reported by the Wall Street Journal for that date (or, if that day is not a business day, the next preceding business day). The Stock Subaccount is credited with “stock units” as of each day that a deferred amount would otherwise have been payable to the non-employee director in Common Stock, is charged with stock units as of each day on which amounts are distributed from the Stock Subaccount and is credited with stock units as of each record date to reflect dividends paid, if any, on the Common Stock. For purposes of the adjustments to the Stock Subaccount, one stock unit corresponds to one share of Common Stock.

 

Deferred amounts are payable to non-employee directors as of a distribution date elected by the non-employee director at the time of the deferral. If no distribution date is specified, payments begin as of the first business day of January of the year following the date on which the non-employee director ceases to be a director of the Company for any reason. Distributions of deferred amounts can be made in ten annual installments commencing on the distribution date elected. A non-employee director may also elect to have payments in a lump sum or in any number of annual payments not exceeding ten. If a non-employee director dies prior to the full payment of his deferral account, the balance will be paid in a lump sum to a beneficiary designated by the non-employee director. The Compensation Committee may also distribute the full balance of a non-employee director’s deferral account in a lump sum at any time.

 

Directors are reimbursed by the Company for travel and entertainment expenses incurred while attending board or committee meetings or while on Company business, including first class airfare between their home cities and the location of the meeting, business meals while on Company business, ground transportation and miscellaneous expenses such as tips and mileage. Hotel charges are billed directly to the Company for directors attending board or committee meetings.

 

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 not identified any late filings by the Section 16(a) Reporting Persons.

 

As of the Record Date, there were 603,496,440 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 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 percent of the Company’s Common Stock, by all current executive officers and directors of the Company as a group, and by certain other TD Ameritrade 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 any other person.

 

 

 

 

Concurrently with entering into the share purchase agreement related to Ameritrade’s acquisition of TD Waterhouse Group, Inc., Ameritrade, the Ricketts holders and TD entered into a 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 are designated by TD, three of whom are designated by the Ricketts holders, one of whom is the chief executive officer of the Company, and three of whom are OID directors, who were initially designated from among Ameritrade’s current independent directors and thereafter will be designated by the existing OID directors of the Company, subject to the consent of TD and the Ricketts holders. The number of directors designated by TD and the Ricketts holders will depend 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). The Company Board of Directors will continue to be classified into three classes, with each class serving staggered three-year terms. Subject to applicable laws and certain conditions, the Company has caused and will continue to cause each committee of its Board of Directors (other than the OID committee and a committee of the Board of Directors comprised solely of all directors who are not TD directors) to consist of two of the directors designated by TD, one of the directors designated by the Ricketts holders, and two of the OID 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 TD Ameritrade agreed that it would solicit votes in favor of, each director nominated for election in the manner provided for in the Stockholders Agreement.

 

Tender Offer and Share Ownership.  The Stockholders Agreement provides that following consummation of the acquisition of TD Waterhouse, TD will commence a cash tender offer pursuant to which TD will offer to purchase a number of shares of Common Stock such that, upon successful completion of the offer, TD will beneficially own 39.9 percent of the outstanding voting securities of the Company. If J. Joe Ricketts elects to participate in the tender offer, he may offer to purchase up to the number of shares of Common Stock such that, upon successful completion of the tender offer, the Ricketts holders collectively own 29 percent of the outstanding voting securities of the Company. The offer price will be no less than $16 per share and the offer will not be subject to any minimum condition on the number of shares tendered. The Stockholders Agreement further provides that following the completion of the tender offer, TD may acquire additional shares of Common Stock only up to an aggregate beneficial ownership interest of 39.9 percent of the outstanding voting securities of the Company for a period of three years following completion of the acquisition of TD Waterhouse, and up to an aggregate beneficial ownership of 45 percent for the remaining term of the Stockholders Agreement, and the Ricketts holders may acquire additional shares of Common Stock only up to an aggregate ownership interest of 29 percent of the outstanding Common Stock. The Stockholders Agreement also provides that TD will not, subject to certain exceptions, solicit proxies with respect to Common Stock. Despite the limitations on TD’s ownership described above, the Stockholders Agreement permits TD to make a non-public proposal to the Company Board of Directors to acquire additional shares pursuant to a tender offer or merger for 100 percent 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.

 

Right to Purchase Securities.  In addition, 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 and certain other issuances specified in the Stockholders Agreement. 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 percent 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 percent or

more of the outstanding shares of the Company, subject to certain exceptions. For so 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, TD, for so long as it owns at least 15 percent of the outstanding shares of Common Stock, is entitled to access to and information regarding the Company’s business, operations and plans as TD 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 none of TD, J. Joe Ricketts, so long as he is a director of the Company, or any of 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 such 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 as 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 percent 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 or quoted on the Nasdaq National Market. TD also is permitted to engage in certain activities in the ordinary course of its banking and securities businesses. In addition, Ameritrade 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 principally engaged in the banking business or (2) in the event that TD does not hold control of any bank or similar depository institution which 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 one or more of any banks or similar depository institutions 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 percent, and (2) upon the earliest to occur of (a) the consummation of a merger or tender offer where TD acquires 100 percent 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 percent 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 percent of Common Stock unless the Company board recommends against such tender offer or exchange offer and continues to take steps to oppose such tender offer or exchange offer, (e) the approval by the Company board of a business combination that would result in another party owning 25 percent 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 20 percent of the voting securities of the Company by a third party. For a period of up to one year following a termination under (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 percent (39.9 percent in the first three years following the completion of the acquisition of TD Waterhouse) or, in the case of the Ricketts holders, 29 percent, except pursuant to a tender offer or merger for 100 percent of the outstanding shares of Common Stock approved by the holders of a majority of the 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.

 

The following table sets forth a three-year history of the annual and long-term compensation awarded to, earned by or paid by the Company and its subsidiaries to each person serving as Chief Executive Officer at any time during the fiscal year ended September 30, 2005, to each of the other four highest paid executive officers of the Company for the fiscal year ended September 30, 2005 who were serving as executive officers as of September 30, 2005, and to one additional individual who would have been included in the disclosure of the four most highly compensated executive officers except that he was not serving as an executive officer as of September 30, 2005 (collectively, the “Named Executive Officers”). In accordance with SEC rules, the compensation described in this table does not include medical, group life insurance and other benefits that are available generally to all salaried employees of the Company and certain perquisites and other personal benefits received by the Named Executive Officers that do not, in the aggregate, exceed the lesser of $50,000 or 10 percent of any such officer’s aggregate salary and bonus described in this table.

 

 

 

 

No stock options or stock appreciation rights were granted to the Named Executive Officers during fiscal year 2005.

 

The following table sets forth information with respect to the Named Executive Officers concerning the exercise of options during fiscal 2005 and unexercised options held as of the end of fiscal 2005.

 

 

 

 

The Company currently has employment agreements with each of its Named Executive Officers.

 

Joseph H. Moglia, Chief Executive Officer.  Mr. Moglia’s employment agreement was entered into as of March 1, 2001 and had a two-year initial term. The agreement was renewed for an additional two-year term on March 1, 2003. On December 15, 2004, the Company and Mr. Moglia agreed to amend and restate Mr. Moglia’s employment agreement. As amended, Mr. Moglia’s employment agreement was extended through September 30, 2005 at the same salary and annual bonus target. This agreement has expired, but the parties continue to perform under the terms of this agreement. Either party may terminate the employment agreement with or without cause. Pursuant to the original agreement, Mr. Moglia was paid a signing bonus of $1.3 million and was reimbursed for relocation costs. The original agreement provided for the payment of a base salary of $600,000 per year, a one-time benefit of $15.6 million pursuant to a deferred compensation plan that vested as of March 1, 2003 and is payable upon his termination, and participation in other employee benefits under the various benefit plans and programs

maintained by the Company. The original agreement was amended in 2002 to provide Mr. Moglia an annual bonus with a target of $625,000. In addition, the original agreement provided that, if Mr. Moglia were still employed by the Company as of March 1, 2003, he would be awarded stock options with respect to 2 percent of the then outstanding shares of Company Common Stock. If Mr. Moglia is discharged from employment by the Company without cause or terminates his employment under circumstances that constitute constructive dismissal, all of his stock options will vest. Under the deferred compensation plan established in connection with the original agreement, Mr. Moglia is entitled to a deferred payment of cash compensation, as adjusted for earnings and losses based on investment performance. The balance in the deferred compensation account vested pro rata on a daily basis over the initial two-year term. Payments of the deferred compensation account balance shall begin as soon as practicable after Mr. Moglia’s termination date and may be made in a lump sum or installments over a period of not more than 10 years, as elected by Mr. Moglia in accordance with the plan. If Mr. Moglia dies before the vested balance in his deferred compensation account is paid to him, the vested balance will be paid in a lump sum to a beneficiary named by him. Pursuant to the December 15, 2004 agreement, Mr. Moglia will be entitled to fly on private aircraft when traveling on Company-related business. Mr. Moglia will establish a budget for private air travel which is subject to the approval by the Company’s Board of Directors and which will not exceed $200,000 for the remainder of the employment term as extended.

 

The original agreement provides that, if a change in control of the Company occurs, Mr. Moglia’s employment will automatically terminate and he will be entitled to the payments and benefits to which he would otherwise be entitled under the agreement had he continued in employment with the Company through both the initial and additional two-year terms. On January 19, 2006, Mr. Moglia entered into an employment agreement addendum with the Company, which specifies that the acquisition of TD Waterhouse Group, Inc. does not constitute a change in control for purposes of his employment agreement and stock option agreements. Pursuant to the December 15, 2004 agreement, Mr. Moglia has agreed not to compete with the Company from the end of the term of his employment through September 30, 2006. He will be entitled to receive noncompetition payments during the period in which the agreement not to compete is in effect equal to the payments (salary, bonus and health and disability insurance) he currently receives under his employment agreement.

 

Following Mr. Moglia’s retirement at the end of the term of his amended employment agreement, Mr. Moglia would be given the title of CEO Emeritus of the Company. He will be entitled to retain this title for no more than five years, subject to earlier termination upon his death, his commencement of other employment, or his engaging in specified conduct that would permit termination for cause under his existing employment agreement. Mr. Moglia would be required to relinquish his title of CEO Emeritus of the Company upon the approval of a majority of the Company’s Board of Directors following the recommendation of the then Company Chief Executive Officer. As CEO Emeritus of the Company, Mr. Moglia would be expected to perform the duties consistent with those of a CEO Emeritus of a public company as requested from time to time by the Company’s Board of Directors. While CEO Emeritus of the Company, Mr. Moglia would be entitled to the following benefits: (a) an office at the Company’s headquarters, subject to relocation at the Company’s or Mr. Moglia’s request to a location in the continental United States of Mr. Moglia’s choice, the cost of such office shall not substantially exceed the cost of providing Mr. Moglia an office in Omaha at September 30, 2005; (b) an assistant at his office location, the cost of such assistant not to substantially exceed the cost of providing Mr. Moglia an assistant in Omaha at September 30, 2005; and (c) the ability to utilize private air travel when traveling at the Company’s request on Company’s business, subject to the same terms as apply to private air travel at September 30, 2005. If Mr. Moglia’s status as CEO Emeritus of the Company is terminated by the Company’s Board of Directors, Mr. Moglia would be entitled to continue to receive the benefits described in (a) and (b) in the preceding sentence for a period equal to the lesser of 24 months after he relinquishes the title of CEO Emeritus of the Company or the remainder of the CEO Emeritus term.

 

Under an agreement between the Company and Mr. Moglia, dated September 13, 2001, the Company agreed to lend Mr. Moglia the Medicare tax amounts due from time to time resulting from his vesting in benefits under the deferred compensation plan. Mr. Moglia is required to repay the loan, which does not bear interest, at the time of termination of his employment. The Company may set off the amount of the loan against the amount that would otherwise be payable to Mr. Moglia under the deferred compensation plan. For periods prior to the termination of his employment, the Company will reimburse Mr. Moglia annually for all taxes imposed on the interest imputed to Mr. Moglia.

J. Joe Ricketts, Chairman and Founder.  Mr. Ricketts’ employment agreement was entered into as of October 1, 2001 and has a seven-year term. Either party may terminate the agreement with or without cause. The agreement provides for the payment of a base salary of not less than $650,000 per year, an annual bonus with a target level for each of fiscal years 2002 and 2003 of not less than 75 percent of his base salary, grants of stock options pursuant to the Company’s long term incentive plan with a target award value for each of fiscal years 2002 and 2003 of not less than $1,200,000, employee assistance program payments and tax payments, fully equipped home offices, participation in employee benefits plans and programs maintained by the Company, and reimbursement for reasonable fees and expenses for legal, tax, accounting, financial and estate planning counseling and services and some insurance coverages. If the agreement is terminated due to Mr. Ricketts’ disability, Mr. Ricketts is entitled to payment of 50 percent of his base salary plus benefits until the earlier of the end of the agreement term or the fifth anniversary of the date of the disability. If Mr. Ricketts is discharged from employment by the Company without cause or terminates his employment following specified breaches of the agreement by the Company, he will be entitled to receive payments of his base salary, bonus, option awards and continuing benefits for the remainder of the agreement term; provided, that in no event will his payments under these circumstances be less than the sum of three times (1) his base salary, determined as of October 1, 2001, and (2) his annual cash bonus payable for 2002. If a termination described in the preceding sentence occurs, Mr. Ricketts will also be entitled to recover damages he incurs as a result of his inability to exercise his outstanding stock options. The agreement contains covenants by Mr. Ricketts not to compete with the Company during the term of the agreement and for a specified period after the term. Mr. Ricketts and the Company entered into an amendment to the employment agreement dated August 5, 2004. Under the amendment, Mr. Ricketts was granted a stock option award for fiscal year 2003 with respect to 750,000 shares of Company Common Stock. Mr. Ricketts will not be entitled to annual stock option awards for fiscal years after 2003 until the Company reinstates its annual stock option award program that existed on October 1, 2001 or implements a new program that provides, after fiscal year 2003, equity-based incentive compensation to at least one of the other executive officers of the Company; however, if Mr. Ricketts is discharged from employment by the Company without cause or terminates his employment following specified breaches of the agreement by the Company, his annual stock option award will be in the amount of options to purchase 390,000 shares of Company Common Stock. Subsequent to fiscal year 2003 the Company will have the discretion to determine the annual cash bonus and annual stock option award targets and target levels for Mr. Ricketts; however, in determining his annual cash bonus and annual stock option award, the Company must treat Mr. Ricketts reasonably, equitably and comparably to the Company’s other executive officers.

 

Asiff S. Hirji, Executive Vice President, Chief Operating Officer.  Mr. Hirji’s employment agreement was entered into as of April 7, 2003 and has a three-year term. The agreement provides for the payment of a base salary of $350,000, an annual bonus with a target of 100 percent of his base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time. If Mr. Hirji is terminated by the Company for any reason other than cause or if he terminates his employment for good reason, Mr. Hirji is entitled to receive continued payments of his base salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Mr. Hirji will also receive the amount of annual target bonus to which he was entitled for the year in which the termination occurs and he will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Mr. Hirji’s employment is terminated by the Company without cause or his employment is terminated for good reason, he is entitled to be paid a lump sum equal to his salary and bonus as described above. The agreement contains covenants by Mr. Hirji not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Mr. Hirji’s execution of a release of claims and, if any payments under the agreement would subject Mr. Hirji to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax.

 

John R. MacDonald, Executive Vice President, Chief Financial Officer and Chief Administrative Officer.  Mr. MacDonald’s employment agreement was entered into as of September 9, 2002 and had a three-year term. The agreement renewed automatically on September 9, 2005 for an additional one year. The agreement provides for the payment of a base salary of $350,000, an annual bonus target of 100 percent of his base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and

participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time and that if Mr. MacDonald is terminated by the Company for any reason other than cause or if he terminates his employment for good reason, he will be entitled to receive continued payments of his base salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Mr. MacDonald will also receive the amount of annual target bonus to which he was entitled for the year in which the termination occurs and he will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Mr. MacDonald’s employment is terminated by the Company without cause or his employment is terminated for good reason, he will be entitled to be paid a lump sum equal to his salary and bonus as described above. The agreement contains covenants by Mr. MacDonald not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Mr. MacDonald’s execution of a release of claims and, if any payments under the agreement would subject Mr. MacDonald to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax.

 

Phylis M. Esposito, Executive Vice President, Chief Strategy Officer.  Ms. Esposito’s employment agreement was entered into as of February 1, 2002 and had an initial term ending on June 30, 2003. Ms. Esposito’s employment agreement was renewed for additional twelve month terms ending June 30, 2004, 2005 and 2006, respectively. The agreement provides for the payment of a base salary of $300,000, an annual bonus with a target of 100 percent of her base salary, grants of stock options pursuant to the Company’s long-term incentive plan, benefits pursuant to a deferred compensation plan and participation in other employee benefits under the various benefit plans and programs maintained by the Company. The agreement provides that it may be terminated by either party at any time. If Ms. Esposito is terminated by the Company for any reason other than cause or if she terminates her employment for good reason, Ms. Esposito is entitled to receive continued payments of her base salary for a period of one year after termination or until the end of the term of the agreement, whichever is longer. Ms. Esposito will also receive the amount of annual target bonus to which she was entitled for the year in which the termination occurs and she will be provided with continuing medical coverage, subject to limitations, for the severance period at the Company’s cost. If, following a change in control, Ms. Esposito’s employment is terminated by the Company without cause or her employment is terminated for good reason, she is entitled to be paid a lump sum equal to her salary and bonus as described above. The agreement contains covenants by Ms. Esposito not to compete with the Company during the term of employment and for a specified period after the term. All severance benefits payable under the agreement are conditional on Ms. Esposito’s execution of a release of claims and, if any payments under the agreement would subject Ms. Esposito to an excise tax on parachute payments, the payments under the agreement will be reduced to the extent necessary to avoid the tax. On June 25, 2002, Ms. Esposito entered into an employment agreement addendum with the Company, which specifies that the merger with Datek does not constitute a change in control for purposes of her employment agreement.

 

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 (the “1933 Act”) or the 1934 Act.

 

The Compensation Committee (the “Committee”) of the Board of Directors establishes and administers the Company’s executive compensation programs. The Committee is composed of three non-employee directors of the board. During fiscal year 2005, Messrs. Hutchins, Cook and Mitchell were members of the Committee. Effective on the close of the transaction with TD Waterhouse, Mr. Mitchell resigned from the board and Mr. Tomcyzk was added as a replacement. No member of the Committee during fiscal year 2005 was an employee of the Company or any of its subsidiaries. Each member of the committee during fiscal year 2005 qualified as a “non-employee director” under rule 16b-3 under the Securities Exchange Act of 1934 and as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

Compensation Philosophy and Policy Overview

 

The Committee’s purpose is to develop and maintain compensation programs and policies reflective of the Company’s strategy to provide strong performance incentive for achieving goals to maximize stockholder value. To accomplish this, the Committee constructs compensation determinations based upon the following goals:

 

1. Align executive compensation with stockholder interests, and

 

2. Enable the Company to be competitive in securing and motivating superior caliber executive talent necessary for continued profitable growth.

 

The Company’s executive officers’ total compensation is determined by comparing individual responsibilities with industry survey data and responsibilities of the other Company executive officers. Market data, provided by a third party consultant, is reviewed utilizing broad data sources, including information from the financial services sector. Comparator groups include a primary comparator group, consisting of brokerage peers, and an alternative comparator group including financial services (non-brokerage) peers. In addition, a target annual incentive bonus award is based on a percentage of salary, which ranges from 30 to 105 percent. The incentive bonus is at-risk pay, which serves to motivate the executive to perform, and comprises a large portion of total executive compensation. The Committee has utilized the services of an external executive compensation consultant to provide objective and competitive market data to ensure stockholder-beneficial decision making consistent with the Company’s compensation goals. The Company aims for total compensation paid to its executives to be at the 50th percentile of the market.

 

The Committee and the Company strongly believe in executive ownership of Company stock. This benefits stockholders by meaningfully aligning executive goals and decision-making to stockholder interests. Executives are required to adhere to equity ownership guidelines that require a specific percentage of stock ownership, ranging from 100 to 500 percent of annual base salary, depending on executive level.

 

Base Salaries

 

In order to remain competitive with the market, the Committee reviews executive salaries annually and as needed. Other than in the context of promotions, the Company has not adjusted the base salaries of its top executive management since fiscal year 2003. Typically executive officer salary adjustments are determined by objective and subjective evaluation of individual performance and by comparison with market data of external comparable positions, internal comparison, and applicable terms of existing employment agreements.

 

Annual Incentive Bonuses

 

Annual incentive bonuses are designed to promote strong Company performance and achievement of the Company’s initiatives. Target incentive percentages are set at the beginning of the fiscal year and payout is earned according to achievement of Company goals. The Company’s executive officers participate in the Management Incentive Plan. This plan is based on the achievement of key corporate performance metrics and is intended to be qualified under Section 162(m) of the Code in order to maximize tax deductibility for the Company, while providing strong incentive for goal achievement at the highest levels of the organization. For fiscal year 2005, 100 percent of annual incentive compensation was based upon quantitative goals for the Company’s diluted earnings per share.

 

Executives were able to defer all or part of annual incentive bonuses under a deferred compensation program in the form of Company stock.

 

Long-Term Incentives

 

The Committee considers the award of stock options in specific cases based on individual performance or for purposes of retaining and attracting key executives.

 

Although the long-term incentive plan also permits the award of stock appreciation rights, stock awards (including restricted stock units) and performance units, no such awards have been made under the program. The Company granted replacement stock appreciation rights in fiscal 2002 to former Datek employees in connection with the Datek merger.

Deductibility of Compensation

 

Section 162(m) of the Code limits the Company’s deduction for compensation paid to the executive officers named in the Summary Compensation Table to $1 million unless certain requirements are met. For fiscal year 2005, the requirements for deductible compensation under Section 162(m) were met for all executive officers. The policy of the Compensation Committee with respect to Section 162(m) is to establish and maintain a compensation program that will optimize the deductibility of compensation. However, the Committee may exercise its right to use judgment, where merited, by the need to respond to changing business conditions or to an executive officer’s individual performance, to authorize compensation which may not in a specific case, be fully deductible by the Company.

 

Chief Executive Officer Compensation

 

In fiscal year 2005, Mr. Moglia served in the capacity of Chief Executive Officer. The determination of the Chief Executive Officer’s salary, annual incentive, and grants of stock options followed the philosophy and policies set forth above for all other executive compensation, subject to any individual terms in the executive’s employment agreement. Mr. Moglia’s compensation history is outlined under the Summary Compensation Table. For fiscal year 2005, his salary remained at $600,000 per year, and he did not receive an equity grant. Seventy-one percent of Mr. Moglia’s compensation, as defined in the Summary Compensation Table, was directly tied to the Company’s performance via diluted earnings per share.

 

Fiscal Year 2006 Compensation

 

The Company intends to review compensation for its executives in fiscal year 2006 in light of the recent acquisition of TD Waterhouse

 

Glenn H. Hutchins, Chairman

Dan W. Cook III

Fredric J. Tomczyk*

 

 

During fiscal 2005, 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 Company performance information 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 Company performance information shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company under the 1933 Act or the 1934 Act.

 

The following graph and table set forth information comparing the cumulative total return from a $100 investment in the Company, a broad-based stock index and the stocks making up an industry peer group on September 29, 2000 through the end of the Company’s most recent fiscal year.

 

 

 

The Peer Group is comprised of the following companies whose primary business is online brokerage:

 

The Charles Schwab Corporation
E*TRADE Financial Corporation

 

CSFBdirect and TD Waterhouse Group, Inc., which were previously included in the Peer Group, are no longer included as they have not been publicly traded since August 21, 2001 and November 26, 2001, respectively.

 

Gartner, Inc. provided professional research services to the Company under a three-year contract, which expired in October 2005. During fiscal 2005, the Company paid approximately $95,000 to Gartner, Inc. under the

contract. Glenn H. Hutchins, a director of the Company, and Michael J. Bingle, a former director of the Company, are directors of Gartner, Inc.

 

Two siblings and a brother-in-law of J. Joe Ricketts each hold management positions with the Company and received annual compensation ranging from approximately $99,000 to $169,200 for fiscal 2005.

 

Under an agreement between the Company and Joseph H. Moglia, Chief Executive Officer, dated September 13, 2001, the Company agreed to lend Mr. Moglia the Medicare tax amounts due from time to time resulting from his vesting in benefits under the deferred compensation plan. Mr. Moglia is required to repay the loan, which does not bear interest, at the time of termination of his employment. The Company may set off the amount of the loan against the amount that would otherwise be payable to Mr. Moglia under the deferred compensation plan. The balance of the loan was approximately $222,000 as of September 30, 2005.

 

Certain directors and executive officers, and members of their immediate families, maintain margin trading accounts with the Company. Margin loans to these individuals were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectibility or present other unfavorable features.

 

In connection with TD Ameritrade’s acquisition of the U.S. retail securities brokerage business of TD Waterhouse Group, Inc. from TD, TD Ameritrade and TD became party to a series of agreements which are described below.

 

TD Ameritrade, the Ricketts holders and TD are a party to a registration rights agreement, pursuant to which the Ricketts holders and TD are granted rights to be included in registrations of TD Ameritrade Common Stock.

 

Demand Registrations

 

TD Ameritrade has granted the Ricketts holders and TD, together the right to demand registration of the shares of TD Ameritrade Common Stock held by them on nine separate occasions. Six of the nine demand rights, including two shelf registrations, are allocated to TD, and three of the nine demand rights, including one shelf registration, are allocated to the Ricketts holders.

 

Piggy Back Registrations

 

TD Ameritrade has also agreed to provide TD and the Ricketts holders with piggy back registration rights, such that if at any time TD Ameritrade proposes to file a registration statement with respect to any offering of its securities for its own account or for the account of any stockholder who holds its securities (subject to certain exceptions) then, as expeditiously as reasonably possible (but in no event less than 20 days prior to the proposed date of filing such registration statement), TD Ameritrade shall give written notice of such proposed filing to all holders of securities subject to registration rights pursuant to the registration rights agreement, or registrable securities, and such notice shall offer the holders of such registrable securities the opportunity to register such number of registrable securities as each such holder may request in writing. The registration rights granted in the registration rights agreement are subject to customary restrictions such as minimums, blackout periods and limitations on the number of shares to be included in any underwritten offering imposed by the managing underwriter. In addition, the registration rights agreement contains other limitations on the timing and ability of stockholders to exercise demands.

 

Expenses

 

TD Ameritrade has agreed to pay all registration expenses, including the legal fees of one counsel for the stockholders exercising registration rights under the registration rights agreement, but excluding underwriting discounts, selling commissions, stock transfer taxes and any other legal fees of such stockholders.

Common Stock of TD Ameritrade is consummated; if the TD Ameritrade board of directors consummates a takeover proposal from a third party; or if the TD trademark or logo becomes materially damaged by the other party.

 

Effects of Termination

 

Upon termination of the trademark license agreement, TD Ameritrade has agreed to stop all new uses of the TD mark within six months and discontinue all use of the TD mark within 12 months. Neither Ameritrade nor TD shall be entitled to use the TD Ameritrade name after the trademark license agreement terminates, and all trademark applications and registrations for the TD Ameritrade trademark shall be expressly abandoned.

 

TD and TD Ameritrade are also a party to a license agreement pursuant to which TD granted TD Ameritrade an exclusive license to use the TDWaterhouse.com Internet domain name for redirection to TD Ameritrade’s home page as well as the rights to include links to international TDWaterhouse Internet domain names. In exchange for those rights, TD Ameritrade agreed to not transfer the rights to the domain names and to use commercially reasonable efforts to include a link on the homepage of TD Ameritrade to the international TDWaterhouse websites. The term of the URL license agreement is 10 years from January 24, 2006 unless mutually extended. Either party may terminate the agreement if the trademark license is terminated or the other party materially breaches the agreement. TD Ameritrade has the right to terminate agreement for any reason 30 days written notice

 

Two broker-dealer subsidiaries of TD Ameritrade, TD Waterhouse Investor Services, Inc. (“TDWIS”) and National Investor Services Corp. (“NISC”), are party to a money market deposit account agreement with TD Waterhouse Bank, N.A. (“TD Bank”) and TD, pursuant to which TD Bank makes available to customers of TDWIS money market deposit accounts as designated sweep vehicles. TDWIS provides marketing and support services with respect to the money market deposit accounts and NISC acts as agent for customers of TDWIS and as recordkeeper for TD Bank, in each case with respect to the money market deposit accounts. In exchange for providing these services, TD Bank pays TDWIS and NISC collectively a fee based on the total assets contained in the all of the money market deposit accounts net of certain fees, costs and expenses incurred by TD Bank.

 

TD Ameritrade and certain of its subsidiaries and an affiliate of TD are party to a services agreement, pursuant to which certain funds are made available as money market sweep or direct purchase options to TD Ameritrade clients, and TD Ameritrade performs marketing support services with respect to those funds. In consideration for offering the funds and performing the marketing support services, the affiliate of TD compensates TD Ameritrade in accordance with the provisions of the services agreement. TD Ameritrade also performs certain services for the applicable fund and receives fees for those services. The services agreement has an initial term of two years from January 24, 2006 and is automatically renewable for successive two year terms (so long as certain related agreements are in effect), provided that following the first anniversary of the agreement, the agreement may be terminated by any party thereto upon one year’s prior written notice. TD Ameritrade may terminate the services agreement upon 120 days notice if it does not earn monthly fees greater than a specified level.

 

Pursuant to an Interim Cash Management Services Agreement, TD Bank provides cash management services to customers of TDWIS, until the earlier of TDWIS successfully converting the cash management services to another service provider or TD Bank and TDWIS entering into a formal cash management services agreement. In exchange for such services, TDWIS will pay TD Bank service based fees agreed upon by the parties.

 

At the closing of the acquisition, TD Waterhouse Group, Inc. and an affiliate of TD entered into a promissory note in the principal amount of $270,000,000. The loan has a term of six months and bears interest at the daily

effective Fed funds rate until the completion of the balance sheet adjustments in the purchase agreement, and after that time at the Fed funds rate plus 150 basis points. The purpose of the loan was to monetize non-cash assets of TD Waterhouse Group, Inc. so that TD Waterhouse Group, Inc. could retain cash equal to $1 per share of the $6 per share special cash dividend declared by Ameritrade, as required by the purchase agreement.

 

Pursuant to an Indemnification Agreement, TD Ameritrade agreed to undertake all liabilities related to the payout of awards under The Toronto-Dominion Bank 2002 Phantom Stock Incentive Plan following the completion of the acquisition. In connection with the payout of awards under the 2002 Phantom Stock Incentive Plan, TD Discount Brokerage Holdings LLC, a direct wholly-owned subsidiary of TD (“Holdings”), agreed to indemnify TD Ameritrade for any liabilities incurred by TD Ameritrade in excess of the provision for such liability included on the closing balance sheet of TD Waterhouse Group, Inc. In addition, in the event that the liability incurred by TD Ameritrade in connection with the 2002 Phantom Stock Incentive Plan is less than the provision for such liability included on the balance sheet of TD Waterhouse Group, TD Ameritrade agreed to pay the difference to Holdings.

 

Pursuant to the Canadian Call Center Services Agreement, TD will continue to receive and service customer calls at its London, Ontario site for customers of TDWIS, until September 30, 2006, unless the agreement is terminated earlier in accordance with its terms. In consideration of the performance by TD of the call center services, the Company will pay TD, on a monthly basis, an amount equal to TD’s monthly cost plus 5 percent.

 

Ernst & Young LLP has been appointed by the Audit Committee as auditor for the Company and its subsidiaries for the fiscal year ending September 29, 2006. This appointment is being presented to the stockholders for ratification. The ratification of the appointment of the independent auditor requires the affirmative vote of the holders of a majority of the total shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting; provided that a quorum of at least a majority of the outstanding shares are represented at the meeting. Abstentions will have the same effect as a vote against ratification. Broker non-votes will not be considered shares entitled to vote with respect to ratification of the appointment and will not be counted as votes for or against the ratification. Proxies submitted pursuant to this solicitation will be voted for the ratification of Ernst & Young LLP as the Company’s auditors for the fiscal year ending September 29, 2006, unless specified otherwise.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S AUDITOR FOR THE FISCAL YEAR ENDING SEPTEMBER 29, 2006.

 

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will be provided an opportunity to make a statement and to respond to appropriate inquiries from stockholders.

 

On November 15, 2005, Deloitte & Touche LLP (“D&T”), the Company’s previous independent registered public accounting firm, informed the Company that D&T declined to stand for reelection for the fiscal year ending on September 29, 2006 due to independence issues that would preclude D&T from continuing to serve as the Company’s independent registered public accounting firm after the closing of the Company’s acquisition of TD Waterhouse Group, Inc. D&T ceased its service as the Company’s independent registered public accounting firm

REVOCABLE PROXY OF HOLDERS
OF COMMON STOCK

TD AMERITRADE HOLDING CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TD AMERITRADE HOLDING CORPORATION FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 9, 2006 AND AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF.

The undersigned hereby appoints Ellen L.S. Koplow, John R. MacDonald and Joseph H. Moglia, each of them, with full power of substitution, as proxies to represent and to vote as designated on the reverse of this card all of the shares of Common Stock of TD Ameritrade Holding Corporation which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Joslyn Art Museum, on Thursday, March 9, 2006, at 10:30 a.m., Central Standard Time, and at any postponement or adjournment of said meeting and thereat to act with respect to all votes that the undersigned would be entitled to cast, if then personally present, in accordance with the instructions below and on the reverse hereof.

1.		ELECTION OF DIRECTORS

(1) W. Edmund Clark (Class I)
(2) Michael D. Fleisher (Class I)
(3) Glenn H. Hutchins (Class II)
(4) Joseph H. Moglia (Class I)
(5) Thomas S. Ricketts (Class I)

(     )		For All
(     )		Withhold All
(     )		For All Except
To withhold authority to vote for any individual nominee, mark “For All Except” and write the nominee’s number on the line below.

2.		AUDITORS. Ratification of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending September 29, 2006.
		(     ) FOR            (     ) AGAINST            (     ) ABSTAIN
3.		LONG-TERM INCENTIVE PLAN. Amendment and Restatement of the Company’s 1996 Long-Term Incentive Plan.
		(     ) FOR            (     ) AGAINST            (     ) ABSTAIN
4.		To vote, in its discretion, upon any other business that may properly come before the Annual Meeting or any postponement or adjournment thereof. Management is not aware of any other matters that should come before the Annual Meeting.
		(     ) FOR            (     ) AGAINST            (     ) ABSTAIN

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF THE BOARD OF DIRECTORS’ NOMINEES FOR DIRECTORS, FOR THE RATIFICATION OF THE APPOINTMENT OF AUDITORS AND FOR THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S 1996 LONG-TERM INCENTIVE PLAN AND ON ALL OTHER MATTERS THAT PROPERLY COME BEFORE THE ANNUAL MEETING, IN THE DISCRETION OF THE PERSONS NAMED AS PROXIES.

     This proxy is revocable and the undersigned may revoke it at any time prior to the Annual Meeting by giving written notice of such revocation to the Secretary of the Company prior to the meeting or by filing with the Secretary of the Company prior to the meeting a later-dated proxy. Should the undersigned be present and want to vote in person at the Annual Meeting, or at any postponement or adjournment thereof, the undersigned may revoke this proxy by giving written notice of such revocation to the Secretary of the Company on a form provided at the meeting. The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of Stockholders of the Company called for March 9, 2006 and the Proxy Statement for the Annual Meeting prior to the signing of this proxy.

Dated:
(Signature)
(Signature if held jointly)

Please sign exactly as name appears on this proxy. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give your full title. If a corporation, please sign in full corporate name by authorized officer. If a partnership or LLC, please sign in firm name by authorized partner or member.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.