UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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

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TD AMERITRADE Holding Corporation

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

February 20, 2008

 

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 Wednesday, February 20, 2008, at 10:30 a.m., Central Standard Time, for the following purposes:

 

1) To elect four directors to the board of directors;

 

2) To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2008; and

 

3) 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 December 28, 2007 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 24, 2008

 

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 2008 Annual Meeting of Stockholders of TD AMERITRADE Holding Corporation (the “Company”). The 2008 Annual Meeting will be held on Wednesday, February 20, 2008 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 January 28, 2008.

 

The Company has one class of common stock. Each share of common stock is entitled to one vote upon each matter to be voted on at the Annual Meeting. Stockholders do not have the right to cumulate votes in the election of directors. Only stockholders of record at the close of business on December 28, 2007 (the “Record Date”) will be entitled to vote at the Annual Meeting. As of the Record Date, there were 594,915,753 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 persons named as proxies 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. The directors expect that shares of the common stock held by executive officers and directors of the Company will be voted “FOR” such proposals. Such shares represent approximately 19% of the common stock outstanding as of the Record Date. At this time, we are unaware of any matters, other than described above in the Notice of Annual Meeting of Stockholders, that may properly come before the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote in accordance with their judgment with respect to such matters.

 

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

 

A quorum consisting of at least a majority of shares of common stock issued and outstanding must be present at the meeting for any business to be conducted. Shares of common stock entitled to vote and represented by properly executed, returned and unrevoked proxies, including shares with respect to which votes are withheld, abstentions are cast or 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 choose not to vote by telephone or electronically, please complete and return the paper proxy card in the pre-addressed, postage-paid envelope provided.

 

If you would like to receive future stockholder materials electronically, please enroll at www.investordelivery.com. Please have the proxy card you received available when accessing the site. 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 beginning of this proxy statement.

 

ELECTION OF DIRECTORS

 

The Company’s certificate of incorporation divides the Company’s board of directors into three classes, with four directors per class and with each class being elected to a staggered three-year term. J. Joe Ricketts, the Company’s chairman and founder, certain members of his family and trusts established for their benefit (collectively, the “Ricketts holders”) owned approximately 22% of our common stock as of the Record Date. The Toronto-Dominion Bank, a Canadian chartered bank (“TD”), owned approximately 40% of our common stock as of the Record Date. In connection with the Company’s acquisition of TD Waterhouse Group, Inc. (“TD Waterhouse”), the Ricketts holders, TD and the Company entered into a stockholders agreement (the “Stockholders Agreement”) effective June 22, 2005. Under the Stockholders Agreement, 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 nominated by the Outside Independent Directors Committee and then approved by TD and the Ricketts holders. The right of each of TD and the Ricketts holders to designate directors is subject to their maintenance of specified ownership thresholds of Company common stock, as set forth in the Stockholders Agreement. Because TD and the Ricketts holders collectively own more than 50% of the voting power of the outstanding common stock of the Company, the Company qualifies as a “controlled company” for purposes of Nasdaq Rule 4350(c) and therefore is exempt from specified director independence requirements of The Nasdaq Stock Market.

 

The board of directors has nominated the following persons as directors to be voted upon at the 2008 Annual Meeting: J. Joe Ricketts, Dan W. Cook III, Thomas J. Mullin and Wilbur J. Prezzano, as Class III directors to serve terms ending at the 2011 Annual Meeting. Mr. J. Joe Ricketts is a designee of the Ricketts holders, Mr. Cook is an outside independent director and Messrs. Mullin and Prezzano are designees of TD.

 

W. Edmund Clark, Mark L. Mitchell, Joseph H. Moglia and Thomas S. Ricketts are Class I directors serving terms ending at the 2009 Annual Meeting. Marshall A. Cohen, William H. Hatanaka, J. Peter Ricketts and Allan R. Tessler are Class II directors serving terms ending at the 2010 Annual Meeting. The board of directors has determined that Messrs. Cohen, Cook, Mitchell, Mullin, Prezzano, and Tessler are independent as defined in Nasdaq Rule 4200.

 

This Proxy Statement relates only to the solicitation of proxies from the stockholders with respect to the election of four Class III directors and ratification of the appointment of the Company’s independent registered public accounting firm. The board of directors knows of no reason why any of Messrs. J. Joe Ricketts, Cook, Mullin and Prezzano might be unavailable to serve as directors, and each has expressed an intention to serve if elected. If any of Messrs. J. Joe Ricketts, Cook, Mullin and Prezzano 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 III 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 a quorum of at least a majority of the outstanding shares of common stock is 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 apart from being counted as present for quorum purposes. Proxies submitted pursuant to this solicitation will be voted “FOR” the election of each of Messrs. J. Joe Ricketts, Cook, Mullin and Prezzano as Class III directors, unless specified otherwise.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF J. JOE RICKETTS, DAN W. COOK III, THOMAS J. MULLIN AND WILBUR J. PREZZANO AS CLASS III DIRECTORS.

 

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

 

 

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 began serving as a director and officer. By 1981, he acquired majority control of the Company. Prior to 1975, Mr. Ricketts was a registered representative with a national brokerage firm, an investment advisor with Ricketts & Co. and a branch manager with The Dun & Bradstreet Corporation, a financial information firm. Mr. Ricketts is a former director of Securities Industry Association (SIA). He 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, each of whom serves as a director of the Company.

 

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. He 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. He was formerly a director of Centex Corporation and Brinker International. Mr. Cook also serves as trustee or director of several charitable organizations.

 

Thomas J. Mullin joined Constellation Brands, Inc. as executive vice president and general counsel in May 2000. Prior to joining Constellation Brands, Mr. Mullin served as president and chief executive officer of TD Waterhouse Bank, N.A. from February to May 2000. He also served as executive vice president, business development and corporate strategy of C.T. Financial Services, Inc. from March 1997 through February 2000. From 1985 through 1997, Mr. Mullin served as vice chairman and senior executive vice president of First Federal Savings and Loan Association of Rochester, New York and from 1982 through 1985, he was a partner in the law firm of Phillips, Lytle, Hitchcock, Blaine & Huber, where he served as the managing partner of the firm’s Rochester office and member of the firm’s governing committee. Prior to joining Phillips, Lytle, Hitchcock, Blaine & Huber, Mr. Mullin practiced law in Rochester, New York and New York City with other firms. He serves on the board of trustees of Albany Law School of Union University. Mr. Mullin received his Bachelor of Arts degree from the State University of New York at Binghamton. He received his Juris Doctorate degree from Albany Law School of Union University and his Master of Laws (in Taxation) from New York University.

 

Wilbur J. Prezzano was employed with Eastman Kodak Company for over 30 years and served in various positions during that time, including as vice chairman of Eastman Kodak Company and chairman and president of Kodak’s greater China region, the positions that he held at the time of his retirement in 1996. Mr. Prezzano received

a Bachelor’s degree and Masters in Business Administration from the University of Pennsylvania. Mr. Prezzano serves as a director of The Toronto-Dominion Bank, EnPro Industries, Inc., Lance, Inc. and Roper Industries, Inc.

 

 

 

 

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

 

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

 

William H. Hatanaka is chairman and chief executive officer of TD Waterhouse Canada, Inc. and group head, wealth management for TD Bank Financial Group. He has over 25 years experience in the financial services industry. Prior to joining TD in 2003, Mr. Hatanaka was a senior executive of the wealth management arm of the Royal Bank of Canada from 1996 to 2001, most recently serving as chief operating officer. He has also held senior executive positions at brokerage firms RBC Dominion Securities, Richardson Greenshields Ltd. and Midland Walwyn Capital. Prior to his career in the financial services industry, Mr. Hatanaka played professional football in the Canadian Football League and was a member of the 1976 Ottawa Rough Riders Grey Cup Championship team. Mr. Hatanaka is the former chairman of the board for the Investment Industry Association of Canada and is a

member of the board of directors for the York University Foundation, currently co-chairing the University Capital Campaign. He is also chairman of the diversity leadership council for TD Bank Financial Group. He holds a B.A. with Honours in Sociology and Economics from York University and has completed the Advanced Management Program at the Harvard Business School.

 

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

 

Joseph H. Moglia 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 subsidiaries, The Equitable Life Assurance Society of the U.S, MONY Life Insurance Company and MONY Life Insurance Company of America. Mr. Moglia also serves on the board of trustees of STRATCOM Consultation Committee and is a director for Creighton University and for the National Italian American Foundation. Mr. Moglia received an M.S. in Economics from the University of Delaware and a B.A. in Economics from Fordham University.

 

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

 

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 InterNotesSM 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, each of whom serves as a director of the Company.

 

Allan R. Tessler has been chairman of the board and chief executive officer of International Financial Group, Inc., an international merchant banking firm, since 1987. He is also chairman of the board of Epoch Investment Partners, Inc., formerly J Net Enterprises. He has previously served as chief executive officer of J Net Enterprises,

co-chief executive officer of Data Broadcasting Corporation, now known as Interactive Data Corporation, chairman of Enhance Financial Services Group, Inc. and chairman and principal shareholder of Great Dane Holdings. Mr. Tessler is the lead director and chair of the finance committee of Limited Brands, Inc. He serves as chairman of the board of trustees of the Hudson Institute and is a member of the board of governors of the Boys & Girls Clubs of America. Mr. Tessler holds a B.A. from Cornell University and a L.L.B. from Cornell University Law School.

 

The Company’s executive officers are as follows:

 

 

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

 

T. Christian Armstrong serves as the executive vice president, client group and is responsible for client experience and marketing. He has served in this role since March 2007. Mr. Armstrong was executive vice president, sales and marketing upon the closing of the Company’s acquisition of TD Waterhouse on January 24, 2006 until becoming chief strategy officer in October 2006. 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 M.B.A. with honors from American University.

 

Michael D. Chochon has served as managing director of finance since October 2006 and treasurer since November 2005. He is responsible for treasury, strategic sourcing and procurement, financial systems and corporate risk as well as external banking and rating agency relations for the Company. Mr. Chochon served as assistant treasurer upon joining the Company in 2003 until his appointment as treasurer. He has 17 years experience in treasury, tax and accounting, including eight 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 served in corporate tax and treasury positions at Ernst & Young, Oracle Corporation and Iomega. He graduated from the University of Nebraska-Lincoln with a B.B.A. in Accounting.

 

Bryce B. Engel has served as chief brokerage operations officer since March 2005. He oversees the Company’s retail and institutional operations as well as clearing firm operations. Mr. Engel was vice president and managing director of clearing from February 2003 to March 2005, where he oversaw all clearing operations including order routing, processing and settlement. Mr. Engel has served in a variety of roles during his 12-year tenure at the Company, including the leadership of call center operations and Ameritrade Clearing. He also played a lead role in the Company’s integration of Datek Online Holdings Corp. (“Datek”) and National Discount Brokers Corporation (“NDB”). He graduated with a B.A. in Finance from the University of Nebraska-Lincoln.

 

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 22 years of marketing experience, including 15 years in the financial services industry. 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. Ms. Garrity is a graduate of Barnard College, Columbia University in New York.

 

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

 

David M. Kelley was appointed chief information officer in October 2007. He oversees all information technology initiatives, including business applications, engineering, emerging technology and architecture, information security, trading operations and user experience. Mr. Kelley joined the Company in June 2006 as senior vice president of the retail investor group. From January 2005 to June 2006, Mr. Kelley was an executive consultant. Prior to January 2005, Mr. Kelley spent 19 years at Merrill Lynch, serving in a number of senior executive positions of increasing responsibility in finance and technology, most recently as chief technology officer, corporate divisions from July 2002 to January 2005. Mr. Kelley received his M.B.A. from Rider University, where he also received his B.S. in Commerce. Mr. Kelley is also a CPA in the State of New Jersey.

 

Ellen L.S. Koplow has served as general counsel since June 2001 and was named secretary in November 2005. She manages the Company’s legal and 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. Ms. Koplow also holds a B.A. in Government and Politics from the University of Maryland.

 

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

 

The 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, 2007, the board of directors held 14 meetings. During fiscal year 2007, each director attended at least 75% of the aggregate number of meetings of the board of directors and meetings of the committees of the board of directors on which he served.

Although the Company does not have a formal policy regarding director attendance at our Annual Meeting of Stockholders, we encourage directors to attend. All 12 directors attended the 2007 Annual Meeting of Stockholders.

 

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

 

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, including assessment of strategic, financial, operational and compliance risk management, (ii) selecting the Company’s independent registered public accounting firm 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 overseeing the financial and regulatory reporting processes, (iv) performing other oversight functions as requested by the board of directors and (v) reporting activities performed to the board of directors. The Audit Committee charter was adopted by unanimous written consent of the board of directors on September 5, 2002 and subsequently adopted by the Audit Committee at the October 3, 2002 Audit Committee meeting. The charter has been reviewed and reaffirmed by the Audit Committee annually, with the most recent review and approval at the November 15, 2007 Audit Committee meeting. The Audit Committee charter is available on the Company’s Web site at www.amtd.com. The Audit Committee is currently composed of Messrs. Cohen, Mullin and Prezzano. Mr. Cohen serves as the Audit Committee’s chairman. All current Audit Committee members are “independent” as defined in the applicable listing standards of The Nasdaq Stock Market. The board of directors has determined that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the committee. The board of directors has also designated Mr. Mullin as an audit committee financial expert as defined by the Securities Exchange Commission (“SEC”). The Company’s Audit Committee met 12 times during fiscal year 2007. The Report of the Audit Committee for the fiscal year ended September 30, 2007 appears under PROPOSAL NO. 2 — “RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.”

 

H.R. and Compensation Committee.  The H.R. and Compensation Committee (referred to in this proxy statement as the compensation committee) reviews and approves broad compensation philosophy and policy and executive salary levels, bonus payments and equity awards pursuant to the Company’s management incentive plans. The compensation committee also reviews the Compensation Discussion and Analysis, discusses it with management, and makes a recommendation as to whether it should be included in each proxy statement. The compensation committee is currently composed of Messrs. Clark, Cook and Mitchell. Mr. Clark serves as the compensation committee’s chairman. The compensation committee charter is available on the Company’s Web site at www.amtd.com. The compensation committee met eight times during fiscal year 2007. The Compensation Committee Report appears under “EXECUTIVE COMPENSATION AND RELATED INFORMATION.”

 

Corporate Governance Committee.  The purpose of this committee is to ensure that the Company has and follows appropriate governance standards. To carry out this purpose, the committee develops and recommends to the board of directors corporate governance principles and leads and oversees the annual evaluation of the board of directors and its committees. The Corporate Governance Committee is currently composed of Messrs. Clark, Cohen, Cook, J. Joe Ricketts and Tessler. Mr. Tessler serves as the Corporate Governance Committee’s chairman. The Company’s Corporate Governance Committee met three times during fiscal year 2007.

 

Outside Independent Directors (“OID”) Committee.  The OID Committee’s purpose is to assist the board of directors in fulfilling the board’s oversight responsibilities by (i) identifying individuals qualified to serve on the board, (ii) reviewing the qualifications of the members of the board and recommending nominees to fill board vacancies and (iii) recommending a slate of nominees for election or reelection as directors by the Company’s stockholders at the Annual Meeting to fill the seats of outside independent directors whose terms are expiring. The OID Committee will also approve transfers of voting securities by TD and the Ricketts holders not otherwise permitted by the Stockholders Agreement, approve qualifying transactions (as defined in the Stockholders Agreement) and determine the fair market value (or select an independent investment banking firm to determine the fair market value) of certain property in connection with the stock purchase and transfer rights of TD and the Ricketts holders set forth in the Stockholders Agreement. The members of the OID Committee are Messrs. Cook, Mitchell and Tessler. Mr. Cook serves as the OID Committee’s chairman. All current OID Committee members are “independent” as defined in the applicable listing standards of The Nasdaq Stock Market. In accordance with the

Stockholders Agreement, the OID Committee will not include any director designated by TD or the Ricketts holders. The Company’s OID Committee met eight times during fiscal year 2007.

 

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: (i) a detailed resume outlining the candidate’s knowledge, skills and experience, (ii) a one-page summary of the candidate’s attributes, including a statement as to why the candidate is an excellent choice for the board, (iii) a detailed resume of the stockholder submitting the director recommendation and (iv) the number of shares held by the stockholder, including the dates such shares were acquired.

 

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

 

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

 

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

 

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

 

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

 

5. 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 is not subject to the committee’s review and recommendation process. The OID Committee charter is available on the Company’s Web site at www.amtd.com.

 

Non-TD Directors Committee.  The Non-TD Directors Committee is composed of all of the directors not designated by TD. The purpose of this committee is to make determinations relating to any acquisition by the Company of a competing business held by TD. The Non-TD Directors Committee is currently composed of Messrs. Cook, Mitchell, Moglia, J. Joe Ricketts, J. Peter Ricketts, Thomas S. Ricketts and Tessler. The Non-TD Directors Committee did not meet during fiscal year 2007.

 

Mergers & Acquisitions Committee.  The Mergers & Acquisitions Committee’s purpose is to investigate, evaluate, analyze, discuss and make reports and recommendations to the board of directors regarding acquisitions, mergers and strategic investments. The Mergers & Acquisitions Committee is composed of the outside independent directors, who currently are Messrs. Cook, Mitchell and Tessler. Mr. Mitchell serves as the Mergers & Acquisitions Committee’s chairman. The Mergers & Acquisitions Committee met 15 times during fiscal year 2007.

 

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

 

Corporate Secretary

TD AMERITRADE Holding Corporation

6940 Columbia Gateway Drive

Columbia, Maryland 21046

 

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

 

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

 

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

 

Based solely upon the Company’s review of forms filed by directors, officers and certain beneficial owners of the Company’s common stock (the “Section 16(a) Reporting Persons”) pursuant to Section 16 of the Securities Exchange Act of 1934 (the “1934 Act”), the Company has identified the following late filings by the Section 16(a) Reporting Persons: Former director Robert T. Slezak’s Form 4 filed on November 29, 2006 and J. Joe Ricketts’ Form 4 filed on January 4, 2007.

 

As of the Record Date, there were 594,915,753 shares of common stock issued and outstanding. The following table sets forth, as of the Record Date, the beneficial ownership of the Company’s common stock by each of the current executive officers named in the Summary Compensation Table and Mr. Tomczyk, by directors and nominees, by each person believed by the Company to beneficially own more than 5% of the Company’s common stock, by all current executive officers and directors of the Company as a group and by certain other Company stockholders. Shares of common stock subject to options that are exercisable within 60 days of the Record Date are deemed beneficially owned by the person holding such options and are treated as outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of any other person. Restricted stock units held by our directors and officers do not have voting rights until the units vest and the underlying shares are distributed. Deferred stock units held by our directors do not have voting rights until the underlying shares are distributed to the holder pursuant to his or her deferral election. The business address of each of the Company’s directors and executive officers is: TD AMERITRADE Holding Corporation, 4211 South 102nd Street, Omaha, NE 68127.

 

 

 

 

 

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

 

Governance of TD AMERITRADE.  The Stockholders Agreement provides that the board of directors of the Company consists of twelve members, five of whom 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 outside independent directors. The outside independent directors were initially designated from among the Company’s then-current independent directors and are now nominated by the OID Committee and subject to the consent of TD and the Ricketts holders. The number of directors designated by TD and the Ricketts holders depends on their maintenance of specified ownership thresholds of common stock and may increase or decrease from time to time based on those ownership thresholds, but will never exceed five (in the case of TD) or three (in the case of the Ricketts holders). The Company’s board of directors is classified into three classes, with each class serving staggered three-year terms. Subject to applicable laws and certain conditions and exceptions, the Company has

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

 

Share Ownership.  The Stockholders Agreement provides that TD may acquire shares of Company common stock only up to an aggregate beneficial ownership interest of 39.9% 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% for the remaining term of the Stockholders Agreement. The Stockholders Agreement also provides that TD will not, subject to certain exceptions, solicit proxies with respect to common stock. Notwithstanding the limitations on TD’s ownership described above, the Stockholders Agreement permits TD to make a non-public proposal to the board of directors to acquire additional shares pursuant to a tender offer or merger for 100% of the outstanding voting securities of the Company and to complete such a transaction, subject to the approval of independent directors and holders of a majority of the outstanding shares of common stock not affiliated with TD. Under the Stockholders Agreement, the Ricketts holders may acquire additional shares of common stock only up to an aggregate ownership interest of 29% of the outstanding common stock.

 

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

 

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

 

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

 

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

 

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

 

Non-Competition Covenants.  Subject to specified exceptions, the Stockholders Agreement generally provides that neither TD nor J. Joe Ricketts (so long as he is a director of the Company) or their respective affiliates may participate in or own any portion of a business engaged in the business of providing securities brokerage services in the U.S. (or, solely in the case of Mr. Ricketts and his affiliates, in Canada) to retail traders, individual investors and registered investment advisors. If TD acquires indirectly a competing business as a result of its acquisition of a non-competing business, TD must offer to sell the competing business to the Company at its appraised fair value determined in accordance with the terms of the Stockholders Agreement. If the Company decides not to purchase the competing business, TD must use commercially reasonable efforts to divest the competing business within two years. Mr. Ricketts, TD and their affiliates are permitted under the terms of the Stockholders Agreement to own a

passive investment representing less than 2% of a class of equity securities of a competing business so long as the class of equity securities is traded on a national securities exchange in the U.S. or the Toronto Stock Exchange. TD also is permitted to engage in certain activities in the ordinary course of its banking and securities businesses. In addition, the Company has agreed that it will not hold or acquire control of a bank or similar depository institution except (i) incidentally in connection with the acquisition of an entity not more than 75% of whose revenues are generated by commercial banks or (ii) in the event that TD does not hold control of any bank or similar depository institution that is able to offer money market deposit accounts to clients of the Company as a designated sweep vehicle, or TD has indicated that it is not willing to offer such accounts to clients of the Company through a bank or similar depository institution it controls.

 

Termination of the Stockholders Agreement.  The Stockholders Agreement will terminate (i) with respect to the Ricketts holders, when their aggregate ownership of common stock falls below approximately 4% , and (ii) upon the earliest to occur of (a) the consummation of a merger or tender offer where TD acquires 100% of the common stock, (b) the tenth anniversary of the consummation of the acquisition of TD Waterhouse, (c) the date on which TD’s ownership of common stock falls below approximately 4% of the outstanding voting securities of the Company, (d) the commencement by a third party of a tender offer or exchange offer for not less than 25% of common stock, unless the board recommends against the offer and continues to take steps to oppose the offer, (e) the approval by the board of a business combination that would result in another party owning more than 25% of the voting securities or consolidated assets of the Company or which would otherwise result in a change of control of the Company, or (f) the acquisition of more than 20% of the voting securities of the Company by a third party. For a period of up to one year following a termination under (ii)(d), (ii)(e) or (ii)(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% (39.9% in the first three years following the completion of the acquisition of TD Waterhouse) or, in the case of the Ricketts holders, 29% , except pursuant to a tender offer or merger for 100% of the outstanding shares of common stock approved by the holders of a majority of the Company’s outstanding shares of common stock (other than the Ricketts holders and TD). In addition, during that one-year period, the provisions of the Stockholders Agreement relating to the designation of directors and certain other provisions will remain in effect.

 

Introduction and Overview

 

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

 

Although he retired on June 1, 2007, the Company’s former chief operating officer, John R. MacDonald, appears in the Summary Compensation Table and related tables below. In connection with Mr. MacDonald’s retirement, the Company entered into a separation and release of claims agreement described under the heading “Potential Payments Upon Termination and Change-in-Control.”

 

Mr. MacDonald’s separation agreement manifests the Company’s pay-for-performance philosophy because his annual incentive was based on the actual performance of the Company during fiscal 2007. In approving the separation agreement, the compensation committee considered Mr. MacDonald’s overall contributions to the Company during his seven years of service prior to his retirement, including serving as the chief financial officer for over six years. Mr. MacDonald’s separation and release of claims agreement is an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2007.

 

The Company’s current chief operating officer, Fredric J. Tomczyk, does not appear in the Summary Compensation Table and related tables below because he did not become chief operating officer until the fourth quarter of fiscal year 2007. Nevertheless, we have included certain information about Mr. Tomczyk’s compensation because we believe it is important for a complete understanding of the Company’s ongoing executive compensation arrangements.

 

The factors considered in the decision to employ Mr. Tomczyk as chief operating officer included (i) his familiarity with the Company’s business attained during his service as a member of the board of directors as a designee of TD and (ii) his extensive experience in the financial services sector, particularly in wealth management, operations management and retail distribution, during his time as a senior executive at TD, including serving as the vice chair of corporate operations.

 

This discussion and the executive compensation tables below are based on the employment agreements of Messrs. Moglia, J. Joe Ricketts, Armstrong, Tomczyk, and Engel. We encourage you to read each of these employment agreements (or summary in the case of Mr. Engel). Mr. Moglia’s employment agreement, as amended, is available as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on June 29, 2006. The employment agreements of Messrs. Armstrong and Tomczyk are available as exhibits to the Company’s Current Reports on Form 8-K filed with the SEC on May 25, 2006 and June 7, 2007, respectively. Mr. J. Joe Ricketts’ employment agreement is available as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2002, and the amendment is available as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on December 9, 2004. A summary of Mr. Engel’s employment agreement is provided below under the heading “Potential Payments Upon Termination or Change-in-Control.”

 

We have organized this report as follows:

 

1. First, we provide information regarding the compensation committee.

 

2. Next, we discuss the guiding principles underlying senior executive compensation policies and decisions.

 

 

5. We describe stock ownership guidelines.

 

6. We discuss severance and change of control benefits.

7. We discuss certain tax treatment of senior executive compensation.

 

8. We then discuss the Company’s historical stock option grant procedures.

 

9. We conclude by describing compensation-related actions since the end of fiscal year 2007.

 

 

The compensation committee establishes and administers the Company’s executive compensation programs. The compensation committee evaluates the performance of the chief executive officer and our chairman and determines their compensation in light of goals and objectives of the compensation program. Mr. Moglia and the compensation committee together assess the performance of the other named executive officers and determine their compensation based on initial recommendations from Mr. Moglia. In October 2005, the compensation committee retained Mercer Human Resources Consulting to advise the compensation committee on all executive compensation matters, including the principal financial terms of new employment agreements and the design, level and mix of cash and equity compensation. Mercer and its affiliates also provide consulting services to the Company on its health and welfare plans and provided certain research to the Company in connection with director compensation.

 

The compensation committee is composed of three non-employee directors of the board. On June 5, 2007, Fredric J. Tomczyk resigned from the board of directors and the compensation committee and Mr. Clark was elected to the compensation committee. No member of the compensation committee during fiscal year 2007 was an employee of the Company or any of its subsidiaries at the time of his service on the compensation committee. Each member of the compensation committee during fiscal year 2007 qualified as a “non-employee director” under rule 16b-3 under the 1934 Act and as an “outside director” under section 162(m) of the Internal Revenue Code of 1986, as amended (“the Code”).

 

The compensation committee has delegated to Mr. Moglia the authority to increase the compensation of, and grant equity awards to, any employee whose compensation is less than the tenth highest paid employee participating in the management incentive plan, or MIP, subject in each case to any increase or grant being (i) within the budget previously approved by the compensation committee and (ii) in accordance with the terms of the applicable compensation plan.

 

The compensation committee delegated to Mr. Moglia the authority to grant restricted stock units, or RSUs, following fiscal 2007 within ranges approved by the compensation committee. The RSUs vest on the third anniversary of grant date. Mr. Gerber, who received an award with a value of $100,000, was the only named executive officer to receive an award of discretionary RSUs. The total fair value for all discretionary RSUs awarded was $3.8 million, calculated using a value of $18.86 per share, the volume-weighted-average price of the Company’s common stock on the October 25, 2007 grant date.

 

 

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

 

 

 

 

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

 

 

 

Targeted Overall Compensation

 

The Company operates in the highly competitive financial services sector, with a leadership position in retail securities brokerage services. The overall compensation program was designed to be competitive in terms of retention value with the total compensation practices at the Company’s major competitors in this market and to align the interests of executives with those of stockholders. Differences in pay within the executive group are driven primarily by differences in market rates of pay.

 

A targeted overall compensation level, including salary and incentive compensation — with incentive compensation being composed of annual cash and equity incentive — was established for each executive position and was designed to be payable when annual and long-term performance goals are fully met. These targeted levels were established with assistance from Mercer, based on comparisons to a primary peer group consisting of A.G. Edwards, Inc., The Charles Schwab Corporation, E*TRADE Financial Corporation, Jeffries Group, Inc. Piper Jaffray & Co., and Raymond James Financial, Inc. In establishing the targeted compensation for the CEO, the compensation committee also considered, as a secondary peer group, the compensation levels for the leaders of the brokerage businesses at Merrill Lynch & Co., Inc., Dean Witter and Smith Barney.

 

The targeted overall compensation package for Mr. Moglia of $10 million was set in the upper quartile in the primary peer group and below the compensation levels in the secondary peer group, reflecting his long and successful tenure with the Company, his experience in the industry and his expected contributions to the success of the integration of TD Waterhouse and to the ultimate growth of the Company.

 

The targeted overall compensation package for Mr. Gerber was set at $750,000, reflecting his overall responsibility, expected contribution and his experience.

 

The targeted overall compensation packages for Messrs. MacDonald and Armstrong were set at a level consistent with similar positions in the primary peer group. The actual targeted compensation level of $2 million for each of these executives reflects an approximate average of the median market compensation for their positions.

 

The targeted overall compensation package for Mr. Engel was set at a level consistent with similar positions in the primary peer group and industry. The actual targeted compensation level of $800,000 reflects the level of responsibility and the prevailing market pay rates.

The targeted overall compensation package for Mr. Tomczyk was set slightly above the median for similar positions in the primary peer group. The actual targeted compensation level of $3.6 million reflects his extensive experience in the financial services sector, particularly in wealth management, operations management and retail distribution.

 

Each named executive officer (and Mr. Tomczyk) had a base salary and target annual incentive award for fiscal year 2007 as follows:

 

 

 

 

The compensation committee, on the recommendation of Mr. Moglia, increased Mr. Gerber’s base salary to $300,000 and his total target annual incentive to $700,000, comprised of $400,000 in cash and $300,000 in RSUs for fiscal year 2008. This increase in his compensation for fiscal year 2008 was made to reflect the increased responsibilities associated with his position as chief financial officer, which he assumed at the beginning of fiscal year 2007. Following fiscal 2007, Mr. Gerber was awarded a discretionary grant of $100,000 of RSUs by Mr. Moglia in consideration of Mr. Gerber’s contribution to the successful integration of the TD Waterhouse acquisition and his overall responsibilities.

 

In addition to the targeted awards reflected in the table above, the compensation committee established a discretionary award pool for fiscal year 2008 that only will be paid if target diluted earnings per share, or EPS, for fiscal year 2008 is achieved or exceeded. The maximum bonus pool is $5 million. Any discretionary bonus pool award is limited to 75% of a participant’s target annual incentive, except for Mr. Moglia whose award is limited to 75% of his target annual cash incentive.

 

Consistent with the Company’s overall principles, the large majority of the total compensation package is based on performance. Within the targeted overall compensation package, the amount of total compensation subject to performance-based objectives is:

 

 

As shown above, Mr. Moglia’s base salary is $1 million, his target annual cash incentive is $3 million, and his target annual equity incentive is $6 million. Consequently, $9 million of his $10 million target overall compensation package, or 90%, is subject to the financial performance of the Company.

Annual Incentive Award

 

The board of directors and the compensation committee believe that the Company’s annual performance is best reflected in the annual EPS of the Company. Awards under the annual incentive plan for executive officers are tied to the achievement of an annual EPS goal established by the compensation committee in order to align the short-term interests of executives with those of stockholders. The Company uses the 1996 Long-Term Incentive Plan, or the LTIP, to motivate, reward and retain key executives and to align their interests to those of stockholders by linking the performance of the Company to equity awards made to executives. The equity component of the annual incentive, which is discussed below, vests on the third anniversary of the grant date in order to align the long-term interests of executives with those of stockholders. This clear measure and specific target ensure a strong, team-oriented pay-for-performance alignment consistent with the Company’s philosophy and also allows the full incentive payments to executive officers to qualify as performance-based compensation under section 162(m) of the Code.

 

For fiscal year 2007, the compensation committee established an EPS target for the annual incentive of $1.10, with the following range:

 

 

In fiscal year 2007, the Company achieved EPS of $1.06. Consistent with the terms of the annual incentive program for fiscal year 2007, the compensation committee approved annual incentive awards equal to 90% of the target annual incentive.

 

Because Mr. Tomczyk’s employment began during the fourth quarter of fiscal 2007, the compensation committee established a separate fourth quarter-only EPS goal for him. The target EPS was $0.29, with the following range:

 

 

For the fourth quarter of fiscal year 2007, the Company achieved EPS of $0.33. Consistent with the terms of Mr. Tomczyk’s annual incentive program, the compensation committee approved his annual incentive award equal to 110% of the target annual incentive, pro-rated for his service during one quarter of fiscal 2007.

 

The fiscal year 2007 annual incentive award consisted of a cash component and an equity component in the form of restricted stock units, or annual RSUs, that vest on the third anniversary of the grant date. In fiscal year 2006, the annual incentive award included performance restricted stock units, or PRSUs, that vested over three years based on EPS in each of fiscal 2007, 2008 and 2009 and also required the executive to be employed by the Company at the end of the three-year vesting period. The compensation committee approved the use of time-based RSUs in place of the PRSUs because it believed that adding an additional layer of performance criteria, beyond the

attainment of the annual EPS target, was not customary within the peer groups and was not providing the desired incentive and retention objectives of the compensation committee and the Company.

 

For fiscal year 2008, the compensation committee established the following EPS range for annual incentive compensation:

 

 

For each $0.01 increase in EPS above the 100% range, the payout is increased 5.0%, and for each $0.01 decrease in EPS below the 100% range, the payout is decreased 2.5%.

 

 

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

 

The stock ownership guidelines are as follows:

 

 

None of these executive officers is permitted to sell any equity interest in the Company until the stock ownership requirements have been met, after which Mr. Moglia must obtain approval from the compensation committee and all senior executives must obtain approval from the chief executive officer. The Company considers any stock held without restrictions and vested and unvested stock units, as well as vested but unexercised in-the-money stock options, deferred compensation that will settle in common stock and 401(k) holdings, in determining whether the stock ownership requirements have been met. As of the end of the fiscal year, only Mr. Armstrong has not met the stock ownership requirements.

 

 

Our senior executive team has been instrumental in successfully building the Company, and we believe it is important to provide benefits upon a change in control. We believe that the interests of stockholders are best served if the interests of senior management are aligned with them, and providing change in control benefits should minimize any reluctance of senior management to pursue change in control transactions that may be in the best interest of stockholders. None of Messrs. Moglia, Tomczyk, Armstrong or Engel will be entitled to any benefits unless there is a change of control of the Company and his employment is terminated without cause or he resigns with good reason. We utilize this dual-trigger change of control provision because we believe that triggering payments simply upon a change of control is not in the Company’s or stockholders’ best interests.

 

 

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

The Company believes that the cash bonuses paid and stock-based awards granted to executive officers under the MIP incentive plan are and will be fully deductible under section 162(m). In addition, the Company has adopted a general policy that all stock-based awards granted to its executive officers should generally only be made pursuant to plans that the Company believes satisfy the requirements of section 162(m). The compensation committee retains discretion and flexibility in developing appropriate compensation programs and establishing compensation levels and, in some instances, may approve compensation that is not fully deductible.

 

 

The Company last granted stock options to employees on November 18, 2005, after which time it has utilized RSUs and PRSUs as incentive equity awards.

 

All stock options issued by the Company were issued with an exercise price at least equal to the fair market value of the underlying shares of Company common stock (which generally was determined based on the closing price of the common stock on the grant date), except the two broad-based grants described below and options assumed in the Datek Online Holdings Corp. merger. The Company has not coordinated its option grants with the release of non-public information and has found no evidence of fraud or manipulation in its stock option grant practices.

 

Following an internal review of its stock option grant practices, the Company identified two tranches of broad-based grants made under the LTIP issued with an exercise price less than the fair market value of the underlying common stock on the measurement date. In order to avoid the adverse tax impact of Section 409A of the Code, the Company implemented a tender offer. The tender offer provided employees the opportunity to amend these options to increase the exercise price to the actual fair market value of the common stock on the measurement date. The Company also made cash payments to its affected employees to compensate them for the increased exercise price required to avoid the adverse tax impact of Section 409A of the Code. The total cost of the cash payments made to affected employees was approximately $250,000 in fiscal year 2006 and $74,000 in fiscal year 2007.

 

 

The table below summarizes RSUs granted to our named executive officers and Mr. Tomczyk for service during fiscal year 2007 as part of the annual equity incentive and discretionary RSUs. Because these grants were made in fiscal 2008, they are not included in the “Grants of Plan-based Awards” and “Outstanding Equity Awards at Fiscal Year-End” tables later in this section.

 

 

The number of RSUs granted was determined by dividing the dollar amount earned by $18.83, the average of the high and low price of the Company’s common stock for the 20 trading days ended October 18, 2007. These awards vest on the third anniversary of the grant date.

 

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

The H.R. and Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” of this Proxy Statement with TD AMERITRADE’s management. Based on that review and those discussions, the H.R. and Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis section be included in this Proxy Statement and incorporated by reference into TD AMERITRADE’s Annual report on Form 10-K for its 2007 fiscal year.

 

W. Edmund Clark, Chairman
Dan W. Cook III
Mark L. Mitchell

 

Messrs. Clark, Cook, Mitchell and Tomczyk served as members of the compensation committee during fiscal 2007. Although Mr. Tomczyk was a member of the compensation committee for part of fiscal 2007, he resigned from the board of directors and compensation committee prior to becoming an officer of the Company. During fiscal 2007, there were no compensation committee interlocks and no insider participation in compensation committee decisions that were required to be reported under the rules and regulations of the 1934 Act.

 

The following table provides information about compensation earned during fiscal year 2007 by Mr. Moglia, our chief executive officer, Mr. Gerber, our chief financial officer, our other three most highly compensated executive officers and Mr. MacDonald, our former chief operating officer who would have been among the three most highly compensated executive officers except he was not serving as an executive officer as of September 30, 2007. We refer to these individuals as our named executive officers. In accordance with SEC rules, the compensation described in this table does not include medical or group life insurance received by the named executive officers that is available generally to all salaried employees of the Company and certain perquisites and other personal benefits received by the named executive officers that in the aggregate do not exceed $10,000.

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes equity awards granted to our named executive officers in fiscal year 2007 under our LTIP. Equity awards granted in fiscal year 2008 for services rendered in fiscal year 2007 are summarized in the Compensation Discussion and Analysis under the heading “Actions Since End of Fiscal Year 2007.”

 

 

 

 

 

The following table provides information on the current holdings of stock option and stock awards by our named executive officers. This table includes unexercised and unvested option awards, unvested RSUs and PRSUs with performance conditions that have not been satisfied or that have not vested. The vesting schedule is shown for each grant in the footnotes to the table. The market value of the stock awards is based on $18.22, the closing market price of the Company’s common stock on September 28, 2007 (the last business day of fiscal 2007). The PRSUs are subject to performance conditions based on diluted earnings per share and operating cost synergies related to the acquisition of the TD Waterhouse, which are further described below.

 

 

 

 

Special PRSUs

 

The special PRSU awards were granted in fiscal year 2006 in connection with the closing of the acquisition of TD Waterhouse. One hundred percent of these special PRSUs will vest in March 2009 if the Company achieves $328 million of operating expense reductions between March 2006 and March 2009. This clear measure and specific target are tied directly to the achievement of the synergy savings expected from the acquisition of TD Waterhouse. The compensation committee established a range of payouts from 0% to 120% based on the percentage of fixed costs achieved relative to a target of $328 million of operating expense reductions.

 

The special PRSU awards made in fiscal year 2006 in connection with the closing of the acquisition of TD Waterhouse were as follows:

 

 

Total value of each special PRSU award (rounded to the nearest hundred dollars) and number of the special PRSUs awarded was determined using target performance and a per-share value of $20.67, the average of the high and low price of the Company’s common stock for the 20 trading days ended March 9, 2006.

 

If the performance objective is achieved, each restricted stock unit will provide for the payment of one share of common stock of the Company. We believe that the use of PRSUs provides a direct link to performance over the performance period and is consistent with the objectives to have a significant link in the incentive program to both the annual and long-term interests of stockholders.

 

Special Award for COO

 

In connection with Mr. Tomczyk’s employment as chief operating officer during the fourth quarter of fiscal 2007, he received a special equity award with a target of 270,833 PRSUs. The number of PRSUs that may ultimately vest will range between 0% and 120% of the target number and will be based on the Company’s achievement of a fiscal 2008 EPS goal. The fiscal 2008 EPS target for this award is $1.27, the midpoint of the EPS forecast per the Company’s October 23, 2007 Outlook Statement. For each $0.01 in fiscal 2008 EPS below the target, the payout percentage decreases 1%. For each $0.01 in fiscal 2008 EPS above the target, the payout percentage increases 2.5%, up to a maximum of 120% of the target. These PRSUs vest on July 9, 2010. The compensation committee determined that the midpoint of the forecast was appropriate because Mr. Tomczyk began his employment during the fourth quarter of fiscal 2007.

 

The following table summarizes stock option exercises for the named executive officers during fiscal 2007. There were no stock awards that vested for the named executive officers during fiscal 2007.

 

 

The table below provides information on the non-qualified deferred compensation of our named executive officers in fiscal year 2007.

 

 

 

 

Introduction and Overview

 

The Company has entered into employment agreements with each of its named executive officers other than Mr. Gerber. The Company has also entered into an employment agreement with Mr. Tomczyk. The employment agreements require the Company to provide compensation and benefits to the executives under these agreements and certain plans maintained by the Company in the event of a termination of employment or a change in control of the Company. The tables and discussion below for our named executive officers and Mr. Tomczyk are separated into six sections: (1) our chief executive officer, (2) our chief financial officer, (3) our founder and chairman, (4) Messrs. Armstrong and Tomczyk, (5) Mr. Engel and (6) Mr. MacDonald. Each table includes columns for specific circumstances that would have been applicable as of September 28, 2007 (the last business day of fiscal 2007) to trigger payments or the provision of benefits.

 

Compensation Plans and Award Agreements

 

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

 

 

Subject to the terms and conditions of the applicable employment agreement (described below) or award agreement, under the LTIP, in the event of a change in control, an award of RSUs or PRSUs will fully vest immediately prior to the change in control, unless the award is assumed, substituted or replaced by the successor company. “Change in control” under the LTIP and the PRSU and RSU award agreements is defined as:

 

 

 

 

 

 

Persons will be considered to be acting as a group if they are owners of a corporation that enters into a business transaction with the Company. Additionally, notwithstanding any public disclosure to the contrary, TD and the Ricketts holders together will not be considered to have formed a group solely as a result of being parties or bound by the stockholders agreement. Any future actions, agreements and arrangements between TD and the Ricketts holders outside of the rights and obligations of the stockholders agreement will be taken into account when considering whether TD and the Ricketts holders have formed a group in the future.

 

Employment Agreements

 

Except as specifically indicated in the separate tables below, we used the following assumptions in calculating the amounts included the tables and discussion below:

 

 

Chief Executive Officer

 

On May 19, 2006, the Company and Mr. Moglia entered into an employment agreement under which he serves as the CEO of the Company. The agreement was amended on June 23, 2006. Following is a brief summary of certain terms of his employment agreement.

Moglia Employment Agreement

 

The following table sets forth the potential payments to Mr. Moglia upon termination, non-renewal or a change of control, based on the terms of his employment agreement.