<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Salomon Inc
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Salomon Inc
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registrations statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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- ---------------
(1)Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
SALOMON INC
SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 212 783-7000
Robert E. Denham
Chairman and
Chief Executive Officer
March 25, 1994
Dear Stockholder:
Attached are materials related to the annual meeting of stockholders, to
be held in New York on May 4.
I encourage you to attend the annual meeting. The annual meeting provides
an opportunity for shareholders to question management about issues of
significance to the Company. By actively participating with meaningful
questions, you can contribute to the quality of the meeting.
Sincerely,
/s/ ROBERT E. DENHAM
ROBERT E. DENHAM
<PAGE> 3
SALOMON INC
SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 212 783-7000
NOTICE OF 1994 ANNUAL MEETING OF STOCKHOLDERS
March 25, 1994
To Our Stockholders:
The Annual Meeting of Stockholders of Salomon Inc will be held in the
Salomon Brothers Auditorium, Seven World Trade Center, New York, New York, on
Wednesday, May 4, 1994, at 10:00 a.m. for the following purposes:
1. To elect directors,
2. To act on a proposal to amend the Company's Equity Partnership
Plans,
3. To act on a proposal to adopt the Salomon Inc Stock Incentive Plan,
4. To act on a proposal to approve the Salomon Inc Executive Officer
Performance Bonus Plan,
5. To ratify the appointment of independent public accountants,
6. To act on a proposal which is expected to be presented at the
meeting by a stockholder and which is opposed by the Board of
Directors, and
7. To transact such other business as may properly come before the
meeting.
The record date for the determination of the stockholders entitled to vote
at the meeting or at any adjournment thereof is the close of business on March
15, 1994.
All stockholders are urged to attend the meeting. However, in order to make
sure that your shares are represented at the meeting, you are requested to sign,
date and return the enclosed proxy promptly in the accompanying envelope, which
requires no postage if mailed in the United States. This will not limit your
right to vote in person.
By Order of the Board of Directors
ARNOLD S. OLSHIN
Secretary
<PAGE> 4
SALOMON INC
SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 212 783-7000
PROXY STATEMENT FOR THE 1994
ANNUAL MEETING OF STOCKHOLDERS
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy, being mailed to the stockholders on or about March 25,
1994, is solicited by the Board of Directors of the Company. If a proxy is duly
received by the Secretary before the meeting, the shares represented by it will
be voted on all matters to be acted upon at the meeting unless the proxy is
revoked by written notice to the Secretary of the Company before the meeting or
by voting by ballot at the meeting.
Holders of the Company's Series A Cumulative Convertible Preferred Stock
(the "Preferred Stock, Series A") and Common Stock as of the close of business
on March 15, 1994 will be entitled to receive notice of and to vote at the
meeting and any adjournment thereof. On that date, there were outstanding and
entitled to vote 700,000 shares of Preferred Stock, Series A, each of which is
entitled to 26.31579 votes with respect to each matter to be voted on at the
meeting, voting together with the holders of the Common Stock, and 109,675,094
shares of Common Stock (exclusive of 45,869,109 shares held in the treasury) of
the Company, each of which is entitled to one vote with respect to each matter
to be voted on at the meeting. The presence at the meeting in person or by proxy
of the holders of Preferred Stock, Series A, and Common Stock holding in the
aggregate a majority of the outstanding shares of the Company's stock entitled
to vote shall constitute a quorum for the transaction of business. All matters
to be acted upon at the meeting shall be approved by the affirmative vote of a
majority of the votes cast. Abstentions and broker non-votes will count for
purposes of establishing a quorum but will not count as votes cast.
The cost of soliciting proxies in the form enclosed will be borne by the
Company. In addition to the solicitation by mail, proxies may be solicited
personally or by telephone by employees of the Company. The Company will
reimburse brokers holding stock in their names, or in the names of their
nominees, for their expenses in sending proxy material to the beneficial owners
of such stock.
1. ELECTION OF DIRECTORS
Eleven directors are to be elected at the Annual Meeting, each to serve for
one year and until his or her successor is elected and qualifies. All of the
nominees indicated below are presently members of the Board of Directors except
for Claire M. Fagin. The Rt. Hon. Lord Young of Graffham, who is currently a
director, is not standing for reelection. In the event any one or more of the
following nominees are unable to serve, it is the intention of the persons named
in the proxy to vote for the election of substitutes proposed by the Board of
Directors or, if no substitute is proposed, for the remaining nominees. The
Board of Directors has no reason to believe that any of the nominees will be
unable to serve.
<PAGE> 5
Information follows with regard to the nominees and their principal
occupations during the past five years and board and committee memberships.
- --------------------------------------------------------------------------------
DWAYNE O. ANDREAS
Mr. Andreas, age 76, has been Chairman of the Board and Chief Executive of
Archer Daniels Midland Company, a processor of agricultural products, for more
than five years.
Mr. Andreas has been a director of the Company since 1982 and is currently
Chairman of the Nominating Committee.
- --------------------------------------------------------------------------------
WARREN E. BUFFETT
Mr. Buffett, age 63, has been Chairman of the Board and Chief Executive Officer
of Berkshire Hathaway Inc., a holding company, for more than five years.(1) He
also served as interim Chairman and Chief Executive Officer of the Company and
interim Chairman and Chief Executive Officer of Salomon Brothers Inc between
August 18, 1991 and June 3, 1992. Mr. Buffett is also a director of Capital
Cities/ABC, Inc., The Coca-Cola Company, The Gillette Company and USAir Group,
Inc.
Mr. Buffett has been a director of the Company since 1987 and is currently
Chairman of the Executive Committee.
- --------------------------------------------------------------------------------
ROBERT E. DENHAM
Mr. Denham, age 48, has been Chairman and Chief Executive Officer of the Company
since June 3, 1992, after serving as General Counsel of the Company from
September 1991. Prior thereto, he was a partner in the law firm of Munger,
Tolles & Olson, Los Angeles, California for more than four years. He rejoined
Munger, Tolles & Olson as a partner in August 1992 and resigned from that firm
on December 31, 1993.
Mr. Denham has been a director of the Company since 1992 and is currently a
member of the Executive Committee.
- --------------------------------------------------------------------------------
CLAIRE M. FAGIN
Dr. Fagin, age 67, has been Interim President of the University of Pennsylvania
since 1993 and the Leadership Professor and Dean Emeritus, School of Nursing,
University of Pennsylvania, since 1992. Prior thereto, she was Professor and
Margaret Bond Simon Dean, School of Nursing, University of Pennsylvania, for
more than five years. Dr. Fagin is a director of Provident Mutual Life Insurance
Company.
- --------------------------------------------------------------------------------
ANDREW J. HALL
Mr. Hall, age 43, has been an Executive Vice President of the Company since
1991. He has also been Chairman and President of Phibro Division of Salomon Inc
since January 1, 1993, after serving as Chairman and Chief Executive Officer of
Phibro Energy, Inc. for one year and as its President since 1987.
Mr. Hall has been a director of the Company since 1991.
- --------------------------------------------------------------------------------
GEDALE B. HOROWITZ
Mr. Horowitz, age 61, has been an Executive Vice President of the Company for
more than five years. Mr. Horowitz is also Chairman of the Board of the New York
Local Government Assistance Corporation and a director of the Municipal
Assistance Corporation for the City of New York.
Mr. Horowitz has been a director of the Company since 1981.
- --------------------------------------------------------------------------------
2
<PAGE> 6
DERYCK C. MAUGHAN
Mr. Maughan, age 46, has been an Executive Vice President of the Company since
May 5, 1993. Additionally, he has been Chairman and Chief Executive Officer of
Salomon Brothers Inc since May 27, 1992, after having served as its Chief
Operating Officer from August 1991. Prior thereto, he served as a Vice Chairman
of Salomon Brothers Inc from January 1991 and as Chairman of Salomon Brothers
Asia Limited from 1986 to 1991.
Mr. Maughan has been a director of the Company since 1991.
- --------------------------------------------------------------------------------
WILLIAM F. MAY
Mr. May, age 78, has been Chairman and Chief Executive Officer of Statue of
Liberty-Ellis Island Foundation, Inc. for more than five years. Mr. May is also
a director of United Thermal Energy Corporation and a director and a member of
the compensation committee of U.S. Surgical Corporation.
Mr. May has been a director of the Company since 1978 and is currently Chairman
of the Audit Committee and a member of the Executive Committee, the Compensation
and Employee Benefits Committee and the Compliance Committee.
- --------------------------------------------------------------------------------
CHARLES T. MUNGER
Mr. Munger, age 70, has been Vice Chairman of the Board of Berkshire Hathaway
Inc. for more than five years.(1) He is also Chairman and a director of Daily
Journal Corporation, Chairman and a director of Wesco Financial Corporation and
a director of USAir Group, Inc.
Mr. Munger has been a director of the Company since 1987 and is currently a
member of the Audit Committee, the Compensation and Employee Benefits Committee,
the Compliance Committee and the Nominating Committee.
- --------------------------------------------------------------------------------
LOUIS A. SIMPSON
Mr. Simpson, age 57, has been President and Chief Executive Officer-Capital
Operations and a director of GEICO Corporation, an insurance organization, since
May 1993 after having served as Vice Chairman of the Board of GEICO Corporation
for more than five years. He is also a director of Potomac Electric Power
Company.
Mr. Simpson has been a director of the Company since 1993 and is currently a
member of the Audit Committee and the Executive Committee.
- --------------------------------------------------------------------------------
ROBERT G. ZELLER
Mr. Zeller, age 75, has been retired since 1979 after serving as Chairman of the
Board and Chief Executive Officer of F. Eberstadt & Co., Inc., investment
bankers. Mr. Zeller is also a director and a member of the compensation
committee of Rykoff-Sexton Corp.
Mr. Zeller has been a director of the Company since 1967 and is currently
Chairman of the Compensation and Employee Benefits Committee and a member of the
Executive Committee and the Audit Committee.
- --------------------------------------------------------------------------------
(1) (For information with respect to Berkshire Hathaway Inc., see
"Information as to Certain Stockholdings" below at Page 5.
3
<PAGE> 7
BOARD OF DIRECTORS' ROLE, MEETINGS, COMMITTEES AND FEES
ROLE. The business of the Company is managed under the supervision of the Board
of Directors. The Company's by-laws provide that, subject to the direction of
the Board, the Chairman shall have the general and active management of the
Company's business. The Board has adopted a policy pursuant to which the
Chairman should be a business-wise, shareholder-oriented person who does not
have personal dependence on or loyalty to management personnel of any of the
principal subsidiaries of the Company by virtue of long service with any of
those organizations. He is responsible, among other things, for organizing Board
process and information flow so that the Board can effectively perform its
functions.
A key function of the Board is the appointment and evaluation of senior
officers who have the direct responsibility for conducting or supervising the
business of the Company and its principal subsidiaries. The Board specifically
articulates objectives for the Chairman and evaluates his performance against
them. In addition, together with the Chairman, it sets objectives for the CEOs
of Salomon Brothers Inc and the Phibro Division of the Company and evaluates
their performance in light of these objectives.
The Board believes that its primary responsibility is to see that the
Company is managed in the long-term interests of shareholders. The Board
discharges this responsibility by meeting directly or through its committees
with senior management to discuss, review and, where appropriate, approve
policies and actions relating to significant issues including: (i) maintaining
high standards for compliance and for ethical behavior toward customers and
counterparties, (ii) determining the amount and structure of capital, (iii)
maintaining appropriate risk management systems, (iv) developing and applying
pro-shareholder compensation systems, and (v) providing fair reporting to
shareholders about the Company and its results.
MEETINGS AND COMMITTEES. The Board of Directors of the Company held eight
meetings in 1993. In addition, the Executive Committee of the Board of Directors
held two meetings during the year. The Company's By-Laws provide that the
Executive Committee may exercise most of the powers of the Board in the general
and active management of the business and affairs of the Company.
In addition to the Executive Committee, the standing committees of the
Board of Directors include the Audit Committee, the Compliance Committee, the
Compensation and Employee Benefits Committee and the Nominating Committee.
The Audit Committee, which consists entirely of nonemployee directors,
holds regular meetings at which the Company's independent accountants and its
internal auditors report directly to the Committee. The Audit Committee monitors
and provides oversight with respect to the Company's accounting policies,
internal accounting controls and the scope and results of the independent
accountants' examination of the financial statements. The Audit Committee held
five meetings in 1993.
The Compliance Committee establishes and reviews policies and their
administration with respect to the compliance of the Company and its
subsidiaries with regulatory and internal procedures and requirements. While it
is inevitable that there will be instances in which such procedures or
requirements are not fully met, the Committee seeks to minimize the risk that
all regulations and compliance policies are not strictly followed. The
Compliance Committee held four meetings in 1993.
The Compensation and Employee Benefits Committee establishes corporate
policy on the compensation of officers and key employees of the Company. The
report of the Compensation and Employee Benefits Committee regarding the 1993
compensation policies applicable to the Company's executive officers, including
the specific relationship of corporate performance to executive compensation, is
set forth below at Page 10. The Compensation and Employee Benefits Committee
consisted in 1993 entirely of nonemployee directors and held seven meetings in
that year.
The Nominating Committee considers and makes recommendations to the Board
with respect to the size and composition of the Board and candidates for
membership on the Board. The Board has directed the Nominating Committee to
consider for nomination to the Board persons with the following qualities: (1)
Owner-oriented. The director should be overwhelmingly focused on promoting the
interests of owners. Generally this owner-orientation is likeliest to be found
in individuals who have a significant investment in
4
<PAGE> 8
Salomon's common stock. (2) Business-wise. The director should be highly
talented in thinking about business issues in a creative and cooperative way and
should be able to react quickly and with sound judgment to business ideas. He or
she should be able and willing to express himself/herself effectively (and
forcefully, if needed) on issues discussed by the Board. (3) Time Commitment.
The director should be willing to make a sufficient time commitment to be an
effective director, including likely service on at least one Board Committee.
In considering candidates for Board vacancies, the Committee intends to
make a wide canvass of possible nominees, including women and persons of diverse
racial and cultural backgrounds. The Board believes that its procedure for
seeking board members and the qualifications it has set for Board service should
over time produce a strong and diverse board membership. Although the Committee
has not established procedures for the submission by shareholders of proposed
candidates for its consideration, the Committee will consider a candidate when
accompanied by sufficient, reliable information on the candidate. The Nominating
Committee held two meetings in 1993.
ATTENDANCE. In 1993, all of the directors of the Company attended at least 75%
of the aggregate number of meetings of the Board and meetings of Committees of
the Board on which they served.
FEES. Each nonemployee director is entitled to an annual retainer of $30,000.
In addition, the following directors' fees have been set: a $2,000 attendance
fee for each board meeting and a $1,000 attendance fee for each committee
meeting attended (if a director attends more than two committee meetings on the
same day or if a committee meeting is held on the same day as a board meeting,
only $2,000 is paid); a $3,000 annual retainer for each committee member and a
$2,000 additional annual retainer to each chairman of a committee. A deferred
compensation plan for nonemployee directors permits such directors to elect on
or before December 31 of each year to have all or a portion of the following
year's compensation deferred. Directors who are employees of the Company are not
entitled to an annual retainer or to any attendance fees or fees for service on
a committee.
INFORMATION AS TO CERTAIN STOCKHOLDINGS
The following are the only persons known to the Company who own
beneficially more than five per cent of any class of the Company's voting
securities as of March 11, 1994:
<TABLE>
<CAPTION>
TITLE OF SHARES PER CENT
CLASS BENEFICIALLY OF CLASS
OF STOCK OWNED OF STOCK
------------------- ------------- ---------
<S> <C> <C> <C>
Berkshire Hathaway Inc.(1)(2)........... Common 6,015,000 5.5
and affiliates Preferred, Series A 700,000 100.0
1440 Kiewit Plaza
Omaha, Nebraska 68131
Dart Financial Corporation.............. Common 7,718,400(3) 7.0
and affiliates
First Interstate Bank of Nevada N.A.....
Trust Department
3800 Howard Hughes Parkway
Suite 200
Las Vegas, Nevada 89109
Ruane, Cunniff & Co., Inc............... Common 5,810,804 5.3
and affiliates
1370 Avenue of the Americas
New York, New York 10019
</TABLE>
- ---------------
(1) The Company has been informed by Berkshire Hathaway Inc. ("Berkshire"), a
Delaware corporation, and by Warren E. Buffett, as follows: Berkshire is a
holding company, the capital stock of which is beneficially owned
approximately 40.7% by Warren E. Buffett and a trust of which he is trustee
but in which he has no beneficial economic interest and 3.1% by Mr.
Buffett's wife, Susan T. Buffett. Additionally, approximately 1.7% of such
capital stock is beneficially owned by Charles T. Munger. Mr. Buffett may be
deemed to control Berkshire and thus to own beneficially the Company's stock
owned beneficially by it. As of
5
<PAGE> 9
March 11, 1994, Berkshire owned beneficially (and, through wholly-or
majority-owned subsidiaries, owned of record) 700,000 shares of Preferred
Stock, Series A, of the Company, which shares are entitled to 18,421,053
votes, constituting approximately 14.4% of the votes entitled to be cast by
the outstanding voting securities of the Company. The Preferred Stock,
Series A, is convertible on the basis of 26.31579 shares of Common Stock for
each share of Preferred Stock, Series A, (subject to adjustment), or, in the
aggregate, for 18,421,053 shares of Common Stock. Under Berkshire's Stock
Purchase Agreement, dated September 27, 1987, with the Company, pursuant to
which affiliates of Berkshire acquired the Preferred Stock, Series A, (the
"Purchase Agreement"), the Company undertook to use its best efforts to
nominate and elect Messrs. Buffett and Munger, or two other Berkshire
representatives, to the Company's Board of Directors. For a description of
the other terms of the Purchase Agreement, see "Compensation Committee
Interlocks and Insider Participation" below at Page 10.
(2) Included are 401,000 shares of Preferred Stock, Series A, constituting
approximately 8.2% of the votes entitled to be cast by the Company's
outstanding voting securities, owned of record by National Indemnity
Company, a wholly-owned subsidiary of Berkshire. As of March 11, 1994,
National Indemnity Company also owned all of the shares of the Company's
Common Stock which are shown as beneficially owned by Berkshire.
(3) Does not deduct 3,210,000 shares of the Company's Common Stock, representing
2.9% of outstanding Common Stock, reported as "shares sold short" on March
4, 1994.
The following is the ownership, as of March 11, 1994, of shares of Common
Stock and Preferred Stock, Series A, of the Company by all directors, nominees
for director, the Executive Officers named in the table on Page 8 and the
ownership as of such date by Executive Officers and directors of the Company as
a group. Common Stock which is referred to as "beneficially owned", and the
number of the Company's shares deemed to be outstanding, include any shares
which may be purchased by any director or Executive Officer of the Company under
the Company's 1984 Non-Qualified Stock Option Plan within sixty days from March
11, 1994 and any shares which may be acquired by any director or Executive
Officer of the Company upon conversion of the Company's Restricted Convertible
Subordinated Notes within sixty days from March 11, 1994. Common Stock which is
referred to as "beneficially owned" also includes any shares owned by a spouse
or minor child and any shares over which the individual directly or indirectly
holds sole or shared voting or investment power. In addition, included are
shares which have been granted to any director or Executive Officer of the
Company under the Company's Equity Partnership Plans and a proportionate number
of the 2,443,671 unallocated shares, as of March 11, 1994, in the Trust under
the Equity Partnership Plans which directors and Executive Officers may direct
the Trustee of such Trust to vote at the Annual Meeting ("Unallocated Shares").
The Preferred Stock, Series A, as owned by Berkshire and deemed owned by Mr.
Buffett, comprises 100% of the class outstanding and 14.4% of the outstanding
voting power of the Company. All directors and Executive Officers as a group (16
persons) own 100% of the Preferred Stock, Series A, 6.8% of the Common Stock and
20.2% of the outstanding voting power of the Company. Except for Mr. Buffett, no
individual nominee for director beneficially owns as much as 1.0% of outstanding
Common Stock or voting securities having 1.0% of the outstanding voting power of
the Company.
6
<PAGE> 10
<TABLE>
<CAPTION>
TITLE OF SHARES
CLASS BENEFICIALLY
OF STOCK OWNED
-------------------- ------------
<S> <C> <C>
Dwayne O. Andreas........................................ Common 165,450(1)
Warren E. Buffett........................................ Common 6,015,000(2)
Preferred, Series A 700,000(2)
Robert E. Denham......................................... Common 25,712(5)
Claire M. Fagin.......................................... Common (7)
Andrew J. Hall........................................... Common 351,128
Gedale B. Horowitz....................................... Common 447,459(3)(4)(5)
Donald S. Howard......................................... Common 18,036(5)(10)
John G. Macfarlane....................................... Common 74,495(5)
Deryck C. Maughan........................................ Common 328,459(3)(5)
William F. May........................................... Common 4,532
Robert H. Mundheim....................................... Common 8,689(5)
Charles T. Munger........................................ Common -- (6)
Louis A. Simpson......................................... Common 25,000
David I. Young........................................... Common 8,760(5)
Robert G. Zeller......................................... Common 11,450
16 Directors and Executive Officers as a Group........... Common 7,500,954(8)(9)(10)
Preferred, Series A 700,000
</TABLE>
- -------------
(1) Such shares are owned by a foundation in which Mr. Andreas may have voting
power. Mr. Andreas disclaims any beneficial interest in such shares.
(2) With respect to voting securities which may be deemed to be beneficially
owned by Mr. Buffett, see footnotes (1) and (2) to the Table above on Page
5.
(3) Shares beneficially owned include shares subject to options granted under
the Company's 1984 Non-Qualified Stock Option Plan which may be exercised
within sixty days from March 11, 1994 as follows: Mr. Horowitz 106,700 and
Mr. Maughan 54,600.
(4) Shares beneficially owned include shares into which the Company's Restricted
Convertible Subordinated Notes (see "Certain Transactions and Legal Matters"
below at Page 13) may be converted within sixty days from March 11, 1994 as
follows: Mr. Horowitz 329,429.
(5) Shares beneficially owned include Unallocated Shares as follows: Mr. Denham
3,300, Mr. Horowitz 570, Mr. Howard 927, Mr. Macfarlane 8,154, Mr. Maughan
33,927, Mr. Mundheim 1,192 and Lord Young 1,064.
(6) Mr. Munger is Vice Chairman of the Board of Berkshire. With respect to
voting securities beneficially owned by Berkshire, see footnotes (1) and (2)
to the Table above at Page 5.
(7) Dr. Fagin has been nominated for election as a director at the 1994 Annual
Meeting of Stockholders. She beneficially owned no shares as of March 11,
1994. However, Dr. Fagin has advised the Board of Directors of the Company
of her intention to invest half of her director's fees to purchase shares of
the Company's Common Stock in open market transactions upon her election as
a director.
(8) Includes 166,200 shares of Common Stock subject to options granted under the
Company's 1984 Stock Option Plan which may be exercised by directors and
Executive Officers of the Company within sixty days from March 11, 1994,
329,429 shares of Common Stock into which the Company's Restricted
Convertible Subordinated Notes may be converted by directors and Executive
Officers of the Company within sixty days from March 11, 1994, 165,750
shares owned by family members or foundations in which shares persons in the
group disclaim any beneficial interest and 50,617 Unallocated Shares.
(9) Participants in the Equity Partnership Plans generally are entitled to
direct voting of a proportional number of unvoted allocated shares held
under the Equity Partnership Plans. While participants are deemed to have
beneficial ownership of such shares, the Table does not reflect such shares
because the number of such shares cannot be determined.
(10) Mr. Howard retired as an Executive Officer of the Company on December 31,
1993. Shares beneficially owned by Mr. Howard are included in the shares
owned by the group.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table shows the compensation of the Chief Executive Officer
and the four most highly compensated Executive Officers of the Company in 1993,
1992 and 1991.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------- --------------------- ----------
OTHER ANNUAL RESTRICTED OPTIONS/ LTIP(7) ALL OTHER
BONUS COMPENSATION STOCK AWARD SARS PAYOUTS COMPENSATION(8)
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) ($) ($)(6) (#) ($) ($)
- ---------------------------- ----- ---------- ---------- ------------ ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ROBERT E. DENHAM............ 1993 $956,800 $ 368,700 $ 23,912 $ 720,653 0 0 $ 6,655
Chairman and Chief Executive 1992 $999,434 0 $103,199(1) $ 196,788 0 0 $ 5,935
Officer 1991 -- -- -- -- --
DONALD S. HOWARD............ 1993 $200,000 $ 800,000 0 0 0 $ 9,968 $10,176
Executive Vice President 1992 $200,000 $ 638,000 0 $ 219,109 0 $ 396,880 $ 8,619
(and until June 1, 1993, 1991 $200,000 $ 638,000 $ 177,856 0 0
Chief Financial Officer)
JOHN G. MACFARLANE.......... 1993 $150,000 $1,238,000 0 $ 802,620 0 $ 19,935 $18,856
Treasurer 1992 $150,000 $1,038,000 $ 3,485 $ 552,595 0 $ 891,832 $16,277
1991 $150,000 $ 808,000 $ 265,866 0 0
DERYCK C. MAUGHAN........... 1993 $400,000 $2,600,000 0 $3,934,412 0 $ 79,741 $26,386
Executive Vice President 1992 $338,269 $1,659,423 $294,082(2) $2,682,498 0 $3,420,220 $17,378
and Chairman and Chief 1991 $250,000 $1,138,000 $ 672,354 0 0
Executive Officer of
Salomon
Brothers Inc
ROBERT H. MUNDHEIM.......... 1993 $958,000(3) $ 0 $ 65,602(4) $ 317,376(5) 0 0 $ 6,144
Executive Vice President and 1992 $351,538 $ 0 0 $ 25,380 0 0 0
General Counsel 1991 -- -- -- -- --
</TABLE>
- ---------------
(1) Includes $96,547 for a temporary residence and other related expenses which
were either paid for or reimbursed by the Company in connection with Mr.
Denham's relocation from Los Angeles to New York.
(2) Includes $283,854 for a temporary residence and other related expenses which
were either paid for or reimbursed by the Company in connection with Mr.
Maughan's relocation from Japan to New York.
(3) Pursuant to his employment contract with the Company, Mr. Mundheim received
$250,000 as base salary and $708,000 as a guaranteed bonus. See "Employment
Contracts and Change of Control Provisions" below at Page 9.
(4) Includes $53,333 for a temporary residence and other related expenses which
were either paid for or reimbursed by the Company in connection with Mr.
Mundheim's relocation from Philadelphia to New York.
(5) Represents market value on date of grant of shares of restricted stock
awarded to Mr. Mundheim under the Company's Equity Partnership Plan for Key
Employees. Such award was based on the Plan's Award Schedule whereunder Mr.
Mundheim's cash bonus of $950,000 for 1993 was reduced by $242,000.
(6) Restricted stock awards are shown at market value on the date of grant. The
number and value of the aggregate restricted stock holdings at December 31,
1993 for each of the persons named is as follows: Mr. Denham, 20,675 shares
with a value of $984,647; Mr. Howard, 16,634 shares with a value of
$792,194; Mr. Macfarlane, 51,082 shares with a value of $2,432,780; Mr.
Maughan, 212,515 shares with a value of $10,121,027; and Mr. Mundheim, 7,467
shares with a value of $355,616. Such restricted stock was awarded to the
persons named under the Company's Equity Partnership Plan for Key Employees
("EPP"). Awards under the EPP represent an unfunded, unsecured promise of
the Company and are generally distributed to participants five years after
the date of grant subject to acceleration in some circumstances and further
deferral or forfeiture in others. The EPP incorporates a dividend
reinvestment structure, pursuant to which the Company contributes an
additional 17.65% of any dividend in order to effect a 15% discount on all
dividend reinvestments. Participants' accounts in the EPP are held in a
grantor trust established by the Company.
(7) These amounts represent residual payouts in February 1993 under the Salomon
Brothers Inc Managing Directors' Compensation Plan and payouts in 1992 of
deferred compensation which vested through December 31, 1991 under the
Company's 1986 Special Bonus Plan and the Salomon Brothers Inc Managing
Directors' Compensation Plan.
(8) Amounts reported for 1993 include the 17.65% contribution which the Company
made in order to effect a 15% discount on all dividend reinvestments under
the EPP for the named executives as follows: Mr. Denham $587, Mr. Howard
$1,858, Mr. Macfarlane $3,788, Mr. Maughan $14,318 and Mr. Mundheim $76;
also includes contributions by the Company under the Salomon Brothers Inc
Retirement Plan to the account of each of the named executives as follows:
Mr. Denham $5,997, Mr. Howard $8,247, Mr. Macfarlane $14,997, Mr. Maughan
$11,997 and Mr. Mundheim $5,997; also includes $71 of term life insurance
premium for each of the named executives which the Company pays.
The Company made no stock option/SAR grants or awards under long-term
incentive plans in 1993 to any named Executive Officer.
8
<PAGE> 12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUE(1)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES ---------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ROBERT E. DENHAM............................. -- -- -0-/-0- -0-/-0-
DONALD S. HOWARD............................. -- -- -0-/-0- -0-/-0-
JOHN G. MACFARLANE........................... -- -- -0-/-0- -0-/-0-
DERYCK C. MAUGHAN............................ -- -- 54,600/-0- 1,581,881/-0-
ROBERT H. MUNDHEIM........................... -- -- -0-/-0- -0-/-0-
</TABLE>
- ---------------
(1)The 1993 year-end value of the Company's common stock was $47.625.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL PROVISIONS
In 1992, the Company entered into a guaranteed employment contract with Mr.
Mundheim through December 31, 1995, subject to Mr. Mundheim's earlier
resignation or termination of employment for cause, whereunder Mr. Mundheim
receives an annual base salary of $250,000 and a bonus of $950,000 in 1993,
$1,100,000 in 1994 and $1,250,000 in 1995. The contract also provides for Mr.
Mundheim's participation in the Company's Equity Partnership Plan for Key
Employees.
In 1988, the Board of Directors approved amendments to certain of the
Company's benefit plans, including the Salomon Inc Profit Sharing Plan, now the
Salomon Brothers Inc Retirement Plan, (the "Retirement Plan"), and the 1984
Stock Option Plan. These amendments provide for the vesting and, under most
circumstances, distribution of benefits and credits made under such Plans upon
the occurrence of certain change of control events not approved by the Board of
Directors. Upon such a change of control (as defined in the Plans), employees
will be entitled to receive the immediate cash payment of the excess of the fair
market value (as defined) of a share of Common Stock over the exercise price of
each share covered by an option or a stock appreciation right under the 1984
Stock Option Plan. Additionally, upon a change of control, each employee will be
entitled to receive an amount not less than the year-end bonus paid to him in
the year preceding the change of control, prorated for the number of months
elapsed up to the change of control, and all amounts credited to employees'
accounts under the Retirement Plan will vest. If a change of control would have
occurred on March 1, 1994, for example, Messrs. Denham, Macfarlane and Maughan
would have been entitled to receive at least the following amounts of cash
compensation with respect to 1993 year-end bonuses (in addition to benefits
under the Company's other benefit plans described above): $57,000, $206,333 and
$433,333, respectively. [Under Mr. Mundheim's employment contract, payment of
his 1994 bonus in full is guaranteed, subject only to his earlier resignation or
termination of employment for cause.] Moreover, participants in the Equity
Partnership Plans would receive a distribution of all shares allocated to them
under the Equity Partnership Plans in the event of a change of control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1993, the Compensation and Employee Benefits Committee consisted of Mr.
Robert G. Zeller, as Chairman, and Messrs. William F. May and Charles T. Munger.
All of the members of the Committee were non-employees of the Company.
In 1993, a son-in-law of Mr. Zeller, a nominee for director of the Company,
was employed by the Company's subsidiary, Salomon Brothers Inc, as a
non-executive officer and received compensation in 1993 comparable to that of
other employees with similar responsibilities and experience. Such employment
was terminated in 1993.
Mr. Munger, a nominee for director of the Company, is Vice Chairman of the
Board of Berkshire. Among the Company's transactions, in the ordinary course of
its business in 1993, Salomon Brothers Inc sold
9
<PAGE> 13
to Berkshire and its affiliates marketable securities having a value of
approximately $1,112,761,847 and purchased from Berkshire and its affiliates
marketable securities having a value of approximately $311,982,342.
Additionally, in 1993, Berkshire and its affiliates paid commissions, fees,
service charges and interest of $2,031,103 to Salomon Brothers Inc in connection
with securities transactions and advisory services. The Company believes that
its transactions with Berkshire and its affiliates are upon terms which are
comparable to those the Company could obtain from other sources.
In addition, Berkshire and its subsidiaries own substantial equity
positions in a number of other corporations, and have equity positions amounting
to 10% or more of the voting power of Capital Cities/ABC, Inc., The Gillette
Company, GEICO Corporation, USAir Group, Inc., PS Group, Inc., The Washington
Post Company, Wells Fargo & Company and General Dynamics Corporation. From time
to time Salomon Brothers Inc engages in the ordinary course of its business in
transactions with some or all of such entities as an underwriter of securities,
as a broker of or dealer in securities, or otherwise. Additionally, other
subsidiaries of the Company may engage in transactions with such entities from
time to time. The Company believes that any such transactions are on terms
comparable to those on which the Company deals with other third parties.
In 1987, the Company entered into the Purchase Agreement with Berkshire
pursuant to which affiliates of Berkshire acquired 700,000 shares of the
Preferred Stock, Series A, for $700 million. In the Purchase Agreement,
Berkshire (which for purposes of the Purchase Agreement includes the affiliates
of Berkshire) agreed that (i) for a period of seven years after its purchase
Berkshire will not acquire in excess of 20% of the Company's voting stock
outstanding without the prior consent of the Company; (ii) for a period of seven
years after its purchase Berkshire will not be a member of a Section 13(d) group
with an unaffiliated party or a participant in a proxy solicitation with respect
to any securities of the Company; (iii) Berkshire will not sell any of the
Company securities owned by it to a third party without first giving the Company
or its designee a reasonable opportunity to purchase such securities at the same
price and on the same terms and conditions proposed with respect to an
anticipated sale by Berkshire to a third party; and (iv) if the Company does not
exercise its right of first refusal and buy Company securities which Berkshire
proposes to sell, Berkshire will not knowingly sell to any one entity or group
acting in concert Company securities giving such entity or group securities
which amount in the aggregate to over 5% of the Company voting stock outstanding
at the time of the sale. In the Purchase Agreement, the Company agreed to use
its best efforts to nominate and elect Warren E. Buffett and Charles T. Munger,
or two other Berkshire representatives, to the Company's Board of Directors. In
addition, in connection with the distribution by the Company on February 18,
1988 of Preferred Share Purchase Rights to its stockholders, the Company issued
Preferred Share Purchase Rights to the holders of the Preferred Stock, Series A,
on the basis of one Right for each share of Common Stock into which a share of
Preferred Stock, Series A, is convertible, and the holders of the Preferred
Stock, Series A, waived the conversion adjustment they would otherwise have been
entitled to under the terms of the Preferred Stock, Series A.
REPORT OF
THE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
The Board's Compensation and Employee Benefits Committee (the "Committee")
makes compensation decisions with respect to the Company's Chief Executive
Officer and other executive officers including Messrs. Howard, Macfarlane,
Maughan and Mundheim. The decisions for 1993 (except as to Mr. Mundheim) are
subjective judgments made by the Committee.
In determining compensation in 1993, the Committee continued to follow the
policy of linking the interests of management with those of the owners. This
policy is implemented by causing the individual manager's compensation to depend
primarily upon his performance in relation to the performance, over time, of the
business unit for which he is responsible. In accordance with industry practice,
salaries are low in comparison to total compensation so that the bulk of
compensation is paid on a performance basis. This approach limits compensation
in periods of poor business performance and increases compensation to recognize
significant results. After the Committee determines the total compensation for
the Chief Executive Officer and each executive officer, a significant portion of
such total compensation is awarded in Company stock, payable, generally, in five
years, under the Company's Equity Partnership Plan for Key Employees
10
<PAGE> 14
(which generally applies to highly compensated employees, including Executive
Officers). The portion to be paid in stock is determined by an award schedule
contained in the plan, and can reach 50% or more for highly compensated
employees. (The table specifying the awards is set forth on page A-23 of this
Proxy Statement.) The market value of the restricted stock awarded to the
Company's Chief Executive Officer and the four most highly compensated Executive
Officers in 1993 is set forth in the Summary Compensation Table in the Company's
1994 Proxy Statement. Dividends paid on the restricted stock are reinvested for
all plan participants, including Executive Officers, pursuant to the terms of
the plan. (See page 8, footnote 6 of this Proxy Statement.)
In addition, the Committee reviewed compensation paid in previous years
(adjusted for an estimate of the current year) by various financial services
companies with which the Company competes, including Bankers Trust Company, Bear
Stearns, Merrill Lynch, Morgan Guaranty and Morgan Stanley. The Committee
anticipated that Mr. Denham's 1993 compensation would be at the lower end of the
competitor range and that Mr. Maughan's compensation would be near the middle of
the range. Bear Stearns, Merrill Lynch and Morgan Stanley are included in the
S&P Brokerage Index referred to in the performance graph set forth in the
Company's 1994 Proxy Statement.
In setting the 1993 compensation of Robert E. Denham, the Company's
Chairman and Chief Executive Officer, the Committee took into account Mr.
Denham's performance in relation to the following factors (in order of
importance):
- Management of the Board of Directors process by insuring that the
Board timely received the appropriate level of information to
discharge its decision-making responsibilities;
- Supervision of the senior officers of Salomon Inc and its major
subsidiaries;
- Supervision of the management of the Company's market and credit
risks to insure that various business units were following
appropriate risk/reward criteria;
- Management of the allocation of the Company's capital to the various
business segments as well as the Company's overall level of capital.
In addition to these criteria, the Committee also considered Mr. Denham's
performance in communicating with creditors and shareholders, maintaining a
positive internal control environment, his role in special situations (such as
his role in resolving significant litigation involving the Company) and
otherwise building shareholder value.
The Committee concluded that based on their subjective judgment Mr.
Denham's performance in 1993 met or exceeded their highest expectations with
respect to each of these factors.
Mr. Maughan's performance as Chairman and Chief Executive Officer of the
Company's securities segment was judged in relation to several significant
objectives (in order of relative importance): limiting risks borne by creditor
and owner interests to appropriate levels, improving the overall performance and
management (including risk management) of proprietary trading activities,
enhancing the earnings capacity of customer oriented businesses, improving
compensation systems and reducing infrastructure costs.
Mr. Howard's compensation in 1993 was established by the Committee at the
same level as his 1992 compensation, taking into account Mr. Howard's
retirement, effective December 31, 1993, after he was succeeded as Chief
Financial Officer of the Company on June 1, 1993.
Mr. Macfarlane's performance was viewed by the Committee in both his role
as a senior financial officer of the Company and as a manager of an element of
Salomon Brothers fixed income business. In his role as a senior financial
manager, Mr. Macfarlane effectively financed a larger balance sheet in 1993 and
played a major role in communications with lenders and credit rating agencies.
The results of Mr. Macfarlane's activities within the fixed income unit of
Salomon Brothers showed significant growth over the prior year's results.
Mr. Mundheim's compensation for 1993 was based upon an employment contract
entered into in 1992 to induce him to join the Company as General Counsel. In
approving Mr. Mundheim's employment contract, the Committee had deemed Mr.
Mundheim's prior experience as the Co-Chairman of the law firm of Fried, Frank,
Harris, Shriver & Jacobson, Dean of the University of Pennsylvania Law School
and General Counsel of the U.S. Treasury to be extremely valuable to the
Company.
11
<PAGE> 15
The Committee addressed the issue as to compliance with newly enacted
Section 162(m) of the Internal Revenue Code of 1986, relating to the
deductibility of compensation paid to the Chief Executive Officer and its other
most highly compensated executive officers. The Committee took the position that
it would attempt to structure compensation for 1993 and the future so that all
compensation would be deductible. The details of the approach to be taken are
included in the material describing the Equity Partnership Plans, Stock
Incentive Plan and Executive Officer Performance Bonus Plan in the Company's
1994 Proxy Statement.
COMPENSATION AND EMPLOYEE
BENEFITS COMMITTEE
Robert G. Zeller, Chairman
William F. May
Charles T. Munger
PERFORMANCE GRAPH
SALOMON INC VS. S&P 500 VS. S&P BROKERAGE INDEXES
Comparison of Five-Year Cumulative Total Return
1988-1993
(GRAPH)
<TABLE>
<CAPTION>
Measurement Period S&P
(Fiscal Year Covered) Salomon Inc S&P 500 Broker-age
--------------------- ------------- --------- ----------
<S> <C> <C> <C>
1988 100.0 100.0 100.0
1989 99.4 131.9 113.4
1990 106.4 127.6 97.6
1991 137.0 166.6 227.5
1992 173.9 179.4 248.1
1993 220.7 197.5 336.7
</TABLE>
Note: Includes the reinvestment of dividends.
12
<PAGE> 16
CERTAIN TRANSACTIONS AND LEGAL MATTERS
Among the Company's transactions, in the ordinary course of its business in
1993, Salomon Brothers Inc sold to Archer Daniels Midland Company ("ADM") and
entities in which the Company is informed ADM has a material interest marketable
securities having a value of approximately $495,603,915 and purchased from ADM
and such entities marketable securities having a value of approximately
$346,523,931. In addition, Salomon Brothers Inc paid net fees of $69,735 in
connection with investment banking and securities trading activities on behalf
of ADM. The Company believes that its transactions with ADM are upon terms which
are comparable to those the Company could obtain from other sources. Dwayne O.
Andreas, a director and a nominee for director of the Company, is Chairman of
the Board and Chief Executive of ADM.
Warren E. Buffett, a director and a nominee for director of the Company, is
Chairman, Chief Executive Officer and the principal shareholder of Berkshire and
a director of The Coca-Cola Company, Capital Cities/ABC, Inc., The Gillette
Company and USAir Group, Inc. For information regarding the Company's
transactions in 1993 with Berkshire, The Coca-Cola Company, Capital Cities/ABC,
Inc., The Gillette Company and USAir Group, Inc., see "Compensation Committee
Interlocks and Insider Participation" above at Pages 9 and 10.
Among the Company's transactions, in the ordinary course of its business in
1993, Salomon Brothers Inc sold to Dart Financial Corporation and its affiliates
("Dart") marketable securities having a value of approximately $2,424,937,385
and purchased from Dart marketable securities having a value of approximately
$1,910,535,589. Additionally, in 1993, Dart paid commissions, fees, service
charges and interest of $20,291,936 to Salomon Brothers Inc in connection with
securities transactions and advisory services. The Company believes that its
transactions with Dart are upon terms which are comparable to those the Company
could obtain from other sources. As of March 11, 1994, Dart beneficially owned
more than five percent of the Company's outstanding Common Stock.
Among the Company's transactions, in the ordinary course of its business in
1993, Salomon Brothers Inc purchased from Ruane, Cunniff & Co., Inc. and its
affiliates ("Ruane") marketable securities having a value of approximately
$157,150. Additionally, in 1993, Ruane paid fees of $145 to Salomon Brothers Inc
in connection with securities transactions. The Company believes that its
transactions with Ruane are upon terms which are comparable to those the Company
could obtain from other sources. As of March 11, 1994, Ruane beneficially owned
more than five percent of the Company's outstanding Common Stock.
In 1993, the Company engaged the services of the law firm of Munger, Tolles
& Olson, Los Angeles, California. It is anticipated that the services of such
firm will continue to be utilized by the Company in 1994. Robert E. Denham, a
director and a nominee for director of the Company, resigned as a partner in
Munger, Tolles & Olson on December 31, 1993. However, prior to his resignation,
Mr. Denham's arrangements with the firm provided that he perform no services for
the Company on behalf of the firm in 1993 and receive no compensation in
connection with the services that the firm performed for the Company in 1993.
In November 1993, the Company loaned Robert H. Mundheim, an Executive
Officer of the Company, the sum of $900,000 to purchase a residence in New York
City in connection with Mr. Mundheim's planned relocation from Philadelphia. The
loan is interest-free.
On October 1, 1981, the Company and Salomon Brothers, an investment banking
and securities trading partnership, combined their businesses. Pursuant to such
combination, the Company issued an aggregate of $250,000,000 of 9% Restricted
Convertible Subordinated Notes, due October 1, 1991 (the "Notes"), to Salomon
Brothers, which Notes were subsequently distributed to certain of its partners.
Upon issuance, the Notes were convertible, in accordance with their respective
terms, into an aggregate of 18,000,000 shares of Common Stock (adjusted for the
2 for 1 stock split declared in 1983). The conversion period commenced October
1, 1982. On December 5, 1990, the Board of Directors approved an extension,
until October 1, 1994, of the maturity date of Notes held by then-current
employees of the Company, provided that the annual rate of interest on such
Notes be reduced from and after October 1, 1991 to 7.75%. Gedale B. Horowitz,
who was a General Partner of Salomon Brothers prior to October 1, 1981, was a
payee of a Note as of December 31, 1993 in the principal amount of $4,575,406.
Mr. Horowitz is a director and a nominee for director of the Company.
13
<PAGE> 17
Among the Company's transactions in the ordinary course of its business in
1993, Salomon Brothers Inc sold to GEICO Corporation ("GEICO") and entities in
which the Company is informed GEICO has a material interest marketable
securities having a value of approximately $58,269,070 and purchased from GEICO
and such entities marketable securities having a value of approximately
$185,681,980. In addition, Salomon Brothers Inc earned net commissions and fees
of $1,117,024 in connection with investment banking and securities trading
activities on behalf of GEICO. The Company believes that its transactions with
GEICO are upon terms which are comparable to those the Company could obtain from
other sources. Louis A. Simpson, a director and a nominee for director of the
Company, is President and Chief Executive Officer--Capital Operations of GEICO
Corporation.
Since January 1, 1993, Salomon Brothers Inc, as agent or principal, has
handled purchases and sales of securities (including different forms of
repurchase transactions) from time to time for various of the directors and
employees of the Company. The Company believes that such transactions were in
the ordinary course of business, were at substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other customers and did not involve more than normal risk of
collectibility or present other unfavorable features.
David C. Fisher, Controller of the Company, sold 500 shares of the
Company's Common Stock held in his Employee Stock Purchase Plan account in
November 1993. The sale was reported by Mr. Fisher in January 1994 rather than
in December 1993 as required by Section 16(a) of the Securities Exchange Act of
1934.
Commencing in 1987, 21 purported derivative lawsuits were filed in Delaware
Chancery Court, New Castle County, New York Supreme Court, New York County, and
the United States District Court for the Southern District of New York against,
among others, the Company and its directors (including Messrs. Andreas,
Horowitz, May and Zeller who are nominees for director) and in two instances
Berkshire, arising out of the Company's purchase of 21,282,070 shares of its
Common Stock beneficially owned by Minerals and Resources Corporation Limited at
$38.00 per share and the Company's sale for $700 million of 700,000 shares of
Preferred Stock, Series A, to affiliates of Berkshire. In addition, the lawsuits
challenge the Company's distribution of Preferred Share Purchase Rights to its
stockholders on February 18, 1988 and the amendment of certain of the Company's
employee benefit plans. The complaints allege, among other things, that the
aforesaid corporate actions were part of a scheme to maintain the positions of
the defendant directors with the Company in derogation of their fiduciary duties
and that the Company had the opportunity to sell the Preferred Stock, Series A,
on superior terms. The complaints seek, among other things, injunctive relief
with respect to the challenged corporate actions, rescission of such corporate
actions and monetary damages. The litigation in Delaware (consisting of 19 of
the purported derivative lawsuits) had been consolidated under the caption In re
Salomon Inc Shareholder Litigation, Civil Action No. 9296. The Delaware court,
on May 24, 1993, entered into a stipulation and order of dismissal without
prejudice with respect to this consolidated action.
2. APPROVAL OF AMENDED EQUITY PARTNERSHIP PLANS
Effective as of June 6, 1990, the Company adopted the Equity Partnership
Plan for Key Employees (the "Key Employee Plan") and the Equity Partnership Plan
for Professional and Other Highly Compensated Employees (the "Professional
Employee Plan") (together, the "Equity Partnership Plans"). Under the Equity
Partnership Plans as currently in effect, up to 30,000,000 shares of Company
Common Stock could be allocated to participants' accounts. The amount of shares
available under the Equity Partnership Plans may be adjusted in the event of a
stock dividend or split, recapitalization, extraordinary dividend, merger,
consolidation, combination or exchange of shares or similar corporate change.
The Equity Partnership Plans initially were approved by the Company's
stockholders at the meeting of the Company's stockholders on May 1, 1991, and
they were again approved by the Company's stockholders at the meeting of
stockholders on May 6, 1992.
On March 2, 1994, the Board of Directors adopted several amendments to the
Equity Partnership Plans (the "Amendments"), subject to the approval of the
Company's stockholders, that are designed to increase
14
<PAGE> 18
the number of shares available under the Equity Partnership Plans and to ease
the administration of the Equity Partnership Plans.
The following table shows the awards that would be granted to specified
individuals under the Equity Partnership Plans in 1994 if they receive the same
compensation in 1994 that they received in 1993. The actual amounts of 1994
awards under the Equity Partnership Plans are not yet determinable.
AMENDED PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR VALUES
NAME AND POSITION ($)(2) NUMBER OF UNITS
- ------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
ROBERT E. DENHAM............................................. $ 720,653 15,415
Chairman and Chief Executive Officer
JOHN G. MACFARLANE........................................... $ 802,620 17,168
Treasurer
DERYCK C. MAUGHAN............................................ $ 3,934,412 84,159
Executive Vice President and Chairman and
Chief Executive Officer of Salomon Brothers Inc
ROBERT H. MUNDHEIM(1)........................................ $ 396,064(1) 8,472(1)
Executive Vice President and General Counsel
All Executive Officers as a Group............................ $ 6,314,076(1) 135,061(1)
Non-Executive Director Group................................. 0 0
Non-Executive Officer Employee Group......................... $ 288,559,186 6,172,389
</TABLE>
- ---------------
(1) To the extent that annual compensation for 1994 is guaranteed, the awards
shown are based on such guaranteed compensation.
(2) Market value as of December 1, 1993.
In 1993, approximately 848 employees received awards under the Key Employee
Plan and approximately 1,303 employees received awards under the Professional
Employee Plan. As of December 31, 1993, a total of 895 employees had accounts
maintained under the Key Employee Plan and 1,736 employees had accounts
maintained under the Professional Employee Plan. In 1993, all employees as a
group received allocations of 6,435,645 shares under the Equity Partnership
Plans. A total of 6,301,626 shares were granted as awards under the Equity
Partnership Plans in 1993 and 169,227 shares were allocated to participants in
the Equity Partnership Plans as a result of the reinvestment of dividends
(including, where applicable, the 17.65% contribution to effect a 15% discount
on dividend reinvestment). Of the 1993 awards, 164,960 shares were granted to
participants in the Professional Employee Plan and 6,136,666 shares were granted
to participants in the Key Employee Plan. The fair market value per-share of
Company Common Stock as of December 1, 1993, the date awards were granted in
1993, was $46.75. In 1993, awards were based on an "average cost per share" of
$41.938. On March 11, 1994, the fair market value per share of the Company's
Common Stock was $52.125.
The following is a summary of the material features of the Equity
Partnership Plans and the effect of the Amendments. The following summary is
qualified in its entirety by reference to the complete text of the Equity
Partnership Plans, as restated to incorporate the Amendments, which are attached
to this Proxy Statement as Exhibits A and B, respectively.
15
<PAGE> 19
DESCRIPTION OF EQUITY PARTNERSHIP PLANS
A. GENERAL
Participation in the Equity Partnership Plans generally is mandatory.
Awards under the Equity Partnership Plans are based on a percentage of each
participant's total compensation and result in a reduction of each participant's
end-of-year cash bonus that the Committee determines would have been paid to the
participant in the absence of the Equity Partnership Plans. All awards under the
Equity Partnership Plans are made in the form of Company Common Stock based on a
price equal to 85% of the "average cost per share" of shares purchased for
awards under the Equity Partnership Plans. The Equity Partnership Plans also
include an automatic dividend reinvestment feature pursuant to which the Company
makes a contribution equal to 17.65% of dividends allocated to participants'
accounts in order to effect a 15% discount on such reinvestments.
Awards generally are distributed to participants within thirty business
days after the expiration of five years after the date as of which the awards
are granted, although earlier distributions may be made upon a participant's
death or termination of employment as a result of disability, upon the
participant's "permissive retirement" (as defined in the Equity Partnership
Plans) if the participant makes a permissive retirement election within
forty-five days after the award is granted, in the event of certain "changes in
control" of the Company or in the event of certain terminations of an Equity
Partnership Plan. In the event that a participant's employment is or is deemed
to have been terminated for cause, the participant will forfeit all shares
allocated to him under the Equity Partnership Plans.
Participants in the Key Employee Plan, but not the Professional Employee
Plan, were permitted to "roll over" to the Key Employee Plan part or all of
their balances from certain prior incentive plans (the "Prior Plans"), and are
required to "roll over" to the Key Employee Plan their balances from another
Equity Partnership Plan. Shares allocated to a participant in respect of a
rollover generally will be distributed pursuant to the same conditions as if
they were awards under the Key Employee Plan. Participants who "rolled over"
funds into the Key Employee Plan from the Prior Plans did so pursuant to an
irrevocable election in December of 1990. Participants in the Key Employee Plan
did not receive the 15% discount in respect of shares allocated to them as a
result of "rollover." Participants do not receive the 15% discount in respect of
reinvested dividends paid on shares allocated to them as a result of "rollover"
from the Prior Plans. Participants do, however, receive the 15% discount on
reinvested dividends in respect of shares rolled over from another Equity
Partnership Plan.
In addition, participants in the Key Employee Plan, but not the
Professional Employee Plan, generally are entitled to make up to two "long-term
investment elections" with respect to each award and rollover under the Key
Employee Plan. Generally, the effect of a "long-term investment election" is to
defer the participant's receipt of the award or rollover with respect to which
the "long-term investment election" is made until the expiration of an
additional 3-year period after such award or rollover would have been
distributed in the absence of such an election. Participants who desire to make
a "long-term investment election" must do so no later than a date two years
prior to any date on which the participant otherwise would have received a
distribution in respect of such award or rollover.
B. ADMINISTRATION
The Equity Partnership Plans must be administered by a committee appointed
by the Board of Directors, which must consist of three or more persons, each of
whom is a "disinterested person" within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Board of
Directors has appointed the Compensation and Employee Benefits Committee of the
Board of Directors (the "Committee") to administer the Equity Partnership Plans.
Each member of the Committee serves for a term determined by the Board of
Directors. All determinations of the Committee with respect to the Equity
Partnership Plans are binding. The expenses of administering the Equity
Partnership Plans are borne by the Company.
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C. ELIGIBILITY
1. Key Employee Plan
Generally, the persons who are eligible to participate in the Key
Employee Plan with respect to a calendar year are the employees or classes
of employees of the Company and its subsidiaries and affiliates that
participate in the Equity Partnership Plans (the "Participating Companies")
(a)(i) whose principal work location during such calendar year is within
the United States of America or (ii) who are citizens of the United States
of America, whose principal work location during such calendar year is
outside of the United States of America and who do not participate in a
plan maintained by their employer during such calendar year that the
Committee determines to be comparable to the Key Employee Plan, (b) whose
annualized compensation with respect to such calendar year is at least
equal to $300,000 (indexed for inflation beginning in 1991) ($353,760 in
1994) and (c) who are designated as eligible to participate in the Key
Employee Plan by the Committee. The Committee may from time to time add or
exclude from participation one or more individuals or classes of
individuals. The Key Employee Plan also has been extended to Participating
Companies in Australia, Canada, Germany, Hong Kong, Japan, Singapore,
Switzerland and the United Kingdom.
2. Professional Employee Plan
Generally, the persons who are eligible to participate in the
Professional Employee Plan with respect to a calendar year are the
employees or classes of employees of the Participating Companies (a)(i)
whose principal work location during such calendar year is within United
States of America or (ii) who are citizens of the United States of America,
whose principal work location during such calendar year is outside of the
United States of America and who do not participate in a plan maintained by
their employer during such calendar year that the Committee determines to
be comparable to the Professional Employee Plan, (b) who are (i) production
employees who are in job classifications designated as "professional" or
(ii) nonproduction employees whose annualized compensation with respect to
such calendar year is at least equal to $77,000 (indexed for inflation
beginning in 1991) ($87,260 in 1994), (c) whose annualized compensation for
such calendar year is less than the minimum compensation level necessary to
participate in the Key Employee Plan and (d) who are designated as eligible
to participate in the Professional Employee Plan by the Committee. As with
the Key Employee Plan, the Committee may from time to time add or exclude
from participation one or more individuals or classes of individuals. The
Professional Employee Plan also has been extended to Participating
Companies in Australia, Canada, Germany, Hong Kong, Japan, Singapore,
Switzerland and the United Kingdom.
D. MECHANICS OF OPERATION
Awards under the Equity Partnership Plans represent unsecured unfunded
obligations of the Company. However, in order to assist the Company in meeting
its obligations under the Equity Partnership Plans, the Company established
certain grantor trusts (the "Trusts"), the assets of which remain subject to
certain of the Participating Companies' bankruptcy and judgment creditors, if
any. The trustee of the Trusts (the "Trustee") is State Street Bank and Trust
Company. Under the Equity Partnership Plans and the Trusts, the Trustee must
make purchases throughout each year for which awards are granted under the
Equity Partnership Plans of amounts at least equal to accruals under the Equity
Partnership Plans. In addition, the Trustee must reinvest all dividends paid on
shares held in the Trusts. Shares purchased in respect of awards are allocated
to participants' accounts as soon as practicable after the date as of which such
awards are granted to participants (generally in December). Shares credited to
participants' accounts may be adjusted in the event of a stock dividend or
split, recapitalization, extraordinary dividend, merger, consolidation,
combination or exchange of shares or similar corporate change.
E. VOTING AND TENDER OF SHARES
Participants in the Equity Partnership Plans generally are entitled to
direct the Trustee as to the voting and tender of shares allocated to their
accounts. In addition, the Trustee must make voting and tender decisions with
respect to any Unallocated Shares held in the Trusts (and voting decisions with
respect to
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allocated shares for which the Trustee does not receive participant
instructions) in proportion to the voting and tender instructions the Trustee
receives from participants.
F. CERTAIN DIVESTITURES
In the event of any transaction immediately after which any Participating
Company both ceases to be at least a 50% subsidiary or affiliate of the Company
and either has stock that is publicly traded or is a member of a "controlled
group of corporations" (as the term is defined in Section 414(b) of the Internal
Revenue Code of 1986 (the "Internal Revenue Code" or the "Code")), with any
trades or businesses, one or more members of which have publicly traded stock as
a result of the transaction, the Common Stock credited to the accounts of (a)
participants who are employed by such Participating Company immediately after
the transaction and (b) terminated participants who are not so employed, but who
were employed by such Participating Company on the date that their employment
with the Company and its subsidiaries and affiliates terminated, will be
converted to equivalent amounts of such publicly traded stock based on the
relative values of such publicly traded stock and Common Stock immediately after
the transaction. Thereafter, each such participant's accounts will be maintained
in such publicly traded stock, the Board of Directors of the affected company
will succeed to the powers of the Committee and the Board of Directors under the
Equity Partnership Plans with respect to the affected participants and a
separate trust containing the accounts of such affected participants will be
created to hold the stock credited to the affected participants' accounts. In
the event that a public market develops for the stock of any Participating
Company and, immediately after such public market develops, such company remains
at least a 50% subsidiary or affiliate of the Company, the Common Stock credited
to the accounts of the participants described above will be converted to
equivalent amounts of the publicly traded stock of such company as described
above or its economic equivalent, as the Committee deems appropriate, unless the
Committee and the Participating Company determine that such a conversion would
be financially detrimental to any subsidiary or affiliate of the Company or such
participants. Thereafter, each such participant's accounts will be maintained in
such publicly traded stock or its economic equivalent, as the case may be.
G. POWER TO AMEND
The Equity Partnership Plans may be amended by the Board of Directors from
time to time in any respect except that, if and to the extent required by Rule
16b-3 promulgated under Section 16(b) of the Exchange Act or by any comparable
or successor exemption under which the Board of Directors believes it is
appropriate for the Equity Partnership Plans to qualify, no amendment shall be
effective without the approval of the stockholders of the Company, that (a)
increases the number of shares of Common Stock that may be distributed under the
Equity Partnership Plans, (b) materially increases the benefits accruing to
individuals under an Equity Partnership Plan or (c) materially modifies the
requirements as to eligibility for participation in an Equity Partnership Plan.
H. MODIFICATION FOR NON-UNITED STATES SUBSIDIARIES AND AFFILIATES
The Equity Partnership Plans represented by Exhibits A and B have been
modified in some respects for participation by Participating Companies in
Australia, Canada, Germany, Hong Kong, Japan, Singapore, Switzerland and the
United Kingdom. These modifications generally affect employees of those
subsidiaries and affiliates who work in the applicable locale. The German, Swiss
and United Kingdom modifications generally are local currency based. In 1994,
the minimum compensation necessary to participate in the Key Employee Plan will
be DM630,000, SFr545,000 and L195,500, respectively. These participation
minimums are indexed for inflation based on local cost-of-living indices. The
German, Swiss and United Kingdom modifications of the Professional Employee Plan
do not have a minimum compensation level. Instead, participation is based solely
on whether an individual is classified as a "professional employee". The non-
United States modifications generally provide specified methods of calculating
conversions of U.S. dollars to the appropriate local currency.
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The following describes the principal modifications to the operation of the
Equity Partnership Plans for the non-United States Participating Companies:
1. Voting and Tender Rights
The Equity Partnership Plans, as modified for participation by the
Company's subsidiaries and affiliates in Australia and Germany do not
permit participants in those plans to direct the voting of shares allocated
to them. The German modifications also do not permit participants to make
tender decisions with respect to shares allocated to them.
2. Timing of Distributions
The Canadian modification generally provides that distributions will
be made upon the expiration of three years after an award is granted, while
the Australian and German modifications of the Key Employee Plan, but not
the Professional Employee Plan, generally provide for distributions upon
the expiration of eight years after an award is granted (subject to the
participant's ability to make a "short-term investment election" as a
result of which awards will be distributed upon the expiration of five
years).
3. Currency Protection Feature
The German, Swiss and United Kingdom modifications permit local
currency paid participants to elect to make "currency protection elections"
with respect to an award granted thereunder within 45 days after the award
is granted. As a result of a currency protection election, participants
will be protected from losses and will give up gains resulting from changes
in the U.S. dollar to local currency exchange rate.
I. SHARES AVAILABLE UNDER THE EQUITY PARTNERSHIP PLANS
Out of the 30,000,000 shares currently approved under the Equity
Partnership Plans, as of December 31, 1993, 8,364,180 shares remained available
for future allocation.
AMENDMENTS TO THE EQUITY PARTNERSHIP PLANS
On March 2, 1994, the Board of Directors adopted the Amendments. The
following discussion summarizes the material effect of the Amendments. This
summary is qualified in its entirety by reference to the complete text of the
Equity Partnership Plans, as restated to incorporate the Amendments, attached to
this Proxy Statement as Exhibits A and B, respectively.
A. STOCK SUBJECT TO THE EQUITY PARTNERSHIP PLANS
As noted above, out of the 30,000,000 shares originally available under the
Equity Partnership Plans, 8,364,180 shares remain available for allocation. The
Amendments increase the number of shares that may be allocated under the Equity
Partnership Plans (including the 30,000,000 shares already authorized) to
40,000,000 shares.
B. WAIVER OF CERTAIN RESTRICTIONS
The Amendments permit the Committee to waive certain restrictions on
transferability applicable to certain shares distributed under the Key Employee
Plan in December 1992. The Amendments provide that the Committee may impose such
conditions on any such waiver, including requiring a forfeiture of any portion
of such shares, as the Committee may determine in its sole discretion.
C. MODIFICATION OF MINIMUM COMPENSATION REQUIREMENTS
The minimum compensation thresholds in the Equity Partnership Plans
currently are based on 150% (for the Key Employee Plan) and 37% (for the
Professional Employee Plan) of the compensation limit contained in Section
401(a)(17) of the Internal Revenue Code as of the prior calendar year. This
limit is reduced in
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1994 from the 1993 level of $235,840 to $150,000, which will be adjusted in the
future (in minimum increments of $10,000) for changes in the cost of living. The
Amendments adjust the minimum compensation thresholds to 240% of the prior
year's Section 401(a)(17) limit for the Key Employee Plan and 60% of the prior
year's Section 401(a)(17) limit for the Professional Employee Plan. Therefore,
the minimum compensation for participation in the Key Employee Plan will be
$353,760 in 1994 and $360,000 in 1995, and the minimum compensation for
participation in the Professional Employee Plan will be $87,260 in 1994 and
$90,000 in 1995.
D. TREATMENT OF EXTENDED LEAVES OF ABSENCE
The Equity Partnership Plans permit participants to make "Permissive
Retirement Elections," as a result of which they generally receive their awards
under the Equity Partnership Plans on their "Permissive Retirement" that occurs
prior to the date they otherwise would have received a distribution. The
Amendments provide that the Committee may treat an extended leave of absence as
a "Permissive Retirement," even where a participant provides limited services to
the Company or an affiliate.
E. PROTECTION OF DEDUCTION
(i) The Amendments permit the Committee to defer a distribution under the
Equity Partnership Plans to any "covered employee" (within the meaning of
Section 162(m) of the Internal Revenue Code) if the Company or an affiliate
might not be permitted to receive a deduction in respect of such payment as a
result the deduction limit under Section 162(m). The amount so deferred will be
converted to cash based on the value of Company Common Stock on the date the
distribution otherwise would have been made and will be credited with interest
at LIBOR from the date the distribution otherwise would have been made until the
last day of the month immediately preceding the month in which such amount is
paid to the participant. Rather than crediting such amount with interest based
on LIBOR, the Committee, in its discretion may elect to adjust such amount as if
it were invested in any investment vehicle or vehicles selected by the
Committee. Any amount so deferred will be paid to a participant if and to the
extent the Committee determines that the Company's or affiliate's deduction in
respect of such amount is not limited by Section 162(m) and, in any case, within
30 days after the earlier of (i) the date the participant no longer is a
"covered employee" and (ii) the occurrence of a change in control of the
Company.
(ii) In addition, the Amendments permit the Committee to grant an award
under the Key Employee Plan to any individual whose year-end bonus constitutes
performance-based compensation, and is thus exempt from the operation of Section
162(m) by reason of Section 162(m)(4)(C) of the Code, based solely on the amount
of such year-end bonus (instead of the participant's total compensation). As a
result, it would appear that awards granted under the Key Employee Plan to such
individuals should themselves constitute performance-based compensation and thus
should be exempt from the operation of Section 162(m).
F. ADDITION OF VOLUNTARY AWARDS
Currently, the Equity Partnership Plans permit only mandatory awards
determined by the Committee pursuant to the appropriate award schedule. The
Amendments permit participants in the Key Employee Plan (but not the
Professional Employee Plan) whom the Committee determines may be "covered
employees" within the meaning of Section 162(m) of the Code (other than
participants described in E(ii)) also to receive certain voluntary awards.
Selected participants will receive voluntary awards by making a compensation
reduction election in the calendar year immediately preceding the calendar year
for which the voluntary award is to be made (or, for 1994, within 30 days after
the Amendments are approved by the Company's stockholders). Voluntary awards
will be treated in all respects as if they were mandatory awards. The amount by
which a selected participant's compensation may be reduced and converted to a
voluntary award cannot exceed the lesser of (a) the excess of the participant's
compensation, after reduction for the mandatory award over $1 million and (b)
the participant's year-end bonus, after reduction for the mandatory award.
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G. MODIFICATION OF VOTING AND TENDER OF CERTAIN SHARES
The Equity Partnership Plans currently provide that, where participants are
not permitted to make voting or tender decisions under the Equity Partnership
Plans for tax reasons, the Trustee is to make voting or tender decisions, as the
case may be, in its discretion. The Amendments take away such discretion from
the Trustee and require that the Trustee make such voting or tender decisions in
proportion to the voting or tender decisions, as the case may be, it receives
from other participants.
H. MANDATORY SHARE WITHHOLDING
The Amendments make clear that the Company can require withholding
obligations applicable to distributions under the Equity Partnership Plans to be
met by withholding shares that otherwise would have been distributed.
I. ABILITY TO MODIFY TRUST PROVISIONS
The Amendments provide the Committee with flexibility to modify certain
provisions of the Trusts dealing with creditors' rights and the rights to
substitute Trust assets, if and to the extent deemed appropriate by the
Committee based on advice of counsel.
J. AMENDMENTS TO THE NON-UNITED STATES MODIFICATIONS
1. Modification of Permissive Retirement Definition
The non-United States modifications generally will permit
distributions to a participant who makes a permissive retirement election
upon the participant's "retirement" pursuant to the custom generally
applicable to the employees of each non-U.S. subsidiary and affiliate. As a
result of this change, "permissive retirement" under certain of the
non-United States modifications may occur earlier than under the Equity
Partnership Plans as they currently exist.
2. U.S. Dollar to Pound Sterling Conversion
The non-United States modifications currently provide that dollar to
local currency conversions will be made based on conversion rates published
in Federal Reserve Statistical Release G.5. With respect to U.S. dollar to
pound Sterling conversions, the Amendments change this conversion rate to
the "achieved hedge rate" resulting from Salomon Brothers International
Limited's foreign exchange management during the applicable year.
STOCKHOLDER APPROVAL REQUIRED
The Amendments were adopted subject to approval by the affirmative vote of
a majority of the voting power of the Company's outstanding voting securities
represented at the meeting in person or by proxy. If the Amendments are not so
approved, then they will be of no force or effect, and the Equity Partnership
Plans as in effect prior to the Amendments would continue in force.
THE BOARD OF DIRECTORS BELIEVES THAT THE EQUITY PARTNERSHIP PLANS ARE AN
EFFECTIVE WAY OF ALIGNING PARTICIPANTS' INTERESTS WITH THOSE OF STOCKHOLDERS.
THE AMENDMENTS WILL PERMIT THE CONTINUATION OF AWARDS BY INCREASING THE NUMBER
OF SHARES AVAILABLE UNDER THE EQUITY PARTNERSHIP PLANS TO 40,000,000 AND WILL
MAKE OTHER CHANGES THAT THE BOARD OF DIRECTORS BELIEVES WILL HELP THE EQUITY
PARTNERSHIP PLANS BETTER FULFILL THEIR PURPOSES. ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENTS.
3. ADOPTION OF SALOMON INC STOCK INCENTIVE PLAN
On March 2, 1994, the Board of Directors adopted the Salomon Inc Stock
Incentive Plan (the "SIP"), subject to the approval of the Company's
stockholders. The SIP is designed to promote the interests of the Company and
its stockholders by (i) aligning the interests of the Company's key employees
with those of the
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Company's stockholders by increasing their proprietary interests in the Company,
(ii) giving the Company the ability to attract and retain qualified key
employees by providing them with appropriate performance-based incentives and
(iii) permitting the Company to pay its key employees certain "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code.
The Board has no present plans to use the SIP as part of the mix of compensation
provided by the Company, and it may well be that the Board will never believe
that use of the SIP is appropriate. Nevertheless, the Board can envision
circumstances and situations that may arise in which the SIP would give the
Company the ability to pay levels and types of incentive compensation in an
efficient manner.
The maximum number of shares of Company Common Stock with respect to which
stock-settled "Incentive Awards" (as hereinafter defined) may be granted under
the SIP is 3,500,000 shares. The maximum number of shares of Company Common
Stock with respect to which cash-settled Incentive Awards may be granted under
the SIP is 1,500,000 shares. The maximum number of shares of Company Common
Stock with respect to which any individual may be granted Incentive Awards
during the term of the SIP is 1,500,000 shares.
To date, no Incentive Awards have been granted under the SIP. While it is
not known whether any Incentive Awards will be granted under the SIP in 1994,
the Board has no present plans to do so.
The following is a summary of the material features of the SIP. The
following summary is qualified in its entirety by reference to the complete text
of the SIP, which is attached to this Proxy Statement as Exhibit C.
DESCRIPTION OF STOCK INCENTIVE PLAN
A. GENERAL
Shares issued under the SIP may be authorized but unissued shares of
Company Common Stock or treasury shares of Company Common Stock, at the
discretion of a committee designated to administer the SIP (the "Committee").
The SIP provides that the Committee shall be the Compensation and Employee
Benefits Committee or such other committee of the Board of Directors as the
Board of Directors shall appoint to administer the SIP; provided, however, the
Committee shall consist of not fewer than two directors, each of whom are
"disinterested persons" under Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and "outside
directors" for purposes of Section 162(m) of the Internal Revenue Code.
The SIP provides for the grant of (i) non-qualified stock options ("NQOs"),
(ii) incentive stock options ("ISOs"), (iii) limited stock appreciation rights
("LSARs"), (iv) tandem stock appreciation rights ("Tandem SARs"), (v)
stand-alone stock appreciation rights ("Stand-Alone SARs"), (vi) shares of
restricted stock, (vii) shares of phantom stock, (viii) stock bonuses; and (ix)
cash bonuses (collectively, "Incentive Awards"). Key employees, including
officers, whether or not they are directors, of the Company and its affiliates
will be eligible to receive grants of Incentive Awards.
The Committee will determine which key employees receive grants of
Incentive Awards, the type of Incentive Awards granted and the number of shares
subject to each Incentive Award. No Incentive Award may be granted under the SIP
after March 1, 2004. Subject to the terms of the SIP, the Committee will also
determine the prices, expiration dates and other material features of the
Incentive Awards granted under the SIP.
The Committee may, in its absolute discretion, without amendment to the
SIP, (i) accelerate the date on which any option or stock appreciation right
granted under the SIP becomes exercisable or otherwise adjust any of the terms
of such option or stock appreciation right, (ii) accelerate the date on which
any Incentive Award vests, (iii) waive any condition imposed under the SIP with
respect to any Incentive Award or (iv) otherwise adjust any of the terms of such
Incentive Award.
The Committee will administer the SIP and have the authority to interpret
and construe any provision of the SIP and to adopt such rules and regulations
for administering the SIP as it deems necessary. All decisions and
determinations of the Committee are final and binding on all parties. The
Company will indemnify each
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member of the Committee against any loss, cost, expense or liability arising out
of any action, omission or determination relating to the SIP, unless such
action, omission or determination was taken or made in bad faith and without
reasonable belief that it was in the best interests of the Company.
The Board of Directors may at any time amend the SIP in any respect;
provided, that if and to the extent required by Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act or by any comparable or successor exemption
under which the Board of Directors believes it is appropriate for the SIP to
qualify, if and to the extent required under Section 422 of the Code (if and to
the extent that the Board of Directors deems it appropriate to comply with
Section 422) and if and to the extent required to treat some or all of the
Incentive Awards as "performance-based compensation" within the meaning of
Section 162(m) of the Code (if and to the extent that the Board of Directors
deems it appropriate to meet such requirements), in general no amendment may (i)
increase the number of shares of Company Common Stock that may be issued under
the SIP, (ii) materially increase the benefits accruing to individuals holding
Incentive Awards or (iii) materially modify the requirements as to eligibility
for participation in the SIP, unless it is approved by the Company's
stockholders.
B. SUMMARY OF AWARDS AVAILABLE UNDER THE SIP
A summary of the most significant features of the Incentive Awards follows.
1. NON-QUALIFIED STOCK OPTIONS
The exercise price of each NQO granted under the SIP shall be such price as
the Committee shall determine on the date on which such NQO is granted, which
price shall not be less than that required by law. Each NQO shall be exercisable
for a term, not to exceed ten years, established by the Committee on the date on
which such NQO is granted. The exercise price shall be paid in cash or, subject
to the approval of the Committee, in shares of Company Common Stock valued at
their fair market value on the date of exercise.
With an exception in the event of the termination of the employment of an
employee for cause, unless otherwise determined by the Committee and included in
the agreement pursuant to which an NQO is granted, NQOs are exercisable while
the employee is employed by the Company and until the expiration of the term of
such NQOs, generally to the extent that such NQOs were exercisable on the last
day of employment. In the event of the termination of the employment of an
employee for cause, all NQOs held by such employee terminate immediately. NQOs
are not transferable other than by will or by the laws of descent and
distribution.
Upon the occurrence of a change in control of the Company (a "Change in
Control"), all NQOs become immediately exercisable. A Change in Control is
defined in the SIP as the occurrence of either of the following:
"(i) The acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than
Salomon Inc or any of its subsidiaries or Berkshire Hathaway, Inc. or any
of its subsidiaries or affiliates (as defined in Rule 12b-2 promulgated
under the Exchange Act), without the prior written approval of the Board of
Directors, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of Salomon Stock or the combined voting power of Salomon
Inc's then outstanding voting securities in a transaction or series of
transactions not approved by a vote of at least a majority of the
Continuing Directors (as hereinafter defined); or
"(ii) A change in the composition of the Board of Directors of Salomon
Inc such that individuals who, as of January 1, 1988, constitute the Board
of Directors of Salomon Inc (generally the "Directors" and as of January 1,
1988 the "Continuing Directors") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a Director
subsequent to January 1, 1988 whose nomination for election was approved by
a vote of at least a majority of the Continuing Directors (other than a
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of Salomon Inc, as such terms are
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used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be
deemed to be a Continuing Director."
2. INCENTIVE STOCK OPTIONS
The exercise price of each ISO granted under the SIP shall be the fair
market value of a share of Company Common Stock on the date on which such ISO is
granted. An ISO shall be exercisable for a term, not to exceed ten years,
established by the Committee on the date on which such ISO is granted. The
exercise price shall be paid in cash or, subject to the approval of the
Committee, in shares of Company Common Stock valued at their fair market value
on the date of exercise.
The aggregate fair market value of shares of Company Common Stock with
respect to which ISOs granted are exercisable for the first time by an optionee
during any calendar year under the SIP or any other plan of the Company or its
subsidiaries may not exceed $100,000. Such fair market value shall be determined
as of the date on which each ISO is granted.
With an exception in the event of the termination of the employment of an
employee for cause, unless otherwise determined by the Committee and included in
the agreement pursuant to which an ISO is granted, ISOs are exercisable while
the employee is employed by the Company and until the expiration of the term of
such ISOs, generally to the extent that such ISO's were exercisable on the last
day of employment. In the event of the termination of the employment of an
employee for cause, all ISOs held by such employee terminate immediately. ISOs
are not transferable other than by will or by the laws of descent and
distribution.
Upon the occurrence of a Change in Control of the Company, all ISOs become
immediately exercisable.
3. LIMITED STOCK APPRECIATION RIGHTS
Each NQO and ISO granted under the SIP may include an LSAR with respect to
a number of shares equal to the number of shares subject to the related option.
The exercise of an LSAR with respect to a number of shares causes the
cancellation of the option with which it is included with respect to an equal
number of shares. The exercise of an option with respect to a number of shares
causes the cancellation of the LSAR included with it with respect to an equal
number of shares.
In general, LSARs are exercisable only during the sixty-day period
immediately following a Change in Control and only to the extent that their
related options are exercisable. The exercise of an LSAR included with an NQO
with respect to a number of shares entitles the employee to an amount in cash,
for each such share, equal to the excess of (i) the greater of (A) the highest
price per share of Company Common Stock paid in connection with the Change in
Control in connection with which the LSAR became exercisable and (B) the highest
fair market value of a share of Company Common Stock on the date of such Change
in Control over (ii) the exercise price of the related NQO. The exercise of an
LSAR included with an ISO with respect to a number of shares entitles the
employee to an amount in cash, for each such share, equal to the excess of (i)
the fair market value of a share of Company Common Stock on the date of exercise
over (ii) the exercise price of the related ISO. LSARs are not transferable
other than by will or by the laws of descent and distribution or other than
together with their related options.
4. TANDEM STOCK APPRECIATION RIGHTS
The Committee may grant, in connection with any NQO or ISO, a Tandem SAR
with respect to a number of shares of Company Common Stock less than or equal to
the number of shares subject to the related option. The exercise of a Tandem SAR
with respect to a number of shares causes the cancellation of its related option
with respect to an equal number of shares. The exercise of an option with
respect to a number of shares causes the cancellation of its related Tandem SAR
to the extent that the number of shares subject to the option after its exercise
is less than the number of shares subject to the Tandem SAR.
A Tandem SAR is exercisable at the same time and to the same extent as its
related option. The exercise of a Tandem SAR with respect to a number of shares
entitles the employee to an amount in cash, for each such share, equal to the
excess of (i) the fair market value of a share of Company Common Stock on the
date
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of exercise over (ii) the exercise price of the related option. Tandem SARs are
not transferable other than by will or by the laws of descent and distribution
and other than together with their related options.
5. STAND-ALONE STOCK APPRECIATION RIGHTS
The Committee may grant Stand-Alone SARs, which are stock appreciation
rights that are not related to any option, pursuant to the SIP. The exercise
price of each Stand-Alone SAR granted under the SIP shall be such price as the
Committee shall determine on the date on which such Stand-Alone SAR is granted.
A Stand-Alone SAR shall be exercisable for a term, not to exceed ten years,
established by the Committee on the date on which such Stand-Alone SAR is
granted. The exercise of a Stand-Alone SAR with respect to a number of shares
entitles the employee to an amount in cash, for each such share, equal to the
excess of (i) the fair market value of a share of Company Common Stock on the
date of exercise over (ii) the exercise price of the Stand-Alone SAR.
With an exception in the event of the termination of the employment of an
employee for cause, unless otherwise determined by the Committee and included in
the agreement pursuant to which a Stand-Alone SAR is granted, Stand-Alone SARs
are exercisable while the employee is employed by the Company or until the
expiration of the term of such Stand-Alone SARs, generally to the extent that
such Stand-Alone SARs were exercisable on the last day of employment. In the
event of the termination of the employment of an employee for cause, all
Stand-Alone SARs held by such employee terminate immediately. Stand-Alone SARs
are not transferable other than by will or by the laws of descent and
distribution.
Upon the occurrence of a Change in Control, Stand-Alone SARs become
immediately exercisable.
6. RESTRICTED STOCK
A grant of shares of restricted stock represents the promise of the Company
to issue shares of Company Common Stock on a predetermined date (the "issue
date") to an employee, provided the employee is continuously employed by the
Company until the issue date. Prior to the vesting of the shares, the shares are
not transferable by the participant and are forfeitable. Vesting of the shares
occurs on a second predetermined date (the "vesting date") if the employee has
been continuously employed by the Company until that date. The Committee may, at
the time shares of restricted stock are granted, impose additional conditions,
such as, for example, the achievement of specified performance goals, to the
vesting of the shares. Vesting of some portion, or all, of the shares of
restricted stock may occur upon the termination of the employment of an employee
other than for cause prior to the vesting date. If vesting does not occur,
shares of restricted stock are forfeited.
Upon the occurrence of a Change in Control, all shares of restricted stock
that have not vested, or have been forfeited, automatically vest.
7. PHANTOM STOCK
A grant of shares of phantom stock represents the right to the economic
equivalent of a grant of restricted stock, which is payable in cash. Shares of
phantom stock are subject to the same vesting requirements as are shares of
restricted stock. In addition, the value of a share of phantom stock (whether or
not vested) is paid immediately upon the occurrence of a Change in Control.
8. STOCK BONUSES
Bonuses payable in Company Common Stock may be granted by the Committee and
may be payable at such times and subject to such conditions as the Committee
determines.
9. CASH BONUSES
In connection with a grant of shares of restricted stock or in connection
with the grant of a stock bonus, the Committee may grant a cash "tax bonus,"
payable when an employee is required to recognize income for
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federal income tax purposes with respect to such shares. The tax bonus may not
be greater than the value of the shares of restricted stock or stock bonus at
the time the income is required to be recognized.
C. SHARE COUNTING
Grants of options, shares of restricted stock and shares of Company Common
Stock granted as stock bonuses count against the limit on the maximum number of
shares of Company Common Stock with respect to which stock-settled Incentive
Awards may be granted under the SIP. Grants of Stand-Alone SARs, shares of
phantom stock and grants of cash "tax bonuses" count against the limit on the
maximum number of shares with respect to which cash-settled Incentive Awards may
be granted under the SIP. Grants of Tandem SARs and LSARs do not count against
either the stock-settled or cash-settled limits. In general, if an Incentive
Award is cancelled or forfeited, the shares subject to that Incentive Award may
be made subject to new Incentive Awards.
The grant of an LSAR or Tandem SAR does not count against the individual
limit on the number of Incentive Awards that may be granted under the SIP. Once
granted to a participant in the SIP, Incentive Awards will not again be
available for grant to that participant under the SIP.
D. CERTAIN CORPORATE CHANGES
The SIP provides for an adjustment in the number of shares of Company
Common Stock available to be issued under the SIP, the number of shares subject
to Incentive Awards, and the exercise prices of certain Incentive Awards upon a
change in the capitalization of the Company, a stock dividend or split, a merger
or combination of shares and certain other similar events. The SIP also provides
for the termination of Incentive Awards upon the occurrence of certain corporate
events.
E. INCOME TAX WITHHOLDING
The SIP provides that participants may be required to meet certain income
tax withholding requirements by remitting to the Company cash or through the
withholding of shares otherwise payable to the participant. In addition, the
participant may meet such withholding requirements, subject to certain
conditions, by remitting shares of previously acquired Company Common Stock.
F. FEDERAL INCOME TAX CONSEQUENCES
1. NON-QUALIFIED OPTIONS
A participant will not be deemed to receive any income at the time an NQO
is granted, nor will the Company be entitled to a deduction at that time.
However, when any part of an NQO is exercised, the participant will be deemed to
have received compensation taxable as ordinary income in an amount equal to the
excess of (A) the fair market value of the shares received on the exercise of
the NQO over (B) the exercise price of the NQO. The taxability of a participant
who is subject to the reporting and short swing profit recovery provisions of
Section 16 of the Exchange Act (a "Section 16 Person") may be modified slightly.
A Section 16 Person also will not be deemed to receive any income at the time an
NQO is granted, nor will the Company be entitled to a deduction at that time.
However, upon the exercise of the NQO, the Section 16 Person will be deemed to
have received compensation taxable as ordinary income in an amount equal to the
excess of (A) the fair market value of the shares received on the exercise of
the NQO on the later to occur of (i) the date of exercise or (ii) unless the
Section 16 Person files an appropriate election under Section 83(b) of the Code
within 30 days of the date the participant exercises the NQO, six months after
the date on which the NQO was awarded to the Section 16 Person over (B) the
exercise price of the NQO. The Section 16 Person's basis in the Company Common
Stock acquired pursuant to the exercise of the NQO is the sum of the exercise
price of the option and the amount of such income required to be recognized.
Upon any subsequent sale of the shares acquired upon the exercise of an
NQO, any gain (the excess of the amount received over the fair market value of
the shares on the date ordinary income was recognized) or loss (the excess of
the fair market value of the shares on the date ordinary income was recognized
over the
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amount received) will be a long-term capital gain or loss if the sale occurs
more than one year after such date of recognition and otherwise will be a
short-term capital gain or loss. A Section 16 Person's holding period for
purposes of determining whether any such gain or loss is short-or long-term is
measured from the later to occur of (i) the date the NQO is exercised or (ii)
unless the Section 16 Person files an appropriate election under Section 83(b)
of the Code within 30 days of the date the participant exercises the NQO, six
months after the NQO was granted. The Company will be entitled to a tax
deduction in an amount equal to the amount of compensation taxable as ordinary
income recognized by the participant.
If all or any part of the exercise price of an NQO is paid by the
participant with previously owned shares of Company Common Stock (including,
based upon proposed regulations under the Code, shares previously acquired on
exercise of an ISO), no gain or loss will be recognized on the shares
surrendered in payment. The number of shares received on such exercise of the
NQO equal to the number of shares surrendered will have the same basis and
holding period, for purposes of determining whether subsequent dispositions
result in long-term or short-term capital gain or loss, as the basis and holding
period of the shares surrendered. The balance of the shares received on such
exercise will be treated for federal income tax purposes as described in the
preceding paragraphs as though issued upon the exercise of the NQO for an
exercise price equal to the consideration, if any, paid by the participant in
cash. The participant's compensation, which is taxable as ordinary income upon
such exercise, and the Company's deduction, will not be affected by whether the
exercise price is paid in cash or in shares of Company Common Stock.
2. INCENTIVE STOCK OPTIONS
In general, a participant will not be deemed to receive any income at the
time an ISO is granted or exercised if a participant does not dispose of the
shares acquired on exercise of the ISO within two years after the grant of the
ISO and one year after the exercise of the ISO. In such a case, the gain (if
any) on a subsequent sale (the excess of the amount received over the exercise
price) or loss (if any) on a subsequent sale (the excess of the exercise price
over the amount received) will be a long-term capital gain or loss. However, for
purposes of computing the "alternative minimum tax" applicable to a participant,
the participant will include in the participant's alternative minimum taxable
income the amount that would have been includable in income if the ISO were an
NQO. Such amount may be subject to an alternative minimum tax at a marginal rate
of up to 28%. Similarly, for purposes of making alternative minimum tax
calculations, the participant's basis in the stock received on the exercise of
an ISO will be determined as if the ISO were an NQO.
If, subsequent to an employee's termination of employment as a result of
disability, the employee exercises an ISO more than one year after such
termination of employment, the ISO will be treated as if it were an NQO. If,
subsequent to an employee's termination of employment other than for disability,
the employee exercises an ISO more than three months after the employee's
termination of employment, the ISO will be treated as if it were an NQO. If the
participant sells the shares acquired on exercise of an ISO within two years
after the date of grant of the ISO or within one year after the exercise of the
ISO, the disposition is a "disqualifying disposition," and the participant will
recognize income in the year of the disqualifying disposition equal to the
excess of the amount received for the shares over the exercise price. Of that
income, the portion equal to the excess of the fair market value of the shares
at the time the ISO was exercised over the exercise price will be treated as
compensation to the participant, taxable as ordinary income, and the balance (if
any) will be long-or short-term capital gain depending on whether the shares
were sold more than one year after the ISO was exercised. If the participant
sells the shares in a disqualifying disposition at a price that is below the
exercise price, the loss will be a short-term capital loss if the participant
has held the shares for one year or less and otherwise will be a long-term
capital loss.
If a participant uses shares previously acquired upon the exercise of an
ISO to exercise an ISO, and the sale of the shares so surrendered for cash on
the date of surrender would be a disqualifying disposition of such shares,
proposed regulations under the Code appear to provide that tax consequences
described above with respect to disqualifying dispositions would apply, except
that no capital gain would be recognized with respect to such disqualifying
disposition. In addition, the basis of the surrendered shares would be allocated
to the
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shares acquired upon exercise of the ISO, and the holding period of the shares
so acquired would be determined, in a manner prescribed in proposed regulations
under the Code.
The Company is not entitled to a deduction as the result of the grant or
exercise of an ISO. If the participant has compensation taxable as ordinary
income as a result of a disqualifying disposition, the Company will be entitled
to a deduction of an equivalent amount in the taxable year of the Company in
which the disposition occurs.
3. LSARS, TANDEM SARS AND STAND-ALONE SARS
A participant will not be deemed to receive any income at the time an LSAR,
Tandem SAR or Stand-Alone SAR is granted, nor will the Company be entitled to a
deduction at that time. However, when any part of the LSAR, Tandem SAR or
Stand-Alone SAR is exercised, the participant will be deemed to have received
compensation taxable as ordinary income in an amount equal to the amount of cash
received. The Company will be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the participant.
4. RESTRICTED STOCK
A participant will not be deemed to receive any income at the time shares
of restricted stock are granted or issued, nor will the Company be entitled to a
deduction at that time. However, when shares of restricted stock vest, the
participant will be deemed to have received compensation taxable as ordinary
income in an amount equal to the fair market value of the shares of restricted
stock on the date on which they vest. However, a Section 16 Person will not be
required to be recognize income in connection with the grant of restricted stock
until the later of (a) the date the restricted stock vests and (b) the
expiration of six months after the date of grant. If, however, a participant
files an appropriate election under Section 83(b) of the Code with the IRS
within thirty days of the issuance of the restricted stock, the participant will
be deemed to have received compensation taxable as ordinary income in an amount
equal to the fair market value of the shares of restricted stock on the date on
which they are issued. The participant will not be entitled to a deduction if
the restricted stock is subsequently forfeited. The Company will be entitled to
a deduction in an amount equal to the amount of ordinary income recognized by
the participant.
Upon any sale of vested shares of restricted stock, any gain (the excess of
the amount received over the fair market value of the shares on the date
ordinary income was recognized) or loss (the excess of the fair market value of
the shares on the date ordinary income was recognized over the amount received)
will be a long-term capital gain or loss if the sale occurs more than one year
after such date of recognition and otherwise will be a short-term capital gain
or loss.
5. PHANTOM STOCK
A participant will not be deemed to receive any income at the time shares
of phantom stock are granted, nor will the Company be entitled to a deduction at
that time. However, when shares of phantom stock vest, the participant will be
deemed to have received compensation taxable as ordinary income in the amount of
the cash received. The Company will be entitled to a deduction in an amount
equal to the amount of ordinary income recognized by the participant.
6. STOCK BONUSES
In general, upon the receipt of a stock bonus, a participant will be deemed
to have received compensation taxable as ordinary income in an amount equal to
the fair market value of the stock at the time it is received. However, a
Section 16 Person will not be required to recognize income in connection with
the grant of a stock bonus until the expiration of six months after the date of
grant. If, however, the Section 16 Person files an appropriate election under
Section 83(b) of the Code with the IRS within thirty days of the issuance of the
Company Common Stock, the participant will be deemed to have received
compensation taxable as ordinary income in an amount equal to the fair market
value of the shares of the Company Common Stock on the date
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on which they are issued. The Company will be entitled to a deduction in an
amount equal to the amount of ordinary income recognized by the participant.
Upon any sale of shares of Company Common Stock received as a stock bonus,
any gain (the excess of the amount received over the fair market value of the
shares on the date ordinary income was recognized) or loss (the excess of the
fair market value of the shares on the date ordinary income was recognized over
the amount received) will be a long-term capital gain or loss if the sale occurs
more than one year after such date of recognition and otherwise will be a
short-term capital gain or loss.
7. CASH BONUSES
Upon the receipt of a cash bonus, a participant will be deemed to have
received compensation taxable as ordinary income in the amount of the cash
received. The Company will be entitled to a deduction in an amount equal to the
amount of ordinary income recognized by the participant.
8. SECTION 162(M) OF THE CODE
The Revenue Reconciliation Act of 1993 amended the Code to include new
Section 162(m) (the "Million Dollar Limit"). The Million Dollar Limit
essentially provides that, for tax years beginning on or after January 1, 1994,
subject to certain exceptions, remuneration in excess of $1 million that is paid
to certain "covered employees" of a publicly held corporation (generally, the
corporation's Chief Executive Officer and its four most highly compensated
executive officers other than the Chief Executive Officer) will not be
deductible by the corporation. If the SIP, is approved by the Company's
stockholders, based on proposed treasury regulations, grants of NQOs, ISOs,
Tandem SARs, LSARs and Stand-Alone SARs generally would appear to qualify for an
exemption from the Million Dollar Limit for "performance-based compensation."
However, without meeting certain other requirements, it would not appear that
other Incentive Awards will be exempt from the Million Dollar Limit. Thus, if
and to the extent such Incentive Awards constitute taxable income to a "covered
employee" in a year such covered employee's income subject to the Million Dollar
Limit exceeds $1 million, the Company would not be entitled to a deduction for
such excess. The SIP permits the Committee, prior to a Change in Control, to
defer payments to "covered employees" that otherwise might count against the
Million Dollar Limit until a year in which such individuals no longer are
covered employees. As a result, based on proposed treasury regulations, it would
appear that the Company's deduction for such amounts would be preserved.
STOCKHOLDER APPROVAL REQUIRED
Approval of the SIP requires the affirmative vote of a majority of the
voting power of the Company's outstanding voting securities represented at the
meeting in person or by proxy.
THE BOARD OF DIRECTORS BELIEVES THAT THE SIP SATISFIES THE OBJECTIVES OF
ATTRACTING AND RETAINING PERSONS OF ABILITY AS KEY EMPLOYEES AND MOTIVATING THEM
TO EXERT THEIR BEST EFFORTS ON BEHALF OF THE COMPANY IN A MANNER THAT PRESERVES
THE COMPANY'S COMPENSATION DEDUCTION. ACCORDINGLY, THE BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION OF THE SIP.
4. APPROVAL OF EXECUTIVE OFFICER PERFORMANCE BONUS PLAN
In 1993 and previous years, the Compensation and Employee Benefits
Committee of the Board of Directors (the "Compensation Committee") has
determined the compensation of senior executive officers in relation to a review
of their performance. The "Million Dollar Limit" imposed by Section 162(m) of
the Code has caused the Compensation Committee to review its procedures with the
objective that compensation continues to be based on performance and be
deductible by the Company. As a result of this review, the Compensation
Committee presently expects to seek to preserve the Company's deduction for
compensation paid to the Company's Chairman and Chief Executive Officer (Robert
E. Denham) and its other most highly compensated officers, other than Deryck C.
Maughan, by determining total compensation for such persons in
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the way it does now, based on performance evaluation, and providing any
compensation in excess of $1 million to any such person in a form that will not
be subject to the Million Dollar Limit by deferring such compensation or,
perhaps, awarding a stock option under the SIP. The Compensation Committee has
determined not to apply a formula at this time to determine the compensation of
these individuals (other than Deryck C. Maughan) because it believes its
objectives for the performance of these individuals are such that discretionary,
non-formulaic evaluation is preferable.
With respect to Deryck C. Maughan, the Chairman and Chief Executive Officer
of Salomon Brothers Inc and an Executive Vice President of the Company, the
Compensation Committee has determined that linking compensation by formula to
the performance of the Salomon Brothers securities segment (the "Securities
Segment") will provide the most effective response to the issues raised by the
Million Dollar Limit. Therefore, effective as of January 1, 1994, the
Compensation Committee adopted, subject to approval by the Company's
stockholders, the Executive Officer Performance Bonus Plan (the "Performance
Bonus Plan") to provide Mr. Maughan an appropriate performance incentive (a
"Performance Bonus") in a form intended to constitute "performance-based
compensation" pursuant to Section 162(m)(4)(C) of the Code. As a result, it is
expected that the Performance Bonus Plan will provide Mr. Maughan with an
appropriate level of compensation, none of which will be subject to the
compensation deduction limitation contained in Section 162(m) of the Code. Mr.
Maughan will be the only participant in the Performance Bonus Plan.
The following table shows the Performance Bonus that would have been
granted to Mr. Maughan under the Performance Bonus Plan based on Securities
Segment return on equity and the return on equity of the "Target Companies" (as
hereinafter defined) assuming a "Bonus Period" (as hereinafter defined) of
October 1, 1992 through September 30, 1993 and based on the performance targets
the Compensation Committee anticipates applying to the Performance Bonus Plan
for 12-month Bonus Periods. The actual amount of the Performance Bonus that will
be payable in 1994 is not yet determinable.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUES($) NUMBER OF UNITS
-------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
DERYCK C. MAUGHAN....................................... $5,200,000(1) NA
Executive Vice President and Chairman and
Chief Executive Officer of Salomon Brothers Inc
All Executive Officers as a Group....................... $5,200,000 NA
</TABLE>
- ---------------
(1) If the 1994 transitional targets had been applied to the period from January
1, 1993 through September 30, 1993, Mr. Maughan's award would have been
$7,700,000.
The following is a summary of the material features of the Performance
Bonus Plan. The following summary is qualified in its entirety by reference to
the complete text of the Performance Bonus Plan, which is attached to this proxy
statement as Exhibit D.
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DESCRIPTION OF PERFORMANCE BONUS PLAN
A. GENERAL
The basic premise of the Performance Bonus Plan is that Mr. Maughan's
compensation should be determined by two factors: the return on equity of the
Securities Segment, which he manages ("Salomon Brothers' ROE"), and the
relationship that Salomon Brothers' ROE has to that of key competitors. Thus,
Mr. Maughan is being measured on profits in relation to equity employed (and
incentivized to use equity efficiently). He is also being measured based on the
relative performance of Salomon Brothers' ROE measured over the Bonus Period
ending within the calendar year for which a Performance Bonus is granted and the
average return on equity of certain key competitors (the "Target Companies")
measured over the 12-month period ending on the last day of the fiscal quarter
of each such company ending on or prior to the last day of the Bonus Period, as
determined by the Compensation Committee ("Comparative ROE"). Thus, for example,
if a rising tide of industry profits raises all boats except Salomon Brothers',
he is penalized; if Salomon Brothers' performance outpaces a rising tide, he
will be rewarded. The formula is designed so that, for maximum performance (the
"Maximum Performance Target") (i.e., for 1995 and thereafter, Salomon Brothers'
ROE of 30% or greater that is 10% or more above Comparative ROE), Mr. Maughan
would receive a Performance Bonus that would equal $24 million (the "Maximum
Performance Bonus"). In such a case, Mr. Maughan's total salary and bonus
compensation would equal $25 million. The formula provides that, for performance
at or below a minimum level (the "Base Performance Target") (i.e., Salomon
Brothers' ROE of 5% that is equal to Comparative ROE) Mr. Maughan would receive
no Performance Bonus. Mr. Maughan's salary and non-performance based bonus will
at all times equal $1 million. For a result similar to last year (the 1993
compensation year), based on the performance targets and bonus levels the
Compensation Committee anticipates using in 1995 and thereafter, Mr. Maughan's
total compensation, including his Performance Bonus, as shown in the table
above, would be similar to what he earned last year. Under the Performance Bonus
Plan, the "Bonus Period" for a calendar year generally is the 12-month period
beginning October 1 of the preceding calendar year and ending September 30 of
the calendar year for which the Performance Bonus is paid. In order to comply
with the requirements for "performance-based compensation" under Section 162(m)
of the Code and transition rules applicable thereto, for 1994 the Bonus Period
will be the nine-month period beginning January 1, 1994 and ending September 30,
1994. Under the Performance Bonus Plan, the "Target Companies" initially will be
Bankers Trust Company, Bear Stearns, Merrill Lynch, Morgan Guaranty and Morgan
Stanley. If and to the extent permitted under Section 162(m)(4)(C) of the Code,
the Compensation Committee may, prior to the commencement of a Bonus Period,
substitute for the foregoing companies other companies deemed appropriate by the
Compensation Committee and with respect to which appropriate financial
information is available.
The Compensation Committee, in addition to establishing the Maximum and
Base Performance Targets and the Maximum Performance Bonus under the Performance
Bonus Plan as described above, also has established the Performance Bonuses it
anticipates will be paid for achieved levels in Salomon Brothers' ROE and in
Comparative ROE between the Maximum Performance Target and the Base Performance
Target. The Compensation Committee, prior to commencement of a Bonus Period, can
vary the relationship that is prescribed between the Performance Bonus and its
determinants: Salomon Brothers' ROE and Comparative ROE. However, the
Compensation Committee cannot, without the approval of the Company's
stockholders, change the Maximum or Base Performance Targets or the Maximum
Performance Bonus from those described above. Notwithstanding the foregoing
description, for 1994, because of the need to conform with transition rules in
relation to Section 162(m), not only is a nine-month Bonus Period being
utilized, but changes are made in the Base Performance Target and otherwise in
the bonus formula to reflect the nine-month period.
Mr. Maughan will receive a Performance Bonus for a calendar year only if he
is employed by the Company on the last day of such calendar year. The
Compensation Committee may, however, in its discretion, waive this end-of-year
employment requirement and pay part or all of the Performance Bonus that
otherwise would have been payable to him had he been employed on the last day of
the calendar year as it may determine in its sole discretion.
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B. ADMINISTRATION
The Performance Bonus Plan will be administered by the Compensation
Committee, which at all times shall be composed solely of at least two directors
of Salomon Inc, each of whom are "outside directors" within the meaning of
Section 162(m) of the Code. All determinations of the Compensation Committee
with respect to the Performance Bonus Plan are binding. The expenses of
administering the Performance Bonus Plan are borne by the Company.
C. ELIGIBILITY
Deryck C. Maughan will be the only individual who is eligible to
participate in the Performance Bonus Plan.
D. PROTECTION OF DEDUCTION
The Performance Bonus Plan provides that the Compensation Committee may
delay the payment of any Performance Bonus if and to the extent that it
determines that the Company might not be permitted to receive a deduction in
respect of such Performance Bonus as a result of the deduction limit under
Section 162(m) of the Code. The amount so delayed generally will be credited
with interest at LIBOR from the date the distribution otherwise would have been
made until the last day of the month immediately preceding the month in which
such amount is paid to the participant. Rather than crediting such amount with
interest at LIBOR, the Compensation Committee, in its discretion, may elect to
adjust such amount as if it were invested in any investment vehicle or vehicles
selected by the Compensation Committee. Any amount so delayed will be paid to
the participant if and to the extent that the Compensation Committee determines
that the Company's deduction in respect of such amount is not limited by Section
162(m) and, in any case, within 30 days after the participant no longer is a
"covered employee" within the meaning of Section 162(m) of the Code.
E. POWER TO AMEND
The Board of Directors may at any time terminate or suspend the Performance
Bonus Plan or revise it in any respect; provided that no amendment shall be made
which would cause payments pursuant to the Performance Bonus Plan to fail to
qualify for the exemption from the limitations of Section 162(m) of the Code
provided in Section 162(m)(4)(C) of the Code.
F. TERM OF THE PERFORMANCE BONUS PLAN
No Performance Bonus shall be payable with respect to a Bonus Period that
begins after October 1, 1998.
STOCKHOLDER APPROVAL REQUIRED
The Performance Bonus Plan requires the affirmative vote of a majority of
the voting power of the Company's outstanding voting securities represented at
the meeting in person or by proxy and that cast votes on such matter. If the
Performance Bonus Plan is not so approved, then it will be of no force or
effect. In such a case, Mr. Maughan's year-end bonus will be determined by the
Compensation Committee based on such factors as it shall determine in its sole
discretion.
THE BOARD OF DIRECTORS BELIEVES THAT THE PERFORMANCE BONUS PLAN IS AN
EFFECTIVE WAY OF PROVIDING MR. MAUGHAN WITH AN APPROPRIATE LEVEL OF COMPENSATION
THAT IS DIRECTLY RELATED TO THE PERFORMANCE OF THE SALOMON BROTHERS SECURITIES
SEGMENT AND THAT WILL PRESERVE THE COMPANY'S DEDUCTION FOR SUCH COMPENSATION.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PERFORMANCE BONUS PLAN.
5. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, based on the recommendation of the Audit Committee,
has voted to continue to retain Arthur Andersen & Co. to serve as independent
public accountants for the year 1994. The Board of
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Directors considers Arthur Andersen & Co. to be eminently qualified, and is
submitting its selection of such firm to the stockholders for ratification. If
the selection is not ratified, the Board of Directors will reconsider its
selection. Arthur Andersen & Co. expects to have a representative at the meeting
who will be available to answer appropriate questions and to make a statement if
such representative wishes to do so. (For further information regarding the
Audit Committee, see "Election of Directors--Board of Directors' Role, Meetings,
Committees and Fees" above at Page 4.)
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Arthur Andersen & Co. to audit the books and accounts of the
Company for the year 1994.
6. STOCKHOLDER'S PROPOSAL
Evelyn Y. Davis, a stockholder owning 100 shares of Common Stock, has given
notice that she intends to present the following resolution for action at the
Annual Meeting:
"RESOLVED: That the shareholders recommend that the Board take the
necessary step that Salomon specifically identify by name and corporate
title in all future proxy statements those executive officers, not
otherwise so identified, who are contractually entitled to receive in
excess of $100,000 annually as a base salary, together with whatever other
additional compensation bonuses and other cash payments were due them."
The stockholder-proponent offers the following supporting statement:
"In support of such proposed Resolution it is clear that the
shareholders have a right to comprehensively evaluate the management in the
manner in which the Corporation is being operated and its resources
utilized. At present only a few of the most senior executive officers are
so identified, and not the many other senior executive officers who should
contribute to the ultimate success of the Corporation. Through such
additional identification the shareholders will then be provided an
opportunity to better evaluate the soundness and efficacy of the overall
management."
"Last year the owners of 4,685,697 shares, representing approximately
5% of shares voting, voted FOR this proposal."
THE BOARD OF DIRECTORS' RECOMMENDATION AND STATEMENT
The Board of Directors recommends a vote AGAINST the adoption of the
foregoing resolution. Unless the shareholder otherwise specifies in the
accompanying Proxy, it will be voted AGAINST such resolution.
In October 1992, the SEC issued new rules setting forth disclosure
requirements with respect to executive compensation. In November 1993, these
rules were amended to require additional disclosure.
The shareholder proposal would require information which goes well beyond
the newly established SEC rules. The Board of Directors thinks that the new
proxy disclosure rules have made it substantially easier for shareholders to
understand the policies and practices relating to the Company's executive
compensation and to compare them with those of other companies in the Company's
business. See Page 10 of this proxy statement for the report of the Company's
Compensation and Employee Benefits Committee. The Board of Directors believes
the information called for by the shareholder resolution would not add to
shareholder understanding but instead would detract from the simple and clear
picture which compliance with the SEC rules accomplishes.
The Board's position was supported by 95% of the shares voting on the same
shareholder proposal at the Company's 1993 Annual Meeting of Stockholders.
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7. OTHER MATTERS
The By-Laws of the Company provide that stockholders are required to give
written notice, not less than 30 days nor more than 60 days in advance of an
Annual Meeting of Stockholders, in order to bring business before the meeting or
nominate a person for election to the Board of Directors.
At the date of this Proxy Statement, the management has no knowledge of any
business other than that described herein which will be presented for
consideration at the meeting. In the event any other business is properly
presented at the meeting, it is intended that the persons named in the enclosed
proxy will have authority to vote such proxy in accordance with their judgment
on such business.
Stockholders desiring to have any proposal considered for inclusion in
proxy material for the 1995 Annual Meeting of Stockholders should submit such
proposal to the Company not later than November 25, 1994.
By Order of the Board of Directors,
ARNOLD S. OLSHIN
Secretary
March 25, 1994
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EXHIBIT A
SALOMON INC
EQUITY PARTNERSHIP PLAN
FOR KEY EMPLOYEES
1. PURPOSE OF THE PLAN
This Equity Partnership Plan for Key Employees is designed to provide
participants, as compensation in respect of past services rendered, with a
continuing long-term investment in common stock of Salomon Inc, the realization
of which will be deferred to a future date. By placing participants in the
position of long-term shareholders of Salomon Inc, participants are expected to
have the same motivations and interests as other shareholders of Salomon Inc,
such as controlling costs (including compensation costs) and seeking to maximize
the return on equity of Salomon Inc and its subsidiaries and affiliates and are
expected to analyze the activities in which they personally are involved in
terms of the overall benefit of such activities to Salomon Inc and its
affiliates and subsidiaries, as well as the effect that such activities will
have on the participants' individual departments or direct compensation. This
plan is intended to be an unfunded "bonus program" (within the meaning of 29 CFR
Part 2510.3-2(c)) designed primarily to provide deferred bonuses to a select
group of highly compensated or management employees.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Accounts" shall mean a Participant's Cash Account, Rollover
Account and Stock Account.
(b) "Affiliate" shall mean any corporation (other than a Company)
which is a member of a "controlled group of corporations" (as that term is
defined in Section 414(b) of the Code) of which a Company is a member and
any trade or business (whether or not incorporated) under "common control"
(as that term is defined in Section 414(c) of the Code) with a Company.
(c) "Average Cost Per Share" shall mean a cost per share of Salomon
Stock calculated as follows:
(i) After each purchase (or deemed purchase) of shares made in
connection with or in anticipation of an Award under an Equity
Partnership Plan, the Average Cost Per Share shall be recalculated and
shall equal (A) the Total Cost of Net Shares immediately after such
purchase, divided by (B) the total number of Net Shares immediately
after such purchase.
(ii) After each allocation of shares from the Suspense Account in
respect of Salomon Inc's 17.65% contribution obligation with respect to
dividends (or deemed dividends) as provided in Section 8 or under
another Equity Partnership Plan, the Average Cost Per Share shall be
recalculated and shall equal (A) the Total Cost of Net Shares
immediately after such allocation, divided by (B) the total number of
Net Shares held immediately after such allocation.
(iii) Contributions of Salomon Stock to the trusts under the Equity
Partnership Plans by Salomon Inc shall be treated as purchases for the
Equity Partnership Plans at the Daily Value as of the date of the
contribution.
(iv) Forfeitures under the Equity Partnership Plans (other than
forfeitures with respect to Rollovers from the Partnership Pool Plan
that are described in Section 7(c)(ii)) shall be treated as purchases
for the Equity Partnership Plans at the Daily Value as of the date of
forfeiture of the number of shares forfeited.
(v) If, on any date that shares of Salomon Stock are purchased for
the Equity Partnership Plans any Awards, Rollovers or dividends paid on
Salomon Stock allocated to Participants' Accounts are awaiting
investment, such purchases shall be deemed to be purchases to satisfy
such Awards, Rollovers and dividends, pro rata based on the dollar
amounts of such Awards, Rollovers and dividends. Any shares that are
purchased in excess of the shares necessary to satisfy such uninvested
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Awards, Rollovers and dividends shall be held in the Suspense Account
and shall be deemed to be purchased in anticipation of awards under the
Equity Partnership Plans.
(vi) Effective as of June 6, 1990, in the event that there are any
shares of Salomon Stock remaining in the Suspense Account on January 1
of any calendar year that were purchased or deemed to have been
purchased in a prior calendar year, the Average Cost Per Share of such
shares shall be deemed to be the Daily Value on the last trading day
immediately preceding such January 1.
(d) "Award" shall mean, with respect to each Participant, an award
granted to such Participant with respect to a calendar year by the
Committee pursuant to Section 7. An Award shall be deemed to have been made
with respect to the calendar year within which ends the Compensation Year
by reference to which the year-end bonus related to the Award is calculated
and in which a Company would, in the absence of the Plan, have accrued a
compensation expense for accounting purposes for the cash value of the
Award.
(e) "Beneficiary" shall mean the person or entity determined to be a
Participant's beneficiary pursuant to Section 19 hereof.
(f) "Board of Directors" shall mean the Board of Directors of Salomon
Inc.
(g) "Cash Account" shall mean (i) a book account maintained by Salomon
Inc reflecting, with respect to tendered shares of Salomon Stock credited
to a Participant's Accounts, the cash amount to be distributed to a
Participant upon a Realization Event and (ii) an account in the Trust
reflecting the consideration received as a result of tendering shares of
Salomon Stock credited to a Participant's Accounts, adjusted to reflect
gains and losses resulting from the Trustee's investment of such amount.
(h) "Cause" shall mean, when used in connection with the termination
of a Participant's employment, the termination of the Participant's
employment by a Company or an Affiliate on account of (i) the willful
violation by the Participant of (A) any federal or state law, (B) any rule
of any Company or Affiliate or (C) any rule or regulation of any regulatory
body to which any Company or Affiliate is subject, including, without
limitation, the New York Stock Exchange or any other exchange or contract
market of which any Company or Affiliate is a member and the National
Association of Securities Dealers, Inc., which violation would materially
reflect on the Participant's character, competence or integrity, (ii) a
breach by a Participant of the Participant's duty of loyalty to the
Companies and Affiliates in contemplation of the Participant's termination
of the Participant's employment, such as the Participant's pretermination
of employment solicitation of customers or employees of any Company or
Affiliate or (iii) the Participant's unauthorized removal from the premises
of any Company or Affiliate of any document (in any medium or form)
relating to any Company or Affiliate or the customers of any Company or
Affiliate. Any rights a Company or an Affiliate may have hereunder in
respect of the events giving rise to Cause shall be in addition to the
rights the Company or Affiliate may have under any other agreement with the
employee or at law or in equity. If, subsequent to a Participant's
voluntary termination of employment or involuntary termination of
employment without Cause, it is discovered that the Participant's
employment could have been terminated for Cause, such Participant's
employment shall, at the election of the Committee in its sole discretion,
be deemed to have been terminated for Cause.
(i) "Change in Control" shall mean:
(i) The acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than
Salomon Inc or any of its subsidiaries or Berkshire Hathaway, Inc. or
any of its subsidiaries or affiliates (as defined in Rule 12b-2
promulgated under the Exchange Act), without the prior written approval
of the Board of Directors, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either the then outstanding shares of Salomon Stock or the combined
voting power of Salomon Inc's then outstanding voting securities in a
transaction or series of transactions not approved by a vote of at least
a majority of the Continuing Directors (as hereinafter defined); or
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(ii) A change in the composition of the Board of Directors of
Salomon Inc such that individuals who, as of January 1, 1988, constitute
the Board of Directors of Salomon Inc (generally the "Directors" and as
of January 1, 1988 the "Continuing Directors") cease for any reason to
constitute at least a majority thereof, provided that any person
becoming a Director subsequent to January 1, 1988 whose nomination for
election was approved by a vote of at least a majority of the Continuing
Directors (other than a nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of Salomon
Inc, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be deemed to be a Continuing Director.
(j) "Code" shall mean the Internal Revenue Code of 1986.
(k) "Committee" shall mean such committee as the Board of Directors
shall appoint from time to time to administer the Plan. The Committee shall
consist of three or more persons, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3 promulgated under Section 16 of
the Exchange Act.
(l) "Companies" shall mean Salomon Inc and its subsidiaries and
affiliates that have adopted the Plan pursuant to Section 3(a) hereof,
while such companies remain subsidiaries or affiliates of Salomon Inc.
(m) "Company" shall mean Salomon Inc or any of its subsidiaries or
affiliates that have adopted the Plan pursuant to Section 3(a) hereof,
while any such company remains a subsidiary or affiliate of Salomon Inc.
(n) "Compensation" shall mean, with respect to a calendar year, the
sum of the dollar amounts of an employee's (i) base salary, (ii) night
differential, (iii) overtime, (iv) year-end bonus and (v) Award, resulting
from services rendered to the Companies, before giving effect to (A) any
"compensation reduction election" under the Retirement Plan (as that term
is defined in the Retirement Plan) or to any similar compensation reduction
election made in connection with a plan within the meaning of Code Section
401(k), (B) any compensation reduction election made in connection with a
"cafeteria plan" within the meaning of Code Section 125 and (C) any
compensation reduction election made in connection with an "employee stock
purchase plan" within the meaning of Code Section 423. Compensation shall
not include the amount of any 17.65% contribution made pursuant to Section
8 hereof or the amount of any up-front or "sign-on" bonus paid to any
individual.
(o) "Daily Value" shall mean, with respect to a share of Salomon
Stock, the average of the high and low reported sales price regular way per
share of Salomon Stock on the New York Stock Exchange Composite Tape, or if
Salomon Stock is not traded on such stock exchange, the principal national
securities exchange on which Salomon Stock is traded, or if not so traded,
the mean between the highest bid and lowest asked quotation on the
over-the-counter market as reported by the National Quotations Bureau, or
any similar organization, on any relevant date, or if not so reported, as
determined by the Committee in a manner consistently applied.
(p) "Disability" shall mean any physical or mental condition that
would qualify a Participant for a disability benefit under the long-term
disability plan maintained by any Company and applicable to the
Participant.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
(r) "Equity Partnership Plans" shall mean the Plan, the Salomon Inc
Equity Partnership Plan for Professional and Other Highly Compensated
Employees and any other equity plan maintained by any Company and
designated by the Committee as an Equity Partnership Plan.
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
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(t) "Investment Period" shall mean, with respect to an Award or a
Rollover from a Prior Incentive Plan, the later of (i) the expiration of
the 5-year period beginning on the date as of which such Award is granted
or such Rollover is made or (ii) the expiration of any period determined
pursuant to any Long-Term Investment Election made by a Participant. In
addition to the foregoing, the Investment Period with respect to an Award
or a Rollover from a Prior Incentive Plan shall end upon the Participant's
Permissive Retirement that occurs prior to the date on which the Investment
Period otherwise would end if the Participant so elects in writing within
45 days after the date such Award is granted or such Rollover is made or
simultaneously with the filing of a Long-Term Investment Election with
respect to such Award or Rollover. The Investment Period of a Rollover from
another Equity Partnership Plan shall be determined as if such Rollover
were an Award under the Plan as of the date on which the related award was
granted under such other Equity Partnership Plan.
(u) "Long-Term Investment Election" shall mean a Participant's
irrevocable written election pursuant to Section 10 hereof.
(v) "Minimum Eligible Compensation" shall mean $300,000 with respect
to 1990, effective as of January 1, 1991, with respect to each calendar
year after 1990 and before 1995, 1.5 multiplied by the compensation
limitation in effect under Section 401(a)(17) of the Code for the
immediately preceding calendar year and, with respect to each calendar year
beginning in 1995 and thereafter, 2.4 multiplied by the compensation
limitation in effect under Section 401(a)(17) for the immediately preceding
calendar year.
(w) "Net Shares" shall mean the number of shares purchased or deemed
to have been purchased with respect to Awards and awards under the other
Equity Partnership Plans, excluding purchases or deemed purchases with
respect to dividends paid on Salomon Stock credited to Participants'
Accounts, less the number of shares credited to Participants' Accounts (and
not theretofore forfeited) from the Suspense Account.
(x) "Participant" shall mean a key employee, including an officer or
director, of any Company who is determined by the Committee to be eligible
to participate in the Plan and who is designated a Participant pursuant to
Section 6 hereof.
(y) "Partnership Pool Plan" shall mean the 1988 Managing Directors'
Partnership Pool.
(z) "Permissive Retirement" shall mean a Participant's termination of
employment with the Companies and Affiliates, other than by reason of death
or Disability, on or after the earliest to occur of: (i) the December 31st
following the date the Participant attains age 55 and completes 10 years of
service determined pursuant to the Retirement Plan; (ii) the Participant's
65th birthday; (iii) the December 31st following the date the Participant
completes 25 years of service determined pursuant to the Retirement Plan;
or (iv) the later of the date the Participant has completed at least 10
years of service determined pursuant to the Retirement Plan and the
December 31st following the date the Participant attains an age which, when
added to the Participant's number of years of service determined pursuant
to the Retirement Plan, equals 75. The Committee may consider an extended
leave of absence to be a termination of employment even though the
Participant may render limited services to the Companies or Affiliates
during such leave.
(aa) "Plan" shall mean the Salomon Inc Equity Partnership Plan for Key
Employees.
(ab) "Prior Incentive Plan" shall mean the Partnership Pool Plan or
the Special Bonus Plan.
(ac) "Realization Event" shall mean, with respect to an Award or a
Rollover, the first to occur of (i) the expiration of the Investment Period
with respect to such Award or Rollover, (ii) the occurrence of a Change in
Control, (iii) the termination of the Plan pursuant to Section 18 hereof,
(iv) the Participant's termination of employment with a Company or
Affiliate as a result of the Participant's Disability or (v) the
Participant's death.
(ad) "Retirement Plan" shall mean the Salomon Brothers Inc Retirement
Plan, as amended from time to time.
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(ae) "Revocation Event" shall mean a determination by the Board of
Directors in its sole discretion that any of the following has occurred or
is likely to occur:
(i) A determination by the Department of Labor or a court of
competent jurisdiction that the assets of the Trust are subject to Part
4 of Subtitle B of Title I of ERISA.
(ii) A determination by the Department of Labor or a court of
competent jurisdiction that the Plan is a "pension plan" (within the
meaning of Section 3(2) of ERISA) subject to Parts 2, 3 and 4 of
Subtitle B of Title I of ERISA.
(iii) A determination by the Internal Revenue Service or a court of
competent jurisdiction that any amount deposited in the Trust is taxable
to any Participant or Beneficiary prior to the distribution to the
Participant or Beneficiary of such amount.
(iv) A determination by Salomon Inc's independent public
accountants that the accounting expense to the Companies of maintaining
the Accounts under the Plan is based on a value of the shares of Salomon
Stock other than such value (A) on the date shares of Salomon Stock are
acquired by the Trust or (B) on the date the shares of Salomon Stock are
credited to a Participant's Accounts.
(af) "Rollover" shall mean an amount transferred to the Plan from
another Equity Partnership Plan or from a Prior Incentive Plan pursuant to
Section 7(b).
(ag) "Rollover Account" shall mean a book account maintained by
Salomon Inc and an account maintained in the Trust reflecting, with respect
to a Rollover, the number of shares of Salomon Stock to be distributed to a
Participant upon a Realization Event.
(ah) "Rollover Election" shall mean a written election by a
Participant to transfer to the Plan amounts credited to the Participant's
accounts from another Equity Partnership Plan or a Prior Incentive Plan
pursuant to Section 7(b).
(ai) "Salomon Stock" shall mean the common stock of Salomon Inc or any
successor thereto.
(aj) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(ak) "Special Bonus Plan" shall mean the Salomon Brothers Inc Special
Bonus Plan, adopted effective as of January 1, 1986.
(al) "Stock Account" shall mean a book account maintained by Salomon
Inc and an account maintained in the Trust reflecting, with respect to each
Award, the number of shares of Salomon Stock to be distributed to each
Participant upon a Realization Event.
(am) "Suspense Account" shall mean an account in the Trust in which
unallocated shares of Salomon Stock are held.
(an) "Total Cost of Net Shares" immediately after a purchase (or
deemed purchase) made in connection with or in anticipation of an award
under the Equity Partnership Plans or an allocation shall mean the Average
Cost Per Share immediately preceding the purchase or allocation, as the
case may be, multiplied by the number of Net Shares immediately preceding
the purchase or allocation, as the case may be (i) in the case of a
purchase, plus (A) the number of such shares purchased multiplied by (B)
the amount paid per share, excluding brokerage commissions, for such shares
or (ii) in the case of an allocation, minus (A) the number of shares
allocated multiplied by (B) the Daily Value on the date of the allocation.
(ao) "Trust" shall mean any trust established in connection with the
Plan.
(ap) "Trustee" shall mean the trustee of the Trust.
(aq) "Voluntary Award Election" shall mean, with respect to a
Participant described in Section 7(a)(iii), an election made pursuant to
Section 7(a)(iii) to reduce the Participant's Compensation by a
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percentage of such Compensation (determined without reference to the
Voluntary Award Election) and have the amount by which the Participant's
Compensation is so reduced converted to an Award.
3. ELECTION BY A COMPANY TO PARTICIPATE IN THE PLAN
(a) By appropriate corporate action, subject to the approval of the Board
of Directors, any subsidiary or affiliate of Salomon Inc may adopt the Plan.
Such subsidiary or affiliate may recommend to the Committee which of its
employees should be eligible to participate in the Plan.
(b) By appropriate corporate action, a Company may terminate its
participation in the Plan.
(c) No affiliate or subsidiary of Salomon Inc that participates in the Plan
shall have any power with respect to the Plan except as specifically provided in
the Plan.
(d) As a condition of participation in the Plan, Salomon Inc shall require
any subsidiary or affiliate to enter into an agreement or agreements to obligate
such subsidiary or affiliate to pay to Salomon Inc, in cash, the appropriate
value, as determined by the Board of Directors, of any Salomon Stock that
Salomon Inc contributes to the Trust in respect of the Participants employed by
such subsidiary or affiliate. In addition, Salomon Inc may require any
subsidiary or affiliate to enter into such other agreement or agreements as it
shall deem necessary to obligate such subsidiary or affiliate to reimburse
Salomon Inc for any other amounts paid by Salomon Inc hereunder, directly or
indirectly, in respect of such subsidiary's or affiliate's employees.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 14 hereof, shares of Salomon
Stock may be allocated to Participants' accounts under the Equity Partnership
Plans in an amount that, in the aggregate since the inception of the Equity
Partnership Plans in 1990, does not exceed 40,000,000 shares. In the event that
any shares of Salomon Stock allocated to a Participant's accounts under the
Equity Partnership Plans are forfeited for any reason, the number of shares of
Salomon Stock forfeited shall again be available for allocation under the Equity
Partnership Plans.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall have
full authority, consistent with the Plan, to administer the Plan, including
authority to interpret and construe any provision of the Plan and to adopt such
rules and regulations for administering the Plan and such forms of elections as
it may deem necessary or appropriate. Decisions of the Committee shall be final
and binding on all parties. Committee decisions shall be made by a majority of
its members present at a meeting (which meeting may be held by telephone) at
which a quorum is present. Any decision reduced to writing and signed by all of
the members of the Committee shall be as fully effective as if it had been made
at a meeting duly held. All expenses of the Plan shall be borne by Salomon Inc.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Companies shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Companies to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost, expense
(including counsel fees, which fees shall be paid as incurred) or liability
(including any sum paid in settlement of a claim with the approval of the Board
of Directors) arising out of any action, omission or determination relating to
the Plan, if such action, omission or determination was taken or made by such
member, director or employee in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Companies, and
with respect to any criminal action or proceeding, such member had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contender or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Companies, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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6. ELIGIBILITY
(a) Effective as of January 1, 1991, the persons who shall be eligible to
participate in the Plan with respect to a calendar year shall be such employees
or classes of employees of the Companies (i) (A) whose principal work location
during such calendar year is within the United States of America or (B) who are
citizens of the United States of America, whose principal work location during
such calendar year is outside of the United States of America and who do not
participate in a plan maintained by their employer during such calendar year
that the Committee determines to be comparable to the Plan, (ii) (A) with
respect to an individual who did not participate in the Plan in the immediately
preceding year, whose annualized Compensation with respect to such calendar year
is at least equal to the Minimum Eligible Compensation or (B) with respect to an
individual who did participate in the Plan in the immediately preceding year,
whose Compensation with respect to such calendar year is at least equal to the
compensation limitation under Section 401(a)(17) of the Code for the immediately
preceding calendar year and (iii) who are designated as eligible to participate
in the Plan by the Committee.
(b) Notwithstanding Paragraph (a) of this Section, the Committee may from
time to time add or exclude from participation one or more individuals or
classes of individuals. Each eligible individual shall become a Participant
effective on the date as of which the individual (or class of individuals
including such individual) is designated as a Participant.
7. AWARDS AND ROLLOVERS UNDER THE PLAN
(a) Awards
(i) Subject to Paragraphs (ii) and (iv) of this Section, the Committee
shall grant Awards to Participants pursuant to the schedule attached hereto
as Appendix A. The Committee may from time to time and in its sole
discretion amend the schedule contained in Appendix A. Any such schedule
shall provide for Awards based on a percentage of a Participant's
Compensation (or, in the Committee's discretion, with respect to any
Participant whose year-end bonus constitutes "Performance-based
Compensation" under Section 162(m)(4)(c) of the Code, such Participant's
year-end bonus) with respect to a calendar year, and will reduce the
Participant's cash bonus that would otherwise be payable with respect to
such calendar year.
(ii) Notwithstanding the schedule attached hereto as Appendix A or any
amendment thereto subject to Section 7(a)(iii), no Award to a Participant
with respect to a calendar year will exceed the lesser of (A) (1) for the
1991 calendar year, 50% of the Participant's Compensation for such calendar
year and (2) for each calendar year after 1991, 50% of the Participant's
Compensation or such greater percentage of Compensation as shall be
determined by the Committee in its sole discretion or (B) the dollar amount
of the bonus (excluding the amount of any up-front or sign-on bonus)
payable to such Participant with respect to such calendar year, before
reduction for any Award with respect to such calendar year, but reduced by
the portion of the bonus (other than an up-front or sign-on bonus)
contributed by the Companies pursuant to the Participant's salary reduction
election to (1) the Retirement Plan or any similar plan, (2) a "cafeteria
plan" within the meaning of Code Section 125 or (3) an "employee stock
purchase plan" within the meaning of Code Section 423.
(iii) Effective as of January 1, 1994, any Participant whom the
Committee determines may be a "covered employee" within the meaning of
Section 162(m) of the Code in a calendar year (other than a Participant
whose year-end bonus constitutes "performance-based compensation" and whose
Award under Section 7(a)(i) is determined solely on the basis of the
Participant's year-end bonus) shall be permitted to receive an additional
Award for a calendar year based on the Participant's Voluntary Award
Election for such calendar year. Each Voluntary Award Election (A) shall
state the percentage of the Participant's Compensation (determined without
reference to the Voluntary Award Election) by which the Participant's
Compensation shall be reduced and converted to an Award hereunder, (B)
shall be made in such form as may be required by the Committee and (C)
shall be delivered to the Committee no later than December 31 of the
calendar year immediately preceding the calendar year for which the
Voluntary Award Election is made (or, with respect to Voluntary Award
Elections for the 1994 calendar
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year, no later than the date 30 days after the Plan is approved by Salomon
Inc's shareholders pursuant to Section 20). Notwithstanding any Voluntary
Award Election, the amount by which the Participant's Compensation shall be
reduced and which shall be converted to an Award hereunder shall not exceed
the lesser of (1) the excess, if any, of (I) the Participant's Compensation
after reduction for any Award granted pursuant to Section 7(a)(i) over (II)
$1 million, and (2) the dollar amount of the bonus (excluding the amount of
any up-front or sign-on bonus) payable to such Participant with respect to
such calendar year, after reduction for any Award granted pursuant to
Section 7(a)(i) with respect to such calendar year and further reduced by
the portion of the bonus (other than an up-front or sign-on bonus)
contributed by the Companies pursuant to the Participant's salary reduction
election to (A) the Profit Sharing Plan or any similar plan, (B) a
"cafeteria plan" within the meaning of Code Section 125 or (C) an "employee
stock purchase plan" within the meaning of Code Section 423.
(iv) Notwithstanding the foregoing, effective as of January 1, 1991,
unless the Committee determines otherwise in its sole discretion, the
following individuals shall not be entitled to receive an Award for a
calendar year (whether or not Awards already have been allocated to
Participants for such calendar year):
(A) an individual who, prior to December 31 of such calendar year,
has notified the applicable Company or Affiliate that the individual
intends to terminate employment with the Companies and Affiliates
effective in such calendar year or the next succeeding calendar year;
(B) an individual who, prior to December 31 of such calendar year,
has been notified by the applicable Company or Affiliate that the
individual's employment with the Companies and Affiliates will be
terminated effective in such calendar year or the next succeeding
calendar year; or
(C) an individual whose employment with the Companies and
Affiliates terminates prior to the end of such calendar year.
(b) Rollovers
(i) A Participant shall be permitted to make a Rollover with respect
to a percentage, up to 100%, of the amount credited to such Participant's
accounts under the Partnership Pool Plan as of December 31, 1990 by
delivering to the Committee, on or before December 31, 1990, a Rollover
Election indicating the percentage of each such amount to be rolled over.
(ii) A Participant shall be permitted to make a Rollover with respect
to a percentage, up to 100%, of the amount credited to such Participant's
accounts under the Special Bonus Plan as of December 31, 1990 by delivering
to the Committee, on or before December 31, 1990, a Rollover Election
indicating the percentage of each such amount to be rolled over.
(iii) To the extent a Participant elects to roll over a portion of the
Participant's accounts under the Partnership Pool Plan or the Special Bonus
Plan the Participant's rights under the Plan with respect to any such
amount shall be in lieu of all rights the Participant would have had under
either such plan.
(iv) Upon becoming eligible to participate in the Plan, all amounts
credited to the Participant's accounts under the Equity Partnership Plans
(other than the Plan) shall be transferred to the Plan as a Rollover.
(v) No Rollover shall be given effect with respect to a Participant
whose employment with the Companies terminates prior to the effective date
of such Rollover.
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(c) Vesting of Awards and Rollovers
Subject to Sections 7(a)(iv) and 11, each Award and Rollover shall be 100%
vested in each Participant, except as follows:
(i) a Participant shall forfeit any Award or Rollover if, prior to the
Realization Event for that Award or Rollover, the Participant's employment
with a Company or an Affiliate is (or is deemed to have been) terminated by
such Company or Affiliate for Cause;
(ii) a Participant shall forfeit any shares of Salomon Stock
attributable to a Rollover from the Partnership Pool Plan if, prior to the
earlier of January 1, 1992 and the Realization Event for that Rollover, the
Participant's employment with the Companies and Affiliates terminates
(whether or not for Cause); and
(iii) a Participant shall forfeit 20% of the shares of Salomon Stock
attributable to a Rollover from the Special Bonus Plan if, prior to the
earliest of (A) January 1, 1992, (B) the date the Participant would be
entitled to Permissive Retirement as a result of the criteria described in
Sections 2(z)(i), (ii) or (iii), (C) the date the Participant has completed
10 years of service under the Retirement Plan in the capacity of Managing
Director and/or as a General Partner of Salomon Brothers Inc, regardless of
the Participant's age at the time of termination and (D) the Realization
Event for that Rollover, the Participant's employment with the Companies
and Affiliates terminates (whether or not for Cause), provided, however,
that a Participant who otherwise would achieve full vesting as a result of
Clauses (B) or (C) of this Paragraph nevertheless shall forfeit 20% of the
shares of Salomon Stock attributable to a Rollover from the Special Bonus
Plan if the Participant joins a competitor organization prior to the
Realization Event for that Rollover. For purposes of this Paragraph, the
term "competitor organization" shall mean an organization that is
determined by the Committee to be a competitor of Salomon Inc.
(d) Simultaneous Occurrence of Realization Event and Termination of
Employment
In the event of the simultaneous occurrence of a Realization Event
described in Section 2(ac)(iv) or 2(ac)(v) with respect to a Rollover from the
Partnership Pool Plan or the Special Bonus Plan and the termination of the
Participant's employment with the Companies and Affiliates, for purposes of
determining whether a Participant will forfeit any amount of such Rollover
pursuant to Section 7(c)(ii) or 7(c)(iii), such Realization Event shall be
deemed to have occurred prior to such termination of the Participant's
employment.
8. FUNDING OF THE PLAN
The Plan shall be unfunded. Benefits under the Plan shall be paid from the
general assets of Salomon Inc. Salomon Inc shall establish the Trust, which
shall be intended to be a "grantor trust" within the meaning of Section 671 of
the Code, pursuant to a trust agreement, to assist Salomon Inc in meeting its
obligations hereunder. Such trust agreement shall provide that the Trust shall
be invested primarily in Salomon Stock.
The trust agreement creating the Trust shall contain procedures to the
following effect:
(a) In the event of the insolvency of any Company, the assets of the
Trust shall be available to pay the claims of any creditor of such Company
to whom a distribution may be made in accordance with state and federal
bankruptcy laws. A Company shall be deemed to be "insolvent" if such
Company is subject to a pending proceeding as a debtor under the Federal
Bankruptcy Code (or any successor federal statute) or any state bankruptcy
code. In the event a Company becomes insolvent, the Board of Directors and
the Chief Executive Officer of Salomon Inc shall notify the Trustee of the
event as soon as practicable. Upon receipt of such notice, or if the
Trustee receives other written allegations of such Company's insolvency
from a third party considered by the Trustee to be reliable and
responsible, the Trustee shall cease making payments of benefits from the
assets of the Trust, shall hold the assets in the Trust for the benefit of
such Company's creditors and shall take such steps as are necessary to
determine within a reasonable period of time whether such Company is
insolvent. In making such determination, the Trustee may rely upon a
certificate of the Board of Directors and the Chief Executive Officer of
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Salomon Inc or a determination by a court of competent jurisdiction that
such Company is or is not insolvent. In the case of the Trustee's
determination of such Company's insolvency, the Trustee will deliver assets
of the Trust to satisfy claims of such Company's creditors pursuant to a
final order of a court of competent jurisdiction.
(b) The assets of the Trust shall be available to pay any claim or
claims of any judgment creditor or judgment creditors of any Company to the
extent such claim or claims are then payable and the Company otherwise
shall fail to pay such claim or claims. The Board of Directors and the
Chief Executive Officer of Salomon Inc shall notify the Trustee as soon as
practicable in the event of any such failure of any Company to pay a
judgment creditor. Upon receipt of such notice, or if the Trustee receives
other written allegations of any Company's such failure to pay a judgment
creditor or judgment creditors from a third party considered by the Trustee
to be reliable and responsible, the Trustee shall, to the extent of such
failure, hold the assets of the trusts under the Equity Partnership Plans
for the benefit of such judgment creditor or judgment creditors and shall
take such steps as are necessary to determine within a reasonable period of
time whether such creditors are entitled to payment. In making such
determination, the Trustee may rely upon a certificate of the Board of
Directors and the Chief Executive Officer of Salomon Inc or a determination
by a court of competent jurisdiction that such creditors are or are not
entitled to payment. In the case of the Trustee's determination of any such
Company's failure to pay a judgment creditor or judgment creditors, the
Trustee will deliver assets of the trusts under the Equity Partnership
Plans to satisfy claims of such Company's judgment creditors as directed
pursuant to a final order of a court of competent jurisdiction. In the
event that the Trustee is required to hold any assets of the trusts under
the Equity Partnership Plans for the benefit of any judgment creditor,
Participants' Accounts shall be ratably reduced by such amount.
(c) In the event the Trustee ceases making payments of benefits as a
result of a Company's insolvency, the Trustee shall resume making payments
of benefits only after the Trustee has determined that no Company is then
insolvent or upon receipt of an order of a court of competent jurisdiction
requiring the payment of benefits. In the event the Trustee holds any
assets in the trusts under the Equity Partnership Plans for the benefit of
a judgment creditor of a Company, the Trustee shall, if the Trustee
determines that no Company then owes any such amount to a judgment
creditor, allocate the then remaining amounts that had been held for the
benefit of any such judgment creditor to the Participants' Accounts that
were reduced, pro rata in proportion to the excess of the reduction in each
such Participant's Accounts over the amounts paid by Salomon Inc to each
such Participant as a result of such reduction. No Participant shall
receive a restoration that exceeds the amount of the reduction together
with the earnings that would have accrued had no reduction been effected,
less amounts paid to the Participant by Salomon Inc as a result of the
reduction. Notwithstanding the provisions of this Section 8(c), the Trustee
shall restore Participants' Accounts in accordance with an order of a court
of competent jurisdiction. In the event the amount available for
restoration exceeds the amount required to be restored to Participants'
Accounts, such excess shall be allocated to the Suspense Account and shall
be treated as a purchase for the Plans at the Daily Value as of the date of
such allocation. In making any determination under this Section, the
Trustee may rely upon a certificate of the Board of Directors and the Chief
Executive Officer of Salomon Inc.
(d) The Trustee shall reinvest all dividends paid on Salomon Stock
held in the Trust in Salomon Stock as follows:
(i) (A) Subject to Paragraph (d)(i)(B) of this Section, as soon as
practicable after the payment date for dividends paid (or deemed paid)
on Salomon Stock credited (or deemed to be credited) to Participants'
Accounts, other than Salomon Stock credited to Participants' Rollover
Accounts with respect to a Rollover from a Prior Incentive Plan, Salomon
Inc shall contribute to the Trust, as compensation to Participants, an
amount equal to 17.65% of such dividends (or deemed dividends) (less
required withholding taxes, if any). As soon as practicable after
receipt of such dividends (or deemed dividends) and such 17.65%
contribution, the Trustee shall use such dividends (or deemed dividends)
and contribution to purchase Salomon Stock.
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(B) To the extent that the Committee elects by notice to the
Trustee, Salomon Inc's 17.65% contribution obligation shall be satisfied
out of the Suspense Account. Effective as of January 1, 1991, if the
Committee makes such an election, the contribution obligation shall be
satisfied (1) first from the dividends paid on shares of Salomon Stock
held in the Suspense Account and (2) second from shares of Salomon Stock
held in the Suspense Account, based on the Daily Value of the shares on
the relevant payment date. Any such share shall be deemed to have been
purchased at such Daily Value for allocation purposes.
(C) Shares of Salomon Stock purchased or deemed purchased pursuant
to this Section 8(d)(i) shall be allocated to the Participant's Accounts
with respect to which they were purchased.
(ii) As soon as practicable after the payment date for dividends
paid on Salomon Stock credited to Participants' Rollover Accounts as of
the record date for such dividends with respect to a Rollover from a
Prior Incentive Plan, the Trustee shall use the amount of such dividends
to purchase Salomon Stock. Shares of Salomon Stock purchased pursuant to
this Section 8(d)(ii) shall be allocated to the Participant's Rollover
Account with respect to which they were purchased.
(iii) As soon as practicable after receipt of dividends paid on
Salomon Stock held in the Suspense Account, the Trustee shall use the
amount of such dividends to purchase Salomon Stock. Shares of Salomon
Stock purchased pursuant to this Section 8(d)(iii) (other than with
dividends used to satisfy Salomon Inc's contribution obligation pursuant
to Paragraph (d)(i)(B)) shall be held in the Suspense Account.
(e) Notwithstanding any other provision hereunder, Salomon Inc may, at
any time, by notice to the Trustee, substitute for part or all of the
assets held by the Trust other assets of equal fair market value at the
time of such substitution. The fair market value of any shares of Salomon
Stock being substituted shall be the Daily Value of such shares of Salomon
Stock on the day as of which the substitution is to be effected. The
Trustee shall distribute to Salomon Inc the assets to be substituted as
soon as practicable after receipt of a notice of substitution but in no
case later than 7 days thereafter; provided, however, that in the event
Salomon Inc elects to substitute Salomon Stock held in the Trust within 90
days prior to the record date of a meeting of the shareholders of Salomon
Inc or on or after the commencement of a tender offer with respect to
Salomon Stock, the Trustee shall continue to hold the Salomon Stock to be
substituted and shall make voting decisions at such meeting and shall make
tender decisions with respect to such Salomon Stock pursuant to Section 13
of the Plan. As soon as practicable after the conclusion of such meeting or
the expiration of such tender offer, as the case may be, the Trustee shall
distribute such shares of Salomon Stock from the Trust to Salomon Inc.
Notwithstanding the foregoing, the Committee shall be permitted to modify or
eliminate the provisions described in Sections 8(a),(b),(c) and (e) if and to
the extent it determines that such action is appropriate based on advice of
counsel.
9. MAINTENANCE OF ACCOUNTS
(a) Stock Account
(i) If, on November 30 of any calendar year, the number of shares held
in the Suspense Account is at least equal to (A) with respect to Awards
granted for the 1990 calendar year, 80% of the amount of shares necessary
to satisfy the total amount of Awards granted for such calendar year and
(B) with respect to Awards granted for each calendar year thereafter, 90%
of the amount of shares necessary to satisfy the total amount of Awards
granted for such calendar year, each Participant's Stock Account shall be
credited with a number of shares of Salomon Stock equal to the dollar
amount of such Participant's Award divided by the product of .85 multiplied
by the Average Cost Per Share of Salomon Stock on November 30 of the
calendar year for which the Award was granted to such Participant. In the
Event that on any such November 30 the number of shares held in the
Suspense Account is less than 80% or 90%, as the case may be, of the number
of shares necessary to satisfy the total amount of Awards granted for such
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calendar year, each Participant's Stock Account shall be credited with a
number of shares of Salomon Stock equal to the dollar amount of such
Participant's Award divided by the product of .85 multiplied by the Average
Cost Per Share of Salomon Stock on the date on which the shares are
credited to such Participant's Stock Account.
(ii) If, as of the date an Award is granted, the number of shares held
in the Suspense Account is insufficient to satisfy such Award, the date on
which Salomon Stock in respect of such Award is credited to a Participant's
Stock Account shall be deferred until such date as the number of shares
held in the Suspense Account equals or exceeds the number of shares with
respect to such Award.
(iii) If the date as of which Awards are granted for a calendar year
is on or prior to the record date for the dividends payable on Salomon
Stock but the number of shares held in the Suspense Account is insufficient
to satisfy such Awards, (A) for purposes of Sections 8(d) and 9(a)(iv), the
shares held in the Suspense Account shall be treated as held in each
Participant's Stock Account pro rata in proportion to each Participant's
Award for such calendar year and (B) Salomon Inc shall make a contribution
to the Trust equal to the difference between (1) the dividends that would
have been paid on shares in respect of Awards for such calendar year had
the Suspense Account held sufficient shares to satisfy the Awards for such
calendar year and (2) the dividends actually paid on the shares held in the
Suspense Account. For purposes of Sections 8(d) and 9(a)(iv), the Salomon
Inc contribution described in clause (B) of this Section shall be treated
as a dividend paid on Salomon Stock held in a Participant's Stock Account,
pro rata in proportion to each Participant's Award for such calendar year.
(iv) As of the payment date for dividends paid (or deemed paid) on
Salomon Stock held (or deemed held) in a Participant's Stock Account as of
the record date for such dividends, each such Participant's Stock Account
shall be credited with the number of shares of Salomon Stock that are in
fact purchased or deemed to have been purchased with such dividends and the
additional 17.65% compensation contribution made in respect of such
dividends, as determined pursuant to Section 8(d).
(v) Each Participant's Stock Account shall be reduced by the number of
shares of Salomon Stock distributed to the Participant in respect of an
Award, whether such shares are distributed from the Trust or directly from
Salomon Inc.
(b) Rollover Account
(i) With respect to a Participant who has an automatic Rollover of his
accounts from another Equity Partnership Plan to the Plan pursuant to
Section 7(b)(iv), the Committee shall maintain such Participant's Rollover
Account as follows:
(A) Each such Participant's Rollover Account shall be credited with
a number of shares of Salomon Stock that were credited to the
Participant's accounts under the Equity Partnership Plans immediately
prior to the Rollover.
(B) All assets held in such Participant's accounts under any trust
maintained in connection with another Equity Partnership Plan
immediately prior to the Rollover shall be transferred to the
Participant's corresponding accounts under the Trust on the date as of
which the Rollover occurs.
(C) As of the payment date for dividends paid on Salomon Stock held
in a Participant's Rollover Account as of the record date for such
dividends, each such Participant's Rollover Account shall be credited
with the number of shares of Salomon Stock purchased or deemed to have
been purchased with such dividends and the additional 17.65%
compensation contribution made in respect of such dividends, as
determined pursuant to Section 8(d).
(ii) With respect to a Participant who makes a Rollover Election with
respect to benefits under a Prior Incentive Plan, the Committee shall
maintain such Participant's Rollover Account as follows:
(A) Each such Participant's Rollover Account shall be credited as
of January 1, 1991 with the number of shares of Salomon Stock purchased
with the dollar amount rolled over from a Prior Incentive Plan.
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(B) As of the payment date for dividends paid on Salomon Stock held
in a Participant's Rollover Account as of the record date for such
dividends, each such Participant's Rollover Account shall be credited
with the number of shares of Salomon Stock purchased with such
dividends.
(iii) Each Participant's Rollover Account shall be reduced by the
number of shares of Salomon Stock distributed to the Participant in respect
of a Rollover, whether such shares are distributed from the Trust or
directly from Salomon Inc.
(c) Cash Account
In the event that a Participant shall elect to tender shares of Salomon
Stock held in the Participant's Accounts pursuant to Section 13(b)(i), the
number of shares of Salomon Stock credited to such Participant's Accounts that
are tendered shall be converted to a dollar amount-per-share equal to the
consideration received in respect of such tender. Such dollar amount shall
thereafter be held in the Participant's Cash Account and shall be credited with
interest during the period beginning on the date as of which such shares were
tendered and ending on the last day of the month immediately preceding the month
in which such amounts are paid to the Participant at a rate which, through the
end of the first calendar month in such period, shall equal the London Interbank
Offered Rate (LIBOR) for 1-month deposits that appears in the Wall Street
Journal on the date immediately preceding the date that such shares were
tendered, and which shall be recalculated for each successive 1-month period
based on the London Interbank Offered Rate (LIBOR) for 1-month deposits
published in the Wall Street Journal on the last day of each preceding calendar
month. If such rate does not appear in the Wall Street Journal on any date as
provided above, then such rate shall be the last such rate that appeared in the
Wall Street Journal prior to the date of determination set forth above.
10. LONG-TERM INVESTMENT ELECTION
To the extent permitted by the Committee, each Participant who (a) is
employed by a Company or an Affiliate and (b) earned the Minimum Eligible
Compensation in the immediately preceding calendar year, shall be entitled to
make a Long-Term Investment Election with respect to an Award or Rollover. Any
such Long-Term Investment Election shall be delivered to the Committee no later
than a date 2 years prior to any date a Participant's Investment Period
otherwise would expire pursuant to the first sentence of Section 2(t) hereof.
The effect of a Long-Term Investment Election will be to defer the realization
of an Award until the earlier of the expiration of an additional 3-year period
beginning on the date the Participant's Investment Period otherwise would expire
or, if the Participant so elects at the time the Participant makes the Long-Term
Investment Election, the Participant's Permissive Retirement that occurs during
such additional 3-year period. The Committee may limit the ability of any
Participant to make a Long-Term Investment Election pursuant to uniform rules
adopted by it. No Participant shall be permitted to make more than two Long-Term
Investment Elections with respect to any Award or Rollover.
11. PAYMENTS UNDER THE PLAN
(a) Subject to Paragraph (b) of this Section, within 30 business days after
the occurrence of a Realization Event with respect to an Award or a Rollover,
Salomon Inc shall deliver or cause to be delivered to the Participant (i)
certificates for a number of shares of Salomon Stock equal to the number of
whole shares of Salomon Stock credited to such Participant's Accounts as of the
Realization Event as a result of such Award or Rollover (including shares
reflecting the reinvestment of dividends paid thereon), and cash with respect to
any fractional shares of Salomon Stock credited to such Participant's Accounts
in an amount equal to the Daily Value of such fractional shares as of the
Realization Event, and (ii) with respect to a Participant who has directed the
Trustee to tender shares of Salomon Stock allocated to the Participant's
Accounts, the dollar amount credited to a Participant's Cash Account as of the
Realization Event in respect of such Award or Rollover. In the event that shares
of Salomon Stock that are allocated to a Participant's Accounts as of the record
date for a dividend are to be distributed to the Participant prior to the
payment date for such dividend, Salomon Inc shall deliver or cause to be
delivered from the Suspense Account to the Participant a number of shares of
Salomon Stock equal to the number of whole shares, and cash with respect to that
number of fractional shares, of Salomon Stock that could have been purchased
with the amount of
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such unpaid dividends, plus 17.65% thereof, at the Daily Value as of the
Realization Event. Notwithstanding the fact that Salomon Inc establishes the
Trust for the purpose of assisting it in meeting its obligations under the Plan,
Salomon Inc shall remain obligated to pay the amounts credited to the
Participants' Accounts. Nothing shall relieve Salomon Inc of its liabilities
under the Plan except to the extent amounts are paid to Participants or
Beneficiaries from assets of the Trust.
(b) Notwithstanding the foregoing, with respect to shares of Salomon Stock
allocated to Participants' Accounts in respect of Awards granted in 1990, 1991
and 1992:
(i) On or before December 31, 1992, Salomon Inc shall deliver or cause
to be delivered to Participants selected by the Committee, certificates for
a number of shares of Salomon Stock equal to 60% of the number of whole
shares of such Salomon Stock allocated to such Participant's Accounts
(including shares reflecting the reinvestment of dividends paid thereon),
and cash with respect to 60% of any fractional shares of such Salomon Stock
allocated to such Participant's Accounts in an amount equal to the Daily
Value of such fractional shares as of the distribution date. Such
distributions shall be made to a Participant only if and to the extent the
Committee determines in its sole discretion that such distributions would
not impair the rights of such Participant in any Award or Rollover
theretofore granted or made or any earnings with respect thereto within the
meaning of Section 18 of the Plan. Subject to Section 11(b)(iii), the stock
certificates so distributed to such Participants shall be restricted as to
transferability and shall remain subject to Sections 7(c) and 11(c)(ii) of
the Plan until the date that a Realization Event would have occurred with
respect to such shares had they not been distributed to the Participant,
and each such stock certificate shall bear the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions contained in the Salomon Inc Equity Partnership Plan
for Key Employees (the violation of which may result in
forfeiture). A copy of the Plan is on file in the office of the
Secretary of Salomon Inc, Seven World Trade Center, New York,
New York 10048.
Any shares remaining in the Participants' Accounts in respect of the
1990, 1991 and 1992 Awards after the distribution of the shares pursuant to
this Section 11(b)(i) shall be distributed to Salomon Inc in exchange for
Salomon Inc's undertaking to pay the amounts set forth in Section
11(b)(ii).
(ii) On or before December 31, 1992, Salomon Inc shall pay each
Participant who receives a distribution under Paragraph (b)(i) of this
Section cash equal to the following amounts:
(A) the Daily Value on December 9, 1992 of 36.24% of the shares
allocated to the Account of such Participant in respect of Awards
granted in 1990;
(B) the Daily Value on December 9, 1992 of 35.11% of the shares
allocated to the Account of such Participant in respect of Awards
granted in 1991; and
(C) 40% of the dollar amount of such Participant's 1992 Awards.
Notwithstanding Section 17 hereunder, in order to meet all federal,
state, local and other withholding tax requirements, if any, attributable
to a distribution described in Section 11(b), Salomon Inc shall withhold
from any distribution under this Section 11(b)(ii) cash equal to the amount
the Committee determines to be sufficient to satisfy the minimum federal,
state, local and other withholding tax requirements under applicable law.
(iii) Notwithstanding Section 11(b)(i), the Committee may, in its sole
discretion, waive the restrictions on transferability and other
restrictions applicable to shares distributed pursuant to Section 11(b)(i).
The Committee may impose such conditions on any such waiver, including,
without limitation, requiring a forfeiture of any portion of such shares,
as the Committee may determine in its sole discretion.
(c) The Plan's principal purpose is to provide Participants with a
continuing long-term investment in Salomon Stock. In order to accomplish that
principal purpose, it is imperative that Participants generally be
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required to remain invested in the Salomon Stock allocated to their Accounts
until the occurrence of a Realization Event with respect to such Salomon Stock.
Accordingly:
(i) In the event that a court of competent jurisdiction finally
determines that Salomon Inc is obligated to distribute to a Participant,
Beneficiary or any other person certificates representing any shares of
Salomon Stock allocated to a Participant's Accounts prior to the occurrence
of a Realization Event with respect to such shares, the stock certificates
so distributed to such Participant, Beneficiary or other person shall be
restricted as to transferability until the date that a Realization Event
would have occurred with respect to such shares had they not been
distributed to the Participant, Beneficiary or other person and remained
subject to the Plan, and each such stock certificate shall bear the
following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions contained in the Salomon Inc Equity Partnership Plan
for Key Employees (the violation of which may result in
forfeiture). A copy of the Plan is on file in the office of the
Secretary of Salomon Inc, Seven World Trade Center, New York,
New York 10048.
(ii) Effective with respect to distributions of Salomon Stock
allocated to Participants' Accounts with respect to Awards under the Equity
Partnership Plans on or after March 4, 1992, prior to receiving any
distribution of such shares, each Participant shall be required to certify
in a form acceptable to the Committee that at no time after March 4, 1992
and before the occurrence of the Realization Event with respect to which
the distribution is to be made has the Participant, directly or indirectly,
held any equity or derivative security position with respect to Salomon
Stock, such as a short sale, a long put option or a short call option, that
increases in value as the value of Salomon Stock decreases. If the
Participant does not make the certification required by this Paragraph, the
Participant shall receive a distribution with respect to such Award or
Rollover equal to the number of shares of Salomon Stock otherwise to be
distributed as of the Realization Event reduced by .15 multiplied by the
number of shares of Salomon Stock otherwise to be distributed as of the
Realization Date in respect of Awards made on or after March 4, 1992 and
the number of shares by which the distribution is reduced shall be
forfeited as of the Realization Event. In the event that a Participant
makes a false certification, the Participant shall forfeit all of the
shares allocated to his accounts in respect of Awards under the Equity
Partnership Plans on or after March 4, 1992 as of such Realization Event.
All amounts forfeited hereunder shall be treated as purchases for the
Equity Partnership Plans at the Daily Value as of the date of forfeiture of
the number of shares forfeited pursuant to Section 2(c)(iv) hereof. For
purposes of applying this Section 11(c)(ii) to shares of Salomon Stock
distributed to participants pursuant to Sections 11(b)(i) and 18(a), the
Realization Date with respect to such Salomon Stock shall be deemed to
occur on the date as of which the restrictions under Section 11(b)(i), or
18(a), as the case may be, are to be removed and the removal of such
restrictions shall be deemed to be distributions under this Section.
(d) Effective with respect to Awards granted on or after December 1, 1993,
notwithstanding any other provision hereunder, if and to the extent that the
Committee determines any Company's or Affiliate's Federal tax deduction in
respect of a distribution under the Plan may be limited as a result of Section
162(m) of the Code, the Committee may delay such distribution as provided below.
In the event the Committee determines to delay a distribution, the Committee
shall convert the shares of Salomon Stock to a dollar amount equal to the
product of (i) the Daily Value of Salomon Stock on the date such shares
otherwise would have been distributed to the Participant multiplied by (ii) the
number of shares of Salomon Stock that otherwise would have been distributed to
the Participant in the absence of this Section 11(d). Such amount shall then be
credited to the Participant's Cash Account. The amount so credited to the
Participant's Cash Account shall, subject to the second succeeding sentence, be
credited with interest during the period beginning on the date on which the
distribution would have been made in the absence of this Section 11(d) and
ending on the last day of the month immediately preceding the month in which
such amount is paid to the Participant, at a rate which, through the end of the
first calendar month in such period, shall equal the London Interbank Offered
Rate for 1-month deposits that appears in The Wall Street Journal on the date
immediately preceding the date on which the distribution would have been made in
the absence of this Section, and which shall be recalculated for each successive
1-month period based on the London Interbank Offered Rate for 1-month
A-15
<PAGE> 53
deposits published in The Wall Street Journal on the last day of each preceding
calendar month. If such rate does not appear in The Wall Street Journal on any
date as provided above, then such rate shall be the last such rate that appeared
in The Wall Street Journal prior to the date of determination set forth above.
The Committee may, in its discretion, elect not to credit interest to the
Participant's Cash Account at the London Interbank Offered Rate as described
above, but instead to adjust the amount so credited to the Participant's Cash
Account to reflect gains and losses that would have resulted from the investment
of such amount in any investment vehicle or vehicles selected by the Committee.
Part or all of the amount credited to the Participant's Cash Account hereunder
shall be paid to the Participant at such times as shall be determined by the
Committee, if and to the extent the Committee determines that a Company's or an
Affiliate's deduction for any such payment will not be reduced by Section 162(m)
of the Code. Notwithstanding the foregoing, the entire balance credited to the
Participant's Cash Account hereunder shall be paid to the Participant within 30
days after the earlier of (A) the date the Participant ceases to be a "covered
employee" within the meaning of Section 162(m) of the Code or (B) the occurrence
of a Change in Control.
12. SECURITIES MATTERS
(a) Subject to Sections 11 and 18, with respect to shares of Salomon Stock
allocated to Participants' Accounts in respect of Awards or Rollovers granted or
made on or before December 31, 1992, Salomon Inc shall use its best efforts to
assure that any securities distributed to Participants hereunder are marketable
at the time of distribution, including, to the extent required under applicable
law, effecting the registration pursuant to the Securities Act of any shares of
Salomon Stock to be distributed hereunder or effecting similar compliance under
any state laws.
(b) Subject to Section 11, with respect to shares of Salomon Stock
allocated to Participants' Accounts in respect of Awards or Rollovers granted or
made after December 31, 1992, Salomon Inc shall use its best efforts to assure
that any securities distributed to Participants hereunder on or after the
Realization Date for the Award or Rollover with respect to which the
distribution is made are marketable at the time of distribution, including, to
the extent required under applicable law, effecting the registration pursuant to
the Securities Act of any shares of Salomon Stock to be distributed hereunder or
effecting similar compliance under any state laws.
(c) Notwithstanding anything herein to the contrary, Salomon Inc shall not
be obligated to cause to be issued or delivered any certificates evidencing
shares of Salomon Stock pursuant to the Plan unless and until Salomon Inc is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of the New York Stock Exchange and any other securities
exchange on which shares of Salomon Stock are traded. The Committee may require,
as a condition of the issuance and delivery of certificates evidencing shares of
Salomon Stock pursuant to the terms hereof, the recipient of such shares to make
such covenants, agreements and representations, and that such certificates bear
such legends, as the Committee, in its sole discretion, deems necessary or
desirable.
(d) Without limitation on the Committee's powers pursuant to Paragraph (a)
of this Section, if and to the extent required by Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act or by any comparable or successor exemption
under which the Board of Directors believes it is appropriate for the Plan to
qualify, the Committee may (i) restrict a Participant's ability to sell any
shares of Salomon Stock distributed to such Participant hereunder until the
expiration of 6 months (or such other period as the Committee deems appropriate)
after the date as of which such shares were allocated to the Participant's
Accounts, (ii) in lieu of distributing shares of Salomon Stock that were
allocated to a Participant's Accounts within 6 months (or such other period as
the Committee deems appropriate) prior to the Realization Event, distribute a
cash amount equal to the Daily Value of such Salomon Stock as of the Realization
Event, or (iii) impose such other conditions on the exercise of any election
under the Plan or in connection with any distribution under the Plan as the
Committee deems appropriate.
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<PAGE> 54
13. VOTING AND TENDER OF SALOMON STOCK
(a) Voting Rights
(i) Each Participant shall be entitled to direct the Trustee, and the
Trustee shall have no discretion, as to the manner in which Salomon Stock
that is entitled to vote and is allocated to such Participant's Accounts is
to be voted. The Trustee shall vote combined fractional shares, to the
extent possible, to reflect the directions of the Participants holding such
shares.
(ii) The Trustee shall have no discretion as to the voting of (A) any
Salomon Stock allocated to any Participant's Accounts for which the Trustee
does not receive affirmative and valid Participant voting directions and
(B) any Salomon Stock held in the Suspense Account. The Trustee shall vote
such Salomon Stock in the same proportions as Salomon Stock held in the
Trust for which the Trustee receives affirmative and valid Participant
voting instructions or which the Trustee votes pursuant to Paragraph
(a)(iii).
(iii) Notwithstanding any other provision of this Section, the Trustee
shall vote the shares held in the Accounts of any Participant with respect
to whom counsel to Salomon Inc advises the Participant would be taxed on
the value of the Participant's Accounts if the Participant were permitted
to direct the voting of shares, in the same proportions as Salomon Stock
held in the Trust for which the Trustee receives affirmative and valid
Participant voting instructions.
(b) Tender Rights
(i) If any person shall commence a tender or exchange offer or any
similar transaction with respect to Salomon Stock, each Participant shall
be entitled to direct the Trustee, and the Trustee shall have no
discretion, as to whether the Salomon Stock allocated to such Participant's
Accounts is to be tendered and whether such tender is to be revoked (to the
extent such a revocation is permitted by the terms of such tender or
exchange offer or applicable law). The Trustee shall tender shares of
Salomon Stock allocated to any Participant's Accounts for which the Trustee
shall have received affirmative and valid Participant directions to tender
(except to the extent such directions are revoked prior to such tender);
the Trustee shall revoke the tender of shares of Salomon Stock allocated to
any Participant's Accounts for which the Trustee shall have received
affirmative and valid Participant directions to revoke such tender.
(ii) The Trustee shall have no discretion as to whether or not to
tender, or whether to revoke tenders with respect to any Salomon Stock held
in the Suspense Account. The Trustee shall tender or not and shall revoke
tenders with respect to shares of Salomon Stock held in the Suspense
Account in the same proportions as the shares of Salomon Stock held in the
Trust for which the Trustee receives affirmative and valid Participant
directions whether or not to tender and whether to revoke such tender.
(iii) The Trustee shall not tender, or revoke the tender of, shares
allocated to Participants' Accounts for which the Trustee does not receive
affirmative and valid Participant directions.
(iv) To the extent that a Participant elects to tender shares of
Salomon Stock held in the Participant's Accounts, the Trustee shall
transfer the consideration the Trustee receives as a result of such tender
to the Participant's Cash Account.
(v) Notwithstanding any other provision of this Section, the Trustee
shall tender or not and shall revoke tenders with respect to shares of
Salomon Stock held in the Accounts of Participants with respect to whom
counsel to Salomon Inc advises that the Participant would be taxed on the
value of the Participant's Accounts if the Participant were permitted to
direct the tender of shares, in the same proportions as the shares of
Salomon Stock held in the Trust for which the Trustee receives affirmative
and valid Participant directions whether or not to tender and whether to
revoke such tender.
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<PAGE> 55
(c) Tender Prior to Allocation
In the event the Trustee is required to make any tender decision prior to
the date on which any shares of Salomon Stock are allocated to any Participant's
Accounts, the Trustee shall poll the participants under the Equity Partnership
Plans (other than the Participants described in Paragraph (b)(v) of this
Section) and shall tender or revoke tenders with respect to shares in proportion
to the number of tender or revocation directions received by such participants.
Each such participant shall have one vote.
(d) Notices and Information Statements
Salomon Inc shall provide the Trustee and each Participant with notices and
information statements (including proxy statements) when voting rights are to be
exercised, and with respect to tender, exchange or similar offers, at the same
time and in the same manner (except to the extent the Exchange Act requires
otherwise) as such notices and information statements (including proxy
statements) are provided to shareholders of Salomon Inc generally.
(e) Confidentiality of Voting and Tender Directions
The Trustee shall devise and implement a procedure that is designed to
assure the confidentiality of any Participant's voting or tender directions so
that in directing the Trustee to vote or tender any shares of Salomon Stock,
Participants are in fact rendering independent decisions without influence from
any Company. Salomon Inc shall cooperate with the Trustee in devising and
implementing such procedures to the extent the Trustee so requests.
(f) Shares Not Entitled to Vote Prior to Approval
Prior to the receipt of the shareholder approval required under Section 20,
no shares held in the Suspense Account shall be voted to the extent that such
shares represent shares in excess of the maximum number of shares authorized
under the Equity Partnership Plans as amended and restated as of December 11,
1992.
14. ADJUSTMENT OF ACCOUNTS IN CERTAIN EVENTS
(a) Unless the Committee otherwise determines, a Participant's Accounts
shall be adjusted to reflect any securities, cash and other property received
with respect to shares of Salomon Stock credited to such Participant's Accounts
as a result of any stock dividend or split, recapitalization, extraordinary
dividend, merger, consolidation, combination or exchange of shares or similar
change or any other event that the Committee, in its sole discretion, deems
appropriate. The purpose of this adjustment is to treat Participants as if they
were shareholders of Salomon Stock with respect to the number of shares credited
to their Accounts. However, the Committee may, in its sole discretion, convert
any securities, cash or other property that would have been received in respect
of shares of Salomon Stock credited to a Participant's Accounts into an
equivalent number of equity securities of Salomon Inc or any successor company
or into cash or other property of equivalent value.
(b) In the event of any change in the number of shares of Salomon Stock
outstanding by reason of any stock dividend or split, recapitalization,
extraordinary dividend, merger, consolidation, combination or exchange of shares
or similar corporate change or any other event that the Committee, in its sole
discretion, deems appropriate, the maximum aggregate number of shares of Salomon
Stock subject to the Equity Partnership Plans shall be appropriately adjusted by
the Committee. In the event of any change in the number of shares of Salomon
Stock outstanding by reason of any other event or transaction, the Committee
may, but need not, make such adjustments in the number and class of shares of
Salomon Stock subject to the Equity Partnership Plans as the Committee may deem
appropriate.
(c) Except as is expressly provided in this Section, a Participant shall
have no rights as a result of any stock dividend or split, recapitalization,
extraordinary dividend, merger, consolidation, combination or exchange of shares
or similar corporate change.
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<PAGE> 56
15. CERTAIN DIVESTITURES
(a) Company with Publicly Traded Stock That No Longer Is a 50% Affiliate
In the event of any transaction immediately after which any Company both
ceases to be a member of a "controlled group of corporations" (as that term is
defined in Section 414(b) of the Code but substituting the phrase "at least 50%"
for the phrase "at least 80%" in each place that it appears in Section 1563(a)
of the Code) of which Salomon Inc is a member and either has stock that is
publicly traded or is a member of a "controlled group of corporations" (as that
term is defined in Section 414(b) of the Code) with any trades or businesses,
one or more members of which have publicly traded stock as a result of the
transaction:
(i) the Salomon Stock credited to the Accounts of (A) Participants who
are employed by such Company immediately after the transaction and (B)
terminated Participants who are not so employed, but who were employed by
such Company on the date that their employment with the Companies and
Affiliates terminated, shall be converted to equivalent amounts of such
publicly traded stock based on the relative values of such publicly traded
stock and Salomon Stock immediately after the transaction. Thereafter, each
such Participant's Accounts shall be maintained in such publicly traded
stock and such Company shall cease to participate in the Plan with respect
to future Awards;
(ii) the Board of Directors of the affected Company shall succeed to
the powers of the Committee and the Board of Directors under the Plan with
respect to the Participants described in Section 15(a)(i); and
(iii) a separate trust containing the Accounts of such Participants
shall be created to hold the stock credited to the Participants' Accounts.
Such trust shall be substantially the same as the Trust and shall be
created pursuant to a trust agreement between the affected Company and the
Trustee.
(b) Company with Publicly Traded Stock That Remains a 50% Affiliate
In the event that a public market develops for the stock of any Company and
immediately after such public market develops such Company remains a member of a
"controlled group of corporations" (as that term is defined in Section 414(b) of
the Code but substituting the phrase "at least 50%" for the phrase "at least
80%" in each place that it appears in Section 1563(a) of the Code) of which
Salomon Inc is a member, the Salomon Stock credited to the Accounts of (i) the
Participants who are employed by such Company immediately after such public
market develops and (ii) terminated Participants who are not so employed, but
who were employed by such Company on the date that their employment with the
Companies and Affiliates terminated, shall be converted to equivalent amounts of
the publicly traded stock of such Company based on the principles described in
Section 15(a)(i) or its economic equivalent, as the Committee deems appropriate,
unless the Committee and the Company determine that such a conversion would be
financially detrimental to any Company or Affiliate or such Participants.
Thereafter, each such Participant's Accounts shall be maintained in such
publicly traded stock or its economic equivalent, as the case may be, and such
Company shall cease to participate in the Plans with respect to future Awards.
(c) Satisfaction of Obligations After a Divestiture
In the event of a divestiture described in this Section 15, any
distributions in respect of the shares credited to the affected Participants'
Accounts as of the date of the divestiture shall be deemed to be payments in
respect of Salomon Inc's obligations under the Plan, except to the extent such
obligations are assumed and discharged by the affected Company.
16. NO SPECIAL EMPLOYMENT RIGHTS
Nothing contained in the Plan shall confer upon any Participant any right
with respect to the continuation of the Participant's employment by any Company
or Affiliate or interfere in any way with the right of any Company or Affiliate
at any time to terminate such employment or to increase or decrease the
compensation of the Participant. Nothing in the Plan shall be deemed to give any
employee of any Company or Affiliate any right to participate in the Plan.
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<PAGE> 57
17. PAYROLL AND WITHHOLDING TAXES
All federal, state, local and other withholding tax requirements, if any,
attributable to a distribution shall be met pursuant to the following
procedures:
(a) The Companies and Affiliates shall have the right to withhold from
any cash amounts payable to a Participant (including salary, bonus or any
other amounts payable from any Company or Affiliate to the Participant) an
amount sufficient to satisfy such federal, state, local and other
withholding tax requirements, prior to the delivery of any certificate or
certificates for such shares of Salomon Stock or other payments under the
Plan; or
(b) Salomon Inc shall have the right to require Participants to remit
to Salomon Inc in cash an amount sufficient to satisfy such federal, state,
local and other withholding tax requirements, prior to the delivery of any
certificate or certificates for such shares of Salomon Stock or other
payments under the Plan; or
(c) Salomon Inc (or, if a distribution is to be made from the Trust,
the Trustee) shall have the right to withhold a number of such shares, the
Daily Value of which on the date the shares are to be distributed to the
Participant the Committee determines to be sufficient to satisfy the
minimum federal, state, local and other withholding tax requirements under
applicable law. In the event that the Trustee withholds shares pursuant to
this Paragraph, the Trustee shall distribute such shares from the Trust to
Salomon Inc and Salomon Inc shall make appropriate withholding tax
payments.
18. TERMINATION AND AMENDMENT
The Plan may be terminated with respect to any or all Participants at any
time by the Board of Directors. Subject to Section 21 hereof, upon such
termination the assets of the Accounts of each Participant with respect to whom
the Plan has been terminated shall be distributed to each such Participant in
order to meet the benefit obligations under the Plan with respect to each such
Participant. With respect to any termination effected on or before December 31,
1992, if and to the extent that the Committee determines in its sole discretion
that the the following distribution method would not impair the rights of any
such Participant in any Award or Rollover theretofore granted or made or any
earnings with respect thereto within the meaning of this Section 18, the benefit
obligation under the Plan shall be satisfied in the following manner:
(a) Salomon Inc shall deliver or cause to be delivered to Participants
with respect to whom the Plan is terminated certificates for a number of
shares of Salomon Stock equal to 60% of the number of whole shares of
Salomon Stock allocated to such Participant's Accounts in respect of Awards
(including shares reflecting the reinvestment of dividends paid thereon),
and cash with respect to 60% of any fractional shares of Salomon Stock
allocated to such Participant's Accounts in respect of Awards in an amount
equal to the Daily Value of such fractional shares as of the distribution
date. The stock certificates so distributed to such Participants shall be
restricted as to transferability and shall remain subject to Section 7(c)
and 11(c)(ii) of the Plan until the date that a Realization Event would
have occurred with respect to such shares had they not been distributed to
the Participant, and each such stock certificate shall bear the following
legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions contained in the Salomon Inc Equity Partnership Plan
for Key Employees (the violation of which may result in
forfeiture). A copy of the Plan is on file in the office of the
Secretary of Salomon Inc, Seven World Trade Center, New York,
New York 10048.
Any shares remaining in the Participants' Accounts in respect of the 1990, 1991
and 1992 Awards after the distribution of the shares pursuant to this Section
18(a) shall be distributed to Salomon in exchange for Salomon's undertaking to
pay the amounts set forth in Section 18(b).
(b) On or before December 31, 1992, Salomon Inc shall pay each Participant
who receives a distribution under Paragraph (a) of this Section cash equal to
the following amounts:
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<PAGE> 58
(i) the Daily Value on December 9, 1992 of 36.24% the shares allocated
to the Account of such Participant in respect of Awards granted in 1990;
(ii) the Daily Value on December 9, 1992 of 35.11% the shares
allocated to the Accounts of such Participants in respect of Awards granted
in 1991; and
(iii) 40% of the dollar amount of such Participant's 1992 Awards.
Notwithstanding Section 17 hereunder, in order to meet all federal,
state, local and other withholding tax requirements, if any, attributable
to a termination on or before December 31, 1992 described in Paragraphs (a)
and (b) of this Section, Salomon Inc shall withhold from any distribution
under this Paragraph (b) cash equal to the amount the Committee determines
to be sufficient to satisfy the minimum federal, state, local and other
withholding tax requirements under applicable law.
(c) In the event the entire Plan is terminated, the remaining assets, if
any, in the Trust after the payment of such benefits shall be paid to Salomon
Inc. In the event of a partial termination of the Plan, the assets, if any,
remaining in any terminated Accounts shall be held in the Suspense Account and
may be used to satisfy Salomon Inc's contribution requirements hereunder;
provided, however, that (i) with respect to a termination described in
Paragraphs (a) and (b) of this Section, and (ii) in the event of a partial
termination of the Plan involving 40% or more of the amounts payable under the
Plan immediately prior to such termination, the Board of Directors may elect
that any such remaining assets be distributed to Salomon Inc.
(d) The Plan may be amended by the Board of Directors from time to time in
any respect, provided, however, that if and to the extent required by Rule 16b-3
promulgated under Section 16(b) of the Exchange Act or by any comparable or
successor exemption under which the Board of Directors believes it is
appropriate for the Plan to qualify, no amendment shall be effective without the
approval of the shareholders of Salomon Inc, that (a) except as provided in
Section 14 hereof, increases the number of shares of Salomon Stock that may be
distributed under the Plan, or (b) materially increases the benefits accruing to
individuals under the Plan or (c) materially modifies the requirements as to
eligibility for participation in the Plan. No amendment or termination shall be
made that would impair the rights of any Participant in any Award or Rollover
theretofore granted or made, or any earnings with respect thereto, without such
Participant's prior written consent; provided, however, that Salomon Inc may
amend the Plan and the Trust from time to time in such a manner as may be
necessary to prevent the the trust agreement pursuant to which the Trust is
created, the Equity Partnership Plans or the Trust from becoming subject to
ERISA and to avoid the current taxation of the assets held in the trusts
established in connection with the Equity Partnership Plans to Participants.
Neither a Participant's incurring any income tax liability nor the loss of an
investment opportunity as a result of the termination of, or, with respect to
amounts allocated to Participants' Accounts on or after December 31, 1992, any
amendment to, the Plan shall be considered an impairment of the rights of a
Participant.
19. PAYMENTS UPON THE DEATH OF A PARTICIPANT
Each Participant shall have the right to designate in writing from time to
time a Beneficiary by filing a written notice of such designation with the
Committee. A Participant's designation of a Beneficiary may be revoked by filing
with the Trustee an instrument of revocation or a later designation. Any
designation or revocation shall be effective when received by the Trustee. In
the event of the death of a Participant, any payment required to be made
hereunder to such Participant shall be made to such Participant's Beneficiary.
Unless the Participant's Beneficiary designation provides otherwise, no person
shall be entitled to benefits upon the death of the Participant unless such
person survives the Participant. If the Beneficiary designated by a Participant
does not survive the Participant or if the Participant has not made a valid
Beneficiary designation, such Participant's Beneficiary shall be such
Participant's estate. If the Participant's Beneficiary is the Participant's
estate, no payment shall be made unless the Committee shall have been furnished
with such evidence as the Committee may deem necessary to establish the validity
of the payment.
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<PAGE> 59
20. SHAREHOLDER APPROVAL REQUIRED
The Plan, as amended and restated as of January 1, 1994, is subject to
approval by the shareholders of Salomon Inc at their annual meeting in May, 1994
in accordance with applicable law, the rules of the New York Stock Exchange and
the requirements of Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act. If the Plan is not so approved, then the Plan shall remain in full force
and effect without regard to the amendments adopted in March, 1994.
21. EFFECT OF REVOCATION EVENT
Upon the occurrence of a Revocation Event, the Board of Directors may, in
its sole discretion, elect to terminate the Plan, the Trust, or any
Participant's Accounts. In the event that the Board of Directors elects to so
terminate the Plan, the Trust or any Participant's Accounts as a result of a
Revocation Event, in consideration of and as soon as practicable after Salomon
Inc's providing the Trustee with a written undertaking to pay to Participants
the amount required to be paid under this Section, all amounts held in the Trust
(or if the entire Trust is not terminated, any terminated Accounts) shall be
distributed to Salomon Inc. Salomon Inc shall, in its sole discretion, (a) pay
to each Participant whose Accounts are terminated, as soon as practicable after
the date of such termination, a lump sum in cash equal to the Daily Value
multiplied by the number of shares of Salomon Stock and cash amounts reflected
in each Participant's Accounts as of the date of such termination, (b)
distribute to each Participant whose Accounts are terminated, as soon as
practicable after the date of such termination, that number of shares of Salomon
Stock that would have been distributable to such Participant under the Plan and
pay to such Participant at such time any cash allocated to the Participant's
Cash Account or (c) distribute to each Participant whose Accounts are terminated
that number of shares of Salomon Stock and that amount of cash that would have
been distributable to such Participant at such time as shares and cash would
have been distributable to such Participant under the Plan, had the Plan
continued. If it is finally determined in a proceeding, which Salomon either
controls or was offered the right to control and declines, that the
Participant's interest in the Trust was taxable to the Participant
notwithstanding any termination of such Participant's Accounts in the Trust,
Salomon Inc shall pay or distribute the Participant's interest (whether or not
the Board of Directors has previously elected to terminate the Plan, the Trust
or the Participant's Accounts) in accordance with either (a) or (b) of the
preceding sentence.
22. MISCELLANEOUS
(a) No transfer (other than any transfer made by will or by the laws of
descent and distribution) by a Participant of any right to any payment
hereunder, whether voluntary or involuntary, by operation of law or otherwise,
shall vest the transferee with any interest or right in or with respect to such
payment, and the transfer shall be of no force and effect.
(b) The Plan and all rights hereunder shall be subject to and interpreted
in accordance with the laws of the State of New York, without reference to the
principles of conflicts of law.
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<PAGE> 60
APPENDIX A
AWARD SCHEDULE
AWARDS FOR 1991 AND THEREAFTER
<TABLE>
<CAPTION>
COMPENSATION
(IN THOUSANDS) AWARD
- --------------------------------------------- ---------------------------------------------
<S> <C>
$0 -- 100.................................... 2% of Compensation
Over 100 but not over 300.................. $ 2,000 plus 5% of the excess over $ 100,000
Over 300 but not over 500.................. 12,000 plus 12 1/2% of the excess over 300,000
Over 500 but not over 750.................. 37,000 plus 20% of the excess over 500,000
Over 750 but not over 1,000................. 87,000 plus 30% of the excess over 750,000
Over 1,000 but not over 1,500................ 162,000 plus 40% of the excess over 1,000,000
Over 1,500 but not over 2,000................ 362,000 plus 50% of the excess over 1,500,000
Over 2,000 but not over 2,500................ 612,000 plus 60% of the excess over 2,000,000
Over 2,500................................... 912,000 plus 75% of the excess over 2,500,000
</TABLE>
AWARDS FOR 1990
<TABLE>
<CAPTION>
COMPENSATION
(IN THOUSANDS) AWARD
- --------------------------------------------- ---------------------------------------------
<S> <C>
$0 -- 100.................................... 2% of Compensation
Over 100 but not over 300.................. $ 2,000 plus 5% of the excess over $ 100,000
Over 300 but not over 500.................. 12,000 plus 8% of the excess over 300,000
Over 500 but not over 750.................. 28,000 plus 13% of the excess over 500,000
Over 750 but not over 1,000................. 60,500 plus 20% of the excess over 750,000
Over 1,000 but not over 1,500................ 110,500 plus 27% of the excess over 1,000,000
Over 1,500 but not over 2,000................ 245,500 plus 33% of the excess over 1,500,000
Over 2,000 but not over 2,500................ 410,500 plus 40% of the excess over 2,000,000
Over 2,500................................... 610,500 plus 50% of the excess over 2,500,000
</TABLE>
PHIBRO DIVISION
AWARDS FOR 1993 AND THEREAFTER
<TABLE>
<CAPTION>
COMPENSATION
(IN THOUSANDS) AWARD
- --------------------------------------------- ---------------------------------------------
<S> <C>
$0 -- 350.................................... 0
Over 350 but not over 500.................. 15% of Compensation in excess of $ 350,000
Over 500 but not over 1,000................. $ 22,500 plus 20% of the excess over $ 500,000
Over 1,000................................... 122,500 plus 30% of the excess over 1,000,000
</TABLE>
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<PAGE> 61
EXHIBIT B
SALOMON INC
EQUITY PARTNERSHIP PLAN
FOR PROFESSIONAL AND
OTHER HIGHLY COMPENSATED EMPLOYEES
1. PURPOSE OF THE PLAN
This Equity Partnership Plan for Professional and Other Highly Compensated
Employees is designed to provide participants, as compensation in respect of
past services rendered, with a continuing long-term investment in common stock
of Salomon Inc, the realization of which will be deferred to a future date. By
placing participants in the position of long-term shareholders of Salomon Inc,
participants are expected to have the same motivations and interests as other
shareholders of Salomon Inc, such as controlling costs (including compensation
costs) and seeking to maximize the return on equity of Salomon Inc and its
subsidiaries and affiliates and are expected to analyze the activities in which
they personally are involved in terms of the overall benefit of such activities
to Salomon Inc and its affiliates and subsidiaries, as well as the effect that
such activities will have on the participants' individual departments or direct
compensation. This plan is intended to be an unfunded "bonus program" (within
the meaning of 29 CFR Part 2510.3-2(c)) designed primarily to provide deferred
bonuses to a select group of highly compensated or management employees.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Accounts" shall mean a Participant's Cash Account and Stock
Account.
(b) "Affiliate" shall mean any corporation (other than a Company)
which is a member of a "controlled group of corporations" (as that term is
defined in Section 414(b) of the Code) of which a Company is a member and
any trade or business (whether or not incorporated) under "common control"
(as that term is defined in Section 414(c) of the Code) with a Company.
(c) "Average Cost Per Share" shall mean a cost per share of Salomon
Stock calculated as follows:
(i) After each purchase (or deemed purchase) of shares made in
connection with or in anticipation of an Award under an Equity
Partnership Plan, the Average Cost Per Share shall be recalculated and
shall equal (A) the Total Cost of Net Shares immediately after such
purchase, divided by (B) the total number of Net Shares immediately
after such purchase.
(ii) After each allocation of shares from the Suspense Account in
respect of Salomon Inc's 17.65% contribution obligation with respect to
dividends (or deemed dividends) as provided in Section 8 or under
another Equity Partnership Plan, the Average Cost Per Share shall be
recalculated and shall equal (A) the Total Cost of Net Shares
immediately after such allocation, divided by (B) the total number of
Net Shares held immediately after such allocation.
(iii) Contributions of Salomon Stock to the trusts under the Equity
Partnership Plans by Salomon Inc shall be treated as purchases for the
Equity Partnership Plans at the Daily Value as of the date of the
contribution.
(iv) Forfeitures under the Equity Partnership Plans (other than
certain forfeitures under the Key Employee Plan with respect to
Rollovers from the "Partnership Pool Plan" (as that term is defined in
the Key Employee Plan) shall be treated as purchases for the Equity
Partnership Plans at the Daily Value as of the date of forfeiture of the
number of shares forfeited.
(v) If, on any date that shares of Salomon Stock are purchased for
the Equity Partnership Plans any Awards, Rollovers or dividends paid on
Salomon Stock allocated to Participants' Accounts (including their
"Rollover Accounts" under the Key Employee Plan) are awaiting
investment, such
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purchases shall be deemed to be purchases to satisfy such Awards,
Rollovers and dividends, pro rata based on the dollar amounts of such
Awards, Rollovers and dividends. Any shares that are purchased in excess
of the shares necessary to satisfy such uninvested Awards, Rollovers and
dividends shall be held in the Suspense Account and shall be deemed to
be purchased in anticipation of awards under the Equity Partnership
Plans.
(vi) Effective as of June 6, 1990, in the event that there are any
shares of Salomon Stock remaining in the Suspense Account on January 1
of any calendar year that were purchased or deemed to have been
purchased in a prior calendar year, the Average Cost Per Share of such
shares shall be deemed to be the Daily Value on the last trading day
immediately preceding such January 1.
(d) "Award" shall mean, with respect to each Participant, an award
granted to such Participant with respect to a calendar year by the
Committee pursuant to Section 7. An Award shall be deemed to have been made
with respect to the calendar year within which ends the Compensation Year
by reference to which the year-end bonus related to the Award is calculated
and in which a Company would, in the absence of the Plan, have accrued a
compensation expense for accounting purposes for the cash value of the
Award.
(e) "Beneficiary" shall mean the person or entity determined to be a
Participant's beneficiary pursuant to Section 18 hereof.
(f) "Board of Directors" shall mean the Board of Directors of Salomon
Inc.
(g) "Cash Account" shall mean (i) a book account maintained by Salomon
Inc reflecting, with respect to tendered shares of Salomon Stock credited
to a Participant's Accounts, the cash amount to be distributed to a
Participant upon a Realization Event and (ii) an account in the Trust
reflecting the consideration received as a result of tendering shares of
Salomon Stock credited to a Participant's Accounts, adjusted to reflect
gains and losses resulting from the Trustee's investment of such amount.
(h) "Cause" shall mean, when used in connection with the termination
of a Participant's employment, the termination of the Participant's
employment by a Company or an Affiliate on account of (i) the willful
violation by the Participant of (A) any federal or state law, (B) any rule
of any Company or Affiliate or (C) any rule or regulation of any regulatory
body to which any Company or Affiliate is subject, including, without
limitation, the New York Stock Exchange or any other exchange or contract
market of which any Company or Affiliate is a member and the National
Association of Securities Dealers, Inc., which violation would materially
reflect on the Participant's character, competence or integrity, (ii) a
breach by a Participant of the Participant's duty of loyalty to the
Companies and Affiliates in contemplation of the Participant's termination
of the Participant's employment, such as the Participant's pretermination
of employment solicitation of customers or employees of any Company or
Affiliate or (iii) the Participant's unauthorized removal from the premises
of any Company or Affiliate of any document (in any medium or form)
relating to any Company or Affiliate or the customers of any Company or
Affiliate. Any rights a Company or an Affiliate may have hereunder in
respect of the events giving rise to Cause shall be in addition to the
rights the Company or Affiliate may have under any other agreement with the
employee or at law or in equity. If, subsequent to a Participant's
voluntary termination of employment or involuntary termination of
employment without Cause, it is discovered that the Participant's
employment could have been terminated for Cause, such Participant's
employment shall, at the election of the Committee in its sole discretion,
be deemed to have been terminated for Cause.
(i) "Change in Control" shall mean:
(i) The acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than
Salomon Inc or any of its subsidiaries or Berkshire Hathaway, Inc. or
any of its subsidiaries or affiliates (as defined in Rule 12b-2
promulgated under the Exchange Act), without the prior written approval
of the Board of Directors, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either the then outstanding shares of Salomon Stock or the combined
voting power
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of Salomon Inc's then outstanding voting securities in a transaction or
series of transactions not approved by a vote of at least a majority of
the Continuing Directors (as hereinafter defined); or
(ii) A change in the composition of the Board of Directors of
Salomon Inc such that individuals who, as of January 1, 1988, constitute
the Board of Directors of Salomon Inc (generally the "Directors" and as
of January 1, 1988 the "Continuing Directors") cease for any reason to
constitute at least a majority thereof, provided that any person
becoming a Director subsequent to January 1, 1988 whose nomination for
election was approved by a vote of at least a majority of the Continuing
Directors (other than a nomination of an individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of Salomon
Inc, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be deemed to be a Continuing Director.
(j) "Code" shall mean the Internal Revenue Code of 1986.
(k) "Committee" shall mean such committee as the Board of Directors
shall appoint from time to time to administer the Plan. The Committee shall
consist of three or more persons, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3 promulgated under Section 16 of
the Exchange Act.
(l) "Companies" shall mean Salomon Inc and its subsidiaries and
affiliates that have adopted the Plan pursuant to Section 3(a) hereof,
while such companies remain subsidiaries or affiliates of Salomon Inc.
(m) "Company" shall mean Salomon Inc or any of its subsidiaries or
affiliates that have adopted the Plan pursuant to Section 3(a) hereof,
while any such company remains a subsidiary or affiliate of Salomon Inc.
(n) "Compensation" shall mean, with respect to a calendar year, the
sum of the dollar amounts of an employee's (i) base salary, (ii) night
differential, (iii) overtime, (iv) year-end bonus and (v) Award, resulting
from services rendered to the Companies, before giving effect to (A) any
"compensation reduction election" under the Retirement Plan (as that term
is defined in the Retirement Plan) or to any similar compensation reduction
election made in connection with a plan within the meaning of Code Section
401(k), (B) any compensation reduction election made in connection with a
"cafeteria plan" within the meaning of Code Section 125 and (C) any
compensation reduction election made in connection with an "employee stock
purchase plan" within the meaning of Code Section 423. Compensation shall
not include the amount of any 17.65% contribution made pursuant to Section
8 hereof or the amount of any up-front or "sign-on" bonus paid to any
individual.
(o) "Daily Value" shall mean, with respect to a share of Salomon
Stock, the average of the high and low reported sales price regular way per
share of Salomon Stock on the New York Stock Exchange Composite Tape, or if
Salomon Stock is not traded on such stock exchange, the principal national
securities exchange on which Salomon Stock is traded, or if not so traded,
the mean between the highest bid and lowest asked quotation on the
over-the-counter market as reported by the National Quotations Bureau, or
any similar organization, on any relevant date, or if not so reported, as
determined by the Committee in a manner consistently applied.
(p) "Disability" shall mean any physical or mental condition that
would qualify a Participant for a disability benefit under the long-term
disability plan maintained by any Company and applicable to the
Participant.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
(r) "Equity Partnership Plans" shall mean the Plan, the Salomon Inc
Equity Partnership Plan for Key Employees, and any other equity plan
maintained by any Company and designated by the Committee as an Equity
Partnership Plan.
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(s) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(t) "Investment Period" shall mean with, respect to an Award, the
expiration of the 5-year period beginning on the date as of which such
Award is granted. Notwithstanding the foregoing, the Investment Period with
respect to an Award shall end upon the Participant's Permissive Retirement
that occurs prior to the date on which the Investment Period otherwise
would end if the Participant so elects in writing within 45 days after the
date the Award is granted.
(u) "Key Employee Plan" shall mean the Salomon Inc Equity Partnership
Plan for Key Employees.
(v) "Maximum Eligible Compensation" shall mean $300,000 with respect
to 1990, effective as of January 1, 1991, with respect to each calendar
year after 1990 and before 1995, 1.5 multiplied by the compensation
limitation in effect under Section 401(a)(17) of the Code for the
immediately preceding calendar year and, with respect to each calendar year
beginning in 1995 and thereafter, 2.4 multiplied by the compensation
limitation in effect under Section 401(a)(17) for the immediately preceding
calendar year.
(w) "Minimum Eligible Compensation" shall mean $50,000 for calendar
year 1990, $77,000 for calendar year 1991, for calendar years after 1991
and before 1995, .37 multiplied by the compensation limitation in effect
under Section 401(a)(17) of the Code for the immediately preceding calendar
year and, for each calendar year after 1994, .6 multiplied by the
compensation limitation in effect under Section 401(a)(17) of the Code for
the immediately preceding calendar year.
(x) "Net Shares" shall mean the number of shares purchased or deemed
to have been purchased with respect to Awards and awards under the other
Equity Partnership Plans, excluding purchases or deemed purchases with
respect to dividends paid on Salomon Stock credited to Participants'
Accounts, less the number of shares credited to Participants' Accounts (and
not theretofore forfeited) from the Suspense Account.
(y) "Participant" shall mean an employee of any Company who is
determined by the Committee to be eligible to participate in the Plan and
who is designated a Participant pursuant to Section 6 hereof.
(z) "Permissive Retirement" shall mean a Participant's termination of
employment with the Companies and Affiliates, other than by reason of death
or Disability, on or after the earliest to occur of: (i) the December 31st
following the date the Participant attains age 55 and completes 10 years of
service determined pursuant to the Retirement Plan; (ii) the Participant's
65th birthday; (iii) the December 31st following the date the Participant
completes 25 years of service determined pursuant to the Retirement Plan;
or (iv) the later of the date the Participant has completed at least 10
years of service determined pursuant to the Retirement Plan and the
December 31st following the date the Participant attains an age which, when
added to the Participant's number of years of service determined pursuant
to the Retirement Plan, equals 75. The Committee may consider an extended
leave of absence to be a termination of employment even though the
Participant may render limited services to the Companies or Affiliates
during such leave.
(aa) "Plan" shall mean the Salomon Inc Equity Partnership Plan for
Professional and Other Highly Compensated Employees.
(ab) "Realization Event" shall mean, with respect to an Award, the
first to occur of (i) the expiration of the Investment Period with respect
to such Award, (ii) the occurrence of a Change in Control, (iii) the
termination of the Plan pursuant to Section 17 hereof, (iv) the
Participant's termination of employment with a Company or Affiliate as a
result of the Participant's Disability or (v) the Participant's death.
(ac) "Retirement Plan" shall mean the Salomon Brothers Inc Retirement
Plan, as amended from time to time.
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(ad) "Revocation Event" shall mean a determination by the Board of
Directors in its sole discretion that any of the following has occurred or
is likely to occur:
(i) A determination by the Department of Labor or a court of
competent jurisdiction that the assets of the Trust are subject to Part
4 of Subtitle B of Title I of ERISA.
(ii) A determination by the Department of Labor or a court of
competent jurisdiction that the Plan is a "pension plan" (within the
meaning of Section 3(2) of ERISA) subject to Parts 2, 3 and 4 of
Subtitle B of Title I of ERISA.
(iii) A determination by the Internal Revenue Service or a court of
competent jurisdiction that any amount deposited in the Trust is taxable
to any Participant or Beneficiary prior to the distribution to the
Participant or Beneficiary of such amount.
(iv) A determination by Salomon Inc's independent public
accountants that the accounting expense to the Companies of maintaining
the Accounts under the Plan is based on a value of the shares of Salomon
Stock other than such value (A) on the date shares of Salomon Stock are
acquired by the Trust or (B) on the date the shares of Salomon Stock are
credited to a Participant's Accounts.
(ae) "Rollover" shall mean an amount transferred to the Key Employee
Plan from the Plan or from a "Prior Incentive Plan" (as that term is
defined in the Key Employee Plan) pursuant the Key Employee Plan.
(af) "Salomon Stock" shall mean the common stock of Salomon Inc or any
successor thereto.
(ag) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(ah) "Stock Account" shall mean a book account maintained by Salomon
Inc and an account maintained in the Trust reflecting, with respect to each
Award, the number of shares of Salomon Stock to be distributed to each
Participant upon a Realization Event.
(ai) "Suspense Account" shall mean an account in the Trust in which
unallocated shares of Salomon Stock are held.
(aj) "Total Cost of Net Shares" immediately after a purchase (or
deemed purchase) made in connection with or in anticipation of an award
under the Equity Partnership Plans or an allocation shall mean the Average
Cost Per Share immediately preceding the purchase or allocation, as the
case may be, multiplied by the number of Net Shares immediately preceding
the purchase or allocation, as the case may be (i) in the case of a
purchase, plus (A) the number of such shares purchased multiplied by (B)
the amount paid per share, excluding brokerage commissions, for such shares
or (ii) in the case of an allocation, minus (A) the number of shares
allocated multiplied by (B) the Daily Value on the date of the allocation.
(ak) "Trust" shall mean any trust established in connection with the
Plan.
(al) "Trustee" shall mean the trustee of the Trust.
3. ELECTION BY A COMPANY TO PARTICIPATE IN THE PLAN
(a) By appropriate corporate action, subject to the approval of the Board
of Directors, any subsidiary or affiliate of Salomon Inc may adopt the Plan.
Such subsidiary or affiliate may recommend to the Committee which of its
employees should be eligible to participate in the Plan.
(b) By appropriate corporate action, a Company may terminate its
participation in the Plan.
(c) No affiliate or subsidiary of Salomon Inc that participates in the Plan
shall have any power with respect to the Plan except as specifically provided in
the Plan.
(d) As a condition of participation in the Plan, Salomon Inc shall require
any subsidiary or affiliate to enter an agreement or agreements to obligate such
subsidiary or affiliate to pay to Salomon Inc, in cash, the
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appropriate value, as determined by the Board of Directors, of any Salomon Stock
that Salomon Inc contributes to the Trust in respect of the Participants
employed by such subsidiary or affiliate. In addition, Salomon Inc may require
any subsidiary or affiliate to enter into such other agreement or agreements as
it shall deem necessary to obligate such subsidiary or affiliate to reimburse
Salomon Inc for any other amounts paid by Salomon Inc hereunder, directly or
indirectly, in respect of such subsidiary's or affiliate's employees.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 13 hereof, shares of Salomon
Stock may be allocated to Participants' accounts under the Equity Partnership
Plans in an amount that, in the aggregate since the inception of the Equity
Partnership Plans in 1990, does not exceed 40,000,000 shares. In the event that
any shares of Salomon Stock allocated to a Participant's accounts under the
Equity Partnership Plans are forfeited for any reason, the number of shares of
Salomon Stock forfeited shall again be available for allocation under the Equity
Partnership Plans.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall have
full authority, consistent with the Plan, to administer the Plan, including
authority to interpret and construe any provision of the Plan and to adopt such
rules and regulations for administering the Plan and such forms of elections as
it may deem necessary or appropriate. Decisions of the Committee shall be final
and binding on all parties. Committee decisions shall be made by a majority of
its members present at a meeting (which meeting may be held by telephone) at
which a quorum is present. Any decision reduced to writing and signed by all of
the members of the Committee shall be as fully effective as if it had been made
at a meeting duly held. All expenses of the Plan shall be borne by Salomon Inc.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Companies shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Companies to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost, expense
(including counsel fees, which fees shall be paid as incurred) or liability
(including any sum paid in settlement of a claim with the approval of the Board
of Directors) arising out of any action, omission or determination relating to
the Plan, if such action, omission or determination was taken or made by such
member, director or employee in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Companies, and
with respect to any criminal action or proceeding, such member had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contender or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Companies, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
6. ELIGIBILITY
The persons who shall be eligible to participate in the Plan with respect
to a calendar year shall be such employees or classes of employees of the
Companies (a)(i) whose principal work location during such calendar year is
within the United States of America or (ii) who are citizens of the United
States of America, whose principal work location during such calendar year is
outside of the United States of America and who do not participate in a plan
maintained by their employer during such calendar year that the Committee
determines to be comparable to the Plan, (b) who are (i) production employees
who are in job classifications designated as "professional" or (ii)
non-production employees whose annualized Compensation with respect to such
calendar year is at least equal to the Minimum Eligible Compensation, (c) whose
annualized Compensation for such calendar year is less than the Maximum Eligible
Compensation and (d) who are designated as eligible to participate in the Plan
by the Committee. The Committee may from time to time add or exclude from
participation one or more individuals or classes of individuals. Each eligible
individual shall
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become a Participant effective on the date as of which the individual (or class
of individuals including such individual) is designated as a Participant.
7. AWARDS UNDER THE PLAN
(a) Awards
(i) Subject to Paragraphs (ii) and (iii) of this Section, the
Committee shall grant Awards to Participants pursuant to the schedule
attached hereto as Appendix A. The Committee may from time to time and in
its sole discretion amend the schedule contained in Appendix A. Any such
schedule shall provide for Awards based on a percentage of a Participant's
Compensation with respect to a calendar year, and will reduce the
Participant's cash bonus that would otherwise be payable with respect to
such calendar year.
(ii) Notwithstanding the schedule attached hereto as Appendix A or any
amendment thereto, no Award to a Participant with respect to a calendar
year will exceed the dollar amount of the bonus (excluding the amount of
any up-front or sign-on bonus) payable to such Participant with respect to
such calendar year, before reduction for any Award with respect to such
calendar year, but reduced by the portion of the bonus (other than an
up-front or sign-on bonus) contributed by the Companies pursuant to the
Participant's salary reduction election to (A) the Retirement Plan or any
similar plan, (B) a "cafeteria plan" within the meaning of Code Section 125
or (C) an "employee stock purchase plan" within the meaning of Code Section
423.
(iii) Notwithstanding the foregoing, effective as of January 1, 1991,
unless the Committee determines otherwise in its sole discretion, the
following individuals shall not be entitled to receive an Award for a
calendar year (whether or not Awards already have been allocated to
Participants for such calendar year):
(A) an individual who, prior to December 31 of such calendar year,
has notified the applicable Company or Affiliate that the individual
intends to terminate employment with the Companies and Affiliates
effective in such calendar year or the next succeeding calendar year;
(B) an individual who, prior to December 31 of such calendar year,
has been notified by the applicable Company or Affiliate that the
individual's employment with the Companies and Affiliates will be
terminated effective in such calendar year or the next succeeding
calendar year; or
(C) an individual whose employment with the Companies and
Affiliates terminates prior to the end of such calendar year.
(b) Vesting of Awards
Subject to Sections 7(a)(iii) and 10, each Award shall be 100% vested in
each Participant, except that a Participant shall forfeit any Award if, prior to
the Realization Event for that Award, the Participant's employment with a
Company or an Affiliate is (or is deemed to have been) terminated by such
Company or Affiliate for Cause.
8. FUNDING OF THE PLAN
The Plan shall be unfunded. Benefits under the Plan shall be paid from the
general assets of Salomon Inc. Salomon Inc shall establish the Trust, which
shall be intended to be a "grantor trust" within the meaning of Section 671 of
the Code, pursuant to a trust agreement, to assist Salomon Inc in meeting its
obligations hereunder. Such trust agreement shall provide that the Trust shall
be invested primarily in Salomon Stock.
The trust agreement creating the Trust shall contain procedures to the
following effect:
(a) In the event of the insolvency of any Company, the assets of the
Trust shall be available to pay the claims of any creditor of such Company
to whom a distribution may be made in accordance with state and federal
bankruptcy laws. A Company shall be deemed to be "insolvent" if such
Company is subject
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to a pending proceeding as a debtor under the Federal Bankruptcy Code (or
any successor federal statute) or any state bankruptcy code. In the event a
Company becomes insolvent, the Board of Directors and the Chief Executive
Officer of Salomon Inc shall notify the Trustee of the event as soon as
practicable. Upon receipt of such notice, or if the Trustee receives other
written allegations of such Company's insolvency from a third party
considered by the Trustee to be reliable and responsible, the Trustee shall
cease making payments of benefits from the assets of the Trust, shall hold
the assets in the Trust for the benefit of such Company's creditors and
shall take such steps as are necessary to determine within a reasonable
period of time whether such Company is insolvent. In making such
determination, the Trustee may rely upon a certificate of the Board of
Directors and the Chief Executive Officer of Salomon Inc or a determination
by a court of competent jurisdiction that such Company is or is not
insolvent. In the case of the Trustee's determination of such Company's
insolvency, the Trustee will deliver assets of the Trust to satisfy claims
of such Company's creditors pursuant to a final order of a court of
competent jurisdiction.
(b) The assets of the Trust shall be available to pay any claim or
claims of any judgment creditor or judgment creditors of any Company to the
extent such claim or claims are then payable and the Company otherwise
shall fail to pay such claim or claims. The Board of Directors and the
Chief Executive Officer of Salomon Inc shall notify the Trustee as soon as
practicable in the event of any such failure of any Company to pay a
judgment creditor. Upon receipt of such notice, or if the Trustee receives
other written allegations of any Company's such failure to pay a judgment
creditor or judgment creditors from a third party considered by the Trustee
to be reliable and responsible, the Trustee shall, to the extent of such
failure, hold the assets of the trusts under the Equity Partnership Plans
for the benefit of such judgment creditor or judgment creditors and shall
take such steps as are necessary to determine within a reasonable period of
time whether such creditors are entitled to payment. In making such
determination, the Trustee may rely upon a certificate of the Board of
Directors and the Chief Executive Officer of Salomon Inc or a determination
by a court of competent jurisdiction that such creditors are or are not
entitled to payment. In the case of the Trustee's determination of any such
Company's failure to pay a judgment creditor or judgment creditors, the
Trustee will deliver assets of the trusts under the Equity Partnership
Plans to satisfy claims of such Company's judgment creditors as directed
pursuant to a final order of a court of competent jurisdiction. In the
event that the Trustee is required to hold any assets of the trusts under
the Equity Partnership Plans for the benefit of any judgment creditor,
Participants' Accounts shall be ratably reduced by such amount.
(c) In the event the Trustee ceases making payments of benefits as a
result of a Company's insolvency, the Trustee shall resume making payments
of benefits only after the Trustee has determined that no Company is then
insolvent or upon receipt of an order of a court of competent jurisdiction
requiring the payment of benefits. In the event the Trustee holds any
assets in the trusts under the Equity Partnership Plans for the benefit of
a judgment creditor of a Company, the Trustee shall, if the Trustee
determines that no Company then owes any such amount to a judgment
creditor, allocate the then remaining amounts that had been held for the
benefit of any such judgment creditor to the Participants' Accounts that
were reduced, pro rata in proportion to the excess of the reduction in each
such Participant's Accounts over the amounts paid by Salomon Inc to each
such Participant as a result of such reduction. No Participant shall
receive a restoration that exceeds the amount of the reduction together
with the earnings that would have accrued had no reduction been effected,
less amounts paid to the Participant by Salomon Inc as a result of the
reduction. Notwithstanding the provisions of this Section 8(c), the Trustee
shall restore Participants' Accounts in accordance with an order of a court
of competent jurisdiction. In the event the amount available for
restoration exceeds the amount required to be restored to Participants'
Accounts, such excess shall be allocated to the Suspense Account and shall
be treated as a purchase for the Plans at the Daily Value as of the date of
such allocation. In making any determination under this Section, the
Trustee may rely upon a certificate of the Board of Directors and the Chief
Executive Officer of Salomon Inc.
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(d) The Trustee shall reinvest all dividends paid on Salomon Stock
held in the Trust in Salomon Stock as follows:
(i)(A) Subject to Paragraph (d)(i)(B) of this Section, as soon as
practicable after the payment date for dividends paid (or deemed paid)
on Salomon Stock credited (or deemed to be credited) to Participants'
Accounts, other than Salomon Stock credited to Participants' Rollover
Accounts with respect to a Rollover from a Prior Incentive Plan, Salomon
Inc shall contribute to the Trust, as compensation to Participants, an
amount equal to 17.65% of such dividends (or deemed dividends) (less
required withholding taxes, if any). As soon as practicable after
receipt of such dividends (or deemed dividends) and such 17.65%
contribution, the Trustee shall use such dividends (or deemed dividends)
and contribution to purchase Salomon Stock.
(B) To the extent that the Committee elects by notice to the
Trustee, Salomon Inc's 17.65% contribution obligation shall be satisfied
out of the Suspense Account. Effective as of January 1, 1991, if the
Committee makes such an election, the contribution obligation shall be
satisfied (1) first from the dividends paid on shares of Salomon Stock
held in the Suspense Account and (2) second from shares of Salomon Stock
held in the Suspense Account, based on the Daily Value of the shares on
the relevant payment date. Any such share shall be deemed to have been
purchased at such Daily Value for allocation purposes.
(C) Shares of Salomon Stock purchased or deemed purchased pursuant
to this Section 8(d)(i) shall be allocated to the Participant's Accounts
with respect to which they were purchased.
(ii) As soon as practicable after the payment date for dividends
paid on Salomon Stock credited to Participants' Rollover Accounts as of
the record date for such dividends with respect to a Rollover from a
Prior Incentive Plan, the Trustee shall use the amount of such dividends
to purchase Salomon Stock. Shares of Salomon Stock purchased pursuant to
this Section 8(d)(ii) shall be allocated to the Participant's Rollover
Account with respect to which they were purchased.
(iii) As soon as practicable after receipt of dividends paid on
Salomon Stock held in the Suspense Account, the Trustee shall use the
amount of such dividends to purchase Salomon Stock. Shares of Salomon
Stock purchased pursuant to this Section 8(d)(iii) (other than with
dividends used to satisfy Salomon Inc's contribution obligation pursuant
to Paragraph (d)(i)(B)) shall be held in the Suspense Account.
(e) Notwithstanding any other provision hereunder, Salomon Inc may, at
any time, by notice to the Trustee, substitute for part or all of the
assets held by the Trust other assets of equal fair market value at the
time of such substitution. The fair market value of any shares of Salomon
Stock being substituted shall be the Daily Value of such shares of Salomon
Stock on the day as of which the substitution is to be effected. The
Trustee shall distribute to Salomon Inc the assets to be substituted as
soon as practicable after receipt of a notice of substitution but in no
case later than 7 days thereafter; provided, however, that in the event
Salomon Inc elects to substitute Salomon Stock held in the Trust within 90
days prior to the record date of a meeting of the shareholders of Salomon
Inc or on or after the commencement of a tender offer with respect to
Salomon Stock, the Trustee shall continue to hold the Salomon Stock to be
substituted and shall make voting decisions at such meeting and shall make
tender decisions with respect to such Salomon Stock pursuant to Section 12
of the Plan. As soon as practicable after the conclusion of such meeting or
the expiration of such tender offer, as the case may be, the Trustee shall
distribute such shares of Salomon Stock from the Trust to Salomon Inc.
Notwithstanding the foregoing, the Committee shall be permitted to modify
or eliminate the provisions described in Sections 8(a), (b), (c) and (e) if and
to the extent it determines that such action is appropriate based on advice of
counsel.
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9. MAINTENANCE OF ACCOUNTS
(a) Stock Account
(i) If, on November 30 of any calendar year, the number of shares held
in the Suspense Account is at least equal to (A) with respect to Awards
granted for the 1990 calendar year, 80% of the amount of shares necessary
to satisfy the total amount of Awards granted for such calendar year and
(B) with respect to Awards granted for each calendar year thereafter, 90%
of the amount of shares necessary to satisfy the total amount of Awards
granted for such calendar year, each Participant's Stock Account shall be
credited with a number of shares of Salomon Stock equal to the dollar
amount of such Participant's Award divided by the product of .85 multiplied
by the Average Cost Per Share of Salomon Stock on November 30 of the
calendar year for which the Award was granted to such Participant. In the
Event that on any such November 30 the number of shares held in the
Suspense Account is less than 80% or 90%, as the case may be, of the number
of shares necessary to satisfy the total amount of Awards granted for such
calendar year, each Participant's Stock Account shall be credited with a
number of shares of Salomon Stock equal to the dollar amount of such
Participant's Award divided by the product of .85 multiplied by the Average
Cost Per Share of Salomon Stock on the date on which the shares are
credited to such Participant's Stock Account.
(ii) If, as of the date an Award is granted, the number of shares held
in the Suspense Account is insufficient to satisfy such Award, the date on
which Salomon Stock in respect of such Award is credited to a Participant's
Stock Account shall be deferred until such date as the number of shares
held in the Suspense Account equals or exceeds the number of shares with
respect to such Award.
(iii) If the date as of which Awards are granted for a calendar year
is on or prior to the record date for the dividends payable on Salomon
Stock but the number of shares held in the Suspense Account is insufficient
to satisfy such Awards, (A) for purposes of Sections 8(d) and 9(a)(iv), the
shares held in the Suspense Account shall be treated as held in each
Participant's Stock Account pro rata in proportion to each Participant's
Award for such calendar year and (B) Salomon Inc shall make a contribution
to the Trust equal to the difference between (1) the dividends that would
have been paid on shares in respect of Awards for such calendar year had
the Suspense Account held sufficient shares to satisfy the Awards for such
calendar year and (2) the dividends actually paid on the shares held in the
Suspense Account. For purposes of Sections 8(d) and 9(a)(iv), the Salomon
Inc contribution described in clause (B) of this Section shall be treated
as a dividend paid on Salomon Stock held in a Participant's Stock Account,
pro rata in proportion to each Participant's Award for such calendar year.
(iv) As of the payment date for dividends paid (or deemed paid) on
Salomon Stock held (or deemed held) in a Participant's Stock Account as of
the record date for such dividends, each such Participant's Stock Account
shall be credited with the number of shares of Salomon Stock that are in
fact purchased or deemed to have been purchased with such dividends and the
additional 17.65% compensation contribution made in respect of such
dividends, as determined pursuant to Section 8(d).
(v) Each Participant's Stock Account shall be reduced by the number of
shares of Salomon Stock distributed to the Participant in respect of an
Award, whether such shares are distributed from the Trust or directly from
Salomon Inc.
(b) Cash Account
In the event that a Participant shall elect to tender shares of Salomon
Stock held in the Participant's Accounts pursuant to Section 12(b)(i), the
number of shares of Salomon Stock credited to such Participant's Accounts that
are tendered shall be converted to a dollar amount-per-share equal to the
consideration received in respect of such tender. Such dollar amount shall
thereafter be held in the Participant's Cash Account and shall be credited with
interest during the period beginning on the date as of which such shares were
tendered and ending on the last day of the month immediately preceding the month
in which such amounts are paid to the Participant at a rate which, through the
end of the first calendar month in such period, shall equal the London Interbank
Offered Rate (LIBOR) for 1-month deposits that appears in The Wall Street
Journal on
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the date immediately preceding the date that such shares were tendered, and
which shall be recalculated for each successive 1-month period based on the
London Interbank Offered Rate (LIBOR) for 1-month deposits published in The Wall
Street Journal on the last day of each preceding calendar month. If such rate
does not appear in The Wall Street Journal on any date as provided above, then
such rate shall be the last such rate that appeared in The Wall Street Journal
prior to the date of determination set forth above.
10. PAYMENTS UNDER THE PLAN
Within 30 business days after the occurrence of a Realization Event with
respect to an Award, Salomon Inc shall deliver or cause to be delivered to the
Participant (a) certificates for a number of shares of Salomon Stock equal to
the number of whole shares of Salomon Stock credited to such Participant's
Accounts as of the Realization Event as a result of such Award (including shares
reflecting the reinvestment of dividends paid thereon), and cash with respect to
any fractional shares of Salomon Stock credited to such Participant's Accounts
in an amount equal to the Daily Value of such fractional shares as of the
Realization Event, and (b) with respect to a Participant who has directed the
Trustee to tender shares of Salomon Stock allocated to the Participant's
Accounts, the dollar amount credited to a Participant's Cash Account as of the
Realization Event in respect of such Award. In the event that shares of Salomon
Stock that are allocated to a Participant's Accounts as of the record date for a
dividend are to be distributed to the Participant prior to the payment date for
such dividend, Salomon Inc shall deliver or cause to be delivered from the
Suspense Account to the Participant a number of shares of Salomon Stock equal to
the number of whole shares, and cash with respect to that number of fractional
shares, of Salomon Stock that could have been purchased with the amount of such
unpaid dividends, plus 17.65% thereof, at the Daily Value as of the Realization
Event. Notwithstanding the fact that Salomon Inc establishes the Trust for the
purpose of assisting it in meeting its obligations under the Plan, Salomon Inc
shall remain obligated to pay the amounts credited to the Participants'
Accounts. Nothing shall relieve Salomon Inc of its liabilities under the Plan
except to the extent amounts are paid to Participants or Beneficiaries from
assets of the Trust.
The Plan's principal purpose is to provide Participants with a continuing
long-term investment in Salomon Stock. In order to accomplish that principal
purpose, it is imperative that Participants generally be required to remain
invested in the Salomon Stock credited to their Accounts until the occurrence of
a Realization Event with respect to such Salomon Stock. Accordingly:
(a) in the event that a court of competent jurisdiction finally
determines that Salomon Inc is obligated to distribute to a Participant,
Beneficiary or any other person certificates representing any shares of
Salomon Stock credited to a Participant's Accounts prior to the occurrence
of a Realization Event with respect to such shares, the stock certificates
so distributed to such Participant, Beneficiary or other person shall be
restricted as to transferability until the date that a Realization Event
would have occurred with respect to such shares had they not been
distributed to the Participant, Beneficiary or other person and remained
subject to the Plan, and each such stock certificate shall bear the
following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions contained in the Salomon Inc Equity Partnership Plan
for Professional and Other Highly Compensated Employees (the
violation of which may result in forfeiture). A copy of the Plan
is on file in the office of the Secretary of Salomon Inc, Seven
World Trade Center, New York, New York 10048; and
(b) effective with respect to distributions of Salomon Stock allocated
to Participants' Accounts with respect to Awards under the Equity
Partnership Plans on or after March 4, 1992, prior to receiving any
distribution of such shares, each Participant shall be required to certify
in a form acceptable to the Committee that at no time after March 4, 1992
and before the occurrence of the Realization Event with respect to which
the distribution is to be made has the Participant, directly or indirectly,
held any equity or derivative security position with respect to Salomon
Stock, such as a short sale, a long put option or a short call option, that
increases in value as the value of Salomon Stock decreases. If the
Participant does not make the certification required by this Paragraph, the
Participant shall receive a distribution with respect to such Award or
Rollover equal to the number of shares of Salomon Stock otherwise to be
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distributed as of the Realization Event reduced by .15 multiplied by the
number of shares of Salomon Stock otherwise to be distributed as of the
Realization Date in respect of Awards made on or after March 4, 1992 and
the number of shares by which the distribution is reduced shall be
forfeited as of the Realization Event. In the event that a Participant
makes a false certification, the Participant shall forfeit all of the
shares allocated to his accounts in respect of Awards under the Equity
Partnership Plans on or after March 4, 1992 as of such Realization Event.
All amounts forfeited hereunder shall be treated as purchases for the
Equity Partnership Plans at the Daily Value as of the date of forfeiture of
the number of shares forfeited pursuant to Section 2(c)(iv) hereof.
(c) Effective with respect to Awards granted on or after December 1,
1993, notwithstanding any other provision hereunder, if and to the extent
that the Committee determines any Company's or Affiliate's Federal tax
deduction in respect of a distribution under the Plan may be limited as a
result of Section 162(m) of the Code, the Committee may delay such
distribution as provided below. In the event the Committee determines to
delay a distribution, the Committee shall convert the shares of Salomon
Stock to a dollar amount equal to the product of (i) the Daily Value of
Salomon Stock on the date such shares otherwise would have been distributed
to the Participant multiplied by (ii) the number of shares of Salomon Stock
that otherwise would have been distributed to the Participant in the
absence of this Section 10(c). Such amount shall then be credited to the
Participant's Cash Account. The amount so credited to the Participant's
Cash Account shall, subject to the second succeeding sentence, be credited
with interest during the period beginning on the date on which the
distribution would have been made in the absence of this Section 10(c) and
ending on the last day of the month immediately preceding the month in
which such amount is paid to the Participant, at a rate which, through the
end of the first calendar month in such period, shall equal the London
Interbank Offered Rate for 1-month deposits that appears in The Wall Street
Journal on the date immediately preceding the date on which the
distribution would have been made in the absence of this Section, and which
shall be recalculated for each successive 1-month period based on the
London Interbank Offered Rate for 1-month deposits published in The Wall
Street Journal on the last day of each preceding calendar month. If such
rate does not appear in The Wall Street Journal on any date as provided
above, then such rate shall be the last such rate that appeared in The Wall
Street Journal prior to the date of determination set forth above. The
Committee may, in its discretion, elect not to credit interest to the
Participant's Cash Account at the London Interbank Offered Rate as
described above, but instead to adjust the amount so credited to the
Participant's Cash Account to reflect gains and losses that would have
resulted from the investment of such amount in any investment vehicle or
vehicles selected by the Committee. Part or all of the amount credited to
the Participant's Cash Account hereunder shall be paid to the Participant
at such times as shall be determined by the Committee, if and to the extent
the Committee determines that a Company's or an Affiliate's deduction for
any such payment will not be reduced by Section 162(m) of the Code.
Notwithstanding the foregoing, the entire balance credited to the
Participant's Cash Account hereunder shall be paid to the Participant
within 30 days after the earlier of (A) the date the Participant ceases to
be a "covered employee" within the meaning of Section 162(m) of the Code or
(B) the occurrence of a Change in Control.
11. SECURITIES MATTERS
(a) Subject to Section 10, with respect to shares of Salomon Stock
allocated to Participant's Accounts in respect of Awards or Rollovers granted or
made on or before December 31, 1992, Salomon Inc shall use its best efforts to
assure that any securities distributed to Participants hereunder are marketable
at the time of distribution, including, to the extent required under applicable
law, effecting the registration pursuant to the Securities Act of any shares of
Salomon Stock to be distributed hereunder or effecting similar compliance under
any state laws.
(b) Subject to Section 10, with respect to shares of Salomon Stock
allocated to Participants' Accounts in respect of Awards or Rollovers granted or
made after December 31, 1992, Salomon Inc shall use its best efforts to assure
that any securities distributed to Participants hereunder on or after the
Realization Date for the Award or Rollover with respect to which the
distribution is made are marketable at the time of
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distribution, including, to the extent required under applicable law, effecting
the registration pursuant to the Securities Act of any shares of Salomon Stock
to be distributed hereunder or effecting similar compliance under any state
laws.
(c) Notwithstanding anything herein to the contrary, Salomon Inc shall not
be obligated to cause to be issued or delivered any certificates evidencing
shares of Salomon Stock pursuant to the Plan unless and until Salomon Inc is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of the New York Stock Exchange and any other securities
exchange on which shares of Salomon Stock are traded. The Committee may require,
as a condition of the issuance and delivery of certificates evidencing shares of
Salomon Stock pursuant to the terms hereof, the recipient of such shares to make
such covenants, agreements and representations, and that such certificates bear
such legends, as the Committee, in its sole discretion, deems necessary or
desirable.
(d) Without limitation on the Committee's powers pursuant to Paragraph (a)
of this Section, if and to the extent required by Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act or by any comparable or successor exemption
under which the Board of Directors believes it is appropriate for the Plan to
qualify, the Committee may (i) restrict a Participant's ability to sell any
shares of Salomon Stock distributed to such Participant hereunder until the
expiration of 6 months (or such other period as the Committee deems appropriate)
after the date as of which such shares were allocated to the Participant's
Accounts, (ii) in lieu of distributing shares of Salomon Stock that were
allocated to a Participant's Accounts within 6 months (or such other period as
the Committee deems appropriate) prior to the Realization Event, distribute a
cash amount equal to the Daily Value of such Salomon Stock as of the Realization
Event, or (iii) impose such other conditions on the exercise of any election
under the Plan or in connection with any distribution under the Plan as the
Committee deems appropriate.
12. VOTING AND TENDER OF SALOMON STOCK
(a) Voting Rights
(i) Each Participant shall be entitled to direct the Trustee, and the
Trustee shall have no discretion, as to the manner in which Salomon Stock
that is entitled to vote and is allocated to such Participant's Accounts is
to be voted. The Trustee shall vote combined fractional shares, to the
extent possible, to reflect the directions of the Participants holding such
shares.
(ii) The Trustee shall have no discretion as to the voting of (A) any
Salomon Stock allocated to any Participant's Accounts for which the Trustee
does not receive affirmative and valid Participant voting directions and
(B) any Salomon Stock held in the Suspense Account. The Trustee shall vote
such Salomon Stock in the same proportions as Salomon Stock held in the
Trust for which the Trustee receives affirmative and valid Participant
voting instructions under the Equity Partnership Plans or which the Trustee
votes pursuant to Paragraph (a)(iii).
(iii) Notwithstanding any other provision of this Section, the Trustee
shall vote the shares held in the Accounts of any Participant with respect
to whom counsel to Salomon Inc advises the Participant would be taxed on
the value of the Participant's Accounts if the Participant were permitted
to direct the voting of shares in the same proportions as Salomon Stock
held in the Trust for which the Trustee receives affirmative and valid
Participant voting instructions.
(b) Tender Rights
(i) If any person shall commence a tender or exchange offer or any
similar transaction with respect to Salomon Stock, each Participant shall
be entitled to direct the Trustee, and the Trustee shall have no
discretion, as to whether the Salomon Stock allocated to such Participant's
Accounts is to be tendered and whether such tender is to be revoked (to the
extent such a revocation is permitted by the terms of such tender or
exchange offer or applicable law). The Trustee shall tender shares of
Salomon Stock allocated to any Participant's Accounts for which the Trustee
shall have received affirmative and valid
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Participant directions to tender (except to the extent such directions are
revoked prior to such tender); the Trustee shall revoke the tender of
shares of Salomon Stock allocated to any Participant's Accounts for which
the Trustee shall have received affirmative and valid Participant
directions to revoke such tender.
(ii) The Trustee shall have no discretion as to whether or not to
tender, or whether to revoke tenders with respect to any Salomon Stock held
in the Suspense Account. The Trustee shall tender or not and shall revoke
tenders with respect to shares of Salomon Stock held in the Suspense
Account in the same proportions as the shares of Salomon Stock held in the
Trust for which the Trustee receives affirmative and valid Participant
directions under the Equity Partnership Plans whether or not to tender and
whether to revoke such tender.
(iii) The Trustee shall not tender, or revoke the tender of, shares
allocated to Participant's Accounts for which the Trustee does not receive
affirmative and valid Participant directions.
(iv) To the extent that a Participant elects to tender shares of
Salomon Stock held in the Participant's Accounts, the Trustee shall
transfer the consideration the Trustee receives as a result of such tender
to the Participant's Cash Account.
(v) Notwithstanding any other provision of this Section, the Trustee
shall tender or not and shall revoke tenders with respect to shares of
Salomon Stock held in the Accounts of Participants with respect to whom
counsel to Salomon Inc advises that the Participant would be taxed on the
value of the Participant's Accounts if the Participant were permitted to
direct the tender of shares, in the same proportions as the shares of
Salomon Stock held in the Trust for which the Trustee receives affirmative
and valid Participant directions whether or not to tender and whether to
revoke such tender.
(c) Tender Prior to Allocation
In the event the Trustee is required to make any tender decision prior to
the date on which any shares of Salomon Stock are allocated to any Participant's
Accounts, the Trustee shall poll the participants under the Equity Partnership
Plans (other than the Participants described in Paragraph (b)(v) of this
Section) and shall tender or revoke tenders with respect to shares in proportion
to the number of tender or revocation directions received by such participants.
Each such participant shall have one vote.
(d) Notices and Information Statements
Salomon Inc shall provide the Trustee and each Participant with notices and
information statements (including proxy statements) when voting rights are to be
exercised, and with respect to tender, exchange or similar offers, at the same
time and in the same manner (except to the extent the Exchange Act requires
otherwise) as such notices and information statements (including proxy
statements) are provided to shareholders of Salomon Inc generally.
(e) Confidentiality of Voting and Tender Directions
The Trustee shall devise and implement a procedure that is designed to
assure the confidentiality of any Participant's voting or tender directions so
that in directing the Trustee to vote or tender any shares of Salomon Stock,
Participants are in fact rendering independent decisions without influence from
any Company. Salomon Inc shall cooperate with the Trustee in devising and
implementing such procedures to the extent the Trustee so requests.
(f) Shares Not Entitled to Vote Prior to Approval
Prior to the receipt of the shareholder approval required under Section 19,
no shares held in the Suspense Account shall be voted to the extent that such
shares represent shares in excess of the maximum number of shares authorized
under the Equity Partnership Plans as amended and restated as of December 11,
1992.
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13. ADJUSTMENT OF ACCOUNTS IN CERTAIN EVENTS
(a) Unless the Committee otherwise determines, a Participant's Accounts
shall be adjusted to reflect any securities, cash and other property received
with respect to shares of Salomon Stock credited to such Participant's Accounts
as a result of any stock dividend or split, recapitalization, extraordinary
dividend, merger, consolidation, combination or exchange of shares or similar
change or any other event that the Committee, in its sole discretion, deems
appropriate. The purpose of this adjustment is to treat Participants as if they
were shareholders of Salomon Stock with respect to the number of shares credited
to their Accounts. However, the Committee may, in its sole discretion, convert
any securities, cash or other property that would have been received in respect
of shares of Salomon Stock credited to a Participant's Accounts into an
equivalent number of equity securities of Salomon Inc or any successor company
or into cash or other property of equivalent value.
(b) In the event of any change in the number of shares of Salomon Stock
outstanding by reason of any stock dividend or split, recapitalization,
extraordinary dividend, merger, consolidation, combination or exchange of shares
or similar corporate change or any other event that the Committee, in its sole
discretion, deems appropriate, the maximum aggregate number of shares of Salomon
Stock subject to the Equity Partnership Plans shall be appropriately adjusted by
the Committee. In the event of any change in the number of shares of Salomon
Stock outstanding by reason of any other event or transaction, the Committee
may, but need not, make such adjustments in the number and class of shares of
Salomon Stock subject to the Equity Partnership Plans as the Committee may deem
appropriate.
(c) Except as is expressly provided in this Section, a Participant shall
have no rights as a result of any stock dividend or split, recapitalization,
extraordinary dividend, merger, consolidation, combination or exchange of shares
or similar corporate change.
14. CERTAIN DIVESTITURES
(a) Company with Publicly Traded Stock That No Longer Is a 50% Affiliate
In the event of any transaction immediately after which any Company both
ceases to be a member of a "controlled group of corporations" (as that term is
defined in Section 414(b) of the Code but substituting the phrase "at least 50%"
for the phrase "at least 80%" in each place that it appears in Section 1563(a)
of the Code) of which Salomon Inc is a member and either has stock that is
publicly traded or is a member of a "controlled group of corporations" (as that
term is defined in Section 414(b) of the Code) with any trades or businesses,
one or more members of which have publicly traded stock as a result of the
transaction:
(i) the Salomon Stock credited to the Accounts of (A) Participants who
are employed by such Company immediately after the transaction and (B)
terminated Participants who are not so employed, but who were employed by
such Company on the date that their employment with the Companies and
Affiliates terminated, shall be converted to equivalent amounts of such
publicly traded stock based on the relative values of such publicly traded
stock and Salomon Stock immediately after the transaction. Thereafter, each
such Participant's Accounts shall be maintained in such publicly traded
stock and such Company shall cease to participate in the Plan with respect
to future Awards;
(ii) the Board of Directors of the affected Company shall succeed to
the powers of the Committee and the Board of Directors under the Plan with
respect to the Participants described in Section 14(a)(i); and
(iii) a separate trust containing the Accounts of such Participants
shall be created to hold the stock credited to the Participants' Accounts.
Such trust shall be substantially the same as the Trust and shall be
created pursuant to a trust agreement between the affected Company and the
Trustee.
(b) Company with Publicly Traded Stock That Remains a 50% Affiliate
In the event that a public market develops for the stock of any Company and
immediately after such public market develops such Company remains a member of a
"controlled group of corporations" (as that term is defined in Section 414(b) of
the Code but substituting the phrase "at least 50%" for the phrase "at
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least 80%" in each place that it appears in Section 1563(a) of the Code) of
which Salomon Inc is a member, the Salomon Stock credited to the Accounts of (i)
the Participants who are employed by such Company immediately after such public
market develops and (ii) terminated Participants who are not so employed, but
who were employed by such Company on the date that their employment with the
Companies and Affiliates terminated, shall be converted to equivalent amounts of
the publicly traded stock of such Company based on the principles described in
Section 14(a)(i) or its economic equivalent, as the Committee deems appropriate,
unless the Committee and the Company determine that such a conversion would be
financially detrimental to any Company or Affiliate or such Participants.
Thereafter, each such Participant's Accounts shall be maintained in such
publicly traded stock or its economic equivalent, as the case may be, and such
Company shall cease to participate in the Plans with respect to future Awards.
(c) Satisfaction of Obligations After a Divestiture
In the event of a divestiture described in this Section 14, any
distributions in respect of the shares credited to the affected Participants'
Accounts as of the date of the divestiture shall be deemed to be payments in
respect of Salomon Inc's obligations under the Plan, except to the extent such
obligations are assumed and discharged by the affected Company.
15. NO SPECIAL EMPLOYMENT RIGHTS
Nothing contained in the Plan shall confer upon any Participant any right
with respect to the continuation of the Participant's employment by any Company
or Affiliate or interfere in any way with the right of any Company or Affiliate
at any time to terminate such employment or to increase or decrease the
compensation of the Participant. Nothing in the Plan shall be deemed to give any
employee of any Company or Affiliate any right to participate in the Plan.
16. PAYROLL AND WITHHOLDING TAXES
All federal, state, local and other withholding tax requirements, if any,
attributable to a distribution shall be met pursuant to the following
procedures:
(a) The Companies and Affiliates shall have the right to withhold from
any cash amounts payable to a Participant (including salary, bonus or any
other amounts payable from any Company or Affiliate to the Participant) an
amount sufficient to satisfy such federal, state, local and other
withholding tax requirements, prior to the delivery of any certificate or
certificates for such shares of Salomon Stock or other payments under the
Plan; or
(b) Salomon Inc shall have the right to require Participants to remit
to Salomon Inc in cash an amount sufficient to satisfy such federal, state,
local and other withholding tax requirements, prior to the delivery of any
certificate or certificates for such shares of Salomon Stock or other
payments under the Plan; or
(c) Salomon Inc (or, if a distribution is to be made from the Trust,
the Trustee) shall have the right to withhold a number of such shares, the
Daily Value of which on the date the shares are to be distributed to the
Participant the Committee determines to be sufficient to satisfy the
minimum federal, state, local and other withholding tax requirements under
applicable law. In the event that the Trustee withholds shares pursuant to
this Paragraph, the Trustee shall distribute such shares from the Trust to
Salomon Inc and Salomon Inc shall make appropriate withholding tax
payments.
17. TERMINATION AND AMENDMENT
The Plan may be terminated with respect to any or all Participants at any
time by the Board of Directors. Subject to Section 20 hereof, upon such
termination the assets of the Accounts of each Participant with respect to whom
the Plan has been terminated shall be distributed to each such Participant in
order to meet the benefit obligations under the Plan with respect to each such
Participant. In the event the entire Plan is terminated, the remaining assets,
if any, in the Trust after the payment of such benefits shall be paid to Salomon
Inc. In the event of a partial termination of the Plan, the assets, if any,
remaining in any terminated
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Accounts shall be held in the Suspense Account and may be used to satisfy
Salomon Inc's contribution requirements hereunder; provided, however, that in
the event of a partial termination of the Plan involving 40% or more of the
amounts payable under the Plan immediately prior to such termination, the Board
of Directors may elect that any such remaining assets be distributed to Salomon
Inc. The Plan may be amended by the Board of Directors from time to time in any
respect, provided, however, that if and to the extent required by Rule 16b-3
promulgated under Section 16(b) of the Exchange Act or by any comparable or
successor exemption under which the Board of Directors believes it is
appropriate for the Plan to qualify, no amendment shall be effective without the
approval of the shareholders of Salomon Inc, that (a) except as provided in
Section 13 hereof, increases the number of shares of Salomon Stock that may be
distributed under the Plan, or (b) materially increases the benefits accruing to
individuals under the Plan or (c) materially modifies the requirements as to
eligibility for participation in the Plan. No amendment or termination shall be
made that would impair the rights of any Participant in any Award or Rollover
theretofore granted or made, or any earnings with respect thereto, without such
Participant's prior written consent; provided, however, that Salomon Inc may
amend the Plan and the Trust from time to time in such a manner as may be
necessary to prevent the trust agreement pursuant to which the Trust is created,
the Equity Partnership Plans or the Trust from becoming subject to ERISA and to
avoid the current taxation of the assets held in the trusts established in
connection with the Equity Partnership Plans to Participants. Neither a
Participant's incurring any income tax liability nor the loss of an investment
opportunity as a result of the termination of, or, with respect to amounts
allocated to Participants' Accounts on or after December 31, 1992, any amendment
to, the Plan shall be considered an impairment of the rights of a Participant.
18. PAYMENTS UPON THE DEATH OF A PARTICIPANT
Each Participant shall have the right to designate in writing from time to
time a Beneficiary by filing a written notice of such designation with the
Committee. A Participant's designation of a Beneficiary may be revoked by filing
with the Trustee an instrument of revocation or a later designation. Any
designation or revocation shall be effective when received by the Trustee. In
the event of the death of a Participant, any payment required to be made
hereunder to such Participant shall be made to such Participant's Beneficiary.
Unless the Participant's Beneficiary designation provides otherwise, no person
shall be entitled to benefits upon the death of the Participant unless such
person survives the Participant. If the Beneficiary designated by a Participant
does not survive the Participant or if the Participant has not made a valid
Beneficiary designation, such Participant's Beneficiary shall be such
Participant's estate. If the Participant's Beneficiary is the Participant's
estate, no payment shall be made unless the Committee shall have been furnished
with such evidence as the Committee may deem necessary to establish the validity
of the payment.
19. SHAREHOLDER APPROVAL REQUIRED
The Plan, as amended and restated as of January 1, 1994, is subject to
approval by the shareholders of Salomon Inc at their annual meeting in May, 1994
in accordance with applicable law, the rules of the New York Stock Exchange and
the requirements of Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act. If the Plan is not so approved, then the Plan shall remain in full force
and effect without regard to the amendments adopted in March, 1994.
20. EFFECT OF REVOCATION EVENT
Upon the occurrence of a Revocation Event, the Board of Directors may, in
its sole discretion, elect to terminate the Plan, the Trust, or any
Participant's Accounts. In the event that the Board of Directors elects to so
terminate the Plan, the Trust or any Participant's Accounts as a result of a
Revocation Event, in consideration of and as soon as practicable after Salomon
Inc's providing the Trustee with a written undertaking to pay to Participants
the amount required to be paid under this Section, all amounts held in the Trust
(or if the entire Trust is not terminated, any terminated Accounts) shall be
distributed to Salomon Inc. Salomon Inc shall, in its sole discretion, (a) pay
to each Participant whose Accounts are terminated, as soon as practicable after
the date of such termination, a lump sum in cash equal to the Daily Value
multiplied by the number of shares of Salomon Stock and cash amounts reflected
in each Participant's Accounts as of the
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<PAGE> 78
date of such termination, (b) distribute to each Participant whose Accounts are
terminated, as soon as practicable after the date of such termination, that
number of shares of Salomon Stock that would have been distributable to such
Participant under the Plan and pay to such Participant at such time any cash
allocated to the Participant's Cash Account or (c) distribute to each
Participant whose Accounts are terminated that number of shares of Salomon Stock
and that amount of cash that would have been distributable to such Participant
at such time as shares and cash would have been distributable to such
Participant under the Plan, had the Plan continued. If it is finally determined
in a proceeding, which Salomon either controls or was offered the right to
control and declines, that the Participant's interest in the Trust was taxable
to the Participant notwithstanding any termination of such Participant's
Accounts in the Trust, Salomon Inc shall pay or distribute the Participant's
interest (whether or not the Board of Directors has previously elected to
terminate the Plan, the Trust or the Participant's Accounts) in accordance with
either (a) or (b) of the preceding sentence.
21. MISCELLANEOUS
(a) No transfer (other than any transfer made by will or by the laws of
descent and distribution) by a Participant of any right to any payment
hereunder, whether voluntary or involuntary, by operation of law or otherwise,
shall vest the transferee with any interest or right in or with respect to such
payment, and the transfer shall be of no force and effect.
(b) The Plan and all rights hereunder shall be subject to and interpreted
in accordance with the laws of the State of New York, without reference to the
principles of conflicts of law.
APPENDIX A
AWARD SCHEDULE
<TABLE>
<CAPTION>
COMPENSATION LEVEL
(IN THOUSANDS) AWARD
----------------------------------------- -----------------------------------------
<S> <C>
$0 -- 100 2% of Compensation
Over 100 but not over 300................ $ 2,000 plus 5% of the excess over $100,000
Over 300 but not over 500................ 12,000 plus 12 1/2% of the excess over 300,000
</TABLE>
PHIBRO DIVISION
AWARDS FOR 1993 AND THEREAFTER
<TABLE>
<CAPTION>
COMPENSATION
(IN THOUSANDS) AWARD
----------------------------------------- -----------------------------------------
<S> <C>
$0 -- 350................................ 0
Over $350 but not over $500.............. 15% of Compensation in excess of $350,000
</TABLE>
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<PAGE> 79
EXHIBIT C
SALOMON INC STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
This Salomon Inc Stock Incentive Plan is intended to promote the interests
of the Company and its shareholders by providing the Company's key employees, on
whose judgment, initiative and efforts the successful conduct of the business of
the Company largely depends, and who are largely responsible for the management,
growth and protection of the business of the Company, with appropriate
incentives and rewards to encourage them to continue in the employ of the
Company and to maximize their performance and to provide certain
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Board of Directors" shall mean the Board of Directors of the
Company.
(b) "Cash Bonus" shall mean an award of a bonus payable in cash
pursuant to Section 13 hereof.
(c) "Cause" shall mean, when used in connection with the termination
of a Participant's employment, the termination of the Participant's
employment by the Company or an affiliate on account of (i) the willful
violation by the Participant of (A) any federal or state law, (B) any rule
of any Company or affiliate or (C) any rule or regulation of any regulatory
body to which any Company or affiliate is subject, including, without
limitation, the New York Stock Exchange or any other exchange or contract
market of which any Company or affiliate is a member and the National
Association of Securities Dealers, Inc., which violation would materially
reflect on the Participant's character, competence or integrity, (ii) a
breach by a Participant of the Participant's duty of loyalty to the Company
and its affiliates in contemplation of the Participant's termination of the
Participant's employment, such as the Participant's pre-termination of
employment solicitation of customers or employees of the Company or an
affiliate or (iii) the Participant's unauthorized removal from the premises
of the Company or affiliate of any document (in any medium or form)
relating to the Company or an affiliate or the customers of the Company or
an affiliate. Any rights a Company or an affiliate may have hereunder in
respect of the events giving rise to Cause shall be in addition to the
rights the Company or affiliate may have under any other agreement with the
employee or at law or in equity. If, subsequent to a Participant's
voluntary termination of employment or involuntary termination of
employment without Cause, it is discovered that the Participant's
employment could have been terminated for Cause, such Participant's
employment shall, at the election of the Committee in its sole discretion,
be deemed to have been terminated for Cause as of date of the occurrence of
the event giving rise to Cause.
(d) "Change in Control" shall mean:
(i) The acquisition by any person (including a group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than
Salomon Inc or any of its subsidiaries or Berkshire Hathaway, Inc. or
any of its subsidiaries or affiliates (as defined in Rule 12b-2
promulgated under the Exchange Act), without the prior written approval
of the Board of Directors, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either the then outstanding shares of Salomon Stock or the combined
voting power of Salomon Inc's then outstanding voting securities in a
transaction or series of transactions not approved by a vote of at least
a majority of the Continuing Directors (as hereinafter defined); or
(ii) A change in the composition of the Board of Directors of
Salomon Inc such that individuals who, as of January 1, 1988, constitute
the Board of Directors of Salomon Inc (generally the "Directors" and as
of January 1, 1988 the "Continuing Directors") cease for any reason to
constitute at least a majority thereof, provided that any person
becoming a Director subsequent to
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January 1, 1988 whose nomination for election was approved by a vote of
at least a majority of the Continuing Directors (other than a nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election
of the Directors of Salomon Inc, as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act) shall be deemed to be a
Continuing Director.
(e) "Code" shall mean the Internal Revenue Code of 1986.
(f) "Committee" shall mean the Compensation and Employee Benefits
Committee of the Board of Directors or such other committee as the Board of
Directors shall appoint from time to time to administer the Plan; provided,
however, that the Committee shall at all times consist of two or more
persons, each of whom shall be a "disinterested person" within the meaning
of Rule 16b-3 promulgated under Section 16 of the Exchange Act and an
"outside director" within the meaning of Section 162(m) of the Code.
(g) "Company" shall mean Salomon Inc.
(h) "Company Stock" shall mean the common stock of the Company.
(i) "Disability" shall mean any physical or mental condition that
would qualify a Participant for a disability benefit under the long-term
disability plan maintained by the Company or an affiliate and applicable to
the Participant.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" shall mean, with respect to a share of Company
Stock, the average of the high and low reported sales price regular way per
share of Company Stock on the New York Stock Exchange Composite Tape, or if
Company Stock is not traded on such stock exchange, the principal national
securities exchange on which Salomon Stock is traded, or if not so traded,
the mean between the highest bid and lowest asked quotation on the
over-the-counter market as reported by the National Quotations Bureau, or
any similar organization, on any relevant date, or if not so reported, as
determined by the Committee in a manner consistently applied.
(l) "Incentive Award" shall mean an Option, LSAR, Tandem SAR,
Stand-Alone SAR, share of Restricted Stock, share of Phantom Stock, Stock
Bonus or Cash Bonus granted pursuant to the terms of the Plan.
(m) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of the Code and
that is identified as an Incentive Stock Option in the agreement by which
it is evidenced.
(n) "Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued
by the Company pursuant to the terms of Section 10(d) hereof.
(o) "LSAR" shall mean a limited stock appreciation right that is
granted pursuant to the provisions of Section 7 hereof and that relates to
an Option. Each LSAR shall be exercisable only upon the occurrence of a
Change in Control and only in the alternative to the exercise of its
related Option.
(p) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(q) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 6 hereof. Each Option shall be identified as
either an Incentive Stock Option or a Non-Qualified Stock Option in the
agreement by which it is evidenced.
(r) "Participant" shall mean an employee of the Company or an
affiliate who is eligible to participate in the Plan and to whom an
Incentive Award is granted pursuant to the Plan, and, upon his death, his
successors, heirs, executors and administrators, as the case may be.
(s) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
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<PAGE> 81
(t) "Phantom Stock" shall mean the right to receive in cash the Fair
Market Value of a share of Company Stock, which right is granted pursuant
to Section 11 hereof and subject to the terms and conditions contained
therein.
(u) "Plan" shall mean this Salomon Inc Stock Incentive Plan, as it may
be amended from time to time.
(v) "Restricted Stock" shall mean a share of Company Stock that is
granted pursuant to the terms of Section 10 hereof and that is subject to
the restrictions set forth in Section 10(c) hereof for so long as such
restrictions continue to apply to such share.
(w) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(x) "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 9 hereof that is not related to any Option.
(y) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Company Stock pursuant to Section 12 hereof.
(z) "Tandem SAR" shall mean a stock appreciation right granted
pursuant to Section 8 hereof that is related to an Option. Each Tandem SAR
shall be exercisable only to the extent its related Option is exercisable
and only in the alternative to the exercise of its related Option.
(aa) "Vesting Date" shall mean the date established by the Committee
on which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN
(a) Plan Limit
Under the Plan, the Committee may grant to Participants (i) Options, (ii)
LSARs, (iii) Tandem SARs, (iv) Stand-Alone SARs, (v) shares of Restricted Stock,
(vi) shares of Phantom Stock, (vii) Stock Bonuses and (viii) Cash Bonuses.
Subject to adjustment as provided in Section 14 hereof, the Committee may
grant: (a) Options, shares of Restricted Stock, and Stock Bonuses under the Plan
with respect to a number of shares of Company Stock that in the aggregate does
not exceed 3,500,000 shares and (b) Stand-Alone SARs, shares of Phantom Stock
and Cash Bonuses with respect to a number of shares of Company stock that in the
aggregate does not exceed 1,500,000 shares. The grant of an LSAR or Tandem SAR
shall not reduce the number of shares of Company Stock with respect to which
Incentive Awards may be granted pursuant to the Plan. Incentive Awards granted
under the Plan shall count against the foregoing limits at the time they are
granted but shall again become available for grant under the Plan as follows:
(1) To the extent that any Options, together with any related rights
granted under the Plan, terminate, expire or are cancelled without having
been exercised (including a cancellation resulting from the exercise of a
related LSAR or a Tandem SAR) the shares covered by such Options shall
again be available for grant under the Plan.
(2) To the extent that any Stand-Alone SARs terminate, expire or are
cancelled without having been exercised, the shares covered by such
Stand-Alone SARs shall again be available for grant under the Plan.
(3) To the extent any shares of Restricted Stock or Phantom Stock, or
any shares of Company Stock granted as a Stock Bonus are forfeited or
cancelled for any reason, such shares (together with any related Cash
Bonuses) shall again be available for grant under the Plan; provided, that,
if and to the extent required under rule 16b-3 promulgated under Section
16(b) of the Exchange Act, no shares of Company Stock in respect of a
forfeited Stock Bonus or grant of Restricted Stock shall again be available
for grant under the Plan to the extent that, prior to such forfeiture, the
Participant had any benefits of ownership such as the present right to
receive dividends distributed with respect thereto.
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<PAGE> 82
Shares of Company Stock issued under the Plan may be either newly issued
shares or treasury shares, at the discretion of the Committee.
(b) Individual Limit
Subject to adjustment as provided in Section 14 hereof, the Committee shall
not, during term of the Plan described in Section 26 hereof, grant any one
Participant Incentive Awards hereunder with respect to more than 1,500,000
shares of Company Stock. Such Incentive Awards may be made up entirely of any
one type of Incentive Award or any combination of types of Incentive Awards
available under the Plan, in the Committee's sole discretion. Once granted to a
Participant, Incentive Awards shall not again be available for grant to that
Participant. The grant of an LSAR or Tandem SAR shall not reduce the number of
shares of Company Stock with respect to which Incentive Awards may be granted to
any Participant pursuant to the Plan.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall from
time to time designate the key employees of the Company and its affiliates who
shall be granted Incentive Awards and the amount and type of such Incentive
Awards.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary or appropriate. Decisions of the
Committee shall be final and binding on all parties.
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or Stand-Alone SAR granted
under the Plan becomes exercisable or otherwise adjust any of the terms of such
Option or Stand-Alone SAR (except that no such adjustment shall, without the
consent of a Participant, reduce the Participant's rights under any previously
granted and outstanding Incentive Award unless the Committee determines that
such adjustment is necessary or appropriate to prevent such Incentive Award from
constituting "applicable employee remuneration" within the meaning of Section
162(m) of the Code), (ii) accelerate the Vesting Date or Issue Date, or waive
any condition imposed hereunder, with respect to any share of Restricted Stock
granted under the Plan or otherwise adjust any of the terms of such Restricted
Stock and (iii) accelerate the Vesting Date or waive any condition imposed
hereunder, with respect to any share of Phantom Stock granted under the Plan or
otherwise adjust any of the terms of such Phantom Stock.
In addition, the Committee may, in its absolute discretion and without
amendment to the Plan, grant Incentive Awards of any type to Participants on the
condition that such Participants surrender to the Committee for cancellation
such other Incentive Awards of the same or any other type (including, without
limitation, Incentive Awards with higher exercise prices or values) as the
Committee specifies. Notwithstanding Section 3(a) herein, prior to the surrender
of such other Incentive Awards, Incentive Awards granted pursuant to the
preceding sentence of this Section 4 shall not count against the limits set
forth in such Section 3(a).
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Committee, subject to applicable law.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
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<PAGE> 83
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be those key employees of the Company and its affiliates who are
largely responsible for the management, growth and protection of the business of
the Company and its affiliates (including officers of the Company, whether or
not they are directors of the Company) as the Committee shall select from time
to time. Directors who are not employees or officers of the Company or its
affiliates shall not be eligible to receive Incentive Awards under the Plan.
6. OPTIONS
The Committee may grant Options pursuant to the Plan. Such Options shall be
evidenced by agreements in such form as the Committee shall from time to time
approve. Options shall comply with and be subject to the following terms and
conditions:
(a) Identification of Options
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b) Exercise Price
The exercise price of any Non-Qualified Stock Option granted under the
Plan shall be such price as the Committee shall determine (which may be
equal to, less than or greater than the Fair Market Value of a share of
Company Stock on the date such Non-Qualified Stock Option is granted) on
the date on which such Non-Qualified Stock Option is granted; provided,
that such price may not be less than the minimum price required by law. The
exercise price of any Incentive Stock Option granted under the Plan shall
be not less than 100% of the Fair Market Value of a share of Company Stock
on the date on which such Incentive Stock Option is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates, during
such period and for such number of shares of Company Stock as shall be
determined by the Committee on the day on which such Option is granted and
set forth in the Option agreement with respect to such Option; provided,
however, that no Option shall be exercisable after the expiration of ten
years from the date such Option was granted; and, provided, further, that
each Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part; provided,
that no partial exercise of an Option shall be for an aggregate exercise
price of less than $1,000. The partial exercise of an Option shall not
cause the expiration, termination or cancellation of the remaining portion
thereof. Upon the partial exercise of an Option, the agreements evidencing
such Option and any related LSARs and Tandem SARs shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the Company's
principal office, to the attention of its Secretary, no less than one
business day in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the agreements evidencing the Option
and any related LSARs and Tandem SARs, shall specify the number of shares
of Company Stock with respect to which the Option is being exercised and
the effective date of the proposed exercise and shall be signed by the
Participant. The Participant may withdraw such notice at any time prior to
the close of business on the business day immediately preceding the
effective date of the proposed exercise, in which case such agreements
shall be returned to him. Payment for shares of Company Stock purchased
upon the exercise of an Option shall be made on the effective date of such
exercise either (i) in cash, by certified check, bank cashier's check or
wire transfer or (ii) subject to the approval of the Committee, in shares
of Company Stock owned by the Participant and valued at their Fair Market
Value on the effective date of such exercise, or partly in shares of
Company Stock with the balance in cash, by certified check, bank
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<PAGE> 84
cashier's check or wire transfer. Any payment in shares of Company Stock
shall be effected by the delivery of such shares to the Secretary of the
Company, duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
(4) During the lifetime of a Participant, each Option granted to him
shall be exercisable only by him. No Option shall be assignable or
transferable otherwise than by will or by the laws of descent and
distribution.
(5) Certificates for shares of Company Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant or his
beneficiary, as the case may be, and delivered to the Participant or his
beneficiary, as the case may be, as soon as practicable following the
effective date on which the Option is exercised.
(d) Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of shares of Company Stock with
respect to which Incentive Stock Options granted hereunder are exercisable
for the first time by a Participant during any calendar year under the Plan
and any other stock option plan of the Company (or any "subsidiary
corporation" of the Company within the meaning of Section 424 of the Code)
shall not exceed $100,000. Such Fair Market Value shall be determined as of
the date on which each such Incentive Stock Option is granted. In the event
that the aggregate Fair Market Value of shares of Company Stock with
respect to such Incentive Stock Options exceeds $100,000, then Incentive
Stock Options granted hereunder to such Participant shall, to the extent
and in the order in which they were granted, automatically be deemed to be
Non-Qualified Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock possessing more
than ten percent of the total combined voting power of all classes of stock
of the Company or any of its "subsidiary corporations" (within the meaning
of Section 424 of the Code), unless (i) the exercise price of such
Incentive Stock Option is at least one hundred and ten percent of the Fair
Market Value of a share of Company Stock at the time such Incentive Stock
Option is granted and (ii) such Incentive Stock Option is not exercisable
after the expiration of five years from the date such Incentive Stock
Option is granted.
(e) Effect of Termination of Employment
(1) Except as otherwise may be determined by the Committee and as may
be set forth in the Option agreement pursuant to which an Option is
granted, in the event a Participant's employment with the Company and its
affiliates terminates (other than a termination that is or is deemed to
have been for Cause): (i) Options granted to such Participant, to the
extent that they were exercisable at the time of such termination, shall
remain exercisable until the expiration of their term and (ii) Options
granted to such Participant, to the extent that they were not exercisable
at the time of such termination, shall expire at the close of business on
the date of such termination. The effect of exercising any Incentive Stock
Option after the day 3 months after such termination (or, in the case of a
termination of employment on account of Disability, after the day 1 year
after such termination) will be to cause such Incentive Stock Option to be
treated as a Non-Qualified Stock Option.
(2) In the event of the a Participant's employment is or is deemed to
have been terminated for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business as of the date of
such termination.
(f) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Option granted under
the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination
or cancellation pursuant to the terms of the Plan.
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<PAGE> 85
7. LIMITED SARS
The Committee may grant in connection with any Option granted hereunder one
or more LSARs relating to a number of shares of Company Stock less than or equal
to the number of shares of Company Stock subject to the related Option. An LSAR
may be granted at the same time as, or, in the case of a Non-Qualified Stock
Option, subsequent to the time that, its related Option is granted. Each LSAR
shall be evidenced by an agreement in such form as the Committee shall from time
to time approve. Each LSAR granted hereunder shall be subject to the following
terms and conditions:
(a) Benefit Upon Exercise
(1) The exercise of an LSAR relating to a Non-Qualified Stock Option
with respect to any number of shares of Company Stock shall entitle the
Participant to a cash payment, for each such share, equal to the excess of
(i) the greater of (A) the highest price per share of Company Stock paid in
the Change in Control in connection with which such LSAR became exercisable
and (B) the Fair Market Value of a share of Company Stock on the date of
such Change in Control over (ii) the exercise price of the related Option.
Such payment shall be made as soon as practicable, but in no event later
than the expiration of five business days after the effective date of such
exercise.
(2) The exercise of an LSAR relating to an Incentive Stock Option with
respect to any number of shares of Company Stock shall entitle the
Participant to a cash payment, for each such share, equal to the excess of
(i) the Fair Market Value of a share of Company Stock on the effective date
of such exercise over (ii) the exercise price of the related Option. Such
payment shall be made as soon as practicable, but in no event later than
the expiration of five business days, after the effective date of such
exercise.
(b) Term and Exercise of LSARs
(1) An LSAR shall be exercisable only during the period commencing on
the first day following the occurrence of a Change in Control and
terminating on the expiration of sixty days after such date.
Notwithstanding the preceding sentence of this Section 7(b), in the event
that an LSAR held by any Participant who is or may be subject to the
provisions of Section 16(b) of the Exchange Act becomes exercisable prior
to the expiration of six months following the date on which it is granted,
then the LSAR shall also be exercisable during the period commencing on the
first day immediately following the expiration of such six month period and
terminating on the expiration of sixty days following such date.
Notwithstanding anything else herein, an LSAR relating to an Incentive
Stock Option may be exercised with respect to a share of Company Stock only
if the Fair Market Value of such share on the effective date of such
exercise exceeds the exercise price relating to such share. Notwithstanding
anything else herein, an LSAR may be exercised only if and to the extent
that the Option to which it relates is exercisable.
(2) The exercise of an LSAR with respect to a number of shares of
Company Stock shall cause the immediate and automatic cancellation of the
Option to which it relates with respect to an equal number of shares. The
exercise of an Option, or the cancellation, termination or expiration of an
Option (other than pursuant to this Paragraph (2)), with respect to a
number of shares of Company Stock, shall cause the cancellation of the LSAR
related to it with respect to an equal number of shares.
(3) Each LSAR shall be exercisable in whole or in part; provided, that
no partial exercise of an LSAR shall be for an aggregate exercise price of
less than $1,000. The partial exercise of an LSAR shall not cause the
expiration, termination or cancellation of the remaining portion thereof.
Upon the partial exercise of an LSAR, the agreements evidencing the LSAR,
the related Option and any Tandem SARs related to such Option, marked with
such notations as the Committee may deem appropriate to evidence such
partial exercise, shall be returned to the Participant exercising such LSAR
together with the payment described in Paragraph 7(a)(1) or (2) hereof, as
applicable.
(4) During the lifetime of a Participant, each LSAR granted to him
shall be exercisable only by him. No LSAR shall be assignable or
transferable otherwise than by will or by the laws of descent and
distribution and otherwise than together with its related Option.
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(5) An LSAR shall be exercised by delivering notice to the Company's
principal office, to the attention of its Secretary, no less than one
business day in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the applicable agreements evidencing
the LSAR, the related Option and any Tandem SARs relating to such Option,
shall specify the number of shares of Company Stock with respect to which
the LSAR is being exercised and the effective date of the proposed exercise
and shall be signed by the Participant. The Participant may withdraw such
notice at any time prior to the close of business on the business day
immediately preceding the effective date of the proposed exercise, in which
case such agreements shall be returned to him.
8. TANDEM SARS
The Committee may grant in connection with any Option granted hereunder one
or more Tandem SARs relating to a number of shares of Company Stock less than or
equal to the number of shares of Company Stock subject to the related Option. A
Tandem SAR may be granted at the same time as, or subsequent to the time that,
its related Option is granted. Each Tandem SAR shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Tandem
SARs shall comply with and be subject to the following terms and conditions:
(a) Benefit Upon Exercise
The exercise of a Tandem SAR with respect to any number of shares of
Company Stock shall entitle a Participant to a cash payment, for each such
share, equal to the excess of (i) the Fair Market Value of a share of
Company Stock on the effective date of such exercise over (ii) the exercise
price of the related Option. Such payment shall be made as soon as
practicable, but in no event later than the expiration of five business
days, after the effective date of such exercise.
(b) Term and Exercise of Tandem SAR
(1) A Tandem SAR shall be exercisable at the same time and to the same
extent (on a proportional basis, with any fractional amount being rounded
down to the immediately preceding whole number) as its related Option.
Notwithstanding the first sentence of this Section 8(b)(1), (i) a Tandem
SAR shall not be exercisable at any time that an LSAR related to the Option
to which the Tandem SAR is related is exercisable and (ii) a Tandem SAR
relating to an Incentive Stock Option may be exercised with respect to a
share of Company Stock only if the Fair Market Value of such share on the
effective date of such exercise exceeds the exercise price relating to such
share.
(2) The exercise of a Tandem SAR with respect to a number of shares of
Company Stock shall cause the immediate and automatic cancellation of its
related Option with respect to an equal number of shares. The exercise of
an Option, or the cancellation, termination or expiration of an Option
(other than pursuant to this Paragraph (2)), with respect to a number of
shares of Company Stock shall cause the automatic and immediate
cancellation of its related Tandem SARs to the extent that the number of
shares of Company Stock subject to such Option after such exercise,
cancellation, termination or expiration is less than the number of shares
subject to such Tandem SARs. Such Tandem SARs shall be cancelled in the
order in which they became exercisable.
(3) Each Tandem SAR shall be exercisable in whole or in part;
provided, that no partial exercise of a Tandem SAR shall be for an
aggregate exercise price of less than $1,000. The partial exercise of a
Tandem SAR shall not cause the expiration, termination or cancellation of
the remaining portion thereof. Upon the partial exercise of a Tandem SAR,
the agreements evidencing such Tandem SAR, its related Option and LSARs
relating to such Option shall be returned to the Participant exercising
such Tandem SAR together with the payment described in Section 8(a) hereof.
(4) During the lifetime of a Participant, each Tandem SAR granted to
him shall be exercisable only by him. No Tandem SAR shall be assignable or
transferable otherwise than by will or by the laws of descent and
distribution and otherwise than together with its related Option.
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(5) A Tandem SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no less than
one business day in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the applicable agreements evidencing
the Tandem SAR, its related Option and any LSARs related to such Option,
shall specify the number of shares of Company Stock with respect to which
the Tandem SAR is being exercised and the effective date of the proposed
exercise and shall be signed by the Participant. The Participant may
withdraw such notice at any time prior to the close of business on the
business day immediately preceding the effective date of the proposed
exercise, in which case such agreements shall be returned to him.
9. STAND-ALONE SARS
The Committee may grant Stand-Alone SARs pursuant to the Plan, which
Stand-Alone SARs shall be evidenced by agreements in such form as the Committee
shall from time to time approve. Stand-Alone SARs shall comply with and be
subject to the following terms and conditions:
(a) Exercise Price
The exercise price of any Stand-Alone SAR granted under the Plan shall
be determined by the Committee at the time of the grant of such Stand-Alone
SAR.
(b) Benefit Upon Exercise
(1) The exercise of a Stand-Alone SAR with respect to any number of
shares of Company Stock prior to the occurrence of a Change in Control
shall entitle a Participant to a cash payment, for each such share, equal
to the excess of (i) the Fair Market Value of a share of Company Stock on
the exercise date over (ii) the exercise price of the Stand-Alone SAR.
(2) The exercise of a Stand-Alone SAR with respect to any number of
shares of Company Stock on or after the occurrence of a Change in Control
shall entitle a Participant to a cash payment, for each such share, equal
to the excess of (i) the greater of (A) the highest price per share of
Company Stock paid in connection with such Change in Control and (B) the
Fair Market Value of a share of Company Stock on the date of such Change in
Control over (ii) the exercise price of the Stand-Alone SAR.
(3) All payments under this Section 9(b) shall be made as soon as
practicable, but in no event later than five business days, after the
effective date of the exercise.
(c) Term and Exercise of Stand-Alone SARs
(1) Each Stand-Alone SAR shall be exercisable on such date or dates,
during such period and for such number of shares of Company Stock as shall
be determined by the Committee and set forth in the Stand-Alone SAR
agreement with respect to such Stand-Alone SAR; provided, however, that no
Stand-Alone SAR shall be exercisable after the expiration of ten years from
the date such Stand-Alone SAR was granted; and, provided, further, that
each Stand-Alone SAR shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Stand-Alone SAR may be exercised in whole or in part;
provided, that no partial exercise of a Stand-Alone SAR shall be for an
aggregate exercise price of less than $1,000. The partial exercise of a
Stand-Alone SAR shall not cause the expiration, termination or cancellation
of the remaining portion thereof. Upon the partial exercise of a
Stand-Alone SAR, the agreement evidencing such Stand-Alone SAR, marked with
such notations as the Committee may deem appropriate to evidence such
partial exercise, shall be returned to the Participant exercising such
Stand-Alone SAR together with the payment described in Section 9(b)(1) or
9(b)(2) hereof.
(3) A Stand-Alone SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no less than
one business day in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the applicable agreement evidencing the
Stand-Alone SAR, shall specify the number of shares of Company Stock with
respect to which the Stand-Alone SAR is being exercised and the effective
date of the proposed exercise and shall be signed by the
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Participant. The Participant may withdraw such notice at any time prior to
the close of business on the business day immediately preceding the
effective date of the proposed exercise, in which case the agreement
evidencing the Stand-Alone SAR shall be returned to him.
(4) During the lifetime of a Participant, each Stand-Alone SAR granted
to him shall be exercisable only by him. No Stand-Alone SAR shall be
assignable or transferable otherwise than by will or by the laws of descent
and distribution.
(d) Effect of Termination of Employment
(1) Except as otherwise may be determined by the Committee and as may
be set forth in the Stand-Alone SAR agreement pursuant to which a
Stand-Alone SAR is granted, in the event a Participant's employment with
the Company and its affiliates terminates (other than a termination that is
or is deemed to have been for Cause): (i) Stand-Alone SARs granted to such
Participant, to the extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of their term
and (ii) Stand-Alone SARs granted to such Participant, to the extent that
they were not exercisable at the time of such termination, shall expire at
the close of business on the date of such termination.
(2) In the event a Participant's employment is or is deemed to have
been terminated for Cause, all outstanding Stand-Alone SARs granted to such
Participant shall expire at the commencement of business as of the date of
such termination.
(e) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, any Stand-Alone SAR
granted under the Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.
10. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the Plan.
Each grant of shares of Restricted Stock shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Each grant of shares
of Restricted Stock shall comply with and be subject to the following terms and
conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting
Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Issue Date and/or Vesting Date for each
class. Except as provided in Sections 10(c) and 10(f) hereof, upon the
occurrence of the Issue Date with respect to a share of Restricted Stock, a
share of Restricted Stock shall be issued in accordance with the provisions
of Section 10(d) hereof. Provided that all conditions to the vesting of a
share of Restricted Stock imposed pursuant to Section 10(b) hereof are
satisfied, and except as provided in Sections 10(c) and 10(f) hereof, upon
the occurrence of the Vesting Date with respect to a share of Restricted
Stock, such share shall vest and the restrictions of Section 10(c) hereof
shall cease to apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Restricted Stock, that the Participant or the
Company achieve such performance criteria as the Committee may specify at
the time of the grant of such shares.
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(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee
with any interest or right in or with respect to such share, but
immediately upon any attempt to transfer such rights, such share, and all
of the rights related thereto, shall be forfeited by the Participant and
the transfer shall be of no force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 10(c) or 10(f) hereof, reasonably
promptly after the Issue Date with respect to shares of Restricted Stock,
the Company shall cause to be issued a stock certificate, registered in the
name of the Participant to whom such shares were granted, evidencing such
shares; provided, that the Company shall not cause to be issued such a
stock certificate unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear
the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and conditions
(including forfeiture provisions and restrictions against transfer)
contained in the Salomon Inc Stock Incentive Plan and an Agreement
entered into between the registered owner of such shares and Salomon
Inc. A copy of the Plan and Agreement is on file in the office of the
Secretary of Salomon Inc, 7 World Trade Center, New York, New York
10048.
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Section 10(d)(1) hereof,
together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be deposited by the Company with a
custodian designated by the Company. The Company shall cause such custodian
to issue to the Participant a receipt evidencing the certificates held by
it which are registered in the name of the Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 10(c) hereof shall cease to apply to
such share. Reasonably promptly after a share of Restricted Stock vests
pursuant to the terms hereof, the Company shall cause to be issued and
delivered to the Participant to whom such shares were granted, a
certificate evidencing such share, free of the legend set forth in Section
10(d)(1) hereof, together with any other property of the Participant held
by the custodian pursuant to Section 14(b) hereof.
(f) Effect of Termination of Employment
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason (other than a termination that is or is
deemed to have been for Cause) prior to the vesting of shares of Restricted
Stock granted to such Participant, a proportion of such shares, to the
extent not forfeited or cancelled on or prior to such termination pursuant
to any provision hereof, shall vest on the date of such termination. The
proportion referred to in the preceding sentence shall initially be
determined by the Committee at the time of the grant of such shares of
Restricted Stock and may be based on the achievement of any conditions
imposed by the Committee with respect to such shares pursuant to Section
10(b). Such proportion may be equal to zero.
(2) In the event a Participant's employment is or is deemed to have
been terminated for Cause, all shares of Restricted Stock granted to such
Participant which have not vested as of the date of such termination shall
immediately be forfeited.
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(g) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Restricted
Stock which have not theretofore vested (including those with respect to
which the Issue Date has not yet occurred), or been cancelled or forfeited
pursuant to any provision hereof, shall immediately vest.
11. PHANTOM STOCK
The Committee may grant shares of Phantom Stock pursuant to the Plan. Each
grant of shares of Phantom Stock shall be evidenced by an agreement in such form
as the Committee shall from time to time approve. Each grant of shares of
Phantom Stock shall comply with and be subject to the following terms and
conditions:
(a) Vesting Date
At the time of the grant of shares of Phantom Stock, the Committee
shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign a
different Vesting Date for each class. Provided that all conditions to the
vesting of a share of Phantom Stock imposed pursuant to Section 11(c)
hereof are satisfied, and except as provided in Section 11(d) hereof, upon
the occurrence of the Vesting Date with respect to a share of Phantom
Stock, such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant shall be
entitled to receive in cash, within 30 days of the date on which such share
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair
Market Value of a share of Company Stock on the date on which such share of
Phantom Stock vests and (ii) the aggregate amount of cash dividends paid
with respect to a share of Company Stock during the period commencing on
the date on which the share of Phantom Stock was granted and terminating on
the date on which such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion, deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Phantom Stock, that the Participant or the
Company achieve such performance criteria as the Committee may specify at
the time of the grant of such shares of Phantom Stock.
(d) Effect of Termination of Employment
(1) In the event a Participant's employment with the Company and its
affiliates terminates for any reason (other than a termination that is or
is deemed to have been for Cause) prior to the vesting of shares of Phantom
Stock granted to such Participant, a proportion of such shares, to the
extent not forfeited or cancelled on or prior to such termination pursuant
to any provision hereof, shall vest on the date of such termination. The
proportion referred to in the preceding sentence initially shall be
determined by the Committee at the time of the grant of such shares of
Phantom Stock and may be based on the achievement of any conditions imposed
by the Committee with respect to such shares pursuant to Section 11(c).
Such proportion may be equal to zero.
(2) In the event a Participant's employment is or is deemed to have
been terminated for Cause, all shares of Phantom Stock granted to such
Participant which have not vested as of the date of such termination shall
immediately be forfeited.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Phantom
Stock which have not theretofore vested, or been cancelled or forfeited
pursuant to any provision hereof, shall immediately vest.
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12. STOCK BONUSES
The Committee may grant Stock Bonuses in such amounts as it shall determine
from time to time. A Stock Bonus shall be paid at such time and subject to such
conditions as the Committee shall determine at the time of the grant of such
Stock Bonus. Certificates for shares of Company Stock granted as a Stock Bonus
shall be issued in the name of the Participant to whom such grant was made and
delivered to such Participant as soon as practicable after the date on which
such Stock Bonus is required to be paid.
13. CASH BONUSES
The Committee may, in its absolute discretion, in connection with any grant
of Restricted Stock or Stock Bonus or at any time thereafter, grant a cash
bonus, payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such grant
of Restricted Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event shall the
amount of a Cash Bonus exceed the Fair Market Value of the related shares of
Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
14. ADJUSTMENT UPON CHANGES IN COMPANY STOCK
(a) Shares Available for Grants
In the event of any change in the number of shares of Company Stock
outstanding by reason of any stock dividend or split, reverse stock split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum number of shares of Company Stock with
respect to which the Committee may grant Incentive Awards under Section 3 hereof
shall be appropriately adjusted by the Committee. In the event of any change in
the number of shares of Company Stock outstanding by reason of any other event
or transaction, the Committee may, but need not, make such adjustments in the
number and class of shares of Company Stock with respect to which Incentive
Awards may be granted under Section 3 hereof as the Committee may deem
appropriate.
(b) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise determines, any
securities or other property (including dividends paid in cash) received by a
Participant with respect to a share of Restricted Stock, the Issue Date with
respect to which occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares
or otherwise will not vest until such share of Restricted Stock vests, and shall
be promptly deposited with the custodian designated pursuant to Section 10(d)(2)
hereof.
The Committee may, in its absolute discretion, adjust any grant of shares
of Restricted Stock, the Issue Date with respect to which has not occurred as of
the date of the occurrence of any of the following events, or any grant of
shares of Phantom Stock, to reflect any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares
or similar corporate change as the Committee may deem appropriate to prevent the
enlargement or dilution of rights of Participants under the grant.
(c) Outstanding Options, LSARs, Tandem SARs and Stand-Alone
SARs -- Increase or Decrease in Issued Shares Without Consideration
Subject to any required action by the shareholders of the Company, in the
event of any increase or decrease in the number of issued shares of Company
Stock resulting from a subdivision or consolidation of shares of Company Stock
or the payment of a stock dividend (but only on the shares of Company Stock), or
any other increase or decrease in the number of such shares effected without
receipt of consideration by the Company, the Committee shall proportionally
adjust the number of shares of Company Stock subject to each outstanding Option,
LSAR, Tandem SAR and Stand-Alone SAR, and the exercise price per share of
Company Stock of each such Option, LSAR, Tandem SAR and Stand-Alone SAR.
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(d) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs -- Certain
Mergers
Subject to any required action by the shareholders of the Company, in the
event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Company Stock receive securities of another corporation), each
Option, LSAR, Tandem SAR and Stand-Alone SAR outstanding on the date of such
merger or consolidation shall pertain to and apply to the securities which a
holder of the number of shares of Company Stock subject to such Option, LSAR,
Tandem SAR or Stand-Alone SAR would have received in such merger or
consolidation.
(e) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs -- Certain
Other Transactions
In the event of (1) a dissolution or liquidation of the Company, (2) a sale
of all or substantially all of the Company's assets, (3) a merger or
consolidation involving the Company in which the Company is not the surviving
corporation or (4) a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Company Stock
receive securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such
event, each Option (including each LSAR and Tandem-SAR related thereto) and
Stand-Alone SAR outstanding immediately prior to such event (whether or not
then exercisable), and, in full consideration of such cancellation, pay to
the Participant to whom such Option or Stand-Alone SAR was granted an
amount in cash, for each share of Company Stock subject to such Option or
Stand-Alone SAR, respectively, equal to the excess of (A) the value, as
determined by the Committee in its absolute discretion, of the property
(including cash) received by the holder of a share of Company Stock as a
result of such event over (B) the exercise price of such Option or
Stand-Alone SAR; or
(ii) provide for the exchange of each Option (including any related
LSAR or Tandem SAR) and Stand-Alone SAR outstanding immediately prior to
such event (whether or not then exercisable) for an option on or stock
appreciation right with respect to, as appropriate, some or all of the
property for which such Option or Stand-Alone SAR is exchanged and,
incident thereto, make an equitable adjustment as determined by the
Committee in its absolute discretion in the exercise price of the option or
stock appreciation right, or the number of shares or amount of property
subject to the option or stock appreciation right or, if appropriate,
provide for a cash payment to the Participant to whom such Option or
Stand-Alone SAR was granted in partial consideration for the exchange of
the Option or Stand-Alone SAR.
(f) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs -- Other
Changes
In the event of any change in the capitalization of the Company or a
corporate change other than those specifically referred to in Sections 14(c),
(d) or (e) hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to Options, LSARs, Tandem
SARs or Stand-Alone SARs outstanding on the date on which such change occurs and
in the per-share exercise price of each such Option, LSAR, Tandem SAR and
Stand-Alone SAR as the Committee may consider appropriate to prevent dilution or
enlargement of rights.
(g) No Other Rights
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of any
class, the payment of any dividend, any increase or decrease in the number of
shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Company Stock subject to an Incentive Award or the exercise
price of any Option, LSAR, Tandem SAR or Stand-Alone SAR.
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15. RIGHTS AS A STOCKHOLDER
No person shall have any rights as a stockholder with respect to any shares
of Company Stock covered by or relating to any Incentive Award granted pursuant
to this Plan until the date the Participant becomes the registered owner of such
shares. Except as otherwise expressly provided in Section 14 hereof, no
adjustment to any Incentive Award shall be made for dividends or other rights
for which the record date occurs prior to the date such stock certificate is
issued.
16. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon any
Participant any right with respect to the continuation of his employment by the
Company or interfere in any way with the right of the Company or an affiliate,
subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the time of the
grant of an Incentive Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
17. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any shares of
Company Stock to be issued hereunder or to effect similar compliance under any
state laws. Notwithstanding anything herein to the contrary, the Company shall
not be obligated to cause to be issued or delivered any certificates evidencing
shares of Company Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of the New York Stock Exchange and any other securities
exchange on which shares of Company Stock are traded. The Committee may require,
as a condition of the issuance and delivery of certificates evidencing shares of
Company Stock pursuant to the terms hereof, that the recipient of such shares
make such covenants, agreements and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems necessary or
desirable.
(b) The exercise of any Option granted hereunder shall be effective only at
such time as counsel to the Company shall have determined that the issuance and
delivery of shares of Company Stock pursuant to such exercise is in compliance
with all applicable laws, regulations of governmental authority and the
requirements of the New York Stock Exchange and any other securities exchange on
which shares of Company Stock are traded. The Committee may, in its sole
discretion, defer the effectiveness of any exercise of an Option granted
hereunder in order to allow the issuance of shares of Company Stock pursuant
thereto to be made pursuant to registration or an exemption from registration or
other methods for compliance available under federal or state securities laws.
The Committee shall inform the Participant in writing of its decision to defer
the effectiveness of the exercise of an Option granted hereunder. During the
period that the effectiveness of the exercise of an Option has been deferred,
the Participant may, by written notice, withdraw such exercise and obtain the
refund of any amount paid with respect thereto.
18. WITHHOLDING TAXES
(a) Cash Remittance
Whenever shares of Company Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a share
of Restricted Stock or the payment of a Stock Bonus, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares. In addition, upon
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the exercise of an LSAR, Tandem SAR or Stand-Alone SAR, the grant of a Cash
Bonus or the making of a payment with respect to a share of Phantom Stock, the
Company shall have the right to withhold from any cash payment required to be
made pursuant thereto an amount sufficient to satisfy the federal, state and
local withholding tax requirements, if any, attributable to such exercise or
grant.
(b) Stock Remittance
Subject to Section 18(d) hereof at the election of the Participant, subject
to the approval of the Committee, when shares of Company Stock are to be issued
upon the exercise of an Option, the occurrence of the Issue Date or the Vesting
Date with respect to a share of Restricted Stock or the grant of a Stock Bonus,
in lieu of the remittance required by Section 18(a) hereof, the Participant may
tender to the Company a number of shares of Company Stock determined by such
Participant, the Fair Market Value of which at the tender date the Committee
determines to be sufficient to satisfy the federal, state and local withholding
tax requirements, if any, attributable to such exercise, occurrence or grant and
not greater than the Participant's estimated total federal, state and local tax
obligations associated with such exercise, occurrence or grant.
(c) Stock Withholding
The Company shall have the right, when shares of Company Stock are to be
issued upon the exercise of an Option, the occurrence of the Issue Date or the
Vesting Date with respect to a share of Restricted Stock or the grant of a Stock
Bonus, in lieu of requiring the remittance required by Section 18(a) hereof, to
withhold a number of such shares, the Fair Market Value of which at the exercise
date the Committee determines to be sufficient to satisfy the federal, state and
local withholding tax requirements, if any, attributable to such exercise,
occurrence or grant and is not greater than the Participant's estimated total
federal, state and local tax obligations associated with such exercise,
occurrence or grant.
(d) Timing and Method of Elections
Notwithstanding any other provisions of the Plan, a Participant who is
subject to Section 16(b) of the Exchange Act may not make the election described
in Section 18(b) hereof prior to the expiration of six months after the date on
which the applicable Option, share of Restricted Stock or Stock Bonus was
granted, except in the event of the death or Disability of the Participant. A
Participant who is subject to Section 16(b) of the Exchange Act may not make
such election other than (i) during the 10-day window period beginning on the
third business day following the date of release for publication of the
Company's quarterly and annual summary statements of sales and earnings and
ending on the twelfth business day following such date or (ii) at least six
months prior to the date such election is made. Such elections shall be
irrevocable and shall be made by the delivery to the Company's principal office,
to the attention of its Secretary, of a written notice signed by the
Participant.
19. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may, at any time, suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that if and to
the extent required by Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act or by any comparable or successor exemption under which the Board
of Directors believes it is appropriate for the Plan to qualify, if and to the
extent required under Section 422 of the Code (if and to the extent that the
Board of Directors deems it appropriate to comply with Section 422) and if and
to the extent required to treat some or all of the Incentive Awards as
"performance-based compensation" within the meaning of Section 162(m) of the
Code (if and to the extent that the Board of Directors deems it appropriate to
meet such requirements), no amendment shall be effective without the approval of
the shareholders of the Company, that (i) except as provided in Section 14
hereof, increases the number of shares of Company Stock with respect to which
Incentive Awards may be issued under the Plan, (ii) materially increases the
benefits accruing to individuals pursuant to the Plan or (iii) materially
modifies the requirements as to eligibility for participation in the Plan.
Nothing herein shall restrict the Committee's ability to exercise its
discretionary authority hereunder pursuant to Section 4 hereof, which discretion
may be exercised without amendment to the Plan. No action under this Section 19
may, without the consent of a Participant, reduce the Participant's rights under
any previously granted and outstanding Incentive Award
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except to the extent that the Board of Directors determines that such amendment
is necessary or appropriate to prevent such Incentive Awards from constituting
"applicable employee remuneration" within the meaning of Section 162(m) of the
Code.
20. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option, LSAR, Tandem SAR or Stand-Alone
SAR shall impose no obligation upon such Participant to exercise such Option,
LSAR, Tandem SAR or Stand-Alone SAR.
21. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgements made by the Participant in connection with the grant of
the Incentive Award. Except as provided in this Section 21, no Incentive Award
shall be transferable, and shall be exercisable only by a Participant during the
Participant's lifetime.
22. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
23. LIMITATIONS IMPOSED BY SECTION 162(M)
Notwithstanding any other provision hereunder, prior to a Change in
Control, if and to the extent that the Committee determines the Company's
Federal tax deduction in respect of an Incentive Award may be limited as a
result of Section 162(m) of the Code, the Committee may take the following
actions:
(a) With respect to Options, Tandem SARs and Stand-Alone SARs, the
Committee may delay the payment in respect of such Options, Tandem SARs and
Stand-Alone SARs until a date that is within 30 days after the earlier to
occur of (i) the date the Participant ceases to be a "covered employee"
within the meaning of Section 162(m) of the Code and (ii) the occurrence of
a Change in Control. In the event that a Participant elects to exercise an
Option, Tandem SAR or Stand-Alone SAR at a time when the Participant is a
"covered employee," and the Committee determines to delay the payment in
respect of such Incentive Award, the Committee shall credit cash or, in the
case of an amount payable in Company Stock, the Fair Market Value of the
Company Stock, payable to the Participant to a book account. The
Participant shall have no rights in respect of such book account and the
amount credited thereto shall not be transferable by the Participant other
than by will or laws of descent and distribution. The Committee may credit
additional amounts to such book account as it may determine in its sole
discretion. Any book account created hereunder shall represent only an
unfunded unsecured promise by the Company to pay the amount credited
thereto to the Participant in the future.
(b) With respect to Restricted Stock, Phantom Stock and Stock Bonuses,
the Committee may require the Participant to surrender to the Committee any
certificates with respect to Restricted Stock and Stock Bonuses and
agreements with respect to Phantom Stock, in order to cancel the awards of
such Restricted Stock, Phantom Stock and Stock Bonuses (and any related
Cash Bonuses). In exchange for such cancellation, the Committee shall
credit to a book account a cash amount equal to the Fair Market Value of
the shares of Company Stock subject to such awards. The amount credited to
the book account shall be paid to the Participant within 30 days after the
earlier to occur of (i) the date Participant ceases to be a "covered
employee" within the meaning of Section 162(m) of the Code and (ii) the
occurrence
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of a Change in Control. The Participant shall have no rights in respect of
such book account and the amount credited thereto shall not be transferable
by the Participant other than by will or laws of descent and distribution.
The Committee may credit additional amounts to such book account as it may
determine in its sole discretion. Any book account created hereunder shall
represent only an unfunded unsecured promise by the Company to pay the
amount credited thereto to the Participant in the future.
24. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for herein, a
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the agreement executed by such Participant (or
beneficiary) evidencing an Incentive Award, unless such failure is remedied by
such Participant (or beneficiary) within ten days after having been notified of
such failure by the Committee, shall be grounds for the cancellation and
forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion, may determine.
25. EFFECTIVE DATE OF PLAN
The Plan was adopted by the Board of Directors on March 2, 1994, subject to
approval by the shareholders of the Company at their annual meeting on May 4,
1994 in accordance with applicable law, the requirements of Section 422 of the
Code, the requirements of Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act and the requirements for treating some or all of the Incentive
Awards as "performance-based compensation" within the meaning of Section 162(m)
of the Code. Incentive Awards may be granted under the Plan at any time prior to
the receipt of such shareholder approval; provided, however, that each such
grant shall be subject to such approval. Without limitation on the foregoing, no
Option, LSAR, Tandem SAR or Stand-Alone SAR may be exercised prior to the
receipt of such approval, no share certificate shall be issued pursuant to a
grant of Restricted Stock or Stock Bonus prior to the receipt of such approval
and no Cash Bonus or payment with respect to a share of Phantom Stock shall be
paid prior to the receipt of such approval. If the Plan is not so approved prior
to March 2, 1995, then the Plan and all Incentive Awards then outstanding
hereunder shall forthwith automatically terminate and be of no force and effect.
26. TERM OF THE PLAN
The right to grant Incentive Awards under the Plan will terminate upon the
expiration of 10 years from the date the Plan was adopted.
27. APPLICABLE LAW
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of New
York, without reference to the principles of conflicts of law.
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EXHIBIT D
SALOMON INC
EXECUTIVE OFFICER PERFORMANCE BONUS PLAN
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
(a) "Base Performance Target" shall mean, for 1994, a level of Salomon
ROE relative to Comparative ROE established by the Committee for the
Participant prior to April 1, 1994, and, for 1995 and thereafter, Salomon
Brothers ROE of 5% that equals Comparative ROE which, if not exceeded for
such Bonus Period, would result in the Participant receiving no Performance
Bonus.
(b) "Bonus Period" shall mean:
(i) For the 1994 calendar year, the 9-month period beginning
January 1, 1994 and ending September 30, 1994; and
(ii) For each calendar year after 1994, the 12-month period
beginning October 1 of the prior calendar year and ending September 30
of such calendar year.
(c) "Code" shall mean the Internal Revenue Code of 1986.
(d) "Committee" shall mean the Compensation and Employee Benefits
Committee of the Board of Directors of Salomon Inc. The Committee at all
times shall be composed of at least two directors of Salomon Inc, each of
whom are "outside directors" within the meaning of Section 162(m) of the
Code.
(e) "Company" shall mean Salomon Inc and its subsidiaries and
affiliates.
(f) "Comparative ROE" shall mean the average return on equity of the
Target Companies for the 12-month period ending on the last day of the
fiscal quarter of each such Target Company ending on or prior to the last
day of the Bonus Period ending within a calendar year for which a
Performance Bonus is paid as determined by the Committee.
(g) "Maximum Performance Bonus" shall mean $24 million, the maximum
Performance Bonus that will be payable under the Plan for any calendar year
if the Maximum Performance Target is met or exceeded.
(h) "Maximum Performance Target" shall mean, for 1994, a level of
Salomon ROE relative to Comparative ROE established by the Committee prior
to April 1, 1994 and, for 1995 and thereafter, Salomon Brothers ROE of 30%
or greater that exceeds Comparative ROE by at least 10% which, if achieved
during the applicable Bonus Period, would entitle the Participant to the
Maximum Performance Bonus.
(i) "Participant" shall mean Deryck C. Maughan.
(j) "Performance Bonus" shall mean a year-end bonus determined
pursuant to the terms and conditions of the Plan.
(k) "Plan" shall mean this Executive Officer Performance Bonus Plan.
(l) "Salomon Brothers ROE" shall mean return on equity of the Salomon
Brothers securities segment as determined by the Committee for the Bonus
Period ending within a calendar year for which a Performance Bonus is
granted.
(m) "Target Companies" shall mean Bankers Trust Company, Bear Stearns,
Merrill Lynch, Morgan Guaranty and Morgan Stanley. If and to the extent
permitted under Section 162(m)(4)(C) of the Code, the Committee may
substitute for the foregoing companies other companies deemed appropriate
by the Committee and with respect to which appropriate financial
information is available.
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2. ELIGIBILITY
The Participant shall be the only individual eligible to participate in the
Plan.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall have
full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Committee
shall be final and binding on all parties. Whether an authorized leave of
absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Committee. All expenses of
the Plan shall be borne by the Company.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company or its affiliates to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated against any cost
or expense (including counsel fees, which fees shall be paid as incurred) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any action, omission or determination relating to
the Plan, unless, in each case, such action, omission or determination was taken
or made by such member, director or employee in bad faith and without reasonable
belief that it was in the best interests of the Company.
4. DETERMINATION AND PAYMENT OF PERFORMANCE BONUSES
(a) The amount of the Performance Bonus payable to the Participant for each
calendar year shall be determined as follows:
(i) Prior to the commencement of the Bonus Period ending within such
calendar year (or, for the first Bonus Period, prior to April 1, 1994), the
Committee shall determine (A) solely with respect to the Performance Bonus
Payable for 1994, the Base Performance Target and Maximum Performance
Target with respect to such Bonus Period and (B) with respect to all
Performance Bonuses Payable hereunder, the Performance Bonuses that will be
payable to the Participant for performance targets that are achieved during
such Bonus Period and that fall between the Base Performance Target and the
Maximum Performance Target.
(ii) As soon as practicable following the end of each Bonus Period,
the Committee shall determine and certify in writing the Comparative ROE
and the Salomon Brothers ROE achieved for such Bonus Period, the level of
performance target achieved and the Performance Bonus payable to the
Participant. Such certification shall be included in the minutes of the
Committee.
(iii) The amount of the Performance Bonus payable to the Participant
with respect to a calendar year shall be equal to the Performance Bonus
determined by the Committee to be payable as a result of the level of
performance targets achieved for the applicable Bonus Period.
(b) The Participant shall not be entitled to any Performance Bonus
hereunder for any calendar year unless the Participant is employed by the
Company on the last day of such calendar year. However, in the event the
Participant is not an employee on the last day of a calendar year, the Committee
may, in its sole discretion, waive the year-end employment requirement and pay
to the Participant such part or all of the Performance Bonus that otherwise
would have been payable to him as the Committee shall determine in its sole
discretion.
(c) Subject to Section 5(h) hereof, at any time after the end of any
applicable Bonus Period and within 30 business days after the end of the
calendar year within which such Bonus Period ends, the Company shall pay the
Performance Bonus certified by the Committee as part of the Participant's
year-end bonus.
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<PAGE> 99
5. MISCELLANEOUS
(a) In the event of the death of the Participant, any payment required to
be made hereunder shall be made to the Participant's estate.
(b) The right of the Participant or of any other person to any payment
hereunder shall not be assigned, transferred, pledged or encumbered.
(c) The Plan and all rights hereunder shall be subject to any and all
governmental laws, regulations and approvals that may exist from time to time
and shall be interpreted in accordance with the laws of the State of New York.
(d) All payments required to be paid hereunder shall be subject to any
required Federal, state, local and other applicable withholdings or deductions.
In addition, such amounts may be subject to reduction and converted into an
award under the Salomon Inc Equity Partnership Plan for Key Employees or any
similar plan maintained by the Company, or subject to reduction in accordance
with the Salomon Brothers Inc Retirement Plan or any other "cash or deferred
arrangement" within the meaning of Section 401(k) of the Code maintained by the
Company, the Salomon Inc Employee Stock Purchase Plan or any other employee
stock purchase plan within the meaning of Section 423 of the Code maintained by
the Company and any "cafeteria plan" within the meaning of Section 125 of the
Code maintained by the Company.
(e)(i) Nothing contained in the Plan shall confer upon the Participant any
right with respect to the continuation of his employment by the Company or
interfere in any way with the right of the Company at any time to terminate such
employment or to increase or decrease the base salary of the Participant from
the rate in effect at the commencement of a Bonus Period or to otherwise modify
the terms of the Participant's employment.
(ii) The Participant shall not have any claim or right to participate in
the Plan in any particular year.
(f) The Board of Directors of Salomon Inc may at any time terminate or
suspend the Plan or revise or amend it in any respect; provided, that no
amendment shall be made which would cause payments pursuant to the Plan to fail
to qualify for the exemption from the limitations of Section 162(m) of the Code
provided in Section 162(m)(4)(C) of the Code. Upon such termination, all rights
of the Participant with respect to any Bonus Period which has not ended on or
prior to the date of such termination shall become null and void. Unless the
Plan is previously terminated pursuant to the preceding sentence, no Performance
Bonus shall be payable under the Plan with respect to a Bonus Period that begins
after October 1, 1998.
(g) The payment of Performance Bonuses pursuant to the Plan shall be
subject to the prior approval of the Plan by the stockholders of Salomon Inc at
their 1994 Annual Meeting in accordance with the requirements of Section
162(m)(4)(C)(ii) of the Code and the regulations thereunder.
(h) Notwithstanding any other provision hereunder, if and to the extent
that the Committee determines that the Company's Federal tax deduction in
respect of a Performance Bonus may be limited as a result of Section 162(m) of
the Code, the Committee may delay such payment as provided below. In the event
the Committee determines to delay the payment of a Performance Bonus, the
Committee shall credit the amount of the Performance Bonus to a book account.
The amount so credited to the book account shall, subject to the second
succeeding sentence, be credited with interest during the period beginning on
the date on which the distribution would have been made in the absence of this
provision and ending on the last day of the month immediately preceding the
month in which such amount is paid to the Participant, at a rate which, through
the end of the first calendar month in such period, shall equal the London
Interbank Offered Rate for 1-month deposits that appears in The Wall Street
Journal on the date immediately preceding the date on which the distribution
would have been made in the absence of this Section, and which shall be
recalculated for each successive 1-month period based on the London Interbank
Offered Rate for 1-month deposits published in The Wall Street Journal on the
last day of each preceding calendar month. If such rate does not appear in The
Wall Street Journal on any date as provided above, then such rate shall be the
last such rate that appeared in The Wall Street Journal prior to the date of
determination set forth above. The Committee may, in its discretion, elect not
to credit interest to the Participant's book account at the London Interbank
Offered Rate
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as described above, but instead to adjust the amount so credited to the
Participant's book account to reflect gains and losses that would have resulted
from the investment of such amount in any investment vehicle or vehicles
selected by the Committee. Part or all of the amount credited to the
Participant's Cash Account hereunder shall be paid to the Participant at such
times as shall be determined by the Committee, if and to the extent the
Committee determines that the Company's deduction for any such payment will not
be reduced by Section 162(m) of the Code. Notwithstanding the foregoing, the
entire balance credited to the Participant's book account shall be paid to the
Participant within 30 business days after the Participant ceases to be a
"covered employee" within the meaning of Section 162(m) of the Code. The
Participant shall have no rights in respect of such book account and the amount
credited therefore shall not be transferable by the Participant other than by
will or laws of descent and distribution; any book account created hereunder
shall represent only an unfunded unsecured promise by the Company to pay the
amount credited thereto to the Participant in the future.
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PROXY
SALOMON INC
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING MAY 4, 1994
The undersigned hereby constitutes and appoints Robert E. Denham, Robert H.
Mundheim and Arnold S. Olshin, and each of them, his true and lawful agents and
proxies with full power of substitution in each, to represent, and to vote the
shares of, the undersigned at the Annual Meeting of Stockholders of SALOMON INC
to be held in the Salomon Brothers Auditorium, Seven World Trade Center, New
York, New York, on Wednesday, May 4, 1994 at 10:00 a.m. and at any adjournments
thereof on all matters coming before said meeting.
Election for Directors. Nominees:
Dwayne O. Andreas, Warren E. Buffett, Robert E. Denham, Claire M. Fagin,
Andrew J. Hall, Gedale B. Horowitz, Deryck C. Maughan, William F. May,
Charles T. Munger, Louis A. Simpson, Robert G. Zeller
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE SIDE
[ X ] PLEASE MARK YOUR VOTES AS IN THE EXAMPLE. 0345
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR PROPOSALS 2, 3, 4 AND 5 AND AGAINST PROPOSAL 6.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2, 3, 4 AND 5 AND
AGAINST PROPOSAL 6.
1. Election of Directors. FOR WITHHELD
(see reverse) [ ] [ ]
For, except vote withheld
from the following nominee(s).
-------------------------------------
2. Approval of amended Equity FOR AGAINST ABSTAIN
Partnership Plans. [ ] [ ] [ ]
3. Adoption of Stock Incentive Plan. [ ] [ ] [ ]
4. Approval of Executive Officer
Performance Bonus Plan. [ ] [ ] [ ]
5. Ratification of the appointment
of Arthur Andersen & Co. as
independent accountants. [ ] [ ] [ ]
6. Shareholder's proposal described
in the Proxy Statement. [ ] [ ] [ ]
This Proxy Must Be Signed Exactly as Name Appears Hereon. Executors,
administrators, trustees, etc., should give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer.
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SIGNATURE(S) DATE
