SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only as permitted by
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THE CIT GROUP, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person (s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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(4) Date Filed:
<PAGE>
[THE CIT GROUP, INC. LOGO]
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1998
----------
TO OUR STOCKHOLDERS:
The annual meeting of stockholders of The CIT Group, Inc. (the "Company")
will be held in the Chase Manhattan Auditorium, at The Chase Manhattan
Corporation, Third Floor, 270 Park Avenue, New York, New York 10017, at 10:30
a.m. Eastern Daylight Savings Time, on Wednesday, May 27, 1998, to vote on the
following:
1. The election of ten directors of the Company; and
2. The selection by the Board of Directors of KPMG Peat Marwick
LLP as the Company's independent public accountants for 1998.
The record date for the meeting, used to determine which stockholders are
entitled to vote at the meeting and receive these materials, is March 30, 1998.
By Order of the Board of Directors,
/s/ ERNEST D. STEIN
------------------------------------
ERNEST D. STEIN
Secretary
New York, New York
March 31, 1998
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD
<PAGE>
THE CIT GROUP, INC
----------
PROXY STATEMENT
----------
The Board of Directors is soliciting proxies to be used at the Annual
Meeting of Stockholders, which will be held in the Chase Manhattan Auditorium,
at The Chase Manhattan Corporation, Third Floor, 270 Park Avenue, New York, New
York, at 10:30 a.m. Eastern Daylight Savings Time, on Wednesday, May 27, 1998.
This proxy statement, the enclosed form of proxy and the Annual Report are being
mailed to you beginning March 31, 1998. The Annual Report does not constitute a
part of the proxy solicitation materials. Our mailing address is 1211 Avenue of
the Americas, New York, New York 10036.
Holders of record of Class A Common Stock and holders of record of Class B
Common Stock on March 30, 1998 (the "Record Date") may vote at the Annual
Meeting. On the Record Date, 37,173,527 shares of Class A Common Stock and
126,000,000 shares of Class B Common Stock were outstanding and entitled to vote
at the Annual Meeting. No other voting securities of the Company were
outstanding. Each stockholder is entitled to one vote for each share of Class A
Common Stock and five votes for each share of Class B Common Stock held on the
Record Date. Holders of Class A Common Stock and Class B Common Stock will vote
together as a single class on the matters that will come before the Annual
Meeting.
If you return your executed proxy in time to permit its review and count,
your shares will be voted as you direct. You can specify whether or not shares
represented by the proxy are to be voted for the election of all nominees for
Director or are to be withheld from some or all of them. You also can specify
approval, disapproval or abstention as to the appointment of independent
accountants.
IF YOUR PROXY CARD DOES NOT SPECIFY HOW YOU WANT TO VOTE YOUR SHARES, THEY
WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES FOR DIRECTOR, AS SET FORTH
UNDER "ELECTION OF DIRECTORS" BELOW, AND "FOR" PROPOSAL 2.
You may revoke your proxy at any time before it is exercised by written
notice to the Secretary, by timely submission of a properly executed later-dated
proxy or by voting in person at the Annual Meeting.
The election of Directors requires a plurality of the votes that could be
cast by stockholders who are present in person or represented by proxy at the
Annual Meeting. Votes may be cast in favor of or withheld from each nominee. The
approval of Proposal 2 requires a majority of the votes that could be cast on
such Proposal by stockholders who are present in person or represented by proxy
at the Annual Meeting.
The total number of votes that could be cast at the Annual Meeting is the
sum of votes cast and abstentions. Abstentions are counted as "shares present"
at the Annual Meeting for purposes of determining the presence of a quorum.
Pursuant to applicable law, abstentions will have the same effect as a vote
"against" any matter for which they are specified. Abstentions may be specified
on Proposal 2, the appointment of independent accountants, but not with respect
to Proposal 1, the election of Directors. Under the Rules of the New York Stock
Exchange (the "NYSE"), brokers who hold shares in street name have the authority
to vote on certain "routine" matters when they have not received instructions
from beneficial owners. Brokers that do not receive instructions are entitled to
vote on the Proposals. Proxies submitted by brokers that do not indicate a vote
for any or all of the Items (referred to as "broker nonvoters") are not
considered "shares present" and will not affect the outcome of the vote.
We do not know of any other matter to be presented at the Annual Meeting.
Under the Company's By-Laws, no business may be transacted at the Annual Meeting
other than business that is (a) stated in the Company's notice of Annual
Meeting, (b) proposed by or at the direction of the Board of Directors, or (c)
proposed by any stockholder of the Company who is entitled to vote at the
meeting and who has complied with the notice procedures in the By-Laws.
<PAGE>
PROPOSAL 1.
ELECTION OF DIRECTORS
The entire Board of Directors, consisting of ten members, will be elected
at the Annual Meeting. Each Director will serve until the next annual meeting of
the stockholders or until he or she is succeeded by another qualified director
who has been elected.
Your shares will be voted as directed on the proxy form. If you return the
proxy form but fail to indicate the manner in which you would like your shares
voted on this Proposal, your shares will be voted for all the nominees named
below. If unforeseen circumstances (for example, death or disability) make it
necessary for the Board of Directors to substitute another person for any of the
nominees, your shares will be voted for that other person, unless you revoke
your proxy.
The Board of Directors met four times during 1997, during which time four
Directors who were serving at that time were officers of the Company and five
Directors who were serving at that time were officers of the Company's two
shareholders. All of the Directors listed below attended at least 75% of the
meetings of the Board of Directors during 1997, except for Mr. Kaneko, who
attended two meetings, and Mr. Amos and Mr. White, who were appointed by the
Board of Directors in January and March, 1998, respectively. On November 13,
1997, the Company consummated its initial public offering (the "Offering") of
its Class A Common Stock, which began trading on the NYSE on that date. The
Class A Common Stock represents approximately 22.8% of the combined economic
interest and 5.6% of the combined voting power of all the outstanding Common
Stock. The Class B Common Stock, which is held entirely by The Dai-Ichi Kangyo
Bank, Limited ("DKB"), represents approximately 77.2% of the combined economic
interest and 94.4% of the combined voting power of all the outstanding Common
Stock. Prior to November 13, 1997, the Company was owned 80% by DKB and 20% by
The Chase Manhattan Corporation, through a wholly owned subsidiary ("Chase"),
and the Board of Directors and its Executive Committee regularly took action by
unanimous consent.
Nominees for Board of Directors
The names and ages of all nominees for the Board of Directors of the
Company as of March 24, 1998 and a biographical summary of each such person
appear on the following pages. Each of the nominees is now a member of the Board
of Directors. This information has been given to the Company by the nominees. No
family relationship exists among these persons. Certain Directors are also
directors or trustees of privately held businesses or not-for-profit entities
that are not discussed below.
Name Age Current Position/Offices
- ---- --- ------------------------
Hisao Kobayashi ..........62 Senior Advisor, DKB
Chairman of the Board of Directors of the Company
Albert R. Gamper, Jr.(1) .56 President & Chief Executive Officer of the Company
Daniel P. Amos ...........46 President and Chief Executive Officer of AFLAC
Incorporated and American Family Life and Casualty
Yoshiro Aoki .............52 Director and General Manager, New York Branch, DKB
Takasuke Kaneko ..........55 Deputy President, DKB
Joseph A. Pollicino (1) ..58 Vice Chairman of the Company
Paul N. Roth .............58 Partner, Schulte Roth & Zabel LLP
Peter J. Tobin ...........54 Chief Financial Officer, The Chase Manhattan
Corporation, retired December 1997
Tohru Tonoike (1) ........47 Senior Executive Vice President of the Company
Alan F. White ............60 Senior Associate Dean, Massachusetts Institute of
Technology, Alfred P. Sloan School of Management
- ----------
(1) Messrs. Gamper, Pollicino, and Tonoike, who are listed above as Directors,
are also Executive Officers of the Company.
2
<PAGE>
Hisao Kobayasi has served as a Director of the Company since December 1989
and as Chairman of the Board of Directors since July 1992. Since May 1995, Mr.
Kobayashi has served as a Senior Advisor of DKB, where he had been an employee
since 1959. Prior to his appointment as a Senior Advisor, Mr. Kobayashi served
in a number of executive positions at DKB, including most recently as Senior
Managing Director from May 1993 and Managing Director from June 1991. Mr.
Kobayashi is a director of AFLAC Incorporated, a life insurance company, and
Nippon Light Metal Co., Limited, a Japanese corporation.
Albert R. Gamper, Jr. has served as President and Chief Executive Officer
since December 1989 and as a Director since May 1984. From May 1987 to December
1989, Mr. Gamper served as Chairman and Chief Executive Officer. Prior to
December 1989, Mr. Gamper also held a number of executive positions at
Manufacturers Hanover Corporation, where he had been employed since 1962.
Daniel P. Amos has served as a Director of the Company since January 1998.
Mr. Amos has served as President and Chief Executive Officer of AFLAC
Incorporated, a life insurance company, and of its principal subsidiary,
American Family Life and Casualty, since August 1990. Mr. Amos is a director of
AFLAC Incorporated and Georgia Power Company.
Yoshiro Aoki has served as a Director of the Company since July 1997. Mr.
Aoki has been Director and General Manager of the New York Branch of DKB since
June 1997 and General Manager of the New York Branch since May 1997. Prior to
such time, Mr. Aoki served as General Manager of the Kabutocho Branch of DKB
since May 1995 and as Assistant General Manager of the Personnel Division of DKB
since February 1991.
Takasuke Kaneko has served as a Director of the Company since June 1995.
He also was a Director and Senior Executive Vice President of the Company from
December 1989 to May 1993. Mr. Kaneko is Deputy President of DKB, a position he
has held since June 1997. Previously, Mr. Kaneko served as Senior Managing
Director from May 1997 and as Managing Director of DKB since May 1995. Prior to
such time, Mr. Kaneko served in a number of other positions at DKB, including
Director and General Manager of the International Planning and Coordination
Division since August 1994, Director and General Manager of the International
Planning Division since June 1994 and General Manager of the International
Finance Division since May 1993.
Joseph A. Pollicino has served as a Director of the Company since August
1986 and Vice Chairman of its Board of Directors since December 1989. Prior to
December 1989, Mr. Pollicino held a number of executive positions at the Company
and at Manufacturers Hanover Corporation, where he had been employed since 1957.
Paul N. Roth has served as a Director of the Company since December 1989.
Mr. Roth has been a partner in the New York law firm of Schulte Roth & Zabel LLP
since it was founded in 1969.
Peter J. Tobin has served as a Director of the Company since May 1984. Mr.
Tobin was appointed Dean of the School of Business at St. John's University,
effective August 1998. From April 1996 to December 1997, Mr. Tobin was the Chief
Financial Officer of The Chase Manhattan Corporation. From January 1992 to April
1996, Mr. Tobin served as Chief Financial Officer of Chemical Bank & Chemical
Banking Corporation, and prior to that he served in a number of executive
positions at Manufacturers Hanover Corporation.
Tohru Tonoike has served as Senior Executive Vice President and as a
Director of the Company since April 1997. Prior to April 1997, Mr. Tonoike was
employed by DKB since April 1973, where he served in a number of executive
positions including, most recently, Head of the Americas Office in the
International Planning and Coordination Division since September 1996, Assistant
General Manager of Corporate Finance Division I since September 1993 and Head of
the CIT Office in the Americas Division since October 1992.
Alan F. White has served as a Director of the Company since March 24,
1998. Mr. White has served as Senior Associate Dean of the Alfred P. Sloan
School of Management, Massachusetts Institute of Technology, since 1991. Mr.
White has held a number of other positions with the Sloan School of Management
since 1973, including responsibility for MIT programs in Asia, Europe, and Latin
America and Director of Executive Education at MIT. He is a director of SBS
Technologies, Inc. and Celerity Solutions, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR
3
<PAGE>
Committees of The Board of Directors
Prior to the Offering, the Board of Directors of the Company had an
Executive Committee and an Audit Committee, but did not have a Compensation
Committee. The Executive Committee was comprised of five members (Messrs. Albert
R. Gamper, Jr., Joseph A. Pollicino, Peter J. Tobin and Yukiharu Uno, each of
whom served as members from January 1, 1997 to November 12, 1997; Mr. Keiji
Torii, who served as a member from January 1, 1997 to April 4, 1997 and Mr.
Tohru Tonoike, who served as a member from April 25, 1997 to November 12, 1997).
The Executive Committee was authorized to take substantially all of the actions
permitted to be taken by the Board of Directors, as well as to perform the
functions of a compensation committee in determining the compensation of certain
executive officers of the Company (other than Messrs. Gamper, Pollicino, Tonoike
and Uno). The Executive Committee met 5 times during 1997, including four times
while performing the function of a compensation committee. Effective November
13, 1997, the Executive Committee was dissolved. The Board of Directors set the
compensation of Messrs. Gamper and Pollicino, who were absent from the
discussions of their compensation.
Prior to the Offering, the Audit Committee of the Board of Directors was
comprised of three members (Messrs. Aoki, Roth and Tobin) and met four times
during 1997. Each member of the Executive Committee and the Audit Committee
attended at least 75% of the meetings held during the period of their service on
such committees.
The following discussion summarizes certain matters concerning current
committees of the Board of Directors of the Company, which were formally
constituted effective January 1998.
Audit Committee
Number of Members ..... 2
Members ............... Peter J. Tobin (Chairman)
Daniel P. Amos
Alan F. White
Functions ............. Recommends independent public accountants to the Board
of Directors for selection, subject to ratification by
stockholders; reviews with such accountants and approves
the scope of their audit; approves the plan of the
internal audit function; reviews reports rendered by the
independent public accountants, internal auditor, and
regulatory examiners; reviews internal controls,
accounting practices, financial reporting, and
regulatory compliance; ascertains that recommendations
for improving the control environment have been
adequately addressed by management; and reports to the
Board of Directors as appropriate regarding these
consultations and reviews.
Compensation Committee
Number of Members ..... 2
Members ............... Daniel P. Amos (Chairman)
Peter J. Tobin
Functions ............. Considers and approves salaries, bonuses and stock-based
compensation for the Named Executive Officers, for whom
compensation is reported under "Executive Compensation";
administers and makes awards under the Long-Term Equity
Compensation Plan; considers and makes recommendations
on the Company's annual bonus and long-term incentive
programs.
Nominating Committee
The Company does not have a standing nominating committee.
4
<PAGE>
Executive Officers of the Company
The names and ages of all executive officers of the Company, in addition
to Messrs. Gamper, Pollicino and Tonoike, who are listed above as Directors, as
of March 24, 1998 and a biographical summary of each such person, appear on the
following pages. No family relationship exists among the executive officers of
the Company or with any Director. The executive officers were appointed by and
hold office at the discretion of the Board of Directors.
Name Age Current Position/Offices (1)
- ---- --- ----------------------------
Thomas A. Johnson .. 51 General Auditor
Joseph M. Leone .... 44 Executive Vice President and Chief Financial Officer
William M. O'Grady . 58 Executive Vice President - Administration
Jeffrey D. Simon ... 32 Senior Vice President - Investor Relations and
Corporate Planning
Ernest D. Stein .... 58 Executive Vice President, General Counsel and Secretary
Corinne M. Taylor .. 36 Senior Vice President and Treasurer
William J. Taylor .. 46 Senior Vice President and Controller
Yukiharu Uno ....... 45 Executive Vice President - Multi-National Marketing
- ----------
(1) Certain Executive Officers are also directors or trustees of privately
held or not-for-profit organizations that are not discussed below.
Thomas A. Johnson has served as General Auditor of the Company since
January 1990. Previously, Mr. Johnson served in various internal audit positions
with Manufacturers Hanover Corporation, including Deputy General Auditor, since
September 1968.
Joseph M. Leone has served as Executive Vice President and Chief Financial
Officer of the Company since July 1995. Previously, Mr. Leone served as
Executive Vice President of Sales Financing, a business unit of the Company,
from June 1991, and in a number of other executive positions with the Company
and Manufacturers Hanover Corporation since May 1982.
William M. O'Grady has served as Executive Vice President of
Administration of the Company since January 1986 and previously served in a
number of other executive positions with the Company and with RCA Corporation, a
prior owner of the Company, from July 1965.
Jeffrey D. Simon has served as Senior Vice President of Investor Relations
and Corporate Planning of the Company since October 1997. Previously, Mr. Simon
served with Business Credit, a business unit of the Company, as Senior Vice
President since January 1996, as Vice President and Regional Manager since June
1993, and in various other positions since July 1988.
Ernest D. Stein has served as Executive Vice President, General Counsel
and Secretary of the Company since February 1994. Previously, Mr. Stein served
as Senior Vice President and Deputy General Counsel since April 1993, as Senior
Vice President and Assistant General Counsel since March 1992, and in a number
of executive positions with Manufacturers Hanover Corporation, including
Executive Vice President and General Counsel since December 1985.
Corinne M. Taylor has served as Senior Vice President and Treasurer of the
Company since March 1993. Previously, Ms. Taylor served in various executive
positions with the Company, including Vice President Finance since September
1990.
William J. Taylor has served as Senior Vice President and Controller of
the Company since March 1993. Previously, Mr. Taylor served in various executive
positions with the Company, including Vice President and Controller since May
1989.
Yukiharu Uno has served as Executive Vice President of Multi-National
Marketing since April 1996. He also served as a Director from April 1996 to
December 1997. Previously, Mr. Uno was employed by DKB since April 1976, where
he served in a number of executive positions including Manager and Head of the
CIT Office in the Americas Division and Assistant General Manager of the
Americas Group in the International Banking Coordination Division.
5
<PAGE>
PRINCIPAL SHAREHOLDERS
Security Ownership of Certain Beneficial Owners
The table below shows, as of February 27, 1998, the name and address of
each person known to the Company that beneficially owns in excess of 5% of any
class of Voting Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
-----------------------------------
Title of Class Name and Address of Sole Voting and Shared Voting and Percent
of Stock Beneficial Owner Investment Power Investment Power of Class
-------- ---------------- ---------------- ----------------- --------
<S> <C> <C> <C>
Class A Common Stock American Century Companies, Inc. 2,311,300 20,300 6.3%
4500 Main Street
P.O. Box 418210
Kansas City, MO 64141-9210
Attn: David H. Reinmiller
Class A Common Stock Jurika & Voyles, L.P. 246,870 1,755,288 5.4%
1999 Harrison Street
Suite 700
Oakland, CA 94612
Class B Common Stock The Dai-Ichi Kangyo Bank, 126,000,000(1) 0 100%
Limited
1-5, Uchisaiwaicho, 1-chome
Chiyoda-ku, Tokyo 100
Japan
</TABLE>
- ----------
(1) Represents approximately 77.2% of the combined economic interest and 94.4%
of the combined voting power of all the outstanding Common Stock.
6
<PAGE>
Security Ownership Of Directors And Executive Officers
The table below shows, as of February 27, 1998, the number of shares of
Class A Common Stock owned by each Director, by Messrs. Gamper, Pollicino,
Leone, O'Grady, and Stein (the "Named Executive Officers"), and by the Directors
and Executive Officers of the Company as a group.
Amount and Nature
of Beneficial Ownership Percentage
Name of Individual (Class A Common Stock)(1)(2) of Class
------------------ ---------------------------- --------
Hisao Kobayashi .................. 2,100 *
Albert R. Gamper, Jr. (3) ........ 140,126 *
Daniel P. Amos (4) ............... 47,000 *
Yoshiro Aoki ..................... 0 *
Takasuke Kaneko .................. 0 *
Joseph A Pollicino ............... 77,778 *
Paul N. Roth ..................... 8,500 *
Peter J. Tobin ................... 7,000 *
Tohru Tonoike .................... 0 *
Joseph M. Leone .................. 30,043 *
William M. O'Grady ............... 27,502 *
Ernest D. Stein .................. 27,150 *
Alan F. White .................... 0 *
All Directors and executive
officers as a group
(18 persons) .................... 411,824 1.1%
- ----------
* Represents less than 1% of the total outstanding Class A Common Stock.
(1) Includes shares of Restricted Stock awarded under the Long-Term Equity
Compensation Plan in connection with the termination of The CIT Career
Incentive Plan, for which the holders have voting rights, but for which
ownership has not vested, in the following amounts: Mr. Gamper -- 125,926,
Mr. Pollicino -- 77,778, Mr. Roth -- 5,000, Mr. Tobin -- 5,000, Mr. Leone
-- 26,043, Mr. O'Grady -- 23,502, and Mr. Stein -- 17,150.
(2) Does not include shares of stock issuable pursuant to stock options
awarded under the Long-Term Equity Compensation Plan, none of which will
vest within 60 days after March 30, 1998.
(3) Includes 1,100 shares owned by Mr. Gamper's daughter and 1,100 shares
owned by Mr. Gamper's son, as to which Mr. Gamper disclaims beneficial
ownership.
(4) Includes 20,000 shares owned by the Daniel P. Amos and Shannon Amos
Foundation, Inc. and 7,000 shares owned by Lapaul, Inc., each of which is
controlled by Mr. Amos.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on the Company's records and other information, the Company believes
that its Directors and officers complied with all applicable SEC filing
requirements for reporting beneficial ownership of equity securities of the
Company for 1997.
7
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
Directors who are not employees or officers of DKB or CIT or of any
subsidiary of either of them are paid an annual Board membership fee of $30,000,
an attendance fee of $1,000 for each meeting of the Board of Directors, and an
annual membership fee of $5,000 for service on any committee of the Board of
Directors. In addition, such Directors are eligible for grants under the
Company's Long-Term Equity Compensation Plan.
A Compensation Committee of the Board (the "Committee") was appointed at
the January 28, 1998 Board of Directors meeting. All such members of the
Committee are outside Directors as defined by Section 162(m) of the Internal
Revenue Code of 1986 (the "Code"). The Compensation Committee approves salaries,
bonuses and stock based compensation for the Company's Named Executive Officers;
administers and makes awards under the Long-Term Equity Compensation Plan; and
considers and makes recommendations on the Company's annual bonus plan. Prior to
the establishment of a Compensation Committee, the Executive Committee of the
Board of Directors provided oversight on compensation matters in the Company.
The Executive Committee met four times in 1997 on compensation matters.
Report from the Compensation Committee Regarding Executive Compensation
Overview and Philosophy
The Company has adopted compensation programs to attract, retain, motivate
and reward management. Its programs are designed to link an executive's
compensation to the performance of the Company and the interest of its
shareholders. The Company seeks to attract and retain the highest caliber of
management by offering, in addition to other intangible non-monetary benefits,
total compensation that is comparable to that offered by its competitors. The
companies used historically for comparison purposes for compensation analysis
may be different from the companies included in the peer group comparison for
the Stock Performance Graph. The Company competes for talented executives among
a variety of companies, not just those chosen for comparison on stock
performance. The Company believes that it is also important to provide
compensation components that accrue to the benefit of, and provide security to,
its management over the long term, such as pension benefits, to promote the
retention of management. To align the interests of management more closely with
that of the Company and to motivate and reward individual initiative and effort,
the Company seeks to promote performance-based compensation so that
contributions to the Company as a whole, as well as the attainment of individual
performance goals, are rewarded. Through the use of performance-based plans that
reward attainment of operating unit or Company goals, the Company seeks to
foster an attitude of teamwork, and the use of tools like equity ownership is
important to ensure that the efforts of management are consistent with the
objectives of shareholders. Through the use of restricted stock and stock
options, the Company seeks to promote increased equity ownership by management
in the Company.
Executive Compensation Plans
Base Salaries
The Company's philosophy on executive compensation emphasizes variable
components such as annual and long-term incentives. In 1997, base salary
increase reviews were conducted at fifteen month intervals for executive
officers, excluding the Vice Chairman and the President and CEO who received
eighteen month reviews. Survey data on financial services competitor companies
conducted in 1997 showed Company executives were slightly below the market
median in base salaries.
Annual Incentives
Annual incentive pools are funded based upon performance against
individual business unit net income targets and the growth of net income over
the prior year for the Company as a whole. Executives are rewarded for their
individual contributions to attainment of business unit targets and the growth
of the Company overall. Survey data on financial services competitor companies
conducted in 1997 showed Company executives were at the market median in annual
bonus compensation.
8
<PAGE>
Long-Term Incentives
From 1990 until 1997, the Company's long-term incentive program, "The CIT
Career Incentive Plan", granted awards in the form of phantom shares of stock.
The value of such phantom shares was related to attainment of performance goals
over a three year period. The value of the phantom shares was paid in cash
payments over a two year period following the performance period. The
performance goals were based upon net income growth targets and return on equity
performance over the period.
Survey data on financial services competitors conducted in 1997 showed
Company executives were below the market median in long-term incentive
compensation. Although performance targets were consistently exceeded during the
period, the availability of annual awards of stock based compensation at
competitor companies provided greater opportunity for reward than the Company's
cash based phantom stock plan.
Upon completion of the Offering, the CIT Career Incentive Plan was
terminated and a settlement of the final performance period payout was made
partially in the form of a one-time cash payment in January 1998 and partially
in the form of a grant of Restricted Stock and stock options on the Company's
Class A Common Stock. The one-time cash payment, the shares of Restricted Stock
and the stock options associated with the termination of the CIT Career
Incentive Plan are included in the table "Summary Compensation Table" under
Executive Compensation.
Following the Offering, the Company adopted a stock-based incentive plan,
"The Long-Term Equity Compensation Plan" (the "ECP"), covering Directors and
employees of the Company and its subsidiaries. The ECP will be administered by
the Compensation Committee of the Board of Directors. A series of option grants
were made following the Offering to align the interests of the Company's
executives with shareholder interests. The level of stock option grants at the
Offering were determined with the assistance of an independent compensation
consultant in order to provide a competitive initial grant of options.
The ECP provides for the grant of annual incentive awards, incentive and
non-qualified stock options, stock appreciation rights, restricted stock,
performance shares and performance units. The Compensation Committee will have
the discretion to select the employees to whom awards will be granted and to
determine the type, size and terms and conditions applicable to each award, and
the authority to interpret, construe and implement the provisions of the ECP.
Grants under the ECP are intended to provide competitive long-term compensation
opportunity that focuses executives on the long-term return to shareholders.
CEO Compensation
In January 1997, an analysis of Mr. Gamper's compensation in comparison
with the compensation of the chief executive officers of other financial
services companies was completed. At that time, his total compensation package
was below the median of his peers. This shortfall was attributable to smaller
long-term awards both in terms of dollar value and as a percentage of base
salary.
Mr. Gamper's base salary was reviewed in June 1997 on an eighteen month
review cycle. The salary increase placed him slightly above median and below the
average of his peers.
The funding for the annual bonus plan is based on the attainment of
individual business unit targets and at the corporate level on the overall
Company growth of net income compared to the prior year. The Company's 1997 net
income increased 19% over 1996. The Board of Directors increased Mr. Gamper's
annual award for 1997 by 7.5% compared to the prior year.
A September 1997 survey of a broad group of financial services CEO's
confirmed earlier surveys that the shortfall in Mr. Gamper's compensation
package was attributable to lower long-term incentive awards. Upon completion of
the Offering, a competitive package of restricted stock and stock options was
awarded to Mr. Gamper. This award was developed in part to settle the
termination of the prior phantom stock plan and to motivate creation of future
value in the Company thereby aligning his compensation with the interests of
shareholders. The Summary Compensation Table displays a one-time cash payment
made to Mr. Gamper (paid in January 1998) which includes the final payment on
the 1993-1995 performance period of the Career Incentive Plan and a settlement
on the 1996-1998 performance plan.
Dated as of March 9, 1998 Compensation Committee
/s/ Daniel P. Amos (Chairman)
/s/ Peter J. Tobin
9
<PAGE>
Comparative Stock Performance
SEC rules require proxy statements to contain a performance graph that
compares the performance of the Class A Common Stock against Standard & Poor's
500 Stock Index and a published industry or line of business index or group of
"peer issuers", covering a five-year period. The Company selected the S&P
Financials Index as the appropriate line of business index for purposes of this
comparison. Because the Class A Common Stock was not priced in the Offering
until November 12, 1997 and did not begin trading on the NYSE until November 13,
1997, the graph compares performance from November 12, 1997 through December 31,
1997. The graph assumes an investment of $100 at the beginning of the period at
the Offering price of $27.00 per share of Class A Common Stock.
The Company's Performance vs S&P Financial and S&P 500 Indices
November 12, 1997 through December 31, 1997
[The following table represents a line graph in the printed material]
1997
---------------------------------------------------------------
Nov. 12 Nov. 19 Nov. 26 Dec. 3 Dec. 10 Dec. 17 Dec.24 Dec. 31
------- ------- ------- ------ ------- ------- ------ -------
CIT 100 113 110 116 116 116 116 119
S&P
Financials 100 105 106 112 112 112 106 111
S&P 500 100 104 105 108 107 107 103 107
Source: Bloomberg; The CIT Group
10
<PAGE>
Executive Compensation
The table below sets forth the annual and long-term compensation,
including bonuses and deferred compensation, of the Named Executive Officers for
services rendered in all capacities to the Company during the fiscal years ended
December 31, 1997, 1996, and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------
Annual Compensation Payouts
----------------------------------------- ---------------------------------
Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying LTIP Compen-
Principal Positions Year Salary Bonus sation (1) Awards (2) Options (3) Payouts(4) sation (5)
------------------- ---- ------ ----- --------------------- ---------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albert R. Gamper, Jr .... 1997 $632,320 $845,000 $79,531 $3,400,000 619,200 $4,122,261 $79,697
President and Chief 1996 $600,002 $785,000 $74,319 $0 0 $ 722,369 $30,000
Executive Officer 1995 $542,302 $675,000 $87,626 $0 0 $ 722,369 $27,692
Joseph A Pollicino ...... 1997 $461,560 $580,000 $47,720 $2,100,000 337,800 $2,533,400 $24,795
Vice Chairman 1996 $439,998 $550,000 $44,775 $0 0 $ 433,400 $23,600
1995 $401,523 $475,000 $51,205 $0 0 $ 433,400 $22,061
Joseph M. Leone ......... 1997 $212,962 $200,000 $18,579 $703,150 114,600 $ 829,486 $14,851
Executive Vice 1996 $203,231 $170,000 $11,109 $0 0 $ 126,444 $14,129
President and Chief 1995 $189,846 $150,000 $16,362 $0 0 $ 126,444 $13,594
Financial Officer
William M. O'Grady ...... 1997 $220,769 $175,000 $16,826 $634,550 108,700 $ 742,900 $15,164
Executive Vice 1996 $209,769 $150,000 $ 9,801 $0 0 $ 108,350 $14,391
President 1995 $200,923 $130,000 $12,080 $0 0 $ 108,350 $14,037
Administration
Ernest D. Stein ......... 1997 $200,769 $130,000 $12,461 $463,050 79,200 $ 538,895 $14,364
Executive Vice 1996 $192,692 $115,000 $ 6,744 $0 0 $ 75,845 $13,708
President, General 1995 $183,077 $100,000 $ 8,979 $0 0 $ 75,845 $13,323
Counsel and Secretary
</TABLE>
- ----------
(1) The payments set forth under Other Annual Compensation represent the
dividends paid under The CIT Group Holdings, Inc. Career Incentive Plan
(the "CIT Career Incentive Plan"). For the performance period 1993 - 1995,
Mr. Gamper was awarded 20,000 phantom shares, Mr. Pollicino was awarded
12,000 phantom shares, Mr. Leone was awarded 3,500 phantom shares, Mr.
O'Grady was awarded 3,000 phantom shares and Mr. Stein was awarded 2,100
phantom shares. The shares awarded for the performance period 1993 - 1995
are vested in one-third increments commencing January 1996. For the
performance period 1996 - 1998 under the CIT Career Incentive Plan, Mr.
Gamper was awarded 20,000 phantom shares, Mr. Pollicino was awarded 12,000
phantom shares, Mr. Leone was awarded 4,100 phantom shares, Mr. O'Grady
was awarded 3,700 phantom shares and Mr. Stein was awarded 2,700 shares.
The Company terminated the CIT Career Incentive Plan in conjunction with
the consummation of the Offering.
(2) The compensation reported in the "Restricted Stock Awards" column is the
value on the date of issuance of shares of restricted Class A Common Stock
awarded under the ECP. The number and value at December 31, 1997 for each
such Restricted Stock Award, based upon the closing market price of $32.25
per share for the Company's Class A Common Stock, was as follows: Mr.
Gamper - 125,926 shares ($4,061,114); Mr. Pollicino - 77,778 shares
($2,508,341); Mr. Leone - 26,043 shares ($839,887); Mr. O'Grady - 23,502
shares ($757,940); and Mr. Stein - 17,150 shares ($553,088). The Company
will pay dividends on the Restricted Stock awarded to each Named Executive
Officer.
(3) Stock options to purchase Class A Common Stock awarded under the ECP.
(4) The payments set forth under LTIP Payouts represent the payout of shares
vested under the CIT Career Incentive Plan. The payouts in 1995, 1996 and
1997 were for shares awarded for the performance period 1993 - 1995. Also
included under LTIP Payouts for 1997 is the one-time cash payout related
to the termination of the CIT Career Incentive Plan for the 1996-1998
Performance Period.
11
<PAGE>
(5) The payments set forth under "All Other Compensation" include the matching
employer contribution to each participant's account and an employer
flexible retirement contribution to each participant's flexible retirement
account under The CIT Group Holdings, Inc. Savings Incentive Plan (the
"CIT Savings Plan"). The matching employer contribution is made pursuant
to a compensation deferral feature of the CIT Savings Plan under Section
401(k) of the Internal Revenue Code of 1986. Each of the Named Executive
Officers received a contribution of $6,333 under the employer match and a
contribution of $6,400 under the employer flexible retirement account. The
payments set forth under "All Other Compensation" also include
contributions to each participant's account under The CIT Group Holdings,
Inc. Supplemental Savings Plan (the "CIT Supplemental Savings Plan"),
which is an unfunded non-qualified plan. They are as follows: Mr.
Gamper-$18,893; Mr. Pollicino- $12,062; Mr. Leone-$2,118; Mr.
O'Grady-$2,431; and Mr. Stein-$1,631. In 1997, Mr. Gamper received a
payment of $48,071 designed to cover the 1.45% Medicare tax liability
created by vesting in the Company's deferred retirement benefits.
Stock Option Awards During 1997
Stock options and other rights related to Class A Common Stock may be
awarded to executives under the ECP. The following table shows the stock options
awarded under the ECP to the Named Executive Officers in 1997.
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------------------
Number of % of Total
Securities Options Granted Grant Date
Underlying to Employees Exercise or Expiration Present
Name Options Granted(2) in Fiscal Year Base Price Date Value (3)(4)
---- ------------------ -------------- ---------- ---- ------------
<S> <C> <C> <C> <C> <C>
Albert R. Gamper, Jr. .......... 619,200 15.3% $27.00 Nov. 13, 2007 $6,928,848
President and Chief Executive
Officer
Joseph A. Pollicino ............ 337,800 8.3% $27.00 Nov. 13, 2007 $3,779,982
Vice Chairman
Joseph M. Leone ................ 114,600 2.8% $27.00 Nov. 13, 2007 $1,282,374
Executive Vice President and
Chief Financial Officer
William M. O'Grady ............. 108,700 2.7% $27.00 Nov. 13, 2007 $1,216,353
Executive Vice President
Administration
Ernest D. Stein ................ 79,200 2.0% $27.00 Nov. 13, 2007 $ 886,248
Executive Vice President, General
Counsel, and Secretary
</TABLE>
- ----------
(1) In conjunction with the Offering, the Company terminated the CIT Career
Incentive Plan. Payments to participants in respect of the termination
were made partially in the form of cash in 1998 and partially in the form
of a grant in 1997 of Restricted Stock in the form of shares of Class A
Common Stock and options to purchase shares of Class A Common Stock. The
options associated with the termination of the CIT Career Incentive Plan
are included in the tables.
(2) Includes (a) stock options, one third of which vests on each of the first,
second and third anniversary of the date of grant, awarded as follows: Mr.
Gamper - 353,800; Mr. Pollicino - 193,000; Mr. Leone - 58,000; Mr. O'Grady
- 54,100; and Mr. Stein - 39,400; and (b) other stock options awarded in
connection with the Offering, which vest one-third on each of the third,
fourth and fifth anniversary of the date of the grant, awarded as follows:
Mr. Gamper - 265,400; Mr. Pollicino - 144,800; Mr. Leone - 56,600; Mr.
O'Grady - 54,600; and Mr. Stein - 39,800. None of the options has vested
as of the date of this Proxy Statement.
12
<PAGE>
(3) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model, which is a mathematical formula
used to value options traded on stock exchanges. The material assumptions
and adjustments incorporated in the Black-Scholes model in estimating the
value of the options reflected in the above table are identified below.
Where appropriate, assumptions are presented for the November grants. The
model assumed: (i) an option term of ten years on all grants, (ii) an
interest rate of 5.88 percent that represents the interest rates on U.S.
Treasury securities on the date of grant with a maturity date
corresponding to that of the option terms, (iii) volatility of 26.8
percent calculated using daily stock prices of common stock from the date
of the company's initial public offering through February 12, 1998, and
(iv) a dividend yield of 1.48 percent based on the grant price of the
options and projected annual dividends on common stock.
(4) The ultimate values of the options will depend on the future market price
of the Company's stock, which cannot be forecast with reasonable accuracy.
The actual value of the options, if any, that an officer may realize will
depend on the extent to which the market value of the Common Stock exceeds
the exercise price of the option on the date the option is exercised.
Consequently, there is no assurance that the value realized by an officer
will be at or near the value estimated above. These amounts should not be
used to predict stock performance.
The following table and notes have additional information on stock
options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
12/31/97 12/31/97
Shares -------- --------
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Albert R. Gamper, Jr. ........................ 0 $0 0/619,200 $0/$3,250,800
President and Chief Executive Officer
Joseph A. Pollicino .......................... 0 $0 0/337,800 $0/$1,773,450
Vice Chairman
Joseph M. Leone ............................... 0 $0 0/114,600 $0/$601,650
Executive Vice President and Chief
Financial Officer
William M. O'Grady ............................ 0 $0 0/108,700 $0/$570,675
Executive Vice President Administration
Ernest D. Stein ............................... 0 $0 0/79,200 $0/$415,800
Executive Vice President, General Counsel
and Secretary
</TABLE>
The options reported are non-qualified stock options to purchase shares of
Class A Common Stock awarded under the ECP. The exercise price of the options is
$27.00 per share and the closing trading price on the NYSE of Class A Common
Stock at December 31, 1997 was $32.25.
13
<PAGE>
Benefit Plans
Retirement Plans
Effective January 1, 1990, The CIT Group Holdings, Inc. Retirement Plan
(the "CIT Retirement Plan") was established. Assets necessary to fund the CIT
Retirement Plan were transferred from the MHC Retirement Plan, Inc. (the "MHC
Retirement Plan"), the predecessor plan in which the Company's employees
participated. Accumulated years of benefit service under the MHC Retirement Plan
are included in the benefits formula of the CIT Retirement Plan, which covers
officers and salaried employees who have one year of service and have attained
age 21.
Subject to certain exceptions, at the normal retirement age of 65, an
employee's pension is 1.25% of final average salary, as defined below, for each
of the first 20 years of benefit service as a participant and 0.75% of such
salary for each year of the next 20 years of benefit service. In general, an
employee who was a participant in the MHC Retirement Plan before 1985 will
receive a pension of not less than 2.0% of final average salary for each of the
first 20 years of benefit service as a participant and 1.0% of such salary for
each of the next 20 years of benefit service, reduced by 0.4% of the
participant's covered compensation for each year of such benefit service up to a
maximum of 35 years and further reduced by the value of certain benefits under
the CIT Savings Plan. An employee who was a participant in the former CIT
Retirement Plan on June 30, 1986 will not receive a pension of less than 1.1% of
final average salary up to certain Social Security limits plus 1.5% of final
average salary in excess of the Social Security limits, for each year of benefit
service to a maximum of 35 years, reduced by certain benefits under the CIT
Savings Plan. "Final average salary" is the highest average salary received in
any five consecutive years in the last ten years. "Salary" includes all wages
paid by the Company, including before-tax contributions made to the CIT Savings
Plan and salary reduction contributions pursuant to any Section 125 Plan, but
excluding commissions, bonuses, incentive compensation, overtime, reimbursement
of expenses, directors' fees, severance pay and deferred compensation. This
salary is comparable to the "Salary" shown in the Summary Compensation Table.
After completing five years of service, an employee whose employment with the
participating company has terminated is entitled to a benefit, as of the
employee's normal retirement date, equal to the benefit earned to the date of
termination of employment, or an actuarially reduced benefit commencing at any
time after age 55 if the participant is eligible for early retirement under the
CIT Retirement Plan. Certain death benefits are available to eligible surviving
spouses of participants.
Since various laws and regulations set limits on the amounts allocable to
a participant under the CIT Savings Plan and benefits under the CIT Retirement
Plan, the Company has established the CIT Supplemental Retirement Plan. The CIT
Supplemental Retirement Plan provides retirement benefits on an unfunded basis
to participants who retire from the Company (whose benefits under the CIT
Retirement Plan would be restricted by the limits) of an amount equal to the
difference between the annual retirement benefits permitted and the amount that
would have been paid but for the limitations imposed.
The amounts set forth in the table are the amounts which would be paid to
employees hired before 1985 pursuant to the CIT Retirement Plan and the CIT
Supplemental Retirement Plan at a participants' normal retirement age assuming
the indicated final average salary and the indicated years of benefit service
and assuming that the straight life annuity form of benefit will be elected and
that CIT Supplemental Retirement Plan benefits will be paid in the form of an
annuity. The amounts may be overstated to the extent that they do not reflect
the reduction for any benefits under the CIT Savings Plan.
14
<PAGE>
PENSION PLAN TABLE
Annual Benefits Based on Years of Credited Service (1)
------------------------------------------------------
Final
Average
Salary of
Employee 15 20 25 30 35 40
---------- -- -- -- -- -- --
150,000 43,132 57,510 64,387 71,265 78,142 85,642
200,000 58,132 77,510 86,887 96,265 105,642 115,642
250,000 73,132 97,510 109,387 121,265 133,142 145,642
300,000 88,132 117,510 131,887 146,265 160,642 175,642
350,000 103,132 137,510 154,387 171,265 188,142 205,642
400,000 118,132 157,510 176,887 196,265 215,642 235,642
450,000 133,132 177,510 199,387 221,265 243,142 265,642
500,000 148,132 197,510 221,887 246,265 270,642 295,642
550,000 163,132 217,510 244,387 271,265 298,142 325,642
600,000 178,132 237,510 266,887 296,265 325,642 355,642
650,000 193,132 257,510 289,387 321,265 353,142 385,642
- ----------
(1) At December 31, 1997, Messrs. Gamper, Pollicino, Leone, O'Grady and Stein
had 30, 33, 13, 28 and 4 years of benefit service respectively.
Executive Retirement Plan
The Named Executive Officers are participants under the Executive
Retirement Plan. The benefit provided is life insurance equal to approximately
three times salary during such participant's employment, with a life annuity
option payable monthly by the Company upon retirement. The participant pays a
portion of the annual premium and the Company pays the balance on behalf of the
participant. The Company is entitled to recoup its payments from the proceeds of
the policy in excess of the death benefit. Upon the participant's retirement, a
life annuity will be payable out of the current income of the Company and the
Company anticipates recovering the cost of the life annuity out of the proceeds
of the life insurance policy payable upon the death of the participant.
In addition to the table of pension benefits shown above, the Company is
conditionally obligated to make annual payments under the Executive Retirement
Plan in the amounts indicated to the Named Executive Officers at retirement: Mr.
Gamper, $367,130, Mr. Pollicino, $233,642, Mr. Leone, $155,392, Mr. O'Grady,
$120,053, and Mr. Stein, $72,351.
Compensation Committee Interlocks and Insider Participation
Prior to the Offering, the Executive Committee of the Board of Directors
functioned as the compensation committee and set the compensation for all
executives except Messrs. Gamper, Pollicino, Tonoike and Uno. The members of the
Executive Committee were as follows:
Albert R. Gamper, Jr.
Joseph A. Pollicino
Peter J. Tobin
Tohru Tonoike
Yukiharu Uno
The Board of Directors, except for Messrs. Gamper and Pollicino, who were
absent from any portion of meetings when their compensation was discussed, set
the compensation of Messrs. Gamper and Pollicino. DKB determines the
compensation for Messrs. Tonoike and Uno. Mr. Tobin recently retired as an
executive of Chase. The Executive Committee was dissolved following the
consummation of the Offering, although the Board of Directors may determine to
reconstitute the Executive Committee at any time.
15
<PAGE>
Employment Agreements
Mr. Gamper has an employment agreement with the Company which provides
that he will serve as the Chief Executive Officer, President, and member of the
Board of Directors of the Company. His employment agreement initially ran for
five years from December 29, 1989, and subsequently was extended until December
31, 1999. The agreement provides for the payment of an annual base salary of not
less than the amount Mr. Gamper received prior to the date of his last extension
on April 1, 1997. Pursuant to his employment agreement, Mr. Gamper's base salary
and performance is reviewed by the Board of Directors during the term of the
agreement pursuant to the Company's normal practices, subject to increases but
not to decreases. Mr. Gamper's employment agreement provides for participation
in all executive bonus and incentive compensation plans.
Mr. Pollicino has an employment agreement with the Company which provides
that he shall serve as the Vice Chairman and member of the Board of Directors of
the Company. Mr. Pollicino's employment agreement initially ran for five years
from December 29, 1989, and subsequently was extended until December 31, 1999.
The agreement provides for the payment of an annual base salary of not less than
the amount Mr. Pollicino received prior to the date of his last extension on
April 1, 1997. Pursuant to his employment agreement, Mr. Pollicino's base salary
and performance is reviewed by the Board of Directors during the term of the
agreement pursuant to the Company's normal practices, subject to increases but
not to decreases. Mr. Pollicino's employment agreement provides for
participation in all executive bonus and incentive compensation plans.
Mr. Leone, Mr. O'Grady and Mr. Stein also have employment agreements with
the Company. Mr. Leone's and Mr. O'Grady's employment agreements initially ran
for three years from December 29, 1989, and subsequently were extended until
December 31, 1998. Mr. Stein entered into an employment agreement on March 17,
1995, which was subsequently extended until December 31, 1998. Mr. Leone's, Mr.
O'Grady's and Mr. Stein's respective agreements provide for the payment of an
annual base salary of not less than the amount received prior to the date of the
last extension on December 6, 1996, to be reviewed by the chief executive
officer or his designee pursuant to the Company's normal practices, subject to
increases but not to decreases. The employment agreements also provide for
participation in all executive bonus and incentive compensation plans.
Termination And Change-In-Control Arrangements
Mr. Gamper's and Mr. Pollicino's employment agreements with the Company
provide that if their employment is terminated "without Cause" (as defined in
the agreement) or if they resign for "Good Reason" (as defined in the agreement)
they will be entitled to receive severance payments equal to their base salary
for the greater of thirty-six months or the remainder of the agreement term,
provided that they do not violate the confidentiality or non-competition
provisions of the agreement (the latter of which, subject to certain exceptions,
extend for up to two years from the date of termination of employment), in which
case the Company would have no obligation to make any remaining payments.
Further, they will be entitled to receive, among other things, all previously
earned and accrued entitlements and benefits of the Company, full employee
welfare benefit coverage, outplacement services for up to one year, any awards
due under the ECP, and all benefits payable under the Company's Executive
Benefits Program.
Each of the employment agreements of Mr. Leone, Mr. O'Grady and Mr. Stein
provide that if his employment is terminated "without Cause" (as defined in the
agreement) or if he resigns for "Good Reason" (as defined in the agreement), he
will be entitled to receive severance payments equal to his base salary for the
greater of 24 months or the remainder of the agreement term, provided that he
does not violate the confidentiality or non-competition provisions of the
agreement (the latter of which, subject to certain exceptions, extend for up to
two years), in which case the Company would have no obligation to make any
remaining payments. Further, upon such termination or resignation, he will be
entitled to all previously earned and accrued entitlements and benefits,
continued employee welfare benefit coverage for 18 months, outplacement
services, any awards due under the ECP, and all benefits payable under the
Company's Executive Benefits Program.
16
<PAGE>
If the Company terminates Mr. Gamper or Mr. Pollicino for Cause or if they
terminate their employment for any reason other than Good Reason, they will be
entitled to all previously earned and accrued entitlements and benefits of the
Company.
With respect to Mr. Leone, Mr. O'Grady and Mr. Stein, if they are
terminated by the Company for cause based on non-performance as determined by
the chief executive officer of the Company as of the execution of the employment
agreement, they will receive all earned and accrued entitlements and benefits,
participation for 18 months in the Company's welfare benefit plan, outplacement
services and base salary for 12 months. This amount is increased to base salary
for 24 months if the chief executive officer at the time of such termination is
not the chief executive officer of the Company as of the execution of the
employment agreement. Termination for Cause based on malfeasance or resignation
for any reason other than "Good Reason" provides for all previously earned and
accrued entitlements and benefits from the Company.
If, during the term of Mr. Gamper's and Mr. Pollicino's employment
agreements, a "Change of Control" (as defined in the agreement) occurs on or
prior to December 31, 1999, Mr. Gamper and Mr. Pollicino will be entitled to
receive a "special payment." With respect to Mr. Gamper, the amount of such
special payment shall equal the sum of his prior four years annual bonuses under
the CIT Bonus Plan, and with respect to Mr. Pollicino, the amount of such
special payment shall equal the sum of his prior three years annual bonuses
under the CIT Bonus Plan. Mr. Gamper and Mr. Pollicino's special payments are
payable over a one year period as follows: (i) one-half of the payment shall be
paid within 30 days after the date of the Change of Control; and (ii) one-half
shall be paid on or before the first anniversary date of such Change of Control.
Notwithstanding the foregoing provision, the special payment shall be
forfeited if during the one-year period following the date of a Change of
Control: (i) their employment is involuntarily terminated by the Company for
cause; (ii) they voluntarily terminate employment with the Company for any
reason other than good reason; or (iii) they breach any non-compete or
confidentiality covenant contained in their employment agreements.
In the event of a Change of Control during the term of employment, Mr.
Gamper or Mr. Pollicino may elect, on 90 days notice, to terminate their
employment, and have such termination deemed "Good Reason"(i) upon the first
anniversary of the Change of Control or (ii) at their election, if the first
anniversary is prior to December 31, 1998, then on December 31, 1998. In the
event the first anniversary of such a Change of Control occurs after the end of
the term, the term shall be extended to the first anniversary of the Change of
Control.
If, during the term of their respective employment agreements, a "Change
of Control" (as defined in the agreement) occurs on or prior to December 31,
1998, Mr. Leone, Mr. O'Grady, and Mr. Stein will be entitled to receive a
"special payment." The amount of such special payment shall equal the sum of
their respective prior two years annual bonuses under The CIT Bonus Plan. The
special payment will be payable over a two year period as follows: (i) one-third
of the payment shall be paid within 30 days after the Change of Control; (ii)
one-third shall be paid on or before the first anniversary date of such Change
of Control; and (iii) one-third shall be paid on or before the second
anniversary date of such Change of Control. Notwithstanding the above, the
special payment will be forfeited (i) to the extent such payment or any part
thereof, when aggregated with any other benefit or compensation payment due to
the executive, would cause the executive to be subject to taxation under Section
4999 of the Internal Revenue Code of 1986 or (ii) if during the two year period
commencing on the date of such Change of Control and ending on the second
anniversary of such date, (a) their employment is involuntarily terminated by
the Company for cause, (b) they voluntarily terminate employment for any reason
other than "Good Reason" as defined in their respective employment agreements or
(c) they breach the non-compete or confidentiality provisions of their
agreements.
Under the ECP, if a participant's employment with the Company is
terminated by the Company, or a successor to the Company, on or after a Change
of Control and prior to the first anniversary of such Change of Control: (i) all
Options and SARs, other than Options granted in consideration of the termination
of the CIT Career Incentive Plan or otherwise granted in connection with the
Offering, held by the participant, if any, shall become immediately exercisable;
(ii) all restrictions and limitations imposed on Restricted Stock, other than
Restricted Stock granted in consideration of the termination of the CIT Career
Incentive Plan or otherwise granted in connection with the Offering, held by the
participant, if any, shall lapse; and (iii) the target payout
17
<PAGE>
opportunities under all outstanding Annual Incentive Awards, Performance Shares
and Performance Units held by the participant, if any, will be deemed to have
been fully earned for the Performance Period. The vesting of all Awards
denominated in shares of Class A Common Stock will be accelerated as of the date
of termination of the participant's employment with the Company and there shall
be paid out in cash, within 30 days of the date of termination of the
participant's employment with the Company, a pro rata amount based on assumed
achievement of all performance goals and upon the length of time of the
performance period elapsed before the Change of Control as determined by the
Administrator. The vesting of all Options and Restricted Stock granted in
consideration of the termination of the CIT Career Incentive Plan or otherwise
granted in connection with the Offering would be accelerated in the event the
participant is terminated on or after the Change of Control and during the
five-year period following the Offering.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has in the past and may in the future enter into certain
transactions with affiliates of the Company. Such transactions have been, and it
is anticipated that such transactions will continue to be, entered into at a
fair market value for the transaction.
Paul N. Roth, a director of the Company, is a partner of Schulte Roth &
Zabel, which provides legal services to the Company. Schulte Roth & Zabel LLP
has been retained in the past and will continue in the future to serve as
outside counsel for DKB.
Relationship with DKB
DKB beneficially owns 126,000,000 of the outstanding shares of Class B
Common Stock of the Company (which have five votes per share). The Class B
Common Stock owned by DKB represents in the aggregate 94.4 % of the combined
voting power and 77.2 % of the combined economic interest of all of the
outstanding Common Stock. For as long as DKB continues to own shares of Common
Stock representing more than 50% of the combined voting power of the Class A
Common Stock and Class B Common Stock, DKB will be able to direct the election
of all of the members of the Company's Board of Directors and exercise a
controlling influence over the business and affairs of the Company, including
any determinations with respect to (i) mergers or other business combinations
involving the Company, (ii) the acquisition or disposition of assets by the
Company, (iii) the incurrence of indebtedness by the Company, (iv) the issuance
of any additional Common Stock or other equity securities and (v) the payment of
dividends with respect to the Common Stock. Similarly, DKB will have the power
(i) to determine matters submitted to a vote of the Company's stockholders
without the consent of the Company's other stockholders, (ii) to prevent a
change in control of the Company or (iii) to take other actions that might be
favorable to DKB.
DKB has advised the Company that it currently intends to continue to hold
all of the shares of Class B Common Stock owned by it. However, DKB is not
subject to any contractual obligation to retain its controlling interest, except
that DKB has agreed not to sell or otherwise dispose of any shares of Class B
Common Stock for a period of 180 days after the date of the Offering without the
prior written consent of J.P. Morgan Securities Inc. As a result, there can be
no assurance that DKB will maintain its percentage ownership of Common Stock
immediately following the Offering for any specified period of time.
Set forth below are descriptions of certain agreements, relationships and
transactions between the Company and DKB.
Regulatory Compliance Agreement
DKB is subject to U.S. and Japanese banking laws, regulations, guidelines
and orders that affect permissible activities of the Company. DKB and the
Company have entered into a regulatory compliance agreement (the "Regulatory
Compliance Agreement") in order to facilitate DKB's compliance with applicable
U.S. and Japanese banking laws, or the regulations, interpretations, policies,
guidelines, requests, directives and orders of the applicable regulatory
authorities or the staffs thereof or a court (collectively, the "Banking Laws").
That Agreement prohibits the Company from engaging in any new activity or
entering into any
18
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transaction for which prior approval, notice or filing is required under Banking
Laws without the required prior approval having been obtained, prior notice
having been given or made by DKB and accepted or such filings having been made.
The Company is also prohibited from engaging in any activity as would cause DKB,
the Company or any affiliate of DKB or the Company to violate any Banking Laws.
In the event that, at any time, it is determined by DKB that any activity then
conducted by the Company is prohibited by any Banking Law, the Company is
required to take all reasonable steps to cease such activity.
Under the terms of the Regulatory Compliance Agreement, DKB is responsible
for making all determinations as to compliance with applicable Banking Laws.
The Regulatory Compliance Agreement expires upon the earlier of the date
on which DKB owns no shares of Common Stock or DKB, in its sole discretion,
requests and obtains an opinion of counsel that (i) DKB will not be required to
receive prior approval from or give notice to or make filings with applicable
regulatory authorities under the Banking Laws as a result of the Company or any
of its subsidiaries engaging in any activity and (ii) DKB and the Company are no
longer subject to the jurisdiction of the Banking Laws with respect to the
activities or transactions in which the Company may engage.
Registration Rights Agreement
DKB and the Company entered into a registration rights agreement (the
"Registration Rights Agreement"), which provides that, upon the request of DKB,
its subsidiaries or certain transferees of Common Stock from DKB or its
subsidiaries (each, a "Qualified Transferee"), the Company will use its best
efforts to effect the registration under the applicable federal and state
securities laws of any of the shares of Class A Common Stock that it may hold or
that are issued or issuable upon conversion of any other security that it may
hold (including the shares of Class B Common Stock) and of any other securities
issued or issuable in respect of the Class A Common Stock, in each case for sale
in accordance with the intended method of disposition of the holder or holders
making such demand for registration, and will take such other actions as may be
necessary to permit the sale thereof in other jurisdictions, subject to certain
specified limitations. DKB, its subsidiaries or any Qualified Transferee also
have the right, which it may exercise at any time and from time to time, subject
to certain limitations, to include any such shares and other securities in other
registrations of equity securities of the Company initiated by the Company on
its own behalf or on behalf of its other stockholders. The Company will pay all
costs and expenses in connection with each such registration which DKB, any
subsidiary thereof or any Qualified Transferee initiates or in which any of them
participates. The Registration Rights Agreement contains indemnification and
contribution provisions: (i) by DKB and its permitted assigns for the benefit of
the Company; and (ii) by the Company for the benefit of DKB and other persons
entitled to effect registrations of Class A Common Stock (and other securities)
pursuant to its terms, and related persons.
Tax Allocation Agreement
DKB does not include the Company in its consolidated group for federal
income tax purposes. DKB includes the Company in its consolidated group for
state income tax purposes only in the State of California. Pursuant to a Tax
Allocation Agreement, dated as of October 23, 1991 (the "Tax Allocation
Agreement"), the Company and certain other subsidiaries of DKB file a
consolidated unitary California franchise tax return and have elected to file
that return on a "water's edge" basis. Under the Tax Allocation Agreement, the
Company is obligated to pay to DKB the California franchise tax that the Company
would have paid as if it were filing on the same basis it would have filed on
had it not entered into the Tax Allocation Agreement, and its liability cannot
exceed the tax liability it would have incurred had it not entered into the Tax
Allocation Agreement. DKB absorbs any residual cost or benefit of the filing of
a consolidated unitary California franchise tax return.
Other Transactions
At December 31, 1997, the Company's credit line coverage with 53 banks
totaled $5.0 billion of committed facilities. At December 31, 1997, DKB was a
committed bank under a $1.2 billion revolving credit facility and a $3.7 billion
revolving credit facility, with commitments of $71.2 million and $213.8 million,
respectively.
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The Company has entered into interest rate swap and cross currency
interest rate swap agreements with financial institutions acting as principal
counterparties, including affiliates of DKB. At December 31, 1997, the notional
principal amount outstanding on interest rate swap agreements with DKB and its
affiliates totaled $220.0 million. The notional principal amount outstanding on
foreign currency swaps totaled $168.0 million with DKB at year-end 1997.
The Company has entered into leveraged leasing arrangements with third
party loan participants, including affiliates of DKB. Leveraged lease
receivables, which are included in lease receivables on the Company's financial
statements, exclude the portion of lease receivables offset by related
nonrecourse debt payable to third party lenders, including amounts owed to
affiliates of DKB that totaled $459.0 million at year-end 1997
At December 31, 1997, the Company had entered into credit-related
commitments with DKB in the form of letters of credit totaling $15.2 million,
equal to the amount of the single lump sum premium necessary to provide group
life insurance coverage to certain eligible retired employees and an amount to
fund certain overseas finance receivables.
The Company has entered into cash collateral loan agreements with DKB
pursuant to which DKB made loans to four separate cash collateral trusts in
order to provide additional security for payments on the certificates of the
related contract trusts. These contract trusts were formed for the purpose of
securitizing certain recreational vehicle and recreational marine finance
receivables. At December 31, 1997, the principal amount outstanding on the cash
collateral loans was $45.8 million.
PROPOSAL 2.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP,
150 John F. Kennedy Parkway, Short Hills, New Jersey 07078, as independent
accountants to examine the financial statements of the Company and its
subsidiaries for the year ending December 31, 1998, and to perform other
appropriate accounting services. This appointment was recommended by the Audit
Committee of the Board of Directors. A resolution will be presented to the
meeting to ratify the appointment. The affirmative vote of a majority of the
number of votes entitled to be cast by the Common Stock represented at the
meeting is needed to ratify the appointment. If the stockholders do not ratify
the appointment of KPMG Peat Marwick LLP, the selection of independent
accountants will be reconsidered by the Board of Directors .
KPMG Peat Marwick LLP has examined the financial statements of the Company
since 1984. A member of KPMG Peat Marwick LLP will be present at the meeting and
will be available to respond to appropriate questions by stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF KPMG
PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS FOR THE COMPANY FOR 1998.
STOCKHOLDERS PROPOSALS AND NOMINATIONS FOR THE 1998
ANNUAL MEETING
Stockholders proposals to be included in the Proxy Statement for our next
annual meeting of stockholders must be received by the Secretary of the Company
not later than December 2, 1998.
Also, under our By-laws, nominations for director or other business
proposals to be addressed at the meeting may be made by a stockholder entitled
to vote who has delivered a notice to the Secretary of the Company no later than
the close of business on March 28, 1999 and not earlier than February 26, 1999.
The notice must contain the information required by the By-laws.
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These advance notice provisions are in addition to, and separate from, the
requirements which a stockholder must meet in order to have a proposal included
in the Proxy Statement under the rules of the Securities and Exchange
Commission.
Copies of our By-laws may be obtained from the Secretary.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be paid by
the Company. We do not expect to pay any fees for the solicitation of proxies,
but may pay brokers, nominees, fiduciaries and other custodians their reasonable
fees and expenses for sending proxy materials to beneficial owners and obtaining
their instructions. In addition to solicitation by mail, proxies may be
solicited in person, or by telephone, facsimile transmission or other means of
electronic communication, by directors, officers and other employees of the
Company.
By Order of the Board of Directors
/s/ Ernest D. Stein
-----------------------------------
Ernest D. Stein
Secretary
<PAGE>
THE CIT GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS OF THE CIT GROUP, INC. ON MAY 27, 1998.
The undersigned stockholder appoints each of Anne Beroza, Donald J. Rapson
and James P. Shanahan attorney and proxy, with full power of substitution, on
behalf of the undersigned and with all powers the undersigned would possess if
personally present, to vote all shares of Common Stock of The CIT Group, Inc.
that the undersigned would be entitled to vote at the above Annual Meeting and
any adjournment thereof. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS
INSTRUCTED BY YOU AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS. IF
NOT OTHERWISE SPECIFIED, SHARES WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE DIRECTORS.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
THE CIT GROUP, INC.
P.O. BOX 11216
NEW YORK, N.Y. 10203-0216
<PAGE>
------------
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD authority to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
</TABLE>
Nominees: Hisao Kobayashi, Albert R. Gamper, Jr., Daniel P. Amos, Yoshiro Aoki,
Takasuke Kaneko, Joseph A. Pollicino, Paul N. Roth, Peter J. Tobin, Tohru
Tonoike, Alan F. White
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions___________________________________________________________________
2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
WILL ATTEND MEETING YES [ ] NO [ ]
VOTING BY MAIL: If you wish to vote by mailing this proxy, please sign your name
exactly as it appears on this proxy and mark, date and return it in the enclosed
envelope. When signing as attorney, executor, administrator, trustee, guardian
or as an authorized person on behalf of a corporation or partnership, please
give your full title as such.
Change of Address and [ ]
or Comments Mark Here
NOTE: Please sign exactly as name appears to the left.
When signing as attorney, executor, administrator,
trustee, guardian or as an authorized person on behalf
of a corporation or partnership, please give full title
as such.
Dated:_____________________________________________,1998
________________________________________________________
Signature
________________________________________________________
Signature
Votes must be indicated
(x) in Black or Blue ink.
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
