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:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TRAVELERS 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| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
|_| $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 transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| 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 registration 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:
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
TRAVELERS GROUP INC.
388 Greenwich Street
New York, New York 10013
March __, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Travelers Group Inc. on Wednesday, April 24, 1996. The meeting will be
held at Carnegie Hall, 881 Seventh Avenue, New York, New York, at 8:30 a.m.
local time. The entrance to Carnegie Hall is on 57th Street just east of
Seventh Avenue.
At this meeting of stockholders, we will be voting on a number of
matters, including:
- an increase in our Company's share capital, in part to make enough
shares available for issuance to stockholders in connection with
the 3-for-2 stock split announced by the Company; and
- a new stock incentive plan, to replace the 1986 Stock Option Plan
which expires this year.
In addition, in furtherance of our long-standing policy of encouraging
employee ownership of our stock, we are pleased to announce the
commencement of a new Travelers WealthBuilder Plan directed to all
employees, especially our lower compensated employees. This Plan will
provide for annual grants of stock options to every full-time employee of
the Company, other than senior executives, based on a percentage of the
first $50,000 of his or her annual compensation. I am particularly excited
about our new Travelers WealthBuilder Plan not only because the number of
shares owned by employees will increase under the Plan, but because all of
our employees will have the opportunity to own shares. While the Travelers
WealthBuilder Plan does not require stockholder approval, the shares
issuable under the Plan will be allocated from the shares issuable under
our new Travelers Group 1996 Stock Incentive Plan, which does require
stockholder approval. Please consider this exciting new opportunity for
employee participation at all levels of our Company as you read about this
and the other proposals for stockholder action described in the statement.
Thank you for your continued support of our Company.
Sincerely,
Sanford I. Weill
Chairman of the Board
and Chief Executive Officer
<PAGE>
TRAVELERS GROUP INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Travelers Group Inc. (the
"Company") will be held at Carnegie Hall, 881 Seventh Avenue, New York, New
York, on Wednesday, April 24, 1996 at 8:30 a.m. local time, for the
following purposes:
ITEM 1. To elect to the Board for a three-year term one class of
directors, consisting of six directors;
ITEM 2. To ratify the selection of the Company's independent
auditors for 1996;
ITEM 3. To consider and vote upon the proposal to amend the
Certificate of Incorporation of Travelers Group Inc. to
increase to 1.5 billion the shares of common stock
authorized for issuance;
ITEM 4. To approve an increase in the number of shares issuable
under the Travelers Group Capital Accumulation Plan and
certain other amendments;
ITEM 5. To adopt the Travelers Group 1996 Stock Incentive Plan;
and to transact such other business as may properly come before the
Annual Meeting.
The Board of Directors has set the close of business on March 6, 1996
as the record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting. A list of stockholders entitled to vote at
the Annual Meeting will be maintained at the Company's headquarters, 388
Greenwich Street, New York, New York prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
Charles O. Prince, III
Secretary
March ___, 1996
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE, SO THAT YOUR SHARES WILL BE REPRESENTED
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
TRAVELERS GROUP INC.
388 Greenwich Street
New York, New York 10013
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to stockholders of Travelers
Group Inc. (the "Company") in connection with the solicitation by the Board
of Directors of the Company of proxies for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at Carnegie
Hall, 881 Seventh Avenue, New York, New York, on Wednesday, April 24, 1996,
at 8:30 a.m. local time, and at any adjournments or postponements of such
meeting. This Proxy Statement and the accompanying proxy card are being
mailed beginning on or about March ___, 1996, to stockholders of the
Company on March 6, 1996, the record date for the Annual Meeting (the
"Record Date"). Employees of the Company who are participants in one or
more of the Company's benefit plans may receive this Proxy Statement and
their proxy cards separately. The Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1995 will be delivered to
stockholders prior to or concurrently with the mailing of the proxy
material.
Stockholders of the Company are cordially invited to attend the Annual
Meeting. Whether or not you expect to attend, it is important that you
complete the enclosed proxy card, and sign, date and return it as promptly
as possible in the envelope enclosed for that purpose. You have the right
to revoke your proxy at any time prior to its use by filing a written
notice of revocation with the Secretary of the Company prior to the
convening of the Annual Meeting, or by presenting another proxy card with a
later date. If you attend the Annual Meeting and desire to vote in person,
you may request that your previously submitted proxy card not be used.
As a result of prior transactions including the payment of stock
dividends in 1993 and the merger with The Travelers Corporation ("old
Travelers"), certain of the Company's records, including but not limited to
those relating to stock option grants and deferred directors' shares,
include fractional share amounts. The Company cannot issue fractional
share interests, however, and accordingly fractional share amounts have
been deleted from the numbers reported in this Proxy Statement.
- 1 -
<PAGE>
Voting Rights
<TABLE>
<S> <C>
As of the Record Date, the outstanding stock of the Company entitled to receive notice of and
to vote at the Annual Meeting consisted of 336,445,965 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), and 3,995,356 shares of $4.53 ESOP Convertible Preferred
Stock, Series C, par value $1.00 per share (the "Series C Preferred Stock"). The Series C Preferred
Stock was issued in exchange for the Series A Preference Stock of old Travelers following the merger
of old Travelers with and into the Company (the "Travelers Merger") effective December 31, 1993.
Each share of Common Stock is entitled to one vote on each matter that is voted on at the Annual
Meeting, and each share of Series C Preferred Stock is entitled to 1.3 votes on each matter that is
voted on at the Annual Meeting. The Common Stock and the Series C Preferred Stock will vote together
as a single class on all matters scheduled to be voted on at the Annual Meeting. Neither class is
entitled to cumulative voting.
The Company's other series of preferred stock, $1.00 par value, including the 8.125% Cumulative
Preferred Stock, Series A, the 5.50% Convertible Preferred Stock, Series B, and the 9.25% Preferred
Stock, Series D, have no right to vote on any of the matters that are scheduled to be voted on at
the Annual Meeting.
Security Ownership of Certain Beneficial Owners
To the best knowledge of the Company, as of the Record Date no person "beneficially owned" (as
that term is defined by the Securities and Exchange Commission (the "SEC")) more than 5% of the
Common Stock outstanding and entitled to vote at the Annual Meeting except:
</TABLE>
<TABLE><CAPTION>
Shares of
Common Stock Percentage
Name and Address of Beneficial Owner (1) Beneficially Owned of Class (2)
- ---------------------------------------- ------------------ ------------
<S> <C> <C>
AXA Assurances I.A.R.D. Mutuelle
AXA Assurances Vie Mutuelle
Alpha Assurances I.A.R.D. Mutuelle
Alpha Assurances Vie Mutuelle
Uni Europe Assurance Mutuelle
AXA
The Equitable Companies Incorporated . . . . . . 17,750,407 [5.6%]
The Equitable Companies Incorporated
787 Seventh Avenue
New York, New York 10019
(1) Based on Schedules 13G filed with the SEC by such beneficial owners in February 1996.
(2) Calculated on the basis of the number of shares of Common Stock outstanding and entitled to
vote at the Annual Meeting as of the Record Date.
All of the Series C Preferred Stock is held of record by Dory & Co., the nominee of Fleet
National Bank of Connecticut, One Federal Street, Boston, Massachusetts 02211, as
</TABLE>
- 2 -
<PAGE>
trustee (the "ESOP Trustee") acting in connection with the employee stock
ownership portion of The Travelers Savings, Investment and Stock Ownership
Plan (the "TESIP Plan"), which plan was assumed by the Company in
connection with the Travelers Merger. As of the Record Date, the shares of
Series C Preferred Stock outstanding were beneficially held by
approximately 15,199 holders through their participation in the TESIP Plan.
QUORUM; VOTING PROCEDURES
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock and Series C Preferred
Stock outstanding and entitled to vote shall constitute a quorum. Pursuant
to applicable Delaware law, with respect to the Common Stock, only votes
cast "for" a matter constitute affirmative votes. Votes "withheld" or
abstaining from voting are counted for quorum purposes, but since they are
not cast "for" a particular matter, they will have the same effect as
negative votes or votes "against" a particular matter. The votes required
with respect to the items set forth in the Notice of Annual Meeting of
Stockholders are set forth in the discussion of each item herein.
Unless contrary instructions are indicated on the proxy card, all
shares of Common Stock represented by valid proxies will be voted FOR all
of the items listed on the proxy card and described below, and will be
voted in the discretion of the persons designated as proxies in respect of
such other business, if any, as may properly be brought before the Annual
Meeting. As of the date hereof, the Board of Directors knows of no other
business that will be presented for consideration at the Annual Meeting
other than those matters referred to herein. If you give specific voting
instructions by checking the boxes on the proxy card, your shares of Common
Stock will be voted in accordance with such instructions.
The ESOP Trustee, as the record holder of the Series C Preferred Stock,
will vote shares of Series C Preferred Stock that have been allocated to
TESIP Plan participants' accounts in accordance with instructions received
from such participants. Shares of Series C Preferred Stock as to which no
instructions are received and shares that have not been allocated to the
accounts of participants in the TESIP Plan will be voted by the ESOP
Trustee in the same proportion as votes in respect of allocated shares as
to which participants in the TESIP Plan have given instructions.
- 3 -
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, the Common Stock
and Series C Preferred Stock ownership of each director and certain executive
officers of the Company. As of the Record Date, the directors and the
executive officers of the Company as a group (26 persons) beneficially
owned 8,372,001 shares of Common Stock including 1,252 shares of Series C
Preferred Stock (assuming the conversion of such shares into shares of
Common Stock) (or approximately [3.1%] of the total voting power of the
Common Stock and Series C Preferred Stock outstanding and entitled to vote
at the Annual Meeting), including an aggregate of 1,627,061 shares of
Common Stock that such persons may acquire pursuant to options exercisable
within 60 days of the Record Date. As of the Record Date, all current and
former employees as a group, including the executive officers of the
Company, beneficially owned or had acquired through employee stock
incentive, award or purchase plans an aggregate of approximately 93 million
shares of Common Stock, which amount of Common Stock includes an aggregate
of approximately 7.7 million shares of Common Stock that such persons may
acquire pursuant to options exercisable within 60 days of the Record Date,
and 3,213,301 shares of Common Stock issuable upon the conversion of the
Series C Preferred Stock. Had such 93 million shares of Common Stock been
held of record on the Record Date, such shares of Common Stock would have
represented approximately [16.7%] of the total voting power of the shares
of Common Stock then outstanding and eligible to vote. These amounts are
based upon the Company's records of beneficial ownership by all employees,
including its current officers, under the Travelers Group Stock Option Plan
(the "1986 Option Plan"), the Travelers Group 401(k) Savings Plan (the
"Savings Plan"), the Travelers Group Capital Accumulation Plan (the "CAP
Plan"), the Travelers Group Employee Incentive Plan ("EIP"), the Travelers
Group Stock Purchase Plan, and various compensation plans for executives of
Smith Barney (as defined herein). These amounts also include beneficial
ownership by employees and executive officers under the old Travelers 1988
Stock Incentive Plan, the old Travelers 1982 Stock Option Plan and the old
Travelers TESIP Plan, which plans were assumed by the Company in connection
with the Travelers Merger, and the old Primerica Corporation Long-Term
Incentive Plan, which was assumed by the Company in connection with the
merger with Primerica Corporation in 1988. The actual ownership by
employees is not determinable by the Company since employees may own shares
of Common Stock in street name.
As of the Record Date, no individual director or executive officer
beneficially owned one percent or more of the Common Stock outstanding and
entitled to vote at the Annual Meeting, except Mr. Weill who beneficially
owned 5,283,354 shares [1.7%)] of Common Stock, including 1,119,797 shares
that he had the right to acquire pursuant to options exercisable within 60
days of the Record Date. As of the Record Date, no individual director or
executive officer beneficially owned one percent or more of the Series C
Preferred Stock, and no director or executive officer beneficially owned
any shares of any other series of the Company's preferred stock. Except as
otherwise expressly stated in the footnotes to the following table,
beneficial ownership of shares means that the beneficial owner thereof has
sole voting and investment power over such shares.
- 4 -
<PAGE>
Amount and Nature of Beneficial Ownership
-----------------------------------------
<TABLE><CAPTION>
Stock Options
Common Stock Exercisable Total
Beneficially Owned Within 60 Common Stock
Excluding Days of Beneficially
Name/Title Options(1) Record Date(2) Owned (1)
---------- ---------- -------------- ---------
<S> <C> <C> <C>
C. Michael Armstrong . . . . . 8,580 8,580
Director
Kenneth J. Bialkin . . . . . . 151,078 151,078
Director
Edward H. Budd(3) . . . . . . . 194,763 24,127 218,890
Director
Joseph A. Califano, Jr.(4) . . 31,242 31,242
Director
Douglas D. Danforth . . . . . . 43,085 43,085
Director
Robert F. Daniell . . . . . . . 7,200 7,200
Director
James Dimon . . . . . . . . . . 548,379 186,884 735,263
Director and
Executive Officer
Leslie B. Disharoon (5) . . . . 78,478 78,478
Director
Gerald R. Ford . . . . . . . . 22,571 22,571
Director
Ann Dibble Jordan . . . . . . . 1,799 1,799
Director
Robert I. Lipp . . . . . . . . 464,887 92,018 556,905
Director and
Executive Officer
Dudley C. Mecum(6) . . . . . . 41,521 41,521
Director
Andrall E. Pearson . . . . . . 31,638 31,638
Director
Joseph J. Plumeri, II . . . . . 74,878 22,837 97,715
Executive Officer
Frank J. Tasco . . . . . . . . 10,520 10,520
Director
Linda J. Wachner . . . . . . . 8,249 8,249
Director
Sanford I. Weill(7) . . . . . . 4,163,557 1,119,797 5,283,354
Director and
Chief Executive Officer
Joseph R. Wright, Jr. . . . . . 24,147 24,147
Director
Arthur Zankel(8) . . . . . . . 92,110 92,110
Director
All Directors and
Executive Officers
as a group
(26 persons)(9)(10) . . . . . . 6,744,940 1,627,061 8,372,001
</TABLE>
- 5 -
<PAGE>
(1) This information includes, as of the Record Date, the following shares
which are also deemed "beneficially owned": (i) the following number
of shares of Common Stock granted in payment of directors' fees to
nonemployee directors under the Company's plan, but receipt of which
is deferred: Mr. Armstrong, 3,867; Mr. Bialkin, 31,078; Mr. Budd,
4,928; Mr. Califano, 21,806; Mr. Danforth, 27,063; Mr. Disharoon,
31,078; Mr. Mecum, 31,078; Mr. Pearson, 31,078; Mr. Tasco, 8,520; and
Mr. Wright, 16,747; (ii) the following number of shares of Common
Stock issued in exchange for shares of old Travelers common stock
held under the old Travelers Deferred Compensation Plan for Non-
employee Directors, receipt of which is deferred: Mr. Armstrong,
3,852; Mr. Lipp, 686; and Mr. Weill, 915; (iii) the following number
of shares of Common Stock held (as of January 31, 1996) under the
Savings Plan of the Company or its subsidiaries, as to which the
holder has voting power but not dispositive power: Mr. Dimon, 2,905;
Mr. Lipp, 4,764; Mr. Plumeri, 47 and Mr. Weill, 5,134; (iv) the
following number of shares of Common Stock under the savings and
investment feature of the TESIP Plan: Mr. Budd, 3,134; (v) the
following number of shares of Common Stock awarded pursuant to the CAP
Plan, as to which the holder may direct the vote but which remain
subject to forfeiture and restrictions on disposition: Mr. Dimon,
45,312; Mr. Lipp, 43,083; Mr. Plumeri, 39,269 and Mr. Weill, 80,657;
and (vi) 1,006 shares of Common Stock, the beneficial ownership of
which is attributable to Mr. Budd, assuming as of February 29, 1996
the conversion into one share of Common Stock of each $66.21 of stated
value of the 1,231 shares of Series C Preferred Stock held by
Mr. Budd, which shares were awarded under the TESIP Plan. The TESIP
Plan was assumed by the Company in connection with the Travelers
Merger. The TESIP Plan includes a tax-deferred savings and investment
feature (similar to the Savings Plan) that permits investment in the
Company's Common Stock. Mr. Budd is the only director or executive
officer who owns shares of Series C Preferred Stock.
(2) Non-employee directors are not eligible to receive stock option grants
under the Company's plans.
(3) Includes 703 shares of Common Stock held by Mr. Budd's wife, as to
which Mr. Budd disclaims beneficial ownership.
(4) Includes 800 shares of Common Stock owned by Mr. Califano's wife and
120 shares held by Mr. Califano as custodian, as to which Mr. Califano
disclaims beneficial ownership.
(5) Includes 1,400 shares of Common Stock owned by Mr. Disharoon's wife,
as to which Mr. Disharoon disclaims beneficial ownership.
(6) Includes 843 shares of Common Stock owned by Mr. Mecum's wife, as to
which Mr. Mecum disclaims beneficial ownership.
(7) Includes 100 shares of Common Stock owned by Mr. Weill's wife, as to
which Mr. Weill disclaims beneficial ownership.
- 6 -
<PAGE>
(8) Includes 3,165 shares of Common Stock owned by Mr. Zankel's wife and
1,200 shares held by a trust of which Mr. Zankel is a trustee, as to
which Mr. Zankel disclaims beneficial ownership.
(9) This information also includes as "beneficially owned" (i) an
aggregate of 23,659 shares of Common Stock and 1,231 shares of Series
C Preferred Stock held under the Savings Plan of the Company or under
the TESIP Plan, as to which the respective holders have voting power
but not dispositive power, and (ii) an aggregate of 296,665 shares of
Common Stock awarded under the CAP Plan, as to which the respective
holders may direct the vote but which shares remain subject to
forfeiture and restrictions on disposition.
(10) The table does not reflect the Common Stock beneficially owned by
Robert F. Greenhill which at December 31, 1995, totaled 2,149,328
shares, consisting of 1,615,995 shares that were beneficially owned
excluding options and 533,333 stock options exercisable within 60 days
of the Record Date. Mr. Greenhill resigned from his positions as
director and executive officer of the Company effective January 15,
1996.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons
who own more than ten percent of a registered class of the Company's equity
securities ("Section 16(a) Persons"), to file reports of ownership and
changes in ownership with the SEC and the New York Stock Exchange, Inc. (the
"NYSE"), and to furnish the Company with copies of all such forms they
file. Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons, the Company
believes that, during the year ended December 31, 1995, each of its
officers, directors and greater than ten percent stockholders complied with
all such applicable filing requirements.
ITEM 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company is classified into three classes.
The six directors serving in Class II have terms expiring at the Annual
Meeting. The Class II directors currently serving on the Board, Messrs.
Armstrong, Bialkin, Mecum, Weill, Wright and Zankel, have been nominated by
the Board of Directors for re-election to three-year terms at the Annual
Meeting.
Each Class II nominee elected will hold office until the Annual
Meeting of Stockholders to be held in 1999 and until his successor has been
duly elected and qualified, unless prior to such meeting a director shall
resign, or his directorship shall become vacant due to his death or
removal.
The following information with respect to the principal occupation and
business experience and other affiliations of the directors during the past
five years has been furnished to the Company by the directors. All ages are
given as of the Record Date. Directors' terms as stated below include
periods of Board membership with Commercial Credit Company ("CCC"), a
predecessor corporation of the Company.
- 7 -
<PAGE>
CLASS II: NOMINATED FOR ELECTION AT THE ANNUAL MEETING FOR A TERM ENDING 1999
C. Michael Armstrong [Picture]
Mr. Armstrong, 57, became a director of the Company in December 1993.
He is Chairman and Chief Executive Officer of Hughes Electronic
Corporation, a designer and manufacturer of advanced electronic systems for
automotive, defense, space communications and industrial applications,
located in Los Angeles, California. Mr. Armstrong was previously an officer
of International Business Machines Corporation ("IBM") where he was a
member of IBM's Management Committee and Chairman of IBM World Trade
Corporation. He is a member of the Board of Trustees of Johns Hopkins
University, is chairman of the advisory board of Johns Hopkins Medical
School, and is a member of the CEO Board of Advisors of the Business School
of the University of Southern California. Mr. Armstrong is Chairman of the
President's Export Council, a member of the National Security
Telecommunications Advisory Committee and a member of the Defense Policy
Advisory Committee on Trade. Mr. Armstrong serves on the Board of
Directors of The Times Mirror Company and The Los Angeles World Affairs
Council, is Chairman of Sabriya's Castle of Fun Foundation, and is a member
of the Supervisory Board of the Thyssen-Bornemisza Group. He is also a
director of The Conference Board and the California Business Roundtable.
Kenneth J. Bialkin [Picture]
Mr. Bialkin, 66, has been a director of the Company since 1986. He has
been for more than five years a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom, which performs legal services for the Company from
time to time. Mr. Bialkin is also a director of The Municipal Assistance
Corporation for the City of New York, Oshap Technologies, Ltd., Tecnomatix
Technologies Ltd. and Sapiens International Corporation N.V.
Dudley C. Mecum [Picture]
Mr. Mecum, 61, has been a director of the Company since 1986. Since
August 1989, Mr. Mecum has been a Partner in the firm of G.L. Ohrstrom &
Co. (a merchant banking firm). He was President of Environmental and
Engineering Services and was a senior executive and director of Combustion
Engineering, Inc. from 1985 to December 1987. Mr. Mecum was Managing
Partner of the New York office of Peat Marwick Mitchell & Co. (now KPMG
Peat Marwick LLP) from 1979 to 1985. He served in the United States
Government as Assistant Director of the United States Office of Management
and Budget in 1973 and as United States Assistant Secretary of the Army
(Installations and Logistics) from 1971 to 1973. Mr. Mecum is a director of
Fingerhut Companies, Inc., Dyncorp, Vicorp Restaurants, Inc., Lyondell
Petrochemical Corp. and Roper Industries, Inc. Mr. Mecum is also a director
and Chairman of Alden Industries, Inc., a privately held company
manufacturing commercial water heaters and boilers. Mr. Mecum is also
Chairman, President and Chief Executive Officer and a director of Hanow
Industries Inc.
- 8 -
<PAGE>
Sanford I. Weill [Picture]
Mr. Weill, 62, has been a director of the Company since 1986. He has
been Chairman of the Board and Chief Executive Officer of the Company and
its predecessor, CCC, since 1986; he was also its President from 1986 until
1991. He was President of American Express Company from 1983 to 1985;
Chairman of the Board and Chief Executive Officer of American Express
Insurance Services, Inc. from 1984 to 1985; Chairman of the Board and Chief
Executive Officer, or a principal executive officer, of Shearson Lehman
Brothers Inc. from 1965 to 1984; Chairman of the Board of Shearson Lehman
Brothers Holdings Inc. from 1984 to 1985; and a founding partner of
Shearson's predecessor partnership from 1960 to 1965. Mr. Weill's son,
Mark P. Weill, is a Senior Vice President and an executive officer of the
Company. Mr. Weill is Chairman of the Board of Trustees of Carnegie Hall,
and a director of the Baltimore Symphony Orchestra. Mr. Weill is a member
of the Board of Governors of New York Hospital and is Chairman of the
Board of Overseers of Cornell University Medical Center and a member of the
Joint Board of New York Hospital--Cornell University Medical College. He
is on the Board of Overseers of Memorial Sloan-Kettering Cancer Center. He
is a member of Cornell University's Johnson Graduate School of Management
Advisory Board and a Board of Trustees Fellow. Mr. Weill is Chairman of
the National Academy Foundation. He served as Chairman of the Joint
Mayoral/City Council Commission on Early Child and Child Care Programs
during the Dinkins Administration.
Joseph R. Wright, Jr. [Picture]
Mr. Wright, 57, has been a director of the Company since 1990.
Mr. Wright is the Vice Chairman of the Jefferson Group, a consulting firm.
He is also Chairman and Chief Executive Officer of AVIC Group
International. From 1989 to 1993, he was Executive Vice President and Vice
Chairman of W.R. Grace & Co. (an international specialty chemicals and
healthcare company) and President of Grace Energy Company (an international
energy services company). Mr. Wright is currently Co-chairman and a member
of the Board of Directors of Baker & Taylor Holdings, Inc. (an
international book and video distribution company), a member of the Board
of Directors of GRC International, a member of the Board of Trustees of
Hampton University and the Freedom Foundation, and a member of the
President's Export Council, Chief Executives Organization, World Business
Council, National Academy for Public Administration, and the Citizens for a
Sound Economy. He was Director and Deputy Director of the United States
Office of Management and Budget from 1982 to 1989, a member of President
Reagan's Cabinet from 1988 to 1989, and Deputy Secretary of Commerce from
1981 to 1982. Prior to that, he was president of two Citicorp retail
credit card subsidiaries and a partner of Booz, Allen & Hamilton. He
received the President's "Citizenship Award" in 1989.
Arthur Zankel [Picture]
Mr. Zankel, 64, has been a director of the Company since 1986. He has
been Co-Managing Partner of First Manhattan Co. (a research and investment
management company) since 1980. He is also a director of Vicorp
Restaurants, Inc. and Fund American Enterprises Holdings, Inc. and a
trustee of Skidmore College, Carnegie Hall and New York Foundation.
- 9 -
<PAGE>
CLASS III: TERM ENDING 1997
Douglas D. Danforth [Picture]
Mr. Danforth, 73, has been a director of the Company since 1987. He
was Chairman of the Board and Chief Executive Officer of Westinghouse
Electric Corporation from December 1983 to December 1987, and was Vice
Chairman and Chief Operating Officer of Westinghouse from 1978 to 1983. He
currently serves as Chairman of the Board of Graco Children's Products,
Inc. Mr. Danforth is a director of Sola International Inc. and The
American European Associates. Mr. Danforth is also a trustee of Carnegie-
Mellon University, Syracuse University, Allegheny Health, Education and
Research Foundation and the Pittsburgh Trust for Cultural Resources. He is
also a member of the Executive Committee of the Allegheny Conference on
Community Development and a director of the Pittsburgh Foundation.
Robert F. Daniell [Picture]
Mr. Daniell, 62, became a director of the Company in December 1993. He
is Chairman of United Technologies Corporation, a broad based designer and
manufacturer of high technology products, located in Hartford, Connecticut.
He joined the Sikorsky Aircraft Division of United Technologies Corporation
in 1956 and served as President of Sikorsky Aircraft from 1981 to 1983. He
was a Senior Vice President of United Technologies from 1983 to 1984 and
served as its President and Chief Operating Officer from 1984 to February
1992. He was elected a director of United Technologies in 1984 and Chairman
in 1987. He served as Chief Executive Officer of United Technologies from
1986 to April 1994. Mr. Daniell is a director of Shell Oil Company. He is
also a member of the Conference Board and The Business Council.
Leslie B. Disharoon [Picture]
Mr. Disharoon, 63, has been a director of the Company since 1986. He
was Chairman of the Board, President and Chief Executive Officer of
Monumental Corporation (an insurance holding company) from 1978 to 1988. He
is a director of The Johns Hopkins Health System, Aegon USA, Inc., GRC
International Inc. and M.S.D. & T. Funds, Inc., and President of the Caves
Valley Club Inc.
Gerald R. Ford [Picture]
The Honorable Gerald R. Ford, 82, has been a director or an honorary
director of the Company since 1986. Mr. Ford was President of the United
States from August 1974 through January 1977, having served as Vice
President of the United States from December 1973 through August 1974. He
is a lecturer and business consultant to several corporations. He serves as
a director of Alexander & Alexander Services, Inc. and is an advisory
director to Texas Commerce Bankshares, Inc. and American Express Company.
- 10 -
<PAGE>
Robert I. Lipp [Picture]
Mr. Lipp, 57, has been a director of the Company since 1991, and is a
Vice Chairman and Group Chief Executive of the Company. Mr. Lipp has been
the Chairman of the Board and Chief Executive Officer of The Travelers
Insurance Group Inc. ("TIGI") since December 1993. The Company has
announced that Mr. Lipp will be the Chairman and Chief Executive Officer of
Travelers/Aetna Property Casualty Corp., the newly formed subsidiary of the
Company that will own The Travelers Indemnity Company and its subsidiaries
as well as all of the property and casualty operations to be purchased
from Aetna Life and Casualty Company ("Aetna"). From 1991 to 1993, he was
Chairman and Chief Executive Officer of CCC, a wholly owned subsidiary of
the Company. From April 1986 through September 1991, he was an Executive
Vice President of the Company and its corporate predecessor. Prior to
joining the Company in 1986, he was a President and a director of Chemical
New York Corporation and Chemical Bank where he held senior executive
positions for more than five years prior thereto. Mr. Lipp is a director of
The New York City Ballet.
Andrall E. Pearson [Picture]
Mr. Pearson, 70, has been a director of the Company since 1986. He has
been a Professor at the Harvard Business School since 1985. He was
President of Pepsico, Inc. from 1970 to 1984. He is a director of The May
Department Stores Company, Pepsico, Inc. and Lexmark Inc. Mr. Pearson is
also a general partner of Clayton, Dubilier & Rice, Inc., a private
investment firm and the Chairman of the Board and a director of Kraft
Foodservice Inc., which is owned by Clayton, Dubilier & Rice, Inc.
Linda J. Wachner [Picture]
Mrs. Wachner, 50, has been a director of the Company since 1991. She
is Chairman, President and Chief Executive Officer of the Warnaco Group,
Inc. and of Warnaco Inc., a Fortune 1000 apparel company, and Chairman and
Chief Executive Officer of Authentic Fitness Corporation, an activewear
manufacturer. Mrs. Wachner is also a director of the American Apparel
Manufacturers Association and the New York City Partnership. She currently
serves on the Policy Committee of The Business Roundtable, the Board of
Trustees of The Aspen Institute and Carnegie Hall, Thirteen/WNET, and the
Board of Overseers of Memorial Sloan-Kettering Cancer Center. In 1994, Mrs.
Wachner was reappointed by President Clinton to the Advisory Committee for
Trade Policy Negotiations, on which she also served under President Bush
and President Reagan. She is a member of the Council on Foreign Relations.
- 11 -
<PAGE>
CLASS I: TERM ENDING 1998
Edward H. Budd [Picture]
Mr. Budd, 62, has been a director of the Company since 1992. Mr. Budd
joined The Travelers Corporation in 1955, and was elected President and a
director in 1976. He became Chief Executive Officer in 1981 and Chairman of
the Board in 1982. Following the completion of the Travelers Merger in
1993, Mr. Budd served as Chairman of the Travelers insurance operations and
as Chairman of the Executive Committee of the Board of Directors of the
Company. In September 1994, Mr. Budd retired as an officer of the Company
and its subsidiaries. He is also a director of Delta Air Lines, Inc. and
GTE Corporation and a member of The Business Council.
Joseph A. Califano, Jr. [Picture]
Mr. Califano, 64, has been a director of the Company since 1988. He is
Chairman and President of the Center on Addiction and Substance Abuse at
Columbia University, an independent not-for-profit organization established
to combat all forms of substance abuse. From 1983 to 1992, he was a Senior
Partner at the law firm of Dewey Ballantine, which performs legal services
for the Company from time to time. He is a director of Authentic Fitness
Corporation, Automatic Data Processing, Inc., Chrysler Corporation, Kmart
Corporation, New York and New England Telephone Companies and Warnaco Inc.,
and a trustee of the American Ditchley Foundation, New York University and
The Twentieth Century Fund. He serves as Chairman of the Institute for
Social and Economic Policy in the Middle East at the Kennedy School of
Government at Harvard University, and as a Governor of New York Hospital,
as a Director of Georgetown University and a member of the governing
council of the Institute of Medicine of the National Academy of Sciences.
Mr. Califano served as Secretary of the United States Department of Health,
Education and Welfare from 1977 to 1979. He was Special Assistant for
Domestic Affairs to the President of the United States for the period from
1965 to 1969, and held various positions in the United States Department of
Defense from 1961 to 1965. He is the author of nine books.
James Dimon [Picture]
Mr. Dimon, 39, has been a director of the Company since September
1991. He is President and Chief Operating Officer of the Company. He is
also Chairman of the Board, Chief Executive Officer and a member of the
executive committee of Smith Barney Inc., the Company's investment banking
and securities brokerage subsidiary ("Smith Barney"). From May 1988 to June
1995 he was Chief Financial Officer of the Company. He was, from May 1988
to September 1991, Executive Vice President of the Company. Mr. Dimon was
Chief Operating Officer of Smith Barney until January 1996 and was Senior
Executive Vice President and Chief Administrative Officer of Smith Barney
from 1990 to 1991. He is also a director, Chief Executive Officer and
Chairman of the Board of Smith Barney Holdings Inc. ("SB Holdings"), the
immediate parent company of Smith Barney. From March 1994 to January 1996
he was Chief Operating Officer of SB Holdings. From 1986 to 1988, Mr. Dimon
was Senior Vice President and Chief Financial Officer of CCC, the Company's
predecessor. From 1982 to 1985, he was a Vice President of American Express
Company and Assistant to the President, Sanford I. Weill.
- 12 -
<PAGE>
Mr. Dimon is a trustee of New York University Medical Center and Chairman
of the Board of the New York Academy of Finance.
Ann Dibble Jordan [Picture]
Ms. Jordan, 61, has been a director of the Company since 1989. She is
a consultant and serves on the Boards of Directors of Johnson & Johnson
Corporation, Hechinger Company, the National Symphony Orchestra, The
Phillips Gallery, Child Welfare League, Automatic Data Processing, Inc. and
the Salant Corp. She was formerly the Director of the Department of Social
Services for the University of Chicago Medical Center from 1986 to 1987,
and was also Field Work Associate Professor at the School of Social Service
Administration of the University of Chicago from 1970 to 1987. She served
as the Director of Social Services of Chicago Lying-in Hospital from 1970
to 1985.
Frank J. Tasco [Picture]
Mr. Tasco, 68, has been a director of the Company since 1992.
Mr. Tasco is the retired Chairman of the Board and Chief Executive Officer
of Marsh & McLennan Companies, Inc. and is currently a director. He is also
a director of New York Telephone Company and New England Telephone Company.
He was a member of President Bush's Drug Advisory Council and is at present
Chairman of New York Drugs Don't Work. Mr. Tasco is a director of Phoenix
House Foundation and St. Francis Hospital, Roslyn, New York. He is a member
of the Council on Foreign Relations, the Lincoln Center Consolidated
Corporate Fund Leadership, the Foreign Policy Association and a trustee of
New York University.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met eight times during 1995. Each director
attended at least 75 percent of the meetings of the Board of Directors and
Board Committees of which he or she was a member during 1995 or the period
thereof during which he or she was a member.
COMMITTEES OF THE BOARD OF DIRECTORS
The following are the current members and functions of the standing
committees of the Board of Directors.
Executive Committee. The members of the Executive Committee are
Messrs. Budd (Chairman), Bialkin, Weill, Wright, and Zankel. The Executive
Committee meets in place of the full Board of Directors when scheduling
makes it difficult to convene all of the directors or when issues arise
requiring immediate attention. The Executive Committee met twice during
1995.
Audit Committee. The members of the Audit Committee are Messrs. Mecum
(Chairman), Armstrong, Califano, Danforth, Disharoon, Tasco and Wright. The
primary functions of the Audit Committee, composed entirely of
nonmanagement directors, are to pass upon the scope of the independent
certified public accountants' examination, to review with the independent
certified public accountants and the Company's principal financial and
- 13 -
<PAGE>
accounting officers the audited financial statements and matters that arise
in connection with the examination, to review the Company's accounting
policies and the adequacy of the Company's internal accounting controls,
and to review and approve the independence of the independent certified
public accountants. The Audit Committee met seven times during 1995.
Nominations and Compensation Committee. The members of the
Nominations and Compensation Committee (the "Compensation Committee") are
Messrs. Zankel (Chairman), Bialkin, Daniell, Ford and Pearson, Ms. Jordan
and Mrs. Wachner. From time to time, the Compensation Committee acts as a
nominating committee in recommending candidates to the Board as nominees
for election at the Annual Meeting of Stockholders or to fill such Board
vacancies as may occur during the year. The Compensation Committee will
consider candidates suggested by directors or stockholders. Nominations
from stockholders, properly submitted in writing to the Secretary of the
Company, will be referred to the Compensation Committee for consideration.
The Compensation Committee represents the full Board of Directors in
matters relating to the compensation of Company officers and, from time to
time, recommends to the full Board of Directors appropriate methods and
rates of director compensation. It also administers the Company's 1986
Option Plan, the Company's CAP Plan, those option plans of old Travelers
assumed by the Company in connection with the Travelers Merger and the
Travelers Group Executive Performance Compensation Plan (the "Compensation
Plan") approved by stockholders at the 1994 Annual Meeting. The
Compensation Committee will have the responsibility for administration of
the Travelers Group 1996 Stock Incentive Plan (the "1996 Incentive Plan")
if approved by stockholders at the Annual Meeting. A subcommittee of the
Compensation Committee, comprised of "outside directors" (as such term is
used in Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code")) will have the exclusive authority to grant options to Section
16(a) Persons and Covered Employees (as hereinafter defined) under the
Company's 1986 Option Plan and the 1996 Incentive Plan and to administer
certain other elements of the 1996 Incentive Plan covered by Section
162(m), if the adoption of such plan is approved by stockholders at the
Annual Meeting. The subcommittee also determines performance goals under
the Compensation Plan and is responsible for determining whether such goals
have been met. The Compensation Committee met nine times during 1995.
References herein to the "Compensation Committee" shall be deemed to be
references to the subcommittee in all cases where Section 162(m) of the
Code would require that action be taken by the subcommittee rather than the
full Compensation Committee.
Ethics and Public Affairs Committee. The members of the Committee are
Messrs. Bialkin (Chairman), Budd, Califano, Daniell, Ford, Mecum and
Wright, and Ms. Jordan. The Committee reviews and approves the Company's
compliance programs, relationships with external constituencies and public
activities. The Committee met three times during 1995.
Finance Committee. The members of the Committee are Messrs. Dimon
(Chairman), Armstrong, Danforth, Disharoon, Pearson, Tasco and Zankel, and
Mrs. Wachner. The Committee reviews issues relating to funding
requirements, significant investments, complex financial instruments and
credit rating issues which arise in the Company's operations. The Committee
met three times during 1995.
- 14 -
<PAGE>
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
---
ELECTION OF EACH OF THE SIX NOMINEES IN CLASS II, C. MICHAEL ARMSTRONG,
KENNETH J. BIALKIN, DUDLEY C. MECUM, SANFORD I. WEILL, JOSEPH R. WRIGHT,
JR. AND ARTHUR ZANKEL, AS A DIRECTOR OF THE COMPANY FOR A THREE-YEAR TERM.
Assuming the presence of a quorum, directors shall be elected by a
plurality of the votes cast at the Annual Meeting by holders of Common
Stock and Series C Preferred Stock, voting as a single class, for the
election of directors. Under applicable Delaware law, in tabulating the
vote, broker nonvotes will not be considered present at the Annual Meeting
and will have no effect on the vote.
EXECUTIVE COMPENSATION
EXECUTIVE PERFORMANCE COMPENSATION PLAN.
The Compensation Plan, approved by stockholders in 1994, establishes
certain performance criteria for determining the maximum amount of bonus
compensation available, including that portion of bonuses payable in the
form of restricted stock under the Company's CAP Plan, for those executive
officers who, on the last day of the Company's taxable year, consist of the
chief executive officer and the four other most highly compensated
executive officers of the Company or its subsidiaries named in the Summary
Compensation Table in the Company's proxy statement from time to time (the
"Covered Employees"). The Compensation Plan sets forth performance-based
criteria based on the consolidated net income of the Company and its
subsidiaries for executive officers who have wide-ranging responsibilities
for the Company's overall performance.
The creation of a bonus pool in which the Company's Chief Executive
Officer and four most highly compensated other executive officers
participate is contingent upon the Company achieving at least a 10% Return
on Equity, as defined in the Compensation Plan. If a Return on Equity of at
least 10% is achieved, a bonus pool of 1.4% of Adjusted Net Income, as
defined in the Compensation Plan, will be established. If Return on Equity
exceeds 10%, the amount of the bonus pool is subject to cumulative
increases based upon the extent to which the Return on Equity exceeds the
10% minimum threshold. Accordingly, the Return on Equity calculation
established under the Compensation Plan is the basis on which both the
availability and size of the bonus pool is determined.
The Compensation Plan also establishes that up to 31% of any bonus
pool established will be available for bonus awards to the chief executive
officer and up to 23% will be available to each of the other three eligible
participants (other than Mr. Greenhill). Any portion (up to $3 million) of
a share of the bonus pool calculated for any of those four eligible
executive officers for a particular bonus year may be awarded by the
Compensation Committee to such person in a succeeding year to the extent
not awarded for the bonus year; provided that such award by the
Compensation Committee will only be made to reward extraordinary
performance by any such executive officer.
- 15 -
<PAGE>
As a result of the resignation of Mr. Greenhill, a fifth individual
will be entitled to share in the bonus pool for 1996. In accordance with
the terms of the Compensation Plan, the amount of the bonus pool for 1996
will be initially determined without taking such additional individual into
account and the bonus pool will then be increased by the dollar amount
available to be paid to any one of the three most highly paid executives
other than the Chief Executive Officer. The net result will be that the
Chief Executive Officer will be entitled to a maximum bonus equal to 25.2%
of the adjusted bonus pool and each of the four other eligible executive
officers will be entitled to a maximum bonus of 18.7% of the adjusted bonus
pool.
In accordance with the Compensation Plan, Mr. Greenhill's bonus was
based on the Defined After-Tax Earnings of Smith Barney Holdings and its
subsidiaries. Because Defined After-Tax Earnings for 1995 exceeded $100
million, Mr. Greenhill was entitled to receive a bonus.
In the event that bonus compensation thresholds are met and the
percentages set forth in the Compensation Plan are applied, the
Compensation Committee nevertheless retains discretion to reduce or
eliminate payments under the Compensation Plan for any of the participating
executive officers to take into account subjective factors, including an
individual's performance or other relevant criteria.
REPORT OF THE NOMINATIONS AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Statement of Philosophy. The Company seeks to attract and retain
highly qualified employees at all levels, including particularly executive
officers whose performance is critical to the Company's success. In order
to accomplish this, the Company is willing to provide superior compensation
for superior performance. Such performance is measured on either a company-
wide or a business unit basis, or using both criteria, as the nature of an
executive's responsibilities may dictate.
Compensation of executive officers in 1995 consisted of base salary
and performance-based bonuses, a significant portion of which was
restricted stock awarded pursuant to the Company's CAP Plan. Bonuses are
generally discretionary, but for the chief executive officer of the Company
and the four most highly compensated other executive officers they are
determined under the Compensation Plan discussed above. In addition, under
the Company's long-standing policy of providing economic incentives to its
employees at all levels in the form of stock ownership, the Company from
time to time grants stock options, not only to executive officers but to a
broad range of employees. All executives who are members of the Company's
Planning Group (the "Planning Group") have agreed that, for so long as they
are members of such group, they will not dispose of their shares of Common
Stock except for donations to charity or for use in connection with
participation in the stock option and restricted stock plans of the
Company.
It is also the Company's policy to take all reasonable steps to obtain
the fullest possible corporate tax deduction for compensation paid to its
executive officers by qualifying for the exemptions from limitations on
such deductibility under Section 162(m) of the Code. To this end, in 1993
the Company requested and received stockholder
- 16 -
<PAGE>
approval for changes to the 1986 Option Plan to meet such Code
requirements, and in 1994 obtained stockholder approval of the Compensation
Plan, which is designed to have such effect. Stockholder approval is being
sought for the adoption of the 1996 Incentive Plan which also is designed
to have such effect.
1995 Compensation Committee Review Process. Compensation of the Chief
Executive Officer is established by the Compensation Committee, which is
composed entirely of nonemployee directors. Executive compensation, other
than the compensation of the Chief Executive Officer of the Company, is
reviewed and approved annually by the Compensation Committee. The
Compensation Committee considered and gave various weights to both
qualitative and quantitative factors, including such factors as earnings,
earnings per share, return on equity and return on assets. In conducting
such review, the Compensation Committee has generally examined changes in
the Company's financial results over time, both overall corporate results
and on an operating unit basis, and comparative data for comparable
companies, to the extent it is publicly available. However, the analysis of
corporate performance in financial reporting terms alone is not
determinative. The Compensation Committee also gave significant weight to
qualitative factors with particular emphasis on the performance of the
Company's executive team in a year in which, among other factors, a
significant disposition was completed, an agreement pertaining to a major
acquisition was entered into, and certain internal restructuring activities
were emphasized.
With regard to its consideration of compensation for the Chief
Executive Officer and the three other most highly compensated executive
officers of the Company other than Mr. Greenhill, the maximum amounts
available for bonus awards to each such person were determined pursuant to
the formula set forth in the Compensation Plan. Under the Compensation
Plan, the maximum bonus pool for 1995 for the Chief Executive Officer and
the three other most highly compensated executive officers of the Company
other than Mr. Greenhill was approximately $36.5 million. The amounts
awarded to such persons is set forth in the Summary Compensation Table
below and total approximately $17 million.
With regard to its consideration of compensation for the Chief
Executive Officer and the three other most highly compensated executive
officers of the Company other than Mr. Greenhill, the Compensation
Committee utilized the assistance of an independent compensation consulting
firm.
The amount of Mr. Greenhill's bonus for 1995, set forth in the Summary
Compensation Table below, was calculated in accordance with his employment
agreement based solely on Defined After-Tax Earnings (as defined in the
Compensation Plan).
Base Salary. Increases in base salary paid to all executive officers
are determined periodically, based upon the individual's performance, any
change in the scope of responsibilities and the individual's seniority and
experience. Examination of competitors' pay practices in this area is
conducted periodically to ensure that the Company will be in a position to
attract new talent and retain current valuable employees.
- 17 -
<PAGE>
Incentive Bonuses. Discretionary bonus awards are generally a
substantial part of total compensation of Company executives. Factors
considered included not only individual performance but also performance of
each business unit for which the executive may be directly responsible, and
such individual's contributions to overall Company policy and strategic
decisions through membership in the corporate Planning Group that consists
of the most senior executives of the Company. Because a percentage of
executive compensation is paid in the form of restricted stock under the
Company's CAP Plan, bonus awards are not only a short-term cash reward but
also a long-term incentive that ties future realization of benefits by such
executives to the enhancement of stockholder values. The restricted period
applicable to awards to executive officers under the CAP Plan was extended
from two to three years beginning with the awards made with respect to
1994, in furtherance of the long-term nature of such compensation. In
addition, the Compensation Plan provided for the determination of maximum
bonuses payable under such plan to the chief executive officer and the
other four most highly compensated executives.
Stock Options. Other than grants of stock options that arose by
operation of the reload feature of the 1986 Option Plan approved by
stockholders in 1992 (which do not increase a participant's net equity
position) no grants of stock options have been made to Mr. Weill since the
Company's initial public offering in 1986 or during 1995 to any other
Covered Employee except 100,000 to Mr. Dimon and 50,000 to Mr. Lipp and,
with respect to Mr. Dimon, options granted in lieu of a portion of shares
of restricted stock awarded under the CAP Plan. In making option awards
generally, the Compensation Committee considers the number of options
previously granted to each executive in order to determine whether the
total number of shares covered by all outstanding option awards adequately
reflects the individual's importance to the future success and profitability
of the Company. The 1986 Option Plan expires by its terms on September 24, 1996
and stockholders are being asked to approve the 1996 Incentive Plan at the
Annual Meeting.
Compensation of the Chief Executive Officer. The Compensation
Committee believes that 1995 was a year of accomplishment for the Company,
marked by another substantial increase in operating earnings per share.
Externally there was one major strategic disposition, as well as the
agreement to acquire the property and casualty insurance operations of
Aetna. Mr. Weill provided the leadership for these accomplishments.
No grants of additional stock options were made to Mr. Weill in 1995,
other than by operation of the reload feature of the Company's 1986 Option
Plan upon Mr. Weill's exercise of his Control Data Options (as defined
herein) and the reload options associated with such exercise.
Based on the factors considered by the Compensation Committee as
discussed elsewhere in this report the Compensation Committee has concluded
that the compensation of each of the senior executives named in the Summary
Compensation Table was appropriate.
THE NOMINATIONS AND
COMPENSATION COMMITTEE:
- 18 -
<PAGE>
ARTHUR ZANKEL (Chairman) ANN DIBBLE JORDAN
KENNETH J. BIALKIN ANDRALL E. PEARSON
ROBERT F. DANIELL LINDA J. WACHNER
THE HONORABLE GERALD R. FORD
- 19 -
<PAGE>
Compensation Committee Interlocks and Insider Participation
The persons named above under the caption "Election of Directors--
Committees of the Board of Directors--Nominations and Compensation
Committee" were the only members of such Committee during 1995. Mr. Bialkin,
a member of the Compensation Committee, is a partner in the law firm of
Skadden, Arps, Slate, Meagher & Flom, which performs legal services for the
Company from time to time. Mr. Bialkin will not serve as a member of the
subcommittee of the Compensation Committee that will administer the
Compensation Plan, grant awards to Section 16(a) Persons under the CAP Plan
and grant options to Section 16(a) Persons under the 1986 Option Plan and
the 1996 Incentive Plan if its adoption is approved by the stockholders at
the Annual Meeting.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation paid
by the Company and its subsidiaries to the chief executive officer and the
four other most highly compensated executive officers for services rendered
to the Company and its subsidiaries in all capacities during each of the
fiscal years ended December 31, 1995, 1994 and 1993. The format of this
table has been established by the SEC. All share numbers in the column
entitled "Securities Underlying Stock Options (number of shares)" and in
the footnotes to the table have been restated to the extent necessary to
give effect to the two stock dividends declared and paid during 1993.
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards(A)
----------------------------------------------- -----------------------------
Securities
Other Restricted Underlying
Name and Principal Annual Stock Stock Options All Other
Position Compensation Awards (number of Compensation
at 12/31/95 Year Salary($) Bonus($) ($)(B) ($)(C) shares) ($)(D)
- ---------------------- ------- ----------- ---------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sanford I. Weill 1995 $1,025,000 $4,303,750 $ 277,781 $2,261,608 $ 2,754,404 $ 2,448
Chairman of the Board 1994 1,025,000 2,653,750 224,219 1,528,327 525,517 3,416
and Chief Executive 1993 1,018,750 3,030,313 242,290 1,618,515 2,057,219 2,404
Officer
James Dimon 1995 650,000 2,904,875 4,889 1,460,153 436,700 1,142
President and 1994 629,167 2,145,208 12,224 750,894 84,031(F) 1,336
Chief Operating 1993 518,750 1,430,312 -- 726,202 450,530 1,132
Officr
Robert I. Lipp 1995 600,000 2,160,000 5,333 1,119,997 245,143 1,962
Vice Chairman 1994 589,167 1,600,208 866,365 96,641 1,982
1993 532,083 1,276,979 666,691 184,541 1,900
Robert F. Greenhill(E) 1995 995,000 10,922,453 109,844 0 0 22,706,150
Chairman and CEO, 1994 995,000 4,034,755 50,000 2,128,770 0 44,150
Smith Barney Inc. 1993 516,635 3,448,341 19,982,785 1,333,333 0
Joseph J. Plumeri II 1995 950,000 1,701,250 5,333 1,064,983 48,527 74,757
Vice Chairman 1994 655,833 1,304,542 5,333 764,600 100,000 293,350
1993 187,500 1,175,625 499,166 200,000 0
</TABLE>
(A) The shares reflected as grants of stock options for 1993, 1994
and 1995 were in each case reload options created upon an exercise o
outstanding options by a surrender
- 20 -
<PAGE>
of previously owned shares, except for options covering: 230,666 shares and
100,000 shares granted to Mr. Dimon in 1993 and 1995, respectively; 1,333,333
shares granted to Mr. Greenhill in 1993; 50,000 shares granted to Mr. Lipp in
each of 1994 and 1995; and 200,000 and 100,000 shares granted to Mr. Plumeri in
1993 and 1994, respectively.
(B) Except as set forth in this column, none of the executive officers
received other annual compensation during 1995 required to be set forth in this
column. The aggregate amounts set forth for Mr. Weill and Mr. Greenhill for
1995 include $46,635 and $109,844, respectively, for use of Company
transportation.
(C) Restricted stock awards are made under the Company's CAP Plan. The
CAP Plan provides for payment, mandatory as to senior executives and certain
others within the Company and certain of its subsidiaries, of a portion of
compensation in the form of awards of restricted stock at a discount (currently
25%) from market value. Under the current award formula in effect under the CAP
Plan for corporate executives, the following percentages of annual compensation
are payable in the form of shares of restricted stock:
Annual Compensation % In Restricted Stock
- --------------------------------------- ---------------------
Up to $200,000 . . . . . . . . . . 10%
$200,001 to $400,000 . . . . . . . 15%
$400,001 to $600,000 . . . . . . . 20%
Amounts over $600,000 . . . . . . . 25%
Annual compensation generally consists of salary and incentive awards. The
recipient of restricted stock is not permitted to sell or otherwise dispose of
such stock (except by will or the laws of descent and distribution and except
in connection with participation in the reload program) for a period of two
years from the date of award with respect to awards made for years prior to
1994 and three years from the date of award for awards made for 1994 and after
(or such other period as may be determined to be applicable to various classes
of participants in the sole discretion of the Compensation Committee). Except
as noted in footnote (E), all of the awards listed in the table for 1993 vest
on the second anniversary of the date of award and for 1994 and 1995 vest on
the third anniversary of the date of award if the executive continues
employment with the Company during the vesting period. Upon expiration of such
restricted period, and assuming the recipient's continued employment with the
Company, the shares of restricted stock become fully vested and freely
transferable. From the date of award, the recipient may vote the restricted
stock and receives dividends or dividend equivalents on the shares of
restricted stock at the same rate as dividends are paid on all outstanding
shares of Common Stock. As of December 31, 1995, and including the awards made
in January 1996 in respect of 1995, the total holdings of restricted stock
under the CAP Plan and the market value at such date of such shares for each of
the persons in the Summary Compensation Table were as follows: Mr. Weill:
80,657 shares ($5,051,144.63); Mr. Dimon: 45,312 shares ($2,837,664); Mr. Lipp:
43,083 shares ($2,698,072.88); Mr. Greenhill: 61,040 shares ($3,822,630) and
Mr. Plumeri: 39,269 shares ($2,459,221.13). The year-end market price was
$62.625 per share.
- 21 -
<PAGE>
(D) Includes the Company matching grant for 1995 pursuant to the
Company's Savings Plan (in the form of Common Stock having a market value of
$1,000 at December 31, 1995) for Messrs. Weill, Dimon, Lipp, Greenhill and
Plumeri and supplemental life insurance paid by the Company. In the case of
Mr. Greenhill, also includes $22,662,000 accrued in connection with his
severance arrangement consisting of $2,985,000 attributable to salary,
$9,632,000 attributable to the unamortized cost of unvested restricted stock,
$3,016,000 attributable to the cash value of restricted stock awarded under the
CAP Plan, $6,817,000 attributable to the cash value of unexercised options and
$212,000 attributable to benefits. In the case of Mr. Plumeri, also includes
the value of certain incentive awards and other benefits granted by the seller
and assumed and satisfied by Smith Barney in connection with the acquisition of
the domestic retail business of Shearson Lehman Brothers Inc. by Smith Barney.
(E) In addition to the restricted stock awarded under the CAP Plan
(referred to in footnote C above), Mr. Greenhill received a restricted stock
award pursuant to his employment agreement. See "Employment Protection
Agreements," below. Such award covered 533,333 shares and vests at a rate of
20% per year on the anniversary of the date of grant. At December 31, 1995,
320,000 shares, with an aggregate year-end market price (at $62.625 per share)
of $20,040,000, were subject to restriction. Effective January 15, 1996,
Mr. Greenhill resigned from his positions as a director and executive officer
of the Company.
(F) Includes 32,297 shares covered by options awarded at the election of
Mr. Dimon in lieu of restricted stock awarded to him under the CAP Plan.
STOCK OPTIONS GRANTED
The following table sets forth information with respect to stock options
granted during 1995 to each of the executives named in the Summary Compensation
Table. All options granted arose under the reload feature of the 1986 Option
Plan (which does not increase the net equity position of the participant)
except for Mr. Dimon's grant covering 100,000 shares and Mr. Lipp's grant
covering 50,000 shares. For Mr. Weill, these reload options arose upon the
exercise of reload options associated with the stock options granted by Control
Data Corporation ("Control Data Options") in 1986 when it was the parent
company of the Company's corporate predecessor to facilitate the public
offering of such subsidiary's stock. The "Grant Date Present Value" numbers
set forth in the table below were derived by application of a variation of the
Black-Scholes option pricing model. The following assumptions were used in
employing such model:
- - stock price volatility was calculated by using the weekly closing price of
the Company's Common Stock on the NYSE Composite Transactions Tape for the
one-year period prior to the grant date of each option;
- - the risk-free interest rate for each option grant was the interpolated
market yield on the date of grant on a Treasury bill with a term identical
to the subject option, as reported by the Federal Reserve;
- - the dividend yield on the date of the option grant (based upon the actual
annual dividend rate of 80 cents per share during 1995) was assumed to be
constant over the life of the option;
- 22 -
<PAGE>
- - exercise of the option was deemed to occur approximately one year after the
date of grant with respect to options that vest six months after the date of
grant and approximately four years after the date of grant with respect to
options that vest at a rate of 20% per year, as appropriate, based upon each
individual's historical experience of the average period between the grant
date and exercise date for those options that have vested;
- - the value arrived at through the use of the Black-Scholes model was
discounted by 25% to reflect the reduction in value (as measured by the
estimated cost of protection) of the options due to the agreement of
executives who are members of the Company's Planning Group not to sell any
Common Stock acquired through option exercises for as long as they are
members of the Planning Group. For purposes of calculating the discount, a
five year holding period was assumed even though each of the individuals may
be a member of the Planning Group for more than five years.
The potential value of options granted depends entirely upon a long-term
increase in the market price of the Common Stock: if the stock price does not
increase, the options would be worthless and if the stock price does increase,
this increase would benefit both option holders and all stockholders.
OPTION GRANTS IN 1995
Individual Grants(B)
- ----------------------------------------------------------------------
<TABLE><CAPTION>
Number
of % of
Securities Total
Underlying Options
Options Granted to
Granted % of Exercise or
(number all Base Price Grant Date
of Employees ($ per Expiration Present
Name shares in 1995 share) Date Value ($)(A)
---- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Sanford I. Weill............ 16,819 0.14% 39.50 02/18/03 $ 64,099
456,745 3.78 41.00 10/30/02 1,662,699
570,514 4.72 42.13 04/30/03 2,181,580
30,262 .25 49.38 02/18/03 134,421
392,106 3.24 53.13 10/30/02 1,856,684
415,944 3.44 49.88 10/30/02 1,851,809
509,621 4.21 53.50 04/30/03 2,510,122
362,393 3.00 59.50 10/30/02 1,993,408
------- ---- ---------
Total 2,754,404 22.78 12,254,822
James Dimon............ 10,398 .09 38.13 02/19/03 34,781
37,230 .31 41.00 10/30/02 133,190
44,798 .37 42.13 04/30/03 168,328
9,390 .08 47.75 02/19/03 40,142
81,521 .67 52.25 08/28/03 374,181
37,813 .31 53.13 10/30/02 176,114
9,168 .08 49.88 02/19/03 40,156
33,903 .28 49.88 10/30/02 149,258
40,016 .33 53.50 04/03/03 193,878
100,000 .83 54.00 12/14/05 1,123,500
32,463 .27 59.50 10/30/02 175,787
------ --- -------
Total 436,700 3.62 2,609,315
Robert I. Lipp............ 11,382 .09 38.63 02/22/03 36,365
30,306 .25 42.13 02/22/03 105,238
10,820 .09 42.13 05/02/03 37,572
30,686 .25 42.13 11/02/02 106,557
31,228 .26 53.13 11/02/02 135,842
7,941 .07 54.63 11/26/04 36,151
19,145 .16 54.63 02/22/03 87,158
- 23 -
<PAGE>
26,650 .22 54.63 11/02/02 121,324
26,985 .22 54.63 05/02/03 318,153
50,000 .41 54.00 12/14/05 226,500
------ --- -------
Total 245,143 2.02 1,210,860
Robert F.Greenhill............ 0 -- -- -- --
Joseph J. Plumeri II.......... 48,527 .40 45.50 07/23/03 138,302
</TABLE>
(A) All of the options granted in 1995 to Mr. Weill and Mr. Plumeri and
all but 100,000 options granted to Mr. Dimon and 50,000 options granted to
Mr. Lipp were reload options. Rather than enhance his or her holdings, reload
options are intended to enable an employee who exercises an option by tendering
previously owned shares to remain in the same economic position (the "Equity
Position") with respect to potential appreciation in the Company's Common Stock
as if he or she had continued to hold the original option unexercised. As
such, reload options meet the Company's objective of fostering continued stock
ownership in the Company by its key executives, but the receipt thereof by any
such executive does not result in a net increase in his or her Equity Position.
The table below sets forth the Equity Position of each of the above named
executives with respect to options exercised and reload options granted in
1995. The Equity Position of each of such executives has remained constant.
NET CHANGES IN EQUITY POSITION(1)
<TABLE><CAPTION>
Ending Net Equity Position
Beginning Net Equity New New
Position/ Net Reload Change
Options Shares Options In Equity
Name Exercised Received Granted Position
- --------------------- ---------------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sanford I. Weill 3,172,473 418,069 2,754,404 0
James Dimon 383,681 46,981 336,700 0
Robert I. Lipp 229,291 34,148 195,143 0
Robert F. Greenhill 0 0 0 0
Joseph J. Plumeri II 55,599 7,072 48,527 0
</TABLE>
(1) The "Options Exercised" column sets forth the number of options
exercised by such executive. The "Net Shares Received" sets forth the number
of shares such executive actually received upon exercise of the option after
subtracting the number of previously owned shares tendered to pay the exercise
price and/or withheld to pay taxes on the exercise. The "New Reload Options"
column sets forth the number of reload options granted to the executive which
is in an amount equal to the number of shares tendered and/or withheld. The
"Net Change in Equity Position" is the difference between the number of options
exercised less the sum of the net shares received and the number of reload
options granted.
(B) The option price of each option granted under the 1986 Option Plan is
not less than the fair market value of the Common Stock subject to the option,
determined in good faith by the Compensation Committee. Under current rules
established by the Compensation Committee, fair market value is the closing
sale price of Common Stock on the NYSE Composite Transactions Tape on the last
trading day prior to the date of grant of the option. Options generally vest in
cumulative installments of 20% on each anniversary of the date of grant such
that the options are fully exercisable on and after five years from the
- 24 -
<PAGE>
date of grant until ten years and one month following such grant (in the case
of non-qualified stock options, which represent all options currently
outstanding). The Compensation Committee has discretion to establish a slower
vesting schedule for options granted under the 1986 Option Plan. Participants
are entitled to direct the Company to withhold shares otherwise issuable upon
an option exercise to cover in whole or in part the tax liability associated
with such exercise, or participants may cover such liability by surrendering
previously owned shares (other than restricted stock).
Under the reload feature of the 1986 Option Plan, participants who tender
previously owned shares (including CAP Plan restricted stock) to pay all or a
portion of the exercise price of vested stock options or tender previously
owned shares or have shares withheld to cover the associated tax liability may
be eligible, in the discretion of the Compensation Committee, to receive a
reload option covering the same number of shares as are tendered or withheld
for such purposes. Such optionee may choose to receive either (i) unrestricted
Incremental Shares (as defined in the CAP Plan) and no reload option, or
(ii) Incremental Shares subject to a period of restriction on the ability to
sell or otherwise transfer such shares (except in certain circumstances) and
a reload option to be granted in accordance with the applicable terms of the
1986 Option Plan. Section 16(a) Persons are required to accept restricted
shares under clause (ii) above. The initial Compensation Committee
determination has set the restricted period at two years. Unless the
Compensation Committee in its discretion modifies or eliminates such
restrictions, optionees are permitted to transfer their Incremental Shares
during the restricted period only under the limited circumstances of an event
of financial hardship demonstrated to the reasonable satisfaction of the Senior
Vice President, Human Resources, of the Company. If the exercise price of an
option is paid by delivery of a number of shares of restricted stock, then the
optionee will receive, in connection with the exercise, an equal number of
identically restricted shares of Common Stock. Further, in order for an optionee
to receive a reload option in connection with his or her exercise of a vested
option, the market price of Common Stock on the date of exercise must equal or
exceed the minimum market price level established by the Compensation Committee
from time to time (the "Market Price Requirement"). The Compensation Committee
has established that the initial Market Price Requirement shall be a market
price on the date of exercise equalto or greater than 120% of the price of
the option being exercised. If a market price does not equal or exceed the
applicable Market Price Requirement, a vested option may be exercised but no
reload option will be granted in connection with such exercise.
The market value on the date of grant of a reload option establishes the
exercise price of such option, and such option will have a term equal to the
remaining term of the original option, except that the reload option will not
be exercisable until six months after its date of grant, unless the
Compensation Committee determines otherwise.
- 25 -
<PAGE>
Reload options are intended to encourage employees to exercise options at
an earlier date and to retain the shares so acquired, in furtherance of the
Company's long-standing policy of encouraging increased employee stock
ownership. With standard stock options, sale of at least a portion of the stock
to be acquired by exercise is often necessitated to cover the exercise price or
the associated withholding tax liability. The employee thereby receives fewer
shares upon exercise, and also forgoes any future appreciation in the stock
sold. By use of previously owned shares to exercise an option, an employee is
permitted to gain from the past price appreciation in such shares, and receives
a new option at the current market price. The reload option so granted enables
the employee to participate in future stock price appreciation.
STOCK OPTIONS EXERCISED
The following table sets forth, in the aggregate, the number of shares
underlying options exercised during 1995 and states the value at year-end of
exercisable and unexercisable options remaining outstanding. The "Value
Realized" column reflects the difference between the market price on the date
of exercise and the market price on the date of grant (which establishes the
exercise price for the option) for all options exercised, even though the
executive may have actually received fewer shares as a result of the surrender
of previously owned shares to pay the exercise price or the tax liability, or
the withholding of shares to cover the tax liability associated with option
exercise. Accordingly, the "Value Realized" numbers do not necessarily reflect
what the executive might receive, should he or she choose to sell the shares
acquired by the option exercise, since the market price of the shares so
acquired may at any time be higher or lower than the price on the exercise date
of the option.
AGGREGATED OPTION EXERCISES IN 1995
and
1995 YEAR-END OPTION VALUES(A)
<TABLE><CAPTION>
Number of Number of Securities
Securities Underlying Unexercised
Underlying Value Options at Value of Unexercised
Options Realized ($) 1995 Year-End In the Money Options
Name Exercised(B) (C) (Number of Shares) at 1995 Year-End($)
---- ------------- ------------ ----------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanford I. Weill 3,172,473 $41,971,395 0 3,830,330 $ 0 $89,944,675
James Dimon 383,681 4,992,890 0 726,232 0 14,805,124
Robert I. Lipp 229,291 3,487,929 29,851 377,461 436,571 8,912,804
Robert F. Greenhill 0 0 533,333 800,000 15,000,000 22,500,000
Joseph J. Plumeri II 55,599 611,589 44,401 248,527 1,296,278 6,646,025
</TABLE>
(A) All of the stock options exercised by Mr. Weill in 1995 were reload
options
arising from Control Data Option exercises.
(B) This column reflects the number of shares underlying options
exercised in 1995 by the named executive officers. The actual number of shares
received by each of these individuals from options exercised in 1995 (net of
shares surrendered or withheld to cover the exercise price and tax liabilities)
was: Mr. Weill, 418,069 shares; Mr. Dimon,
- 26 -
<PAGE>
46,981 shares; Mr. Lipp, 34,148 shares; Mr. Greenhill, 0 shares; and Mr.
Plumeri, 7,072 shares.
(C) "Value Realized" is in each case calculated as the difference between
the market price on the date of exercise and the market price on the date of
grant, which establishes the exercise price for option exercise. All of the
above executives have agreed that, for so long as they are members of the
Planning Group, they will not dispose of their shares of Common Stock except
for donations to charity or for use in connection with participation in the
stock option and restricted stock plans of the Company. Other than shares of
Common Stock used in connection with employee compensation plans or charitable
contributions, at December 31, 1995, none of the above employees had ever
disposed of any Common Stock.
PERFORMANCE GRAPH
The following line graph compares annual changes in "Cumulative Total
Return" of the Company (as defined below) with (i) Cumulative Total Return of a
performance indicator of equity stocks in the overall stock market, the S&P 500
Index, and (ii) Cumulative Total Return of a "Peer Index," each for the last
five years. The Peer Index is the S&P Financial Index, which comprises the
following Standard & Poor's industry groups: Money Center Banks, Major Regional
Banks, "Savings & Loan", Life Insurance, Multi-Line Insurance, Property and
Casualty Insurance, Personal Loans and Financial Services (excluding the
Company and both of the government-sponsored entities: the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association). The Peer
Index has been weighted based on market capitalization. "Cumulative Total
Return" is calculated (in accordance with SEC instructions) by dividing (i) the
sum of (A) the cumulative amount of dividends during the relevant period,
assuming dividend reinvestment at the end of the month in which such dividends
were paid, and (B) the difference between the market capitalization at the end
and the beginning of such period, by (ii) the market capitalization at the
beginning of such period.
The comparisons in this table are set forth in response to SEC disclosure
requirements, and therefore are not intended to forecast or be indicative of
future performance of the Common Stock.
TRAVELERS GROUP INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
GRAPH
1990 1991 1992 1993 1994 1995
----- ------ ------ ------ ------ -------
Travelers Group Inc. 100.0 174.65 218.18 355.51 301.00 594.96
S&P 100.0 124.35 141.34 155.59 155.46 216.24
Peer Index 100.0 136.38 176.87 197.07 191.45 293.39
- 27 -
<PAGE>
Assumes $100 invested at the closing price on December 31, 1990, in the
Company's Common Stock, the S&P 500 Index, and the Peer Index, representing the
S&P Financial Index (excluding the Company, and both of the government-
sponsored entities: the Federal Home Loan Mortgage Corporation and the Federal
National Mortgage Association). The Peer Index has been weighted based on
market capitalization.
COMPENSATION OF DIRECTORS
Pursuant to the Company's By-Laws, the members of the Board of Directors
are compensated in a manner and at a rate determined from time to time by the
Board of Directors. It has been the practice of the Company since its initial
public offering in 1986 to pay its outside directors in shares of Common Stock,
in order to assure that the directors have an ownership interest in the Company
in common with other stockholders. Compensation of outside directors of the
Company currently consists of an annual retainer of $100,000, payable in shares
of Common Stock other than the amount of current tax liability incurred by a
director who has not elected to defer receipt of compensation which amount is
paid in cash. A director who has elected to defer receipt of compensation will
be paid entirely in shares of Common Stock.
Directors receive no additional compensation for participation on
committees of the Board. Additional compensation, if any, for special
assignments undertaken by directors will be determined on a case by case basis,
but no such additional compensation was paid to any director in 1995. Directors
who are employees of the Company or its subsidiaries do not receive any
compensation for their services as directors.
RETIREMENT PLANS
Executive officers and employees are eligible to participate in the
Travelers Group Pension Plan (the "Retirement Plan") on the later of attaining
age 21 or completion of one year of service. Benefits under the Retirement Plan
vest after five years of service with the Company or its subsidiaries. The
normal form of retirement benefit is, in the case of a married participant, a
joint and survivor annuity payable over the life of the participant and his or
her spouse, or in the case of an unmarried participant, an annuity payable over
the participant's life. Instead of such normal form of payment, participants
may elect to receive other types of annuities or a single sum payable at
retirement or, with respect to certain participants, other termination of
service.
When expressed as a single sum payment option, benefits accrue for the
first five years of covered service at an annual rate varying between .75% and
4.0% of the participant's qualifying compensation, depending upon the
participant's age at the time of accrual. "Qualifying compensation" generally
includes base salary (before pre-tax contributions to the Savings Plan or other
benefit plans), overtime pay, commissions and bonuses. Under rules promulgated
by the Internal Revenue Service (the "Service"), a ceiling of $150,000 for 1995
(subject to annual adjustment) is imposed on the amount of compensation that
may be considered "qualifying compensation" under the Retirement Plan.
- 28 -
<PAGE>
During the period of the sixth through the fifteenth year of covered
service, benefits accrue at an annual rate of between 1.25% and 5.0% of the
participant's qualifying compensation, depending upon the participant's age at
the time of accrual. After a participant has completed 15 years of covered
service, benefits accrue at an annual rate varying between 1.25% and 7.0% of
the participant's qualifying compensation, depending upon the participant's age
at the time of accrual. There are also minimum benefits provided for under the
Retirement Plan.
Subject to the statutory maximum benefits payable by a qualified plan (as
described below), a participant also accrues annually an additional amount
calculated as 1.0% to 2.5% of qualifying compensation (again depending upon his
or her age) for that part of qualifying compensation in excess of the amount of
the Social Security wage base. There is an interest accrual added to the
participant's single sum entitlement. This interest amount is determined by
multiplying the prior year's single sum by a percentage calculated annually
pursuant to a formula set forth in the Plan.
The statutory maximum retirement benefit that may be paid to any one
individual by a tax qualified defined benefit pension plan in 1995 is $120,000
annually. Years of service credited under the Retirement Plan to date for each
of the individuals named in the Summary Compensation Table are as follows:
Mr. Weill, 9 years; Mr. Dimon, 9 years; Mr. Lipp, 9 years; Mr. Plumeri, 23
years; and Mr. Greenhill, 2 years.
The Company and certain Company subsidiaries provide certain pension
benefits, in addition to the statutory maximum benefit payable under tax
qualified pension plans, under non-funded, non-qualified retirement benefit
equalization plans ("RBEPs"). The benefits payable under RBEPs are unfunded,
and will come from the general assets of each plan's sponsor. In 1993, the
Compensation Committee amended the RBEPs in two respects: first, to exclude
certain executives of the Company and its subsidiaries (including each of the
persons named in the Summary Compensation Table) and employees of certain
subsidiaries from further participation in the RBEPs, and second, to limit the
compensation covered by such plans to a fixed amount of $300,000 (equal to
twice the 1994 statutory maximum qualifying compensation without giving effect
to any future adjustments) less amounts covered by the Retirement Plan, thereby
limiting benefits payable under the RBEPs to all participants. No benefits were
accrued in 1995 under any of the RBEPs for the account of each of the persons
named in the Summary Compensation Table.
Effective at the end of 1993, the Compensation Committee also froze
benefits payable under the Company's Supplemental Retirement Plan ("SERP")
covering supplemental retirement benefits to designated senior executives of
the Company and its subsidiaries. At that time, 25 individuals were SERP
participants, including each of the individuals named in the Summary
Compensation Table. The maximum benefit payable under SERP is also reduced by
any benefits payable under the Retirement Plan (or its predecessor plans, if
applicable), under any applicable RBEP, under any other Company or subsidiary
sponsored qualified or non-qualified defined benefit or defined contribution
pension plan (other than the Savings Plan or other 401(k) plans), and under the
Social Security benefit program.
- 29 -
<PAGE>
Estimated annual benefits under the three benefit plans of the Company for
the five executive officers named in the Summary Compensation Table using the
applicable formulas under the Retirement Plan and the frozen RBEP and SERP
Plans and assuming their retirement at age 65, would be as follows: Mr. Weill,
$615,187; Mr. Dimon, $238,807; Mr. Lipp, $288,986; Mr. Plumeri, $83,059; and
Mr. Greenhill, $128,836. Mr. Plumeri's annuity under the Retirement Plan
includes his accrued annuity transferred from the retirement plan of Shearson
Lehman Brothers Holdings, Inc. These estimates were calculated assuming that
the interest accrual was 8% for 1989 through 1991, 6% for 1992 through 1993,
5.5% for 1994, 7% for 1995 and 5.5% thereafter until the participant retires at
the age of 65, and that the current salary of the participant, the 1994 dollar
ceiling on qualifying compensation (which was set by legislation adopted in
1993 at $150,000 annually), the 1995 Social Security wage base and the current
regulatory formula to convert lump-sum payments to annual annuity figures each
remains unchanged.
EMPLOYMENT PROTECTION AGREEMENTS
The Company has entered into employment protection agreements with certain
of its executive officers. Under the agreement with Mr. Weill, the Company
agrees to employ Mr. Weill as its Chief Executive Officer (and Mr. Weill agrees
to serve in such capacity) with an annual salary, incentive participation and
employee benefits as determined from time to time by the Company's Board of
Directors. The agreement contains automatic one-year renewals (unless notice of
nonrenewal is given by either party). In the event of his termination of
employment without cause, the agreement provides that Mr. Weill will be paid
and entitled to receive other employee benefits (as in effect at the
termination date) through the remaining term of the agreement and will be
entitled to two years additional vesting and exercise of his stock options (and
a cash payment based on the value of any portion of the stock options that
would not vest within such additional period). During such period of continuing
payments and stock option vesting and exercise, Mr. Weill would be subject to a
noncompetition agreement in favor of the Company.
Mr. Plumeri is a party to an employment agreement, dated December 30,
1994, with Smith Barney, a subsidiary of the Company pursuant to which he has
agreed to serve as Vice Chairman of the Company through July 30, 1997. Under
the agreement, Mr. Plumeri is entitled to an annual base salary and
consideration for an annual discretionary bonus under the Compensation Plan
(or, in the event that Mr. Weill ceases to be chief executive officer of the
Company during the term of the agreement, to specified levels of bonus
payments). The agreement provides that Mr. Plumeri will participate in the CAP
Plan, will be reimbursed for the cost of certain life insurance and will be
entitled to participate in other employee benefit plans generally available to
senior executives. The agreement also provides that Mr. Plumeri will be
entitled to specified payments in the event Mr. Plumeri's employment is
terminated. Under the terms of the agreement, Mr. Plumeri received option
grants under the 1986 Option Plan which are reflected in the table of Option
Grants above. During any period after termination in which he receives
compensation under the terms of the agreement, Mr. Plumeri will be subject to a
prohibition on hiring certain former employees of the Company and its
subsidiaries.
Mr. Greenhill served as Chairman of the Board and Chief Executive Officer
of SB Holdings from June 1993 until January 1996 pursuant to an employment
agreement,
- 30 -
<PAGE>
dated June 23, 1993, as amended, that provided for annual compensation based
upon a percentage of the consolidated after-tax earnings of SB Holdings and its
subsidiaries and certain other Company subsidiaries. Under the agreement,
Mr. Greenhill was granted an option to purchase 1,333,333 shares of Common
Stock at an option price of the then-current market price of $34.50, and a
grant of 533,333 shares of restricted stock, vesting at 20% a year over five
years (all share numbers and exercise prices in this paragraph have been
restated for the subsequent stock split in August 1993). The agreement also
provided that, in the event of separation from employment under certain
conditions, Mr. Greenhill was entitled to continued payment of compensation for
a period of up to three years and continued vesting of stock options and
restricted stock for a period of two years (with any stock options or
restricted stock vesting beyond such two year period to be "cashed out" at the
time of separation). Mr. Greenhill terminated his employment in January 1996
under the foregoing provisions. During the period in which he receives
compensation under the terms of the agreement, Mr. Greenhill will be subject to
a prohibition on hiring certain former employees of Smith Barney or its
subsidiaries.
CERTAIN INDEBTEDNESS
Certain executive officers have from time to time, including periods
during 1995, incurred indebtedness to Smith Barney, a wholly owned subsidiary
of the Company and a registered broker-dealer, on margin loans against
securities accounts with Smith Barney. Such margin loans were made in the
ordinary course of Smith Barney's business, were made on substantially the same
terms (including interest rates and collateral) as those prevailing for
comparable transactions for other persons, and did not involve more than the
normal risk of collectability or present other unfavorable features.
CERTAIN TRANSACTIONS
Pursuant to the terms of his employment agreement, Mr. Greenhill was
reimbursed for use of personal aircraft for company business at an arms' length
rate charged for air charter by an unaffiliated third party. During 1995, such
reimbursements to two aircraft companies of which Mr. Greenhill is the sole
stockholder totaled approximately $748,679.
ITEM 2:
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("Peat Marwick")
as the independent auditors of the Company for 1996. Peat Marwick has served
as the independent auditors of the Company and its predecessors since 1969.
Arrangements have been made for a representative of Peat Marwick to attend the
Annual Meeting. The representative will have an opportunity to make a statement
if he or she desires to do so, and will be available to respond to appropriate
stockholder questions.
- 31 -
<PAGE>
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
---
OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR 1996. Assuming the presence of a quorum, the affirmative vote of a
majority of the votes cast by the holders of shares of Common Stock and Series
C Preferred Stock present and entitled to vote on this item at the Annual
Meeting, voting as a single class, is required to ratify the selection of the
Company's auditors. Under applicable Delaware law, in determining whether this
item has received the requisite number of affirmative votes, abstentions and
broker nonvotes will be counted and will have the same effect as a vote against
this item.
ITEM 3:
APPROVAL OF AN INCREASE IN AUTHORIZED COMMON STOCK
On January 24, 1996, the Board of Directors unanimously approved an
amendment to the Certificate of Incorporation of the Company to increase
to 1.5 billion the number of shares of the Common Stock authorized for
issuance, and directed that the amendment be submitted to a vote of
stockholders at the Annual Meeting. The form of the proposed amendment
(the "Amendment") is attached to this Proxy Statement as Annex A.
Paragraph A of Article Fourth of the Company's Certificate of
Incorporation as currently in effect authorizes the issuance of up to an
aggregate of 500 million shares of Common Stock. As of the Record Date,
336,445,965 shares of Common Stock were issued and outstanding including
17,388,274 shares issued but held by subsidiaries of the Company.
Approximately 57 million shares of Common Stock have been reserved for issuance
pursuant to various employee compensation and benefit plans of the Company and
of the Company's subsidiaries, and 10,694,532 shares were reserved for issuance
upon conversion of outstanding convertible securities of the Company. There
were, therefore, as of the Record Date, 500 million shares of Common
Stock authorized for issuance, and approximately 404 million issued or reserved
for issuance, leaving approximately 96 million shares of authorized Common
Stock available for future issuances by the Company. The Board believes it
would be desirable to increase the number of shares of authorized Common Stock
in order to make available additional shares for possible stock dividends,
stock splits, including the 3 for 2 stock split payable to stockholders of
record on May 6, 1996 approved by the Board of Directors subject to the
approval by stockholders of this Item 3, employee benefit plan issuances,
acquisitions, financings and for such other corporate purposes as may arise.
Therefore, the Board has approved and recommends to stockholders an increase
in the number of shares of authorized Common Stock to an aggregate of
1.5 billion shares in accordance with the Amendment.
The Company has no specific plans currently calling for issuance of any of
the additional shares of Common Stock, other than the 3 for 2 stock split
referred to above. The rules of the NYSE currently require stockholder
approval of issuances of Common Stock under certain circumstances including
those in which the number of shares to be issued is equal to or exceeds 20% of
the voting power outstanding (or, currently, for the Company,
- 32 -
<PAGE>
issuance of more than approximately 57 million shares of Common Stock). In
other instances, the issuance of additional shares of authorized Common Stock
would be within the discretion of the Board of Directors, without the
requirement of further action by stockholders. All newly authorized shares
would have the same rights as the presently authorized shares, including the
right to cast one vote per share and to participate in dividends when and to
the extent declared and paid. Under the Company's Certificate of
Incorporation, stockholders do not have preemptive rights. While the issuance
of shares in certain instances may have the effect of forestalling a hostile
takeover, the Board does not intend or view the increase in authorized Common
Stock as an anti-takeover measure, nor is the Company aware of any proposed or
contemplated transaction of this type.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
---
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE TO 1.5
BILLION THE SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE. Assuming the
presence of a quorum, the affirmative vote of a majority of the votes entitled
to be cast at the Annual Meeting by the holders of all of the outstanding
shares of Common Stock and Series C Preferred Stock, voting as a single class,
is required to adopt the proposed Amendment to the Company's Certificate
of Incorporation. Under applicable Delaware law, in determining whether this
item has received the requisite number of affirmative votes, abstentions and
broker nonvotes will be counted and will have the same effect as a vote against
this item.
ITEM 4:
APPROVAL OF INCREASE IN SHARES ISSUABLE UNDER THE
TRAVELERS GROUP CAPITAL ACCUMULATION PLAN
AND CERTAIN OTHER AMENDMENTS
Item 4 is a proposal to increase the number of shares available for
issuance as restricted stock awards or grants of stock options under the CAP
Plan. As of January 31, 1996, the Compensation Committee, which administers
the CAP Plan, had determined that approximately 10,200 employees were eligible
to receive awards of restricted stock and grants of options under the CAP Plan.
As amended to date, the CAP Plan provides for grants of up to 31 million shares
in the form of awards of restricted stock and options. As of February 29, 1996,
24,801,311 shares of restricted stock have been awarded and options covering
2,614,262 shares of Common Stock were outstanding (with a weighted average
exercise price of $37.5546) and options covering 623,823 shares had been
exercised, leaving only 2,960,604 shares of Common Stock available for awards
of restricted stock and future option grants under the CAP Plan.
The CAP Plan was originally approved by stockholders in April 1989. On
January 24, 1996, the Board of Directors of the Company unanimously approved
Amendments Nos. 9 and 10 to the CAP Plan. Amendment No. 9 to the CAP Plan
("Amendment No. 9") conforms certain provisions of the CAP Plan to the
corresponding provisions of the proposed 1996 Incentive Plan. In particular,
the provisions relating to vesting and forfeiture of awards in the event of
termination of employment, retirement, death and disability will be amended to
ensure that such events will be afforded similar treatment under both the CAP
Plan and the 1996 Incentive Plan and a similar sale
- 33 -
<PAGE>
restriction will apply to Incremental Shares (as defined in the CAP Plan) issued
upon the exercise of an option granted under either such Plan. (See
"Description of the Travelers Group 1996 Incentive Plan - Expiration
of Awards" and " - Additional Forfeiture Provisions"). Amendment
No. 9 does not require stockholder approval but will not be effective
until April 24, 1996. Amendment No. 10 to the CAP Plan ("Amendment
No. 10") provides for the continued operation of the CAP Plan by
making available up to 10 million additional shares of Common Stock plus, to
the extent of repurchases of Common Stock after the date of approval of
Amendment No. 10, up to an additional 10 million shares, for awards of
restricted stock and the exercise of stock options thereunder, as well as
certain other amendments described below. The Board of Directors has
recommended that Amendment No. 10 be submitted to stockholders for approval at
the Annual Meeting. Because it increases the number of shares available for
issuance under the CAP Plan, in accordance with the Securities Exchange Act of
1934, the adoption of Amendment No. 10 requires the approval of stockholders of
the Company.
The Company believes that it has been able to attract highly qualified
personnel in part through the use of awards of restricted stock and options
grants, and that it is desirable to have the continued flexibility to attract
additional personnel, if needed, and to retain and reward exceptional
performance by employees through additional awards of restricted stock and
option grants. Accordingly, the Company is recommending that stockholders
approve Amendment No. 10. The full text of Amendment No. 10 is set forth in
Annex B to this Proxy Statement, and the description of Amendment No. 10 in
this Proxy Statement is qualified in its entirety by reference to the text of
such Amendment. A general description of the terms of the CAP Plan as in
effect prior to the effective date of Amendments Nos. 9 and 10 is set forth
below.
Under Amendment No. 10, 10 million additional shares of Common
Stock, plus, to the extent of repurchases of Common Stock after the date of
approval of Amendment No. 10, up to an additional 10 million shares, would be
made available to be the subject of awards of restricted stock or issued upon
the exercise of options granted under the CAP Plan, bringing the aggregate
number of shares subject to the CAP Plan up to 51 million shares of Common
Stock, including the 2,960,604 shares currently available for future awards of
restricted stock and stock option grants. Absent the recommended increase,
the usefulness of the CAP Plan as a continuing source of employee incentives
is severely impaired. Shares that are the subject of awards of restricted stock
or are covered by grants of stock options under the CAP Plan may be issued by
the Company from authorized but unissued stock, from shares previously issued
and reacquired by the Company, or any combination of such sources.
Amendment No. 10 also conforms certain provisions of the CAP Plan to the
corresponding provisions of the proposed 1996 Incentive Plan. In particular,
under Amendment No. 10, Participants may be permitted, in the discretion of the
Compensation Committee, to transfer options granted under the CAP Plan to
a trust for the benefit of family members. In addition, the Compensation
Committee may allow options to continue to vest in the event of the death
of a Participant. Under Amendment No. 10, if a Participant becomes disabled,
vested options may be exercised during the period of disability and, unless
the Compensation Committee determines otherwise, vesting will continue if
the Participant resumes employment. Amendment No.
- 34 -
<PAGE>
10 would permit a Participant to exercise vested options for a period of three
years following "retirement" (which for purposes of the CAP Plan will mean
being no longer occupied within one's business or profession and having
terminated active employment at age fifty-five and having completed five years
of service). Amendment No. 10 allows the Compensation Committee to alter the
vesting and exercisability periods for options under the CAP Plan, provided
that no such alteration which would extend such time periods may be made
without such Participant's written consent.
Restricted stock is awarded under the CAP Plan based upon formulas applied
to qualifying compensation, and therefore future benefits to be allocated to
any individual or group of individuals under the CAP Plan are not determinable.
For information regarding restricted stock awards made during calendar year
1995 to the Chief Executive Officer and the four other most highly compensated
officers of the Company, see the Summary Compensation Table.
DESCRIPTION OF THE TRAVELERS GROUP CAPITAL ACCUMULATION PLAN
The following description of the CAP Plan sets forth certain terms as
currently in effect without giving effect to Amendments Nos. 9 and 10 and is
qualified in its entirety by reference to the complete text of the CAP Plan,
which is attached hereto as Annex C. Capitalized terms used but not defined
herein shall have the meanings set forth in the CAP Plan.
Description of the CAP Plan. The CAP Plan provides for the payment of a
portion of compensation in the form of restricted stock. In the discretion of
the Compensation Committee, a participant may elect to receive non-qualified
stock options to purchase shares of Common Stock in place of a portion of the
restricted stock.
Before giving effect to Amendment No. 10, the Company had reserved
31,000,000 shares of Common Stock for issuance under the CAP Plan which may
consist of shares that are authorized but unissued, or previously issued and
reacquired by the Company, or both. The total number of shares of Common Stock
reserved and the option price may be adjusted upward or downward as the
Compensation Committee in its sole discretion may determine in the event of any
stock dividend, recapitalization, stock split or other capital adjustment or
transaction materially affecting the Common Stock. In the event restricted
stock is forfeited, or an option granted under the CAP Plan is forfeited,
canceled or terminated, or expires prior to the end of the period during which
such option may be exercised, such restricted stock or the shares subject to
such forfeited, canceled, terminated or expired option, as the case may be,
will be available for future issuances.
Officers and certain other employees of the Company and its subsidiaries
are designated to be eligible to participate in the CAP Plan at the discretion
of the Compensation Committee. Upon designation by the Compensation Committee,
participation in the CAP Plan is generally mandatory, although the Compensation
Committee may in certain circumstances make participation elective.
The Compensation Committee also has exclusive discretion to determine the
percentage of cash compensation subject to the CAP Plan and other terms of
- 35 -
<PAGE>
participation, to modify within certain limits the terms of participation and
to make all other determinations which it deems necessary or desirable in the
interpretation and administration of the CAP Plan. The Compensation Committee
has the authority to administer, construe and interpret the CAP Plan, and its
decisions are final, binding and conclusive.
Restricted Stock. A portion of each participant's annual compensation,
determined in the discretion of the Compensation Committee, is paid in the form
of restricted stock. The price of the restricted stock for purposes of
determining the number of shares to be issued is discounted 25% from fair
market value or, at the discretion of the Compensation Committee, such other
percentage as may be necessary to adequately reflect the impact of the
restricted nature and potential forfeiture of the stock. For purposes of the
CAP Plan, "fair market value" of the Common Stock shall be the average of the
closing prices on the Composite Tape of the NYSE for the five trading days
prior to the date of an award. The participant is not able to sell, pledge or
otherwise dispose of the restricted stock, except by will or the laws of
descent and distribution, for a period of three years (or such other period as
may be determined to be applicable to various classes of participants in the
sole discretion of the Compensation Committee) (the "Restricted Period"). Prior
to the expiration of the restricted period, unless the Compensation Committee
determines otherwise, participants may direct the vote of the restricted stock
and are entitled to receive regular dividends or dividend equivalents on such
shares. The Compensation Committee will determine the effect of any
extraordinary dividends on the restricted stock. Upon expiration of the
Restricted Period, the participant obtains full dispositive power over his or
her shares, including sale of such shares to the Company; if such shares are
repurchased by the Company, they will be available for future issuances under
the CAP Plan.
The restrictions on the restricted stock immediately lapse upon the death
or disability of a participant. In the event a participant voluntarily
terminates his or her employment, or is involuntarily terminated for "Cause"
(as defined in the CAP Plan) prior to the expiration of the Restricted Period,
such participant forfeits his or her restricted stock. A participant who is
involuntarily terminated without cause prior to the expiration of the
Restricted Period or who retires from employment but does not fall within the
definition of Retirement (as defined in the CAP Plan), forfeits his or her
restricted stock and receives in return without interest, a cash payment equal
to the portion of his or her annual compensation that had been paid in the form
of restricted stock (not the undiscounted fair market value of the restricted
stock issued to him or her). A participant who retires prior to the expiration
of the Restricted Period, meets the definition of Retirement and whose total
annualized compensation equals or exceeds $100,000 receives, in the sole
discretion of the Compensation Committee, either (i) his or her restricted
stock upon the completion of the Restricted Period, as if such participant had
not retired or (ii) a cash payment equal to the portion of his or her
compensation that had been paid in the form of restricted stock, without
interest on such amount. Subject to the discretion of the Compensation
Committee, a participant who retires prior to the expiration of the Restricted
Period, meets the definition of Retirement and whose total annualized
compensation is less than $100,000 will receive his or her restricted stock
upon expiration of the Restricted Period.
- 36 -
<PAGE>
Stock Options. As an alternative to payment of compensation in the form of
restricted stock, the Compensation Committee may in its sole discretion permit
the participant to elect to receive up to one-third of his or her award in the
form of a grant of options (a participant who so elects is referred to herein
as an "Optionee"). The Compensation Committee in its sole discretion shall
determine the number of options to be awarded in lieu of each share of
restricted stock, and may adjust the maximum percentage of restricted stock
that may be exchanged for options.
Subject to the following, the Compensation Committee has sole authority
and absolute discretion to determine the terms of the options (including the
option price, the method of exercise, the term during which the options may be
exercised and the other provisions of the option agreements) that will be
granted under the CAP Plan. The option price of each option granted shall
be the average closing price of the Common Stock for the five trading days
prior to the grant of the option and shall not be less than the fair market
value of the Common Stock subject to the option as of the date of grant.
No options granted under the CAP Plan may be exercised more than ten years
from the date of grant. Options granted under the CAP Plan will vest pursuant
to a schedule determined by the Compensation Committee, in its sole discretion,
prior to the participant's election to receive options.
Unless the Compensation Committee in its sole discretion extends or
shortens the exercise period, an option expires on the earliest of (i) the
expiration of the term for which it was granted, (ii) the participant's
voluntary termination of employment (other than for Retirement), (iii) 30 days
after the optionee's involuntary termination of employment (other than for
Cause or due to death or disability), or (iv) three years after Retirement;
provided, however, that in the case of an optionee holding an unexercised
option who dies or is disabled within 30 days of termination for any reason,
the option will expire at the earlier of the expiration of the term for which
the option was granted or one year after the death or disability occurs. If an
optionee's employment is terminated due to death or disability, his or her
unexercised options expire on the expiration of the term for which the option
was granted.
Upon exercise of an option, payment to the Company of the option price may
be made in cash, check or, unless the Compensation Committee determines
otherwise, a participant may use previously owned shares or shares of
restricted stock (awarded at least six months prior to such use) to pay all or
a portion of the option exercise price for vested options granted under the CAP
Plan. Previously owned stock used to pay the option exercise price may include
shares held by the optionee jointly with his or her spouse. An equivalent
number of option shares received upon exercise using shares of restricted stock
would be subject to the same restrictions as the shares of restricted stock
surrendered for such purposes. Any option shares received over and above the
number of shares surrendered for exercise would be free of any restriction.
Unless the Compensation Committee determines otherwise, a participant may
surrender previously owned shares (excluding shares of restricted stock, shares
held in a 401(k) plan or an IRA) acquired more than six months prior to such
tender, to pay any tax liability associated with such option exercise or may
request that the company withhold shares otherwise issuable upon exercise.
Reload Options. The Compensation Committee, at its discretion, may grant
to any participant who tenders previously owned shares or restricted stock to
pay all or a portion
- 37 -
<PAGE>
of the exercise price of vested stock options, or who tenders previously owned
shares (excluding restricted stock, shares held in a 401(k) plan or an IRA) to
cover the associated tax liability, or who elects to have the Company withhold
shares otherwise issuable upon such exercise to cover the tax liability
associated with such exercise, a replacement (or "reload") option, covering the
same number of shares as are tendered by and/or withheld for the account of the
participant for such purposes. Such replacement or reload option would have as
its exercise price the closing price of the Common Stock on the NYSE (a) on the
trading date immediately prior to the date the option exercise notice is
received by the Company if such notice is received before the NYSE opens or (b)
on the date such notice is received by the Company if received by the Company
after the NYSE opens, and, in the discretion of the Compensation Committee,
would vest and be exercisable at such times and for such periods as the
Compensation Committee determines.
During an Optionee's lifetime, an option is exercisable only by the
Optionee. No option granted under the CAP Plan is transferable by the Optionee
except by will or the laws of descent and distribution or once to a trust for
the benefit of family members.
Amendments to or Discontinuance of the Plan. The Board of Directors,
without the approval of stockholders or CAP Plan participants, may at any time
terminate, amend or modify the CAP Plan, provided that no such action may
without a participant's consent adversely affect restricted stock previously
issued or options previously granted, and no amendment may become effective
without approval of the Company's stockholders that would increase the maximum
number of shares of Common Stock which may be issued as restricted stock or for
which options may be granted under the CAP Plan (except in connection with
certain capital adjustments described above).
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of transactions under the CAP Plan based on current Federal income
tax laws. This summary is not intended to be exhaustive and, among other
things, does not address possible state, local or foreign tax consequences.
Restricted Stock. Generally, a participant must include in ordinary income
an amount equal to the fair market value of the restricted stock at the time
such restricted stock is no longer subject to a substantial risk of forfeiture
within the meaning of Section 83 of the Code. Income and payroll taxes are
required to be withheld on the amount of ordinary income attributable to the
restricted stock. A participant may elect pursuant to Section 83(b) of the
Code (a "Section 83(b) election") to include as income in the year the
restricted stock is transferred by the Company to such participant (i.e. the
year of the award) an amount equal to the fair market value of the restricted
stock on the date of such transfer (as if the restricted stock were
unrestricted and could be sold or transferred immediately). If the stock
subject to the Section 83(b) election is subsequently forfeited, no deduction
or tax refund is allowed for the amount included as income as a result of the
Section 83(b) election. A Section 83(b) election must be made within thirty
(30) days of the date of such transfer.
- 38 -
<PAGE>
A participant's tax basis in shares of restricted stock will be equal to
the amount of ordinary income recognized by such participant with respect to
such shares of restricted stock. Upon the sale of shares after the expiration
of the Restricted Period, a participant will generally recognize gain or loss
which will be capital gain or loss if the restricted stock has been held as a
capital asset; such capital gain or loss will be treated as long-term if the
stock sold was held for more than one (1) year. The holding period for capital
gains treatment will begin when the Restricted Period expires, unless the
participant has made a Section 83(b) election, in which event the holding
period will commence on the date of transfer of the restricted stock by the
Company to such participant. With respect to individuals, the excess of net
long-term capital gain over the net short-term capital loss is subject to a
statutory maximum tax rate of twenty-eight percent (28%).
The Company generally will be entitled to a deduction in the amount of a
participant's ordinary income at the time such income is recognized as
described above.
Options and Reload Stock Options. No income is realized by an Optionee
upon the grant of an option (including a reload option). Upon the exercise of
an option, the Optionee will recognize ordinary compensation income in an
amount equal to the excess, if any, of the fair market value of the shares of
Common Stock obtained by exercise of the option over the aggregate option
exercise price (the "Spread") at the time of exercise. Income and payroll
taxes are required to be withheld by the Company on the amount of ordinary
income resulting to the Optionee from the exercise of an option. The Spread is
deductible by the Company or the subsidiary engaging the services of the
Optionee, if applicable, for Federal income tax purposes, subject to the
possible limitations on deductibility of compensation paid to certain
executives pursuant to Section 162(m) of the Code. (See "Certain Limitations
on Deductibility of Executive Compensation"). The Optionee's tax basis in
shares of Common Stock acquired by exercise of an option will be equal to the
exercise price plus the amount taxable as ordinary income to the Optionee.
Upon a sale of the shares of Common Stock received by the Optionee upon
exercise of the option, any gain or loss will generally be treated for Federal
income tax purposes as long-term or short-term capital gain or loss, depending
upon the holding period of such stock. The holding period for long-term
capital gain is presently more than one (1) year. The Optionee's holding
period for shares acquired pursuant to the exercise of an option begins on the
date of exercise of such option. With respect to individuals, the excess of
net long-term capital gain over net short-term capital loss is subject to a
statutory maximum tax rate of twenty-eight percent (28%).
If the Optionee pays the exercise price in full or in part with shares of
previously acquired Common Stock, such exercise will not affect the tax
treatment described above. With respect to such exercise, no gain or loss
generally will be recognized to the Optionee upon the surrender of the
previously acquired shares to the Company. The shares received upon exercise
which are equal in number to the previously acquired shares tendered will have
the same tax basis as the previously acquired shares surrendered to the
Company, and will have a holding period for determining capital gain or loss
that includes the holding period of the shares surrendered. With respect to
the total number of shares receivable upon the exercise which exceed the number
of shares tendered
- 39 -
<PAGE>
("Additional Shares") the fair market value of such Additional Shares will be
taxable to the Optionee as compensation. Additional Shares will have a tax
basis equal to the compensation income recognized by the Optionee and the
holding period will commence on the exercise date. Shares tendered to pay
applicable income and payroll taxes arising from such exercise will generate
taxable income or loss equal to the difference between the tax basis of such
shares and the amount of income and payroll taxes satisfied with such shares.
Such income or loss will be treated as long-term or short-term capital income
or loss depending on the holding period of the shares surrendered.
If the Optionee pays the exercise price with restricted stock, the basis
of shares of restricted stock surrendered is zero (if a Section 83(b) election
has not been made) and income will be recognized upon the lapsing of
restrictions, at which time the Optionee will have a basis in such stock equal
to such income recognized. In the case of an Optionee who has made a Section
83(b) election to take into account an amount equal to the fair market value of
the restricted stock on the date that the restricted stock is granted to the
Optionee ("Section 83 restricted stock"), the basis of the Section 83
restricted stock subject to such election will be equal to the amount
recognized as ordinary income. The Additional Shares received, which will be
unrestricted shares of Common Stock, will have a basis equal to the fair market
value of such shares on the date of exercise.
Certain Limitations on Deductibility of Executive Compensation
With certain exceptions, Section 162(m) of the Code limits the Company's
deduction for compensation paid to the chief executive officer and the Covered
Employees in excess of $1 million dollars per executive per taxable year
(including any deduction with respect to the exercise of an option or reload
stock option). However, compensation paid to Covered Employees will not be
subject to such deduction limit if it is considered "qualified performance-
based compensation" (within the meaning of Section 162(m) of the Code). The
options and reload stock options are, by virtue of their terms, intended to be
qualified performance-based compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSED
---
AMENDMENT NO. 10 TO THE TRAVELERS GROUP INC. CAPITAL ACCUMULATION PLAN.
Assuming the presence of a quorum, the affirmative vote of a majority of the
votes cast by the holders of shares of Common Stock and Series C Preferred
Stock present and entitled to vote on this item at the Annual Meeting, voting
as a single class, is required to approve proposed Amendment No. 10. Under
applicable Delaware law, in determining whether this item has received the
requisite number of affirmative votes, abstentions will be counted and will
have the same effect as a vote against this item. Broker nonvotes will not be
considered present at the Annual Meeting and will have no effect on the vote.
ITEM 5:
ADOPTION OF TRAVELERS GROUP 1996 STOCK INCENTIVE PLAN
On January 24, 1996, the Board of Directors of the Company unanimously
approved the adoption of the 1996 Incentive Plan and recommended that the
1996 Incentive Plan be
- 40 -
<PAGE>
submitted to stockholders for approval at the Annual Meeting. If approved by
stockholders, the 1996 Incentive Plan will replace the 1986 Option Plan. The
following summary is qualified in its entirety by reference to the complete
text of the 1996 Incentive Plan, which is attached hereto as Annex D.
Capitalized terms used but not defined herein shall have the meanings set forth
in the 1996 Incentive Plan.
The Company has a long-standing policy of encouraging its employees at all
levels to become stockholders of the Company in order to share with other
stockholders both the perspective of, and the rewards experienced by, non-
employee owners of the Company. This policy has been effected in part through
grants of options under the 1986 Option Plan. As the 1986 Option Plan is
expiring this year, without approval of the 1996 Incentive Plan, the Company
will lose an effective source of incentives to reward the efforts of highly
motivated employees or to attract new personnel if it so desires. The Company
believes that the 1996 Incentive Plan will permit the Company to continue to
reward the efforts of its employees and to attract new personnel with awards of
stock options, allowing both employees and the Company to benefit.
The 1996 Incentive Plan is substantially similar to the 1986 Option Plan it
replaces except for the following design differences:
- restriction on sale: the optionee may not transfer shares received
upon exercise of an option for one year from the date of exercise
except that an optionee may sell shares solely to facilitate the
exercise of stock options;
- restriction on exercise: if an optionee who is no longer employed by
the Company conducts himself in a manner detrimental to the Company, he
will forfeit his options and the Incremental Shares issued in
connection with option exercises;
- maximum allocation: the 1996 Incentive Plan sets the maximum number of
options that may be granted to any one employee during the term of the
Plan;
- additional features: the Compensation Committee will be given
authority to permit optionees to transfer options to a trust
for the benefit of family members and to defer the receipt of
stock upon the exercise of an option; and
- Compensation Committee: the Compensation Committee will have greater
discretion with respect to vesting and exercisability of options,
including accelerated vesting and extended exercisability and vesting
under certain circumstances.
Options are granted by the Compensation Committee in its discretion, and
therefore future benefits to be allocated to any individual or group of
individuals under the 1996 Incentive Plan are not determinable.
NEW TRAVELERS WEALTHBUILDER PLAN
In furtherance of its policy of encouraging employees at all levels to
become stockholders of the Company, the Company has announced the adoption of a
new
- 45 -
<PAGE>
Travelers WealthBuilder Plan (the "Travelers WealthBuilder Plan") for all full
time employees of the Company other than senior executives. It is anticipated
that the Travelers WealthBuilder Plan will become effective for the Company and
most of its subsidiaries on January 1, 1997. The Travelers WealthBuilder Plan,
by providing for automatic option grants to employees at all income
levels, including lower compensated employees, will result not only in
an increase in the number of shares owned by employees, but share ownership by
a greater number of employees. The Travelers WealthBuilder Plan provides for
annual grants of stock options to all eligible employees. Each employee's
option grant will be in an amount equal to 10% of such employee's compensation
for the year, including salary, bonus, and commissions, up to a maximum of
$50,000 of compensation, divided by the exercise price. The exercise price of
options granted under the Travelers WealthBuilder Plan will be the closing price
of the Common Stock on the NYSE on the day prior to the date of grant. The
options will vest at the rate of 20% per year and will have a ten year term.
The Travelers WealthBuilder Plan will be in addition to the compensation plans
of the Company. Because the source of the shares available for exercise of
options granted under the Travelers WealthBuilder Plan will be the shares
available for issuance under the 1996 Incentive Plan, the Company will not be
required to reserve additional shares to effect the Travelers WealthBuilder Plan
if adoption of the 1996 Incentive Plan is approved. The Travelers WealthBuilder
Plan does not require stockholder approval.
DESCRIPTION OF THE TRAVELERS GROUP 1996 STOCK INCENTIVE PLAN
Awards. The 1996 Incentive Plan provides for the issuance of options to
employees and agents of the Company and its participating subsidiaries,
including Nonqualified Options and Incentive Stock Options ("ISOs").
Granting of Options; Administration. Options awarded to Section 16(a)
Persons and Covered Employees will be granted by the Incentive Compensation
Subcommittee of the Board of Directors. Options awarded to all other
Participants may be granted by the Compensation Committee or the Incentive
Compensation Subcommittee. As used in this Item 5, the term "Compensation
Committee" means, with respect to Section 16(a) Persons and Covered Employees,
the Incentive Compensation Subcommittee, and with respect to all other
Participants, either the Compensation Committee or the Incentive Compensation
Subcommittee, as the case may be. The number of employees selected to receive
options will likely vary from year to year. No options will be granted until
after the 1996 Incentive Plan has been approved by stockholders.
Committee Authority. The Compensation Committee will have the authority
to select the employees to be granted options under the 1996 Incentive Plan,
and to determine the type, size, number, exercise price and terms of options,
to determine the time when options will be granted, to determine, modify,
waive, extend or accelerate the terms and conditions for vesting,
exercisability and forfeiture of options, to determine whether the Common Stock
issued pursuant to options should be restricted in any manner, and the nature,
terms and conditions of any such restrictions.
- 42 -
<PAGE>
Shares Available for Issuance. Subject to the overall limitation set
forth below, the maximum number of shares of Common Stock that may be issued
pursuant to option exercises under the 1996 Incentive Plan is fifty million
(50,000,000). Common Stock issued pursuant to the 1996 Incentive Plan may
consist of shares that are authorized but unissued, or previously issued shares
reacquired by the Company, or both. If an option is forfeited, canceled,
terminated or expires prior to the end of the period during which such option
may be exercised, the shares of Common Stock underlying such option will be
available for future grants of options. IF THE NUMBER OF SHARES COVERED BY
OPTIONS GRANTED BUT UNEXERCISED AT ANY TIME UNDER ALL PLANS OF THE COMPANY
PROVIDING FOR THE ISSUANCE OF OPTIONS IS GREATER THAN 10% OF THE COMMON STOCK
ISSUED AND OUTSTANDING AT THE CLOSE OF THE MOST RECENT FISCAL QUARTER, THE
COMPANY WILL NOT BE PERMITTED TO GRANT ANY ADDITIONAL OPTIONS UNTIL THE NUMBER
OF OUTSTANDING BUT UNEXERCISED OPTIONS IS LESS THAN 10% OF THE COMMON STOCK
ISSUED AND OUTSTANDING. As of the Record Date, the number of outstanding
options granted but unexercised is equal to 7.3% of the Common Stock issued and
outstanding.
Maximum Number of Shares Issuable to any One Employee. During the term
of the 1996 Incentive Plan, the aggregate number of shares of Common Stock
that may be issued to any one employee pursuant to options granted under the
1996 Incentive Plan (including reload options) will not exceed twelve million
shares (as used in this Item 5, the "Maximum Allocation").
Adjustments. The total number of shares of Common Stock covered by
outstanding options and the exercise price applicable to outstanding options
may be adjusted by the Compensation Committee, if the Compensation Committee
determines that any stock split, stock dividend, distribution,
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares or other similar event equitably requires such an
adjustment. Each of the Maximum Allocation and the maximum number of shares
available for issuance under the 1996 Incentive Plan is subject to appropriate
adjustment in the event of stock dividends, stock splits or other
recapitalizations affecting all outstanding shares.
Options. The Compensation Committee will determine the exercise price
applicable to each option, which will not be less than the fair market value of
the Common Stock at the time of the option grant, and the terms, conditions and
limitations applicable to the vesting and exercisability of each option.
Unless the Compensation Committee specifies a different vesting schedule for a
particular option, the option will vest, on a cumulative basis, at the rate of
twenty percent (20%) per year, on each anniversary date of the date of grant.
Unless the Compensation Committee determines otherwise, options may not be
exercised until a period of at least one year has elapsed from the date of
grant. Common Stock issued as a result of an option exercise may not be
transferred by the Participant for a period of one (1) year, or such other
period as is determined by the Compensation Committee, and are subject to
forfeiture if, after termination of employment, the Participant engages in
certain activities which would constitute "Cause," as defined in the 1996
Incentive Plan.
- 43 -
<PAGE>
Payment of Exercise Price. Upon the exercise of an option, payment of the
option exercise price may be made in cash or, if permitted by the Compensation
Committee, by tendering Common Stock owned by the Participant (or the person
exercising the option) including shares owned jointly with his or her spouse
and acquired at least six (6) months prior to such tender, including restricted
shares of Common Stock awarded under the CAP Plan or EIP, having a fair market
value equal to the exercise price applicable to such option, by a combination
of cash and Common Stock or by authorizing the Company to sell, on behalf of
the Participant, the appropriate number of shares otherwise issuable upon the
option exercise, with the sale proceeds applied towards the exercise price.
If shares of Common Stock are so tendered, the Participant may be eligible for
the grant of a reload option, as described below.
Reload Options. A reload option gives the Participant the right to
purchase a number of shares of Common Stock equal to the number of shares of
Common Stock surrendered to pay the exercise price and/or surrendered or
withheld to pay the withholding taxes applicable to an option exercise. Reload
options do not increase the net equity position of the Participant, their
purpose is to facilitate continued stock ownership in the Company by its key
executives. Upon the exercise of an option granted under the 1996 Incentive
Plan or under other benefit plans of the Company which may be designated by the
Compensation Committee from time to time (including but not limited to the CAP
Plan, EIP or any successor plans) the Participant, at the discretion of the
Compensation Committee, may receive a reload option on the terms, conditions
and limitations determined by the Compensation Committee, from time to time.
Market Price Requirement. In order for a Participant to be eligible to
receive a reload option, the fair market value of a share of Common Stock, on
the date of the exercise, must equal or exceed the minimum market price
requirement established by the Compensation Committee, from time to time, which
is currently set at 120%. The closing price of the Company's Common Stock on
the NYSE Composite Transactions Tape on March ___, 1996 was $_______ per share.
Restrictions on Shares. An Optionee who is eligible to receive a reload
option may elect to receive upon exercise of his or her vested option either
(i) Incremental Shares (as defined above) of Common Stock subject to a one year
sale restriction and no reload option or (ii) Incremental Shares subject to a
two year sale restriction and a reload option to be granted under the 1996
Incentive Plan. Section 16(a) Persons will be required to accept restricted
shares under clause (ii) above.
Payment of Exercise Price by Surrendering Restricted Common Stock. If the
exercise price of an option is paid by delivery of a number of restricted
shares of Common Stock, then a portion of the shares the Participant will
receive in connection with the option exercise will have identical restrictions
to the shares tendered.
Exercise Price and Features of Reload Options. The Compensation Committee
will determine the exercise price of reload options, provided, however, that
the exercise price will not be less than the fair market value of the Common
Stock on the date of grant. Reload options will be subject to the terms and
provisions contained in the 1996 Incentive Plan, and such other terms,
conditions and limitations as the Compensation Committee may determine from
time to time regarding the vesting, exercisability, forfeiture and other
features of reload options. Unless the Compensation Committee determines
otherwise, a
- 44 -
<PAGE>
reload option will vest on the six-month anniversary of the date of grant and
will expire on the same day as the underlying option with respect to which the
reload option was granted.
Change in Control. Unless a "Change of Control," as defined in the 1996
Incentive Plan is approved by a vote of at least two-thirds of the directors of
the Company, upon such a Change of Control, all outstanding options will become
immediately exercisable with respect to one hundred percent (100%) of the
shares of Common Stock subject to such options.
Expiration of Awards. The 1996 Incentive Plan provides that vested options
will remain exercisable until the earliest to occur of (i) the expiration of
the term for which it was granted; (ii) the date of the Participant's voluntary
termination of employment (other than pursuant to retirement) (iii) the date of
the Participant's involuntary termination of employment for Cause; (iii) thirty
(30) days after the Participant's involuntary termination of employment (other
than for Cause, or due to death or disability) or (iv) three (3) years after
retirement, (which three year period shall not be affected by a subsequent
death of the Participant). Upon the death of a Participant prior to the
termination of employment or during any period of disability, vested options
continue to be exercisable through the expiration date of the option. The
Compensation Committee will determine the rights of a Participant with respect
to unvested options in the event of death or disability; however, if a
Participant holding a vested unexercised option dies or becomes disabled within
thirty (30) days of an involuntary termination of employment (other than for
Cause), the option will expire at the earlier of (x) the expiration of the term
for which the option was granted or (y) one (1) year after the death or
disability occurs.
Additional Forfeiture Provisions. Options and Incremental Shares are
subject to forfeiture if, after termination of employment, the Participant
engages in certain activities which constitute "Cause" as defined in the 1996
Incentive Plan.
Transferability. The Compensation Committee may permit a one time
transfer of options to a trust for the benefit of immediate family members;
otherwise, options granted under the 1996 Incentive Plan will not be
transferable other than by will or the laws of descent and distribution.
Deferrals. The Compensation Committee may postpone the exercising of
options or the issuance or delivery of Common Stock under any option grant to
prevent the Company or any Subsidiary from being denied a Federal income tax
deduction with respect to any option grant. In addition, the Compensation
Committee may determine that all or a portion of a payment to a Participant,
whether in cash, shares of Common Stock or a combination thereof, will be
deferred, for such periods and upon such terms and conditions as the
Compensation Committee determines.
Amendment and Termination. The Board of Directors, without the approval
of stockholders or 1996 Incentive Plan participants, may at any time terminate,
amend or modify the 1996 Incentive Plan, provided that no such action may
without a Participant's written consent, adversely affect any previously
granted options, and no amendment that would require stockholder approval may
become effective without stockholder approval. Unless earlier terminated, the
Plan will terminate ten years after its effective date.
- 45 -
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of transactions under the 1996 Incentive Plan, based on current
Federal income tax laws. This summary is not intended to be exhaustive, does
not constitute tax advice and, among other things, does not address possible
state, local or foreign tax consequences.
Nonqualified Options and Reload Stock Options
No income is realized by an Optionee upon the grant of a Nonqualified
Option (including a reload stock option). Upon the exercise of a Nonqualified
Option, the optionee will recognize ordinary compensation income in an amount
equal to the excess, if any, of the fair market value of the shares of Common
Stock obtained by exercise of the option over the aggregate option price (the
"Spread") at the time of exercise. Income and payroll taxes are required to be
withheld by the Company on the amount of ordinary income resulting to the
Optionee from the exercise of a Nonqualified Option. The Spread is deductible
by the Company (or the subsidiary engaging the services of the Optionee, if
applicable) for Federal income tax purposes, subject to the possible
limitations on deductibility of compensation paid to the top-paid executives of
the Company pursuant to Section 162(m) of the Code (See "Certain Limitations on
Deductibility of Executive Compensation"). The Optionee's tax basis in shares
of Common Stock acquired by exercise of a Nonqualified Option will be equal to
the exercise price plus the amount taxable as ordinary income to the Optionee.
Upon a sale of the shares of Common Stock received by the Optionee upon
exercise of the Nonqualified Option, any gain or loss will generally be treated
for Federal income tax purposes as long-term or short-term capital gain or
loss, depending upon the holding period of such stock. The holding period for
long-term capital gain is presently more than one year. The Optionee's holding
period for shares acquired pursuant to the exercise of a Nonqualified Option
begins on the date of exercise of such option. With respect to individuals,
the excess of net long-term capital gain over net short-term capital loss is
subject to a statutory maximum tax rate of twenty-eight percent (28%).
If the Optionee pays the exercise price in full or in part with shares of
previously acquired Common Stock, such exercise will not affect the tax
treatment described above. With respect to such exercise, no gain or loss
generally will be recognized to the Optionee upon the surrender of the
previously acquired shares to the Company. The shares received upon exercise
which are equal in number to the previously acquired shares tendered will have
the same tax basis as the previously acquired shares surrendered to the
Company, and will have a holding period for determining capital gain or loss
that includes the holding period of the shares surrendered. The fair market
value of the Additional Shares will be taxable to the Optionee as compensation.
Additional Shares will have a tax basis equal to the compensation income
recognized by the Optionee and the holding period will commence on the exercise
date. Shares tendered to pay applicable income and payroll taxes arising from
such exercise will generate taxable gain or loss equal to the difference, if
any, between the tax basis of such shares and the amount of
- 46 -
<PAGE>
income and payroll taxes satisfied with such shares. Such gain or loss will be
treated as long-term or short-term capital gain or loss depending on the
holding period of the shares surrendered.
If the Optionee pays the exercise price with restricted stock, the basis
of shares of restricted stock surrendered is zero (if a Section 83(b) election
has not been made) and income will be recognized upon the lapsing of
restrictions, at which time the Optionee will have a basis in such stock equal
to such income recognized. The basis of any Section 83 Restricted Stock will
be equal to the amount recognized as ordinary income. The Additional Shares
received, which will be subject to transfer restrictions for one year, will
have a basis equal to the fair market value of such shares on the date of
exercise.
Section 16(a) Persons are subject to the six-month short-swing profit
recapture provisions of Section 16(b) of the Exchange Act. If the timing of
income recognition for a Section 16(a) Person is deferred for any period
following the exercise of a Nonqualified Option (the "Deferral Period"), under
Section 83(b) of the Code, that Section 16(a) Person may elect, within thirty
(30) days after the exercise of a Nonqualified Option (or reload stock option),
to be taxed as of the exercise date on the excess of the fair market value of
the shares of Common Stock as of the date of exercise over the aggregate option
exercise price ("Section 83(b) election"). Under a Section 83(b) election, the
holding period for long-term capital gains treatment commences on the date of
the transfer of the shares of Common Stock acquired by the exercise of the
option. The Company will generally be entitled to a deduction in the amount of
an Optionee's ordinary income at the time such income is recognized by the
Optionee, with such income being subject to applicable Federal income tax
withholding by the Company. In the absence of a Section 83(b) election by the
Section 16(a) Person, the recognition of income by such person will be deferred
until the expiration of the Deferral Period.
Incentive Stock Options
No taxable income is realized by an Optionee upon the grant or exercise of
an ISO. If shares of Common Stock are issued to an Optionee pursuant to the
exercise of an ISO granted under the 1996 Incentive Plan and if no
"disqualifying disposition" of such shares is made by such Optionee within two
(2) years after the date of grant or within one (1) year after the receipt of
such shares by such Optionee, then (a) upon the sale of such shares, any amount
realized in excess of the option exercise price will be taxed to such Optionee
as a long-term capital gain and (b) no deduction will be allowed to the
Company. Additionally, the exercise of an ISO will give rise to an item of tax
preference that may result in alternative minimum tax liability for the
Optionee.
If shares of Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of either holding period described above,
such disposition would be a "disqualifying disposition," and generally (a) the
Optionee will realize ordinary income in the year of disposition in an amount
equal to the excess, if any, of the fair market value of the shares at the date
of exercise (or, if less, the amount realized on the disposition of the shares)
over the option exercise price thereof, and (b) the Company will be entitled to
deduct such amount. Any other gain realized by the Optionee on such
disposition will be taxed as short-term or long-term capital gain, and will not
result in any
- 47 -
<PAGE>
deduction by the Company. If an Optionee pays the exercise price in full or in
part with previously acquired shares of Common Stock, the exchange will not
affect the tax treatment of the exercise. Upon such exchange, no gain or loss
generally will be recognized upon the delivery of the previously acquired
shares to the Company, and the shares issued in replacement of the shares
tendered to pay the exercise price and withholding taxes, if any, will have the
same basis and holding period for long-term capital gain purposes as the
previously acquired shares. An Optionee, however, would not be able to utilize
the holding period for the previously acquired shares for purposes of
satisfying the ISO statutory holding period requirements. Additional Shares of
Common Stock will have a basis of zero and a holding period that commences on
the date the Common Stock is issued to the Optionee upon exercise of the ISO.
If such an exercise is effected using shares of Common Stock previously
acquired through the exercise of an ISO, the exchange of the previously
acquired shares may be considered a disqualifying disposition of such Common
Stock for purposes of the ISO rules.
If an ISO is exercised at a time when it no longer qualifies as an ISO,
the option will be treated as a Nonqualified Option. Subject to certain
exceptions for disability or death, an ISO generally will not be eligible for
the Federal income tax treatment described above if it is exercised more than
three (3) months following the termination of employment.
Dividends
Dividends paid on shares of Common Stock acquired pursuant to the exercise
of options will be taxed at ordinary income rates and the Company will not be
entitled to a deduction with respect to such dividends.
Payments in Respect of a Change of Control
The 1996 Incentive Plan provides for acceleration of Options in the event
of a "Change of Control" as defined in the 1996 Incentive Plan unless such
Change of Control is approved by the vote of not less than two-thirds of the
directors of the Company. Such acceleration or payment with respect to such
acceleration may cause the consideration involved to be treated in whole or in
part as a "parachute payment" under Section 28OG of the Code. Under proposed
regulations, the portion of the consideration that would not be treated as a
"parachute payment" would be that portion of the payment that would have been
substantially certain at the time of the Change of Control. To the extent that
any such payment would be treated as an "excess parachute payment" under
Section 28OG of the Code, it would subject the recipient thereof to a non-
deductible 20% excise tax, in addition to such amount being subject to tax at
the recipient's regular income tax rate, and such payment would be rendered
non-deductible to the Company.
- 48 -
<PAGE>
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
With certain exceptions, Section 162(m) of the Code limits the Company's
deduction for compensation paid to the chief executive officer and the Covered
Employees in excess of $1 million dollars per executive per taxable year
(including any deduction with respect to the exercise of a Nonqualified Option
or reload stock option). However, compensation paid to Covered Employees will
not be subject to such deduction limit if it is considered "qualified
performance-based compensation" (within the meaning of Section 162(m) of the
Code). The Nonqualified Options and reload stock options are, by virtue of
their terms, and in accordance with certain written requirements of Section
162(m) of the Code which are contained within the 1996 Incentive Plan, intended
to be qualified performance-based compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION
---
OF THE TRAVELERS GROUP 1996 STOCK INCENTIVE PLAN. Assuming the presence of a
quorum, the affirmative vote of a majority of the votes cast by the holders of
shares of Common Stock and Series C Preferred Stock present and entitled to
vote on this item at the Annual Meeting, voting as a single class, is required
to approve the adoption of the Travelers Group 1996 Stock Incentive Plan.
Under applicable Delaware law, in determining whether this item has received
the requisite number of affirmative votes, abstentions will be counted and will
have the same effect as a vote against this item. Broker nonvotes will not be
considered present at the Annual Meeting and will have no effect on the vote.
COST OF SOLICITING PROXIES
The cost of soliciting proxies and the cost of the Annual Meeting will be
borne by the Company. In addition to the solicitation of proxies by mail,
proxies may be solicited by personal interview, telephone and similar means
by directors, officers or employees of the Company, none of whom will be
specially compensated for such activities. The Company also intends to request
that brokers, banks and other nominees solicit proxies from their principals
and will pay such brokers, banks and other nominees certain expenses incurred
by them for such activities. The Company has retained Georgeson & Company,
Inc., a proxy soliciting firm, to assist in the solicitation of proxies, for an
estimated fee of $8,500, plus reimbursement of certain out-of-pocket expenses.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the next Annual Meeting of
Stockholders and who wishes such proposal to be included in the Proxy Statement
for that meeting must submit such proposal in writing to the Secretary of the
Company, at the address set forth on the first page of this Proxy Statement,
and such proposal must be received on or before December 2, 1996.
- 49 -
<PAGE>
OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Annual Meeting. If other matters should
arise at the Annual Meeting, shares represented by proxies will be voted
at the discretion of the proxy holder.
- 50 -
<PAGE>
ANNEX A
PROPOSED AMENDMENT TO ARTICLE FOURTH
OF THE CERTIFICATE OF INCORPORATION
OF TRAVELERS GROUP INC.
________________________________
The first sentence of paragraph A, Article FOURTH, is hereby amended to read in
its entirety as follows:
The total number of shares of Common Stock which the
Corporation shall have authority to issue is One Billion
Five Hundred Million (1,500,000,000) shares of Common Stock
having a par value of one cent ($.01) per share.
________________________________
A-1
<PAGE>
ANNEX B
AMENDMENT NO. 10 to the
TRAVELERS GROUP CAPITAL ACCUMULATION PLAN
(effective as of April 24, 1996)
The Travelers Group Capital Accumulation Plan is hereby amended in the
following respects:
1. Section 4(b) is hereby deleted in its entirety and replaced with the
following:
"The maximum number of shares of Stock which may be issued under the
Plan, either as restricted stock or pursuant to the exercise of
Options, shall not be more than 41,000,000 shares of Stock, plus, to
the extent of repurchases of Stock after April 24, 1996, up to an
additional 10 million shares of Stock, subject to adjustment as
provided in Section 8, and such shares may be authorized but unissued
shares, or previously issued shares reacquired by the Company, or
both."
2. Section 6(d) is hereby deleted in its entirety and replaced with the
following:
"(d) Options, reload options and, during any period of restrictions on
transferability, Incremental Shares may not be sold, assigned,
pledged, hypothecated or otherwise transferred by the Participant
other than by will or the laws of descent and distribution, except as
provided in this Section 6(d). The Committee may permit (on such
terms, conditions and limitations as it shall establish) Options and
reload options to be transferred one time to a trust or similar
vehicle for the benefit of a Participant's immediate family members
(the "Permitted Transferee"). Except to the extent required by law,
no right or interest of any Participant in the Plan or any award
granted hereunder shall be subject to any lien, levy, attachment,
pledge, obligation, liability or bankruptcy of the Participant. All
rights with respect to Awards granted to a Participant shall be
exercisable during his or her lifetime only by the Participant, or if
applicable, the Permitted Transferee. A Participant may designate one
or more beneficiaries to succeed to the rights of the Participant with
respect to Awards granted under the Plan in the event of the death of
the Participant, by providing written notice of such designation to the
Committee, on such form as may be prescribed by the Committee. If no
such notice is received, the Participant's estate shall succeed to the
rights of the Participant with respect to Awards granted under the Plan."
3. Section 6(e) is hereby amended by deleting the word "and" which
appears immediately prior to the beginning of subsection (C), by adding the
word "or" at the end of subsection (C) and adding the following new
subsection (D):
B-1
<PAGE>
"(D) if permitted by the Committee, by authorizing the Company to
sell, on behalf of the Participant, the appropriate number of shares
otherwise issuable to the Participant upon the exercise of the option
with the proceeds of sale applied to pay the exercise price."
4. Section 6(f)(iii) is hereby deleted in its entirety and replaced with
the following new subsections (iii)(A) and (iii)(B):
"(iii)(A) In the event of a Participant's death prior to the
termination of employment, the Committee may permit unvested Options
to continue to vest as scheduled. Vested Options (or vested portions
thereof) that have not been exercised and have not expired may be
exercised by the Participant's executors, administrators, heirs or
distributees at any time prior to the expiration date of the Option.
If a Participant dies at any time after a termination of employment,
the provisions relating to the particular conditions of such
termination of employment shall govern the vesting and exercisability
of Options granted to such Participant, except that if a Participant
dies within thirty (30) days of an involuntary termination (other than
for Cause) the provisions of subsection (vi) below shall apply; or
(iii)(B) In the event of a Participant's Disability prior to the
termination of employment, vested Options (or vested portions thereof)
that have not been exercised and have not expired may be exercised at
any time prior to the expiration date of the Option, provided the
Participant continues to meet the conditions prescribed by the
Committee for determination of Disability. The Committee shall
determine a Participant's rights with respect to unvested Options, at
the time of determination of Disability. However, unless the
Committee determines otherwise, if a Participant holds any unvested
Options at the time of determination of Disability no further vesting
shall occur unless and until the Participant resumes employment with
the Company or a Subsidiary upon the earlier to occur of (a) the end
of the period of Disability (or any related leave of absence as
permitted under the Company's policies governing family and medical
leave), or (b) twelve (12) months (or such other time period as
determined by the Committee) after the determination of the
Disability. If the Participant resumes employment with the Company or
a Subsidiary, within the applicable time limits, then vesting shall
resume, effective on the return-to-work date, without any credit given
for the time during which the Participant was unable to work as a
result of the Disability or the related leave. If the Participant
does not resume employment with the Company or a Subsidiary within the
applicable time limit or, if at any time prior to the end of any
remaining period of vesting and/or exercisability of Options, the
Participant no longer meets the conditions prescribed by the Committee
for the determination of Disability, all unvested and unexercised
Options shall be forfeited;"
4. Section 6(f)(v) is hereby amended to delete the words "such person is
not a Section 16(a) Person and" from the first sentence thereof.
5. Section 6(f)(vii) is hereby deleted in its entirety and replaced with
the following:
B-2
<PAGE>
"(vii) notwithstanding the foregoing provisions of this Section 6(f),
the Committee shall have the authority, on a case by case basis, in
its sole and absolute discretion, to alter the period of vesting
and/or exercisability, however such periods may not be extended after
the date of grant without the Participant's written consent."
6. Section 6(g) is hereby amended to add the following sentence at the
end of such Section:
"Reload options may also be granted under the Travelers Group 1996
Stock Incentive Plan, after such plan has been approved by
stockholders."
B-3
<PAGE>
ANNEX C
TRAVELERS GROUP
CAPITAL ACCUMULATION PLAN
as amended to November 30, 1995
SECTION 1. Purpose of the Plan.
The name of this plan is TRAVELERS GROUP CAPITAL ACCUMULATION PLAN
(the "Plan"). The purpose of the Plan is to enable TRAVELERS GROUP INC.
(the "Company") and its Subsidiaries to attract, retain and motivate
officers and certain other employees, to compensate them for their
contributions to the growth and profits of the Company and to encourage
ownership of stock in the Company on the part of such personnel. The Plan
provides incentives to participating officers and certain other employees
which are linked directly to increases in stockholder value and will
therefore inure to the benefit of all stockholders of the Company.
SECTION 2. Definitions.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means termination by the Company or a Subsidiary of a
Participant's employment upon (i) the willful and continued failure by such
Participant to substantially perform his duties with the Company or a
Subsidiary (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to such Participant by the Board, which demand
specifically identifies the manner in which the Board believes that such
Participant has not substantially performed his duties, or (ii) the willful
engaging by a Participant in conduct which is demonstrably and materially
injurious to the Company or a Subsidiary, monetarily or otherwise. For
purposes of this Subsection, no act, or failure to act, on a Participant's
part shall be deemed "willful" unless done, or omitted to be done, by such
Participant not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company or a Subsidiary.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the Nominations and Compensation Committee of
the Board, appointed by the Board from among its members and shall consist
of not less than three members thereof who are and shall
C-1
<PAGE>
remain Committee members only so long as they remain "disinterested
persons" as defined in Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "1934 Act").
(e) "Disability" means permanent and total disability as determined
under the Company's long-term disability plan.
(f) "Eligible Employee" means an employee of the Company or any
Subsidiary as described in Section 3.
(g) "Options" mean non-qualified stock options to purchase shares
of Stock which are not incentive stock options under Section 422 of the
Code and which are granted under Section 6 herein.
(h) "Participant" means an Eligible Employee selected by the
Committee, pursuant to the Committee's authority in Section 7, to receive
an award of Restricted Stock.
(i) "Related Employment" means the employment of an individual by
an employer which is neither the Company nor a Subsidiary provided (i) such
employment is undertaken by the individual at the request of the Company or
a Subsidiary, (ii) immediately prior to undertaking such employment, the
individual was an officer or employee of the Company or a Subsidiary, or
was engaged in Related Employment as herein defined and (iii) such
employment is recognized by the Committee, in its sole discretion, as
Related Employment for purposes of this Plan. The death or Disability of
an individual during a period of Related Employment as herein defined shall
be treated, for purposes of this Plan, as if the death or onset of
Disability had occurred while the individual was an officer or employee of
the Company or a Subsidiary.
(j) "Restricted Stock" means an award of shares of Stock that is
subject to the restrictions set forth in Section 5.
(k) "Retirement" means no longer being occupied in one's business
or profession and terminating active employment with the Company or a
Subsidiary after either (i) reaching age 65, or (ii) reaching age 60 and
having 30 years of employment with the Company or a Subsidiary.
(l) "Section 16(a) Person" means any officer or director of the
Company or any Subsidiary who is subject to the reporting requirements of
Section 16(a) of the 1934 Act.
(m) "Stock" means the common stock of the Company.
(n) "Subsidiary" means any corporation (other than the Company) 50%
or more of the total combined voting power of all classes of stock of which
is owned, directly or indirectly, by the Company.
SECTION 3. Eligibility and Participation.
Officers and certain other employees of the Company or its
Subsidiaries who are responsible for or contribute to the management,
growth and/or profitability of the Company or its Subsidiaries shall be
eligible to participate in the Plan. The Participants under the Plan shall
be selected from time of time by the Committee, in its sole discretion,
from among Eligible Employees.
C-2
<PAGE>
SECTION 4. Amount and Form of Awards.
(a) Awards under the Plan shall be determined by the Committee in
its discretion. Awards will be made in lieu of cash payment of a
percentage of the Participant's annual compensation and will be granted at
such time as the Committee may in its sole discretion determine, and the
Committee may also in its sole discretion provide for alternative methods
for grants of awards. A Participant will receive such award in Restricted
Stock or, alternatively, and, if so elected by the Participant and
determined by the Committee pursuant to Section 6, a portion of such award
may be received in Options.
(b) The maximum number of shares of Stock which may be issued under
the Plan, either as Restricted Stock or pursuant to the exercise of
Options, shall be not more than 31,000,000 shares of Stock, subject to
adjustment as provided in Section 8, and such shares may be authorized but
unissued shares, or previously issued shares reacquired by the Company, or
both. In the event Restricted Stock is forfeited, or an outstanding Option
is terminated, expires or is canceled, prior to the end of the period
during which the restrictions on Restricted Stock expire, or the Options
can be exercised, the shares of Stock called for by such award of
Restricted Stock or the unexercised portion of the Option award will become
available for future awards.
SECTION 5. Restricted Stock.
(a) The number of shares of Restricted Stock awarded to a
Participant under the Plan will be determined by a formula or formulas
approved by the Committee. In order to reflect the impact of the
restrictions on the value of the Restricted Stock, as well as the
possibility of forfeiture of Restricted Stock, the fair market value of
Stock shall be discounted at a rate of 25% in determining the number of
shares of Restricted Stock to be awarded. The Committee may, where it
deems appropriate, and in its sole discretion, provide for an alternative
discount rate. For purpose of this Plan, the fair market value of Stock
for an award will be the average of the Stock's closing prices on the
Composite Tape of the New York Stock Exchange for the five trading days
prior to the date of the award. The dollar value of an award will be
divided by the discounted market value to determine the number of shares of
Restricted Stock in an award. The value of fractional shares will be paid
in cash. In the event the Committee provides for alternative methods for
grants of awards, the Committee, in its sole discretion, may provide for
alternative methods of determining the fair market value of Stock for such
awards, and may also provide for alternative forfeiture provisions, so long
as the alternative methods or provisions do not (i) materially increase the
benefits, (ii) materially increase the number of shares of Restricted Stock
or Options issued or (iii) materially modify the eligibility requirements
applicable to Section 16(a) Persons.
(b) A Participant shall not have any rights with respect to an
award, unless or until such Participant has executed an agreement
evidencing the award (a "Restricted Stock Award Agreement") and has
delivered a fully executed copy thereof to the Company, within a period of
60 days after the date of the award (or such shorter period after the date
of the award as the Committee may specify). Each Participant who is awarded
Restricted Stock may, but need not, be issued a stock certificate in
respect of such shares of Restricted Stock.
C-3
<PAGE>
A "book entry" (i.e., a computerized or manual entry) shall be made in the
records of the Company to evidence an award of shares of Restricted Stock
to a Participant where no certificate is issued in the name of the
Participant. Such Company records shall, absent manifest error, be binding
on the Participants. Each certificate, if any, registered in the name of a
Participant shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
"The transferability of the certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Travelers Group
Capital Accumulation Plan and a Restricted Stock Award
Agreement entered into between the registered owner and
Travelers Group Inc. Copies of such Plan and Agreement are
on file in the offices of Travelers Group Inc."
The Committee shall require that any stock certificate issued in the
name of a Participant evidencing shares of Restricted Stock be held in the
custody of the Company until the restrictions thereon shall have lapsed,
and that, as a condition of such issuance of a certificate for Restricted
Stock, the Participant shall have delivered a stock power, endorsed in
blank, relating to the shares covered by such certificate.
(c) The shares of Restricted Stock awarded pursuant to this Section
5 shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Restricted
Stock Award Agreements, during the two-year period (together with any
extensions thereof approved as provided herein) commencing on the date
of the award (the "Restricted Period"), the Participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under the Plan. The Committee may, in its sole
discretion, (x) initially provide for an alternative Restricted Period
or alter the two-year Restricted Period for a previously granted award
(provided that the Committee may not extend the Restricted Period for
a previously granted award without the Participant's written consent),
(y) during any extension of such Restricted Period, provide for
alternative restrictions (provided that nothing contained in this
clause shall grant the Committee any additional powers under the Plan
with respect to awards granted to or to be granted to Section 16(a)
Persons), and (z) provide for the lapse of any such restrictions in
installments and accelerate or waive any such restrictions in whole or
in part based on such factors and such circumstances as the Committee
may determine, in its sole discretion, including, but not limited to,
the Participant's Retirement, termination, death or Disability.
(ii) Unless the Committee in its sole discretion shall determine
otherwise at or prior to the time of the grant of any award, the
Participant shall have the right to direct the vote of his shares of
Restricted Stock during the Restricted Period, in accordance with
paragraph (e) of this Section 5. The Participant shall have the right
to receive any regular dividends on such shares of Restricted Stock.
The Committee shall in its sole discretion determine the Participant's
rights with respect to extraordinary dividends on the shares of
Restricted Stock.
(iii) Certificates for shares of Restricted Stock shall be
delivered to the Participant promptly after, and only after, the
Restricted Period shall expire (or such earlier time as the
restrictions may
C-4
<PAGE>
lapse in accordance with paragraph (c)(i) of this Section 5) without
forfeiture in respect of such shares of Restricted Stock.
(d) Subject to the provisions of paragraph (c)(i) of this Section
5, the following provisions shall apply to a Participant's shares of
Restricted Stock prior to the end of the Restricted Period (including
extensions and Related Employment):
(i) Upon the death or Disability of a Participant, the
restrictions on his or her Restricted Stock shall immediately lapse.
(ii) If a Participant voluntarily terminates employment or if a
Participant is involuntarily terminated for Cause, such Participant
shall forfeit his or her Restricted Stock.
(iii) If a Participant is involuntarily terminated without cause
or retires from employment, but does not fall within the definition of
Retirement, such Participant shall forfeit his or her Restricted Stock
and receive in return, without interest, a cash payment equal to the
portion of his or her annual compensation that had been paid in the
form of such forfeited Restricted Stock.
(iv) If a Participant whose total annual compensation is less
than $100,000 terminates employment upon Retirement, he or she shall
receive his or her Restricted Stock upon completion of the Restricted
Period. If a Participant whose total annual compensation equals or
exceeds $100,000 terminates employment upon Retirement, he or she
shall receive, in the sole discretion of the Committee, either (A) his
or her Restricted Stock upon the completion of the Restricted Period,
or (B) a cash payment equal to the portion of his or her annual
compensation that had been paid in the form of Restricted Stock,
without interest.
(e) Unless the Committee in its sole discretion shall determine
otherwise at or prior to the time of the grant of any award, during the
Restricted Period the shares of Restricted Stock shall be voted by the
Company's senior administrative officer in charge of administering the
Plan, or such other person as the Committee may designate (the "Plan
Administrator"), and the Plan Administrator shall vote such shares in
accordance with instructions received from Participants (unless to do so
would constitute a violation of the Plan Administrator's fiduciary duties).
Shares as to which no instructions are received shall be voted by the Plan
Administrator proportionately in accordance with instructions received from
Participants in the Plan (unless to do so would constitute a violation of
the Plan Administrator's fiduciary duties).
SECTION 6. Election of Options.
(a) At the time a Participant is notified of his or her award of
Restricted Stock under the Plan, the Committee in its sole discretion may
permit such Participant to elect to receive up to a maximum of one-third
(1/3) of his or her award in the form of Options. The Committee in its
sole discretion shall determine the number of Options to be awarded in lieu
of each share of Restricted Stock given up and may alter the maximum
percentage of Restricted Stock which may be exchanged for Options. Such
election shall be made within a period of 60 days after the grant of the
award (or such shorter period after the date of the award as the
C-5
<PAGE>
Committee may specify). In the absence of such an election, the award will
be paid entirely in shares of Restricted Stock.
(b) Options will be granted with an exercise price equal to the
fair market value of Stock, which will be the average of the Stock's
closing prices on the Composite Tape of the New York Stock Exchange on the
five trading days prior to the grant date. The Committee in its discretion
shall determine the expiration date of the Options, provided that in no
event shall the expiration date be later than ten years from the date of
the award. Options granted under the Plan shall vest pursuant to a
schedule determined by the Committee, in its sole discretion, prior to the
Participant's election to receive Options.
(c) Recipients of Options shall enter into a stock option agreement
with the Company, in such form as the Committee shall determine, which
agreement shall set forth, among other things, the exercise price of the
Option, the term of the Option and provisions regarding exercisability of
the Option granted thereunder.
(d) Options are not transferable other than by will or the laws of
descent and distribution. During the lifetime of the Participant the
Options may be exercised only by the Participant.
(e) An Option shall not be exercisable unless payment in full is
made for the shares being acquired thereunder at the time of exercise; such
payment shall be made (A) in United States dollars by cash or check, or (B)
in lieu thereof, unless the Committee shall in its sole discretion
determine otherwise, by tendering to the Company Stock owned by the person
exercising the Option (or owned by the person exercising the Option and his
or her spouse, jointly) and acquired at least six months prior to such
tender, including shares of Restricted Stock awarded hereunder at least six
months prior to such tender, and having a fair market value equal to the
cash exercise price applicable to such Option, such fair market value to be
determined in such reasonable manner as may be provided for from time to
time by the Committee or as may be required in order to comply with or to
conform to the requirements of any applicable or relevant laws or
regulations, or (C) by a combination of United States dollars and Stock as
aforesaid.
(f) An Option shall not be exercisable unless the person exercising
the Option has been, at all times during the period beginning with the date
of grant of the Option and ending on the date of such exercise, an officer
or employee of the Company or a Subsidiary, except that:
(i) if such person shall cease to be an officer or employee of
the Company or a Subsidiary solely by reason of a period of Related
Employment, he or she may, during such period of Related Employment,
exercise the Option as if he or she continued to be such an officer or
employee; or
(ii) if such person shall cease to be such an officer or employee
on account of an involuntary termination of employment (other than
death or Disability) or on account of voluntary termination of
employment (which voluntary termination is not considered to be
"retirement" as provided in subsection (v) below or "Retirement" as
defined above), while holding an Option which has not expired and has
not been fully exercised, such person may before the expiration of
thirty (30) days after such termination (but in no event after the
Option has expired under the provisions of Section 6(b) hereof)
exercise the Option with respect to any shares as to which he or she
could have exercised the Option on the date he or she terminated
employment, except that the Committee may in its sole
C-6
<PAGE>
discretion refuse to permit a person who has voluntarily terminated
his or her employment or who has been involuntarily terminated with
Cause to exercise any Options after the date of termination; or
(iii) if such person shall cease to be such an officer or employee
by reason of death or Disability while holding an Option which has not
expired and has not been fully exercised, such person (or in the case
of death, his or her executors, administrators, heirs or distributees,
as the case may be) may exercise the Option (but in no event after the
Option has expired under the provisions of Section 6(b) hereof) with
respect to any shares as to which such person could have exercised the
Option on the date he or she ceased to be such an officer or employee;
or
(iv) if such person shall cease to be such an officer or employee
by reason of Retirement while holding an Option which has not expired
and has not been fully exercised, such person may exercise the Option
with respect to any shares as to which he or she could have exercised
the Option on the date he or she ceased to be such an officer or
employee at any time within three years of the date he or she ceased
to be such an officer or employee (but in no event after the Option
has expired under the provisions of Section 6(b) hereof); or
(v) if such person is not a Section 16(a) Person and such person
shall cease to be an officer or employee because he or she has
"retired" from employment (i.e., such person is no longer occupied
within his or her business or profession and has terminated active
employment with the Company or a Subsidiary after reaching age 55 and
having completed at least five years of employment with the Company or
a Subsidiary) but has not met the definition of "Retirement", while
holding an Option which has not expired and has not been fully
exercised, such person may exercise the Option with respect to any
shares as to which he or she could have exercised the Option on the
date he or she ceased to be such an officer or employee at any time
within three years of the date he or she ceased to be such an officer
or employee (but in no event after the Option has expired under the
provisions of Section 6(b) hereof); or
(vi) if within 30 days of his or her termination of employment
for any reason, any person to whom an Option has been granted shall
die or become disabled (as may be determined by the Board in its sole
and absolute discretion) holding an Option which has not been fully
exercised, he or she or his or her executors, administrators, heirs or
distributees, as the case may be, and, at any time within one year
after the date of such event (but in no event after the Option has
expired under the provisions of Section 6(b) hereof), may exercise the
Option with respect to any shares as to which such person could have
exercised his Option at the time of his or her death or disability; or
(vii) notwithstanding the foregoing provisions of this Section
6(f), the Committee shall have the authority, on a case by case basis,
in its sole and absolute discretion, to extend for a period of up to
two (2) years following the termination of employment of an optionee
the period of vesting determined by the Committee prior to the
Participant's election to receive Options and the period of
exercisability, provided such extension complies with Section 6(b).
C-7
<PAGE>
(g) If an Option is exercised by a Participant, then, at the
discretion of the committee administering the Company's Stock Option Plan,
the Participant may receive a replacement or reload option under such Stock
Option Plan in accordance with the provisions of such plan.
(h) If the exercise price of an Option is paid by delivery of a
number of shares of Restricted Stock, then the Participant shall receive,
in connection with the exercise, an equal number of identically restricted
shares of Stock; the remaining shares of Stock issued upon such exercise
shall contain any applicable restrictions that are set forth in the
Participant's stock option agreement and shall otherwise be unrestricted.
In such event, the fair market value of shares of Restricted Stock
delivered or withheld, for purposes of this Plan, shall not take into
account the restrictions on such shares.
SECTION 7. Administration.
The Plan shall be administered by the Committee which shall be
appointed by the Board and which shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant Restricted
Stock or Options to Participants, pursuant to the terms of the Plan.
In particular, the Committee shall have the authority:
(i) to select those employees of the Company and its
Subsidiaries who are Eligible Employees;
(ii) to determine whether and to what extent Restricted Stock or
Options are to be granted to Participants hereunder;
(iii) to determine the number of shares of Stock to be covered by
each such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder; and
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, which shall govern all written instructions
evidencing the Options and Restricted Stock.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan; and to
otherwise supervise the administration of the Plan. All decisions made by
the Committee pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and the Participants.
C-8
<PAGE>
SECTION 8. Adjustments upon a Change in Common Stock.
In the event of any change in the outstanding Stock of the Company by
reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar event if such change equitably requires an adjustment in the number
or kind of shares that may be issued under the Plan pursuant to Section
4(b), or in the number or kind of shares subject to, or the option price
per share under, any outstanding Option which has been granted to any
Participant, such adjustment shall be made by the Committee and shall be
conclusive and binding for all purposes of the Plan. In no event shall the
excess of the aggregate fair market value of the Stock subject to the
Options immediately after any substitution, exchange or adjustment over the
aggregate option price for such Stock be more than the excess of the
aggregate fair market value of all of the Stock subject to the Option
immediately before any such substitution, exchange or adjustment over the
aggregate option price of such Stock nor shall the adjusted Option give the
holder thereof any additional benefits he did not have under the old
Option.
SECTION 9. Amendment and Termination.
The Plan may be amended or terminated at any time and from time to
time by the Board, but no amendment which increases the aggregate number of
shares of Stock which may be issued pursuant to the Plan (except as
provided in Section 8) shall be effective unless and until the same is
approved by the stockholders of the Company. Neither an amendment to the
Plan nor the termination of the Plan shall adversely affect any right of
any Participant with respect to any Restricted Stock or Option theretofore
granted without such Participant's written consent.
SECTION 10. General Provisions.
(a) The Committee may require each person purchasing shares
pursuant to an Option to represent and agree with the Company in writing
that such person is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restriction on transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
The adoption of the Plan shall not confer upon any employee of the Company
or any Subsidiary any right to continued employment
C-9
<PAGE>
with the Company or a Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time.
(c) No member of the Board or the Committee, nor any officer or
employee of the Company acting on behalf of the Board or the Committee,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of
the Board or the Committee and each and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such
action, determination or interpretation.
(d) A Participant's rights and interest under the Plan may not be
assigned or transferred in whole or in part either directly or by operation
of law or otherwise (except in the event of a Participant's death)
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner and no such right or
interest of any Participant in the Plan shall be subject to any obligation
or liability of such Participant.
(e) The Company and its Subsidiaries shall have the right to deduct
from any payment made under the Plan any federal, state or local income or
other taxes required by law to be withheld with respect to such payment.
It shall be a condition to the obligation of the Company to issue Stock
upon the lapse of restrictions on Restricted Stock or upon exercise of an
Option that the Participant (or any beneficiary or person entitled to
exercise the Option) pay to the Company, upon its demand, such amount as
may be requested by the Company for the purpose of satisfying any liability
to withhold federal, state or local income or other taxes. If the amount
requested is not paid, the Company may refuse to issue shares. Unless the
Committee shall in its sole discretion determine otherwise, payment for
taxes required to be withheld may be made in whole or in part by an
election by a Participant, in accordance with rules adopted by the
Committee from time to time (A) to have the Company withhold Stock
otherwise issuable pursuant to the Plan having a fair market value equal to
such tax liability and/or (B) to tender to the Company shares of Stock
owned by the person exercising the option and acquired more than six months
prior to such tender (excluding shares of Restricted Stock awarded
hereunder) and having a fair market value equal to such tax liability, such
fair market value (in the case of clause (A) or (B)), to be determined in
such reasonable manner as may be provided for from time to time by the
Committee or as may be required in order to comply with or to conform to
the requirements of any applicable or relevant laws or regulations.
(f) The Plan is intended to comply with all applicable conditions of
Rule 16b-3 of the 1934 Act or any successor statute, rule or regulation.
All transactions involving any Section 16(a) Person shall be subject to the
conditions set forth in Rule 16b-3, regardless of whether such conditions
are expressly set forth in the Plan. Any provision of the Plan which is
contrary to Rule 16b-3 shall not apply to Section 16(a) Persons.
SECTION 11. Effective Date of Plan.
The Plan shall be effective on the date it is adopted by the Board,
subject to the approval of stockholders.
C-10
<PAGE>
ANNEX D
TRAVELERS GROUP
1996 STOCK INCENTIVE PLAN
as of April 24, 1996
1. PURPOSE. The purpose of the Travelers Group 1996 Stock Incentive
Plan (the "Plan") is to advance the interests of the Company, its
Subsidiaries and stockholders by providing incentives to those Employees
who contribute significantly to the long-term performance and growth of the
Company and its Subsidiaries.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
have the following meanings:
"Award" shall mean an Option or Reload Option granted under the Plan.
"Award Agreement" shall mean the document evidencing an Award granted
under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (a) failure by a Participant to perform
substantially his or her duties with the Company or a Subsidiary,
after reasonable notice to the Participant of such failure; (b)
conduct by a Participant that is in material competition with the
Company or a Subsidiary or (c) conduct by a Participant that breaches
his or her duty of loyalty to the Company or a Subsidiary or that is
materially injurious to the Company or a Subsidiary, monetarily or
otherwise, which conduct shall include, but not be limited to (i)
disclosing or misusing any confidential information pertaining to the
Company or a Subsidiary; (ii) any attempt, directly or indirectly to
induce any Employee, agent, insurance agent, insurance broker or
broker-dealer of the Company or any Subsidiary to be employed or
perform services elsewhere or (iii) any attempt by a Participant
directly or indirectly to solicit the trade of any customer or
supplier or prospective customer or supplier of the Company or any
Subsidiary or (iv) disparaging the Company, any Subsidiary or any of
their respective officers or directors. The determination of whether
any conduct, action or failure to act constitutes "Cause" shall be
made by the Committee.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
D-1
<PAGE>
"Committee" shall mean, with respect to Section 16(a) Persons and
Covered Employees, the Incentive Compensation Subcommittee, and with
respect to all other Participants, either the Nominations and
Compensation Committee or the Incentive Compensation Subcommittee, as
the case may be.
"Common Stock" shall mean the common stock of the Company, par value
$.01 per share.
"Company" shall mean Travelers Group Inc., a Delaware corporation.
"Covered Employees" shall mean "covered employees", as such term is
defined in Section 162(m) of the Code.
"Disability" shall mean a disability that renders an individual unable
to be occupied within his or her business or profession for a
specified period of time, as determined by the Committee, or its
designee.
"Employee" shall have the meaning set forth in General Instruction A
to the Registration Statement on Form S-8 promulgated under the
Securities Act of 1933, as amended.
"Employment" shall mean continuous employment with the Company or a
Subsidiary, or in the case of a consultant, advisor or agent, a
continuous contractual association between such person and the Company
or a Subsidiary.
"Exercise Price" shall mean the purchase price of a share of Common
Stock covered by an Option or a Reload Option.
"Fair Market Value" shall mean the closing price of the Common Stock
as reported on the Composite Tape of the New York Stock Exchange, Inc.
on the date that such Fair Market Value is to be determined, or if no
shares were traded on the determination date, the immediately
preceding day on which the Common Stock was traded, or the fair market
value as determined by any other method adopted by the Committee, from
time to time, which the Committee may deem appropriate under the
circumstances, or as may be required in order to comply with or to
conform to the requirements of applicable laws or regulations.
"Incentive Compensation Subcommittee" shall mean a subcommittee of the
Nominations and Compensation Committee, appointed by the Nominations
and Compensation Committee, consisting of at least three (3) members
thereof who are and shall remain "disinterested persons" as defined in
Rule 16b-3 under the 1934 Act and who also qualify, and shall remain
qualified as "outside directors" as defined in Section 162(m) of the
Code.
D-2
<PAGE>
"Incentive Stock Option" shall mean an option which is intended to
meet the requirements of Section 422 of the Code.
"Incremental Shares" shall have the meaning set forth in Section (f).
"Nominations and Compensation Committee" shall mean the Nominations
and Compensation Committee appointed by the Board, consisting of at
least three (3) members thereof who are and shall remain
"disinterested persons" as defined in Rule 16b-3 under the 1934 Act.
"Nonqualified Option" shall mean an Option which is not intended to be
an Incentive Stock Option.
"Option" shall mean the right, granted under the Plan, to purchase a
specified number of shares of Common Stock, at a fixed price for
specified period of time.
"Participant" shall mean an Employee who has received an Award under
the Plan.
"Plan" shall mean the Travelers Group 1996 Stock Incentive Plan, as
the same may be amended from time to time.
"Reload Options" shall have the meaning set forth in Section 10.
"Related Employment" shall have the meaning set forth in Section 13.
"Reload Grant Amount" shall have the meaning set forth in Section 10.
"Restricted Period" shall mean the applicable period during which
Incremental Shares are subject to restrictions on transferability.
"Retirement" shall mean, unless the Committee determines otherwise, no
longer being occupied within one's business or profession and having
terminated active Employment with the Company or a Subsidiary after
reaching age fifty-five (55) and having completed at least five (5)
years of Employment with the Company or a Subsidiary.
"Section 16(a) Persons" shall mean Employees who are subject to the
reporting requirements of Section 16(a) of the 1934 Act.
D-3
<PAGE>
"Subsidiary" shall mean any entity at least one-half of whose
outstanding voting stock, or beneficial ownership for entities other
than corporations, is owned, directly or indirectly, by the Company,
or which is otherwise controlled directly or indirectly by the
Company.
"Surrendered Shares" shall have the meaning set forth in Section 9(f).
"Withheld Shares" shall have the meaning set forth in Section 9(f).
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, rule or regulation.
3. COMMITTEE POWERS AND AUTHORITY.
(a) Granting of Awards. Awards granted to Section 16(a) Persons
and Covered Employees shall be granted by the Incentive Compensation
Subcommittee. Awards granted to Employees who are not Section 16(a)
Persons or Covered Employees may be granted by the Nominations and
Compensation Committee or the Incentive Compensation Subcommittee. No
Award shall be granted to any member of the Committee. The Committee shall
have all of the powers vested in it by the terms of the Plan, including the
power and authority to select the Employees to be granted Awards under the
Plan, and, subject to any limitations which may be specifically set forth
in the Plan, to determine the type, the Exercise Price and the number of
shares exercisable in connection with each Option and Reload Option, to
determine the terms, conditions and limitations applicable to the vesting
and exercisability of Awards, to determine the time when Awards will be
granted and paid and whether payment of any Award may be deferred, to
establish objectives and conditions for earning Awards, to determine
whether such objectives or conditions have been met, to determine the
payment provisions applicable to the exercise of Options and Reload Options,
to determine, modify, waive, extend or accelerate the terms and conditions for
vesting, exercisability and forfeiture of Awards, to determine whether payment
of an Award should be reduced or eliminated, to determine whether the Common
Stock issued pursuant to Awards should be restricted in any manner, and the
nature, terms and conditions of any such restrictions and to interpret the
provisions of the Plan and all Awards granted hereunder.
(b) Administration of the Plan. Subject to the allocation of
responsibility for granting of Awards as set forth in Section 3(a) above,
and to the extent permissible under Section 162(m) of the Code, the day-to-
day administration of the Plan shall be managed by the Nominations and
Compensation Committee, which shall have the power and authority to
administer the Plan, to establish, amend and rescind such rules,
regulations and administrative guidelines relating to the Plan, to
prescribe and modify, as necessary, a form of Award Agreement, to correct
any defect, supply any omission or clarify any inconsistency in the Plan
and/or in any Award Agreement and to take such actions and make such
administrative
D-4
<PAGE>
determinations that the Nominations and Compensation Committee deems
necessary or advisable. Any decision of the Nominations and Compensation
Committee in the administration of the Plan, as described herein, shall be
conclusive and binding on all parties concerned, including the Company, its
stockholders and Subsidiaries and all Participants.
(c) Delegation of Authority. The Nominations and Compensation
Committee may delegate some or all of its authority over the day-to day-
administration of the Plan, but only with respect to persons who are not
Section 16(a) Persons or Covered Employees.
(d) Committee Action. The Committee may act in writing by a
majority of its members in office. The members of the Committee may
authorize any one or more of the members of the Committee or any officer of
the Company to execute and deliver documents on behalf of such Committee.
No member of the Committee shall be personally liable for anything done or
omitted to be done by him or her or by any other member of the Committee in
connection with the Plan, except for his or her own willful misconduct or
as expressly provided by statute.
4. PARTICIPATION BY SUBSIDIARIES. Upon approval by the Board or a
committee authorized by the Board, Subsidiaries of the Company may
participate in the Plan. A Subsidiary's participation in the Plan may be
terminated at any time by the Board or an authorized committee. If the
participation in the Plan of a Subsidiary shall terminate, such termination
shall not relieve it of any obligations theretofore incurred by it under
the Plan, except with the approval of the Board or a committee authorized
by the Board.
5. MAXIMUM NUMBER OF SHARES.
(a) Subject to the provisions of subsection (b) of this Section
5, the maximum number of shares of Common Stock that may be issued pursuant
to Awards granted under the Plan shall be fifty million (50,000,000), subject
to adjustment as provided in Section 15. As described in Section 9(f) below,
Surrendered Shares and Withheld Shares shall not be counted towards the maximum
number of shares that may be issued hereunder.
(b) No Awards may be granted hereunder if such grant would cause the
number of shares of Common Stock which are then subject to Awards which have
been granted, have not been forfeited and remain unexercised under this Plan, or
which are then subject to options, including reload options, which have been
granted, have not been forfeited and remain unexercised under the Travelers
Group Stock Option Plan, the Travelers Group Capital Accumulation Plan ("CAP"),
the Travelers Group Employee Incentive Plan ("EIP") or any other similar benefit
plan of the Company, to exceed ten percent (10%) of the total number of shares
of Common Stock issued and outstanding, determined as of the close of the most
recent fiscal quarter of the Company, in accordance with generally accepted
accounting principles.
D-5
<PAGE>
(c) Common Stock issued pursuant to Awards granted under the Plan
may be either authorized but unissued shares or previously issued shares
reacquired by the Company, or both. The number of shares of Common Stock
available for grant of Awards under the Plan shall be decreased by the sum of
(1) the number of shares of Common Stock with respect to which Awards have
been granted and are then outstanding but unexercised and (2) the number of
shares of Common Stock that have been issued pursuant to exercise of Awards
granted under the Plan, less the aggregate of the Surrendered Shares and
the Withheld Shares.
(d) In the event any outstanding Award expires, is terminated or
is cancelled prior to the date the Plan is terminated, the shares of Common
Stock that would otherwise be issuable with respect to the unexercised
portion of such expired, terminated or cancelled Award may be made subject
to a subsequent Award under the Plan.
6. MAXIMUM NUMBER OF SHARES ISSUABLE TO ANY ONE EMPLOYEE. During
the term of the Plan, the aggregate number of shares of Common Stock which
may be issued to any one Employee pursuant to Awards granted under this
Plan shall not exceed twelve million (12,000,000) shares (the "Maximum
Allocation"). The Maximum Allocation shall be subject to adjustment as
provided in Section 15.
7. RIGHTS WITH RESPECT TO COMMON STOCK. Participants who have been
granted Awards under the Plan (and persons succeeding to such Participant's
rights pursuant to the Plan) shall not have any rights as stockholders with
respect to any Common Stock until the date of the issuance of such shares,
unless the Committee determines otherwise.
8. AWARD AGREEMENTS. Awards granted under the Plan shall be
evidenced in the manner prescribed by the Committee from time to time in
accordance with the Plan. The Committee may require that a Participant
execute and deliver an Award Agreement to the Company in order to evidence
a Participant's acceptance of an Award.
9. OPTIONS.
(a) Grant of Options. At the discretion of the Committee,
Options granted under the Plan may be Nonqualified Options or
Incentive Stock Options. At the discretion of the Committee, a Participant
may also be eligible to receive a Reload Option in connection with an Option
Exercise, as more particularly set forth in Section 10 below.
(b) Option Exercise Price. The Committee shall determine the
Exercise Price at the time each Option is granted, provided that the Exercise
Price shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date of grant.
D-6
<PAGE>
(c) Vesting Schedules; Exercisability. The Committee shall
determine the vesting schedules and the terms, conditions and limitations
governing exercisability of Options granted under the Plan. If the
Committee does not specify a vesting schedule for a particular Option, the
Option shall vest, on a cumulative basis, at the rate of twenty percent
(20%) per year, on each anniversary date of the date of grant. Unless the
Committee determines otherwise, an Option may not be exercised until a
period of at least one (1) year has elapsed from the date of grant, and the
term of any Option granted hereunder shall not exceed ten (10) years.
(d) Payment of Exercise Price. A Participant may exercise all
or any portion of a vested Option by making payment in full of the Exercise
Price for the shares being acquired at the time of exercise. Such payment
shall be made (i) in cash, in United States dollars, (ii) if permitted by
the Committee, by tendering Common Stock owned by the Participant (or the
person exercising the Option) including Common Stock owned jointly with his
or her spouse, and acquired at least six (6) months prior to such tender,
including (for exercise of Nonqualified Options only) restricted shares of
Common Stock awarded under CAP or EIP or any other similar benefit plan of
the Company, granted at least six (6) months prior to such tender, and
having a Fair Market Value equal to the Exercise Price applicable to such
Option, (iii) by a combination of United States dollars and Common Stock as
aforesaid or (iv) if permitted by the Committee, by authorizing the Company
to sell, on behalf of the Participant, the appropriate number of shares
otherwise issuable to the Participant upon the exercise of an Option with
the proceeds of sale applied to pay the Exercise Price.
(e) Payment with Restricted Common Stock. If the Exercise Price
of an Option is paid by delivery of a number of restricted shares of Common
Stock, then the Participant shall receive, in connection with the Option
exercise, an equal number of shares of identically restricted Common Stock.
The Fair Market Value of the restricted shares tendered by the Participant
shall not be reduced to take into account any restrictions on such Common
Stock.
(f) Incremental Shares. For purposes of the Plan, "Incremental
Shares" shall mean those shares of Common Stock actually issued to a
Participant upon the exercise of an Option. If a Participant exercises an
Option by paying the Exercise Price and the withholding taxes entirely in
cash, the number of Incremental Shares will equal the number of shares
exercised. If, however, a Participant exercises an Option by surrendering
previously owned shares of Common Stock or restricted Common Stock, as may
be permitted hereunder (the "Surrendered Shares"), to pay the Exercise
Price of an Option, or if the Participant authorizes the Company to sell
the appropriate number of shares of Common Stock in order to cover the
Exercise Price and/or requests that the Company withhold the appropriate
number of shares otherwise issuable to cover the withholding tax liability
associated with the Option exercise (the "Withheld Shares"), the number of
Incremental Shares will equal the number of Option shares exercised minus
the sum of (a) the number of Surrendered Shares or the number of shares of
Common Stock sold by the Company on behalf of the Participant to pay the
Exercise Price and (b) the Withheld Shares. Surrendered Shares and
Withheld Shares shall not count towards the
D-7
<PAGE>
maximum number of shares that may be issued under the Plan as set forth in
Sections 5 and 6 above.
(g) Sale Restriction on Incremental Shares. The Incremental
Shares issued as a result of the exercise of an Option may not be sold,
assigned, pledged, hypothecated or otherwise transferred by the
Participant, except as specifically permitted pursuant to Section 16 below,
for a period of one (1) year following the date of exercise if no Reload
Option is granted in connection with such exercise, or for a period of two
(2) years if a Reload Option is granted in connection with such exercise,
or such other shorter or longer Restricted Periods as may be determined by
the Committee.
(h) Issuance of Incremental Shares. The Company may, but shall
not be required to issue a stock certificate evidencing the issuance of
Incremental Shares to a Participant. A "book entry" (i.e. computerized or
manual entry) shall be made in the records of the Company to evidence the
issuance of such shares where no certificate is issued. Such Company
records shall, absent manifest error, be binding on the Participants. Each
certificate, if any, registered in the name of a Participant shall bear an
appropriate legend referring to the restrictions on transferability set
forth herein, in such form as may be prescribed by the Committee from time
to time. Any stock certificate issued in the name of the Participant
evidencing shares of Common Stock subject to restrictions on
transferability shall be held in the custody of the Company until the
restrictions thereon have lapsed, and as a condition to the issuance of
such certificate, the Participant shall deliver a stock power, endorsed in
blank, relating to the shares covered by such certificate.
(i) Termination of Employment. As a condition to the exercise
of an Option, the Participant must have been, at all times during the
period beginning on the date of grant of the Option and ending on the date
of exercise, an Employee of the Company, a Subsidiary or of a corporation,
or a parent or subsidiary of a corporation, substituting or assuming the
Option in a transaction to which Section 424(a) of the Code applies.
Except and only to the extent as specifically permitted by this Section
9(i), or unless the Committee determines otherwise at or after the time of
grant, vesting of Options shall cease and Options shall no longer be
exercisable following a termination of Employment.
(1) Voluntary Termination. In the event of a voluntary
termination of Employment other than pursuant to Retirement,
vested Options (or vested portions thereof) that have not been
exercised and have not expired shall be forfeited upon the close
of business on the last day of Employment.
(2) Involuntary Termination for Cause. In the event of an
involuntary termination of Employment for Cause, vested Options
(or vested portions thereof) that have not been exercised and
have not expired shall be forfeited upon the close of business on
the last day of Employment.
D-8
<PAGE>
(3) Involuntary Termination other than for Cause. In the event
of an involuntary termination of Employment other than for Cause
and not due to death or Disability, vested Options (or vested
portions thereof) that have not been exercised and have not
expired may be exercised at any time within thirty (30) days
following the last day of Employment, but in no event after the
Option has expired.
(4) Death. In the event of a Participant's death prior to the
termination of Employment, the Committee may permit unvested
Options to continue to vest as scheduled. Vested Options (or
vested portions thereof) that have not been exercised and have
not expired may be exercised by the Participant's executors,
administrators, heirs or distributees at any time prior to the
expiration date of the Option. If a Participant dies at any time
after a termination of Employment, the provisions relating to the
particular conditions of such termination of Employment shall
govern the vesting and exercisability of Options granted to such
Participant, except that if a Participant dies within thirty (30)
days of an involuntary termination (other than for Cause), the
provisions of subsection (8) below shall apply.
(5) Disability. In the event of a Participant's Disability
prior to the termination of Employment, vested Options (or vested
portions thereof) that have not been exercised and have not
expired may be exercised at any time prior to the expiration date
of the Option, provided the Participant continues to meet the
conditions prescribed by the Committee for determination of
Disability. The Committee shall determine a Participant's rights
with respect to unvested Options, at the time of determination of
Disability. However, unless the Committee determines otherwise,
if a Participant holds any unvested Options at the time of
determination of Disability no further vesting shall occur unless
and until the Participant resumes Employment with the Company or
a Subsidiary upon the earlier to occur of (a) the end of the
period of Disability (or any related leave of absence as
permitted under the Company's policy governing family and medical
leave), or (b) twelve (12) months (or such other time period as
determined by the Committee) after the determination of the
Disability. If the Participant resumes Employment with the
Company or a Subsidiary, within the applicable time limits, then
vesting shall resume, effective on the return-to-work date,
without any credit given for the time period during which the
Participant was unable to work as a result of the Disability or
the related leave of absence. If the Participant does not resume
Employment with the Company or a Subsidiary within the applicable
time limit or, if at any time prior to the end of any remaining
period of vesting and/or exercisability of Options, the
Participant no longer meets the conditions
D-9
<PAGE>
prescribed by the Committee for the determination of Disability,
all unvested and unexercised Options shall be forfeited.
(6) Retirement. In the event a Participant ceases to be an
Employee by reason of Retirement, vested Options (or vested
portions thereof) that have not been exercised and have not
expired may be exercised at any time within three (3) years
following the last day of Employment, but in no event after the
Option has expired. However, if at any time after such
Retirement and prior to the end of any remaining period of
exercisability, the Participant no longer meets the conditions of
Retirement, as prescribed by the Committee, then all unexercised
Options shall be forfeited.
(7) Related Employment. If a Participant ceases to be an
Employee solely by reason of a period of Related Employment, to
the extent approved by the Committee (i) vested Options (or
vested portions thereof) that have not been exercised and have
not expired may be exercised during such period of Related
Employment; (ii) unvested Options shall continue to vest as
scheduled and (iii) death and Disability shall be treated as if
the Participant had not terminated Employment.
(8) Death or Disability within Thirty Days of Termination. If a
Participant shall die or become Disabled within thirty (30) days
of his or her involuntary termination of Employment other than
for Cause, vested Options (or vested portions thereof) that have
not been exercised and have not expired or been forfeited may be
exercised by the Participant or his or her executors,
administrators, heirs or distributees, as the case may be, at any
time within one (1) year after the date of such event, but in no
event after the Option has expired.
10. RELOAD OPTIONS. A Reload Option gives the Participant the right
to purchase a number of shares of Common Stock equal to the number of
Surrendered Shares and/or the number of Withheld Shares (the "Reload Grant
Amount").
(a) Eligibility for Reload Options. Upon the exercise of an
Option or a Reload Option granted hereunder or an option granted under
other benefit plans which may be designated by the Committee from time to
time (including but not limited to CAP or EIP), the Participant, at the
discretion of the Committee, may receive a Reload Option on the terms,
conditions and limitations determined by the Committee, from time to time.
(b) Market Price Requirement. For a Participant to receive a
Reload Option in connection with an Option exercise, the Fair Market Value
of a share of Common Stock on the date of exercise must equal or exceed the
minimum market price level, expressed as a
D-10
<PAGE>
percentage of the Exercise Price, established by the Committee from time to
time (the "Market Price Requirement"). If the Fair Market Value of the
Common Stock on the date of exercise of the Option does not equal or exceed
the applicable Market Price Requirement, a vested Option may be exercised
but no Reload Option will be granted in connection with such exercise. In
no event will the Market Price Requirement be less than one hundred percent
(100%) of the Exercise Price of any Option to which it applies. Unless the
Committee selects a different percentage, the Market Price Requirement
shall be one hundred twenty percent (120%).
(c) Election by Participant. A Participant who has been
determined by the Committee to be eligible to receive a Reload Option may
elect, at the time of exercising an Option, whether to receive (i)
Incremental Shares of Common Stock issuable upon the Option exercise, which
Incremental Shares will be subject to restrictions on transferability for a
period of one (1) year, or such other shorter or longer period as may be
determined by the Committee, and no Reload Option, or (ii) Incremental
Shares of Common Stock issuable upon the Option exercise, subject to
restrictions on transferability for a period of two (2) years, or such
other shorter or longer period as may be determined by the Committee, and a
Reload Option for the number of shares equal to the Reload Grant Amount.
Section 16(a) Persons may only exercise Options pursuant to clause (ii) of
the previous sentence.
(d) Exercise Price and Features of Reload Options. The
Committee shall determine the Exercise Price at the time each Reload Option
is granted, provided that the Exercise Price shall not be less than the Fair
Market Value of a share of Common Stock on the Option exercise date. Reload
Options shall be subject to the terms and provisions contained in the Plan,
including, but not limited to Sections 9(d) through 9(i), and such other terms,
conditions and limitations as the Committee shall determine from time to time
regarding the vesting, exercisability, forfeiture, payment provisions and
other features of Reload Options. Unless the Committee determines
otherwise, a Reload Option shall vest on the six-month anniversary of the
date of grant and shall expire on the same date as the underlying Option
with respect to which the Reload Option was granted.
11. INCENTIVE STOCK OPTIONS. The terms and conditions of any
Incentive Stock Options granted hereunder shall be subject to and shall be
designed to comply with the provisions of Section 422 of the Code, and any
other administrative procedures adopted by the Committee, from time to
time. Incentive Stock Options may not be granted to any person who is not
an employee of the Company or a Subsidiary at the time of grant.
12. FORFEITURE OF AWARDS.
(a) Options. In any instance where the vesting and/or
exercisability of an Option or Reload Option extends past the date of
termination of a Participant's Employment, either pursuant to the terms of
the Plan or by action of the Committee, the rights of the Participant to
continued vesting and exercisability shall be forfeited if, in the
determination of the Committee, the Participant, at any time within such
remaining period of continued vesting or
D-11
<PAGE>
exercisability engages in any of the conduct described in subparagraphs (b)
or (c) of the definition of Cause under this Plan.
(b) Incremental Shares. If during any period following the
exercise of an Option or Reload Option and prior to the expiration of the
Restricted Period on any Incremental Shares issued upon such exercise, the
Participant, in the determination of the Committee, engages in any of the
conduct described in subparagraph (c) of the definition of Cause under this
Plan, at the option of the Committee, the Participant shall forfeit such
Incremental Shares and shall receive instead, a cash payment, without
interest, equal to the original Exercise Price for the Option or Reload
Option under which the Incremental Shares were issued, multiplied by the
number of Incremental Shares forfeited.
13. RELATED EMPLOYMENT. For the purposes of this Plan, Related
Employment shall mean the employment of an individual by an employer that
is neither the Company nor a Subsidiary, provided (i) such employment is
undertaken by the individual at the request of the Company or a Subsidiary,
(ii) immediately prior to undertaking such employment the individual was an
Employee of the Company or a Subsidiary, or was engaged in Related
Employment as herein defined and (iii) such employment is recognized by the
Committee, in its discretion, as Related Employment. The death or
Disability of an individual during a period of Related Employment as herein
defined shall be treated, for purposes of the Plan, as if the death or
Disability had occurred while the individual was an Employee of the Company
or a Subsidiary.
14. CHANGE OF CONTROL. Notwithstanding anything to the contrary
contained herein, upon a "Change of Control," (defined below), all
outstanding Options and Reload Options shall become immediately
exercisable with respect to one hundred percent (100%) of the Common Stock
subject thereto. "Change in Control" shall mean the occurrence of any of
the following, unless such occurrence shall have been approved or ratified
by at least a two thirds (2/3) vote of the Continuing Directors (defined
below): (A) any person within the meaning of Sections 13(d) and 14(d) of
the 1934 Act, shall have become the beneficial owner, within the meaning of
Rule 13d-3 under the 1934 Act, of shares of stock of the Company having
twenty five percent (25%) or more of the total number of votes that may be
cast for election of the directors of the Company, or (B) there shall have
been a change in the composition of the Board such that at any time a
majority of the Board shall have been members of the Board for less than
twenty-four (24) months, unless the election of each new director who was
not a director at the beginning of the period was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of such period, or who were approved as
directors pursuant to the provisions of this Section (the "Continuing
Directors").
15. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in
the outstanding Common Stock of the Company by reason of any stock split,
stock dividend, distribution,
D-12
<PAGE>
recapitalization, merger, consolidation, reorganization, combination or
exchange of shares or other similar event, and if the Committee determines
that such change equitably requires an adjustment in (a) the number or kind
of shares that may be issued pursuant to Awards granted under the Plan; (b)
the number or kind of shares subject to an Option or Reload Option; (c) the
Exercise Price under any outstanding Option or Reload Option; or (d) any
measure of performance, such adjustment shall be made by the Committee and
shall be conclusive and binding for all purposes of the Plan. In no event
shall the excess of the aggregate Fair Market Value of the Common Stock
subject to Awards immediately after any such adjustment over the aggregate
Exercise Price for such Awards be more than the excess of the aggregate
Fair Market Value of all of the Common Stock subject to the Award
immediately before any such adjustment over the aggregate Exercise Price
without regard to the adjustment, nor shall the adjusted Award give the
Participant any additional benefits he or she did not have under the Award
without regard to the adjustment.
16. TRANSFERABILITY. Options, Reload Options and, during any period
of restrictions on transferability, Incremental Shares, may not be sold,
assigned, pledged, hypothecated or otherwise transferred by the Participant
other than by will or the laws of descent and distribution, except as
provided in this Section 16. The Committee may permit (on such terms,
conditions and limitations as it shall establish) Options and Reload
Options to be transferred one time to or to a trust or similar vehicle for
the benefit of a Participant's immediate family members (the "Permitted
Transferee"). Except to the extent required by law, no right or interest
of any Participant in the Plan or any Award granted hereunder shall be
subject to any lien, levy, attachment, pledge, obligation, liability or
bankruptcy of the Participant. All rights with respect to Awards granted
to a Participant shall be exercisable during his or her lifetime only by
the Participant, or if applicable, the Permitted Transferees. A
Participant may designate one or more beneficiaries to succeed to the
rights of the Participant with respect to Awards granted under the Plan
in the event of the death of the Participant, by providing written notice
of such designation to the Committee, on such form as may be prescribed by
the Committee. If no such notice is received, the Participant's estate shall
succeed to the rights of Participant with respect to Awards granted under
the Plan.
17. INCOME AND WITHHOLDING TAXES. The Company and its Subsidiaries
shall have the right to deduct from all amounts paid to a Participant (or
his or her beneficiaries or any Permitted Transferee) under the Plan any
Federal, state or local income or other taxes required by law to be
withheld with respect to such payment. It shall be a condition to the
obligation of the Company to issue Common Stock upon exercise of an Option
or Reload Option that the Participant (or any beneficiary or person entitled
to act on behalf of the Participant) pay to the Company, upon demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold Federal, state or local income or other taxes. If the
amount requested is not paid, the Company may refuse to issue shares. Unless
the Committee shall in its discretion determine otherwise, payment for taxes
required to be withheld may be made in whole or in part by a Participant's
election, in accordance with rules adopted by the Committee from time to
D-13
<PAGE>
time, (a) to have the Company withhold shares of Common Stock otherwise
issuable pursuant to the Plan having a Fair Market Value equal to such tax
liability and/or (b) to tender to the Company shares of Common Stock owned
by the Participant (or the person exercising the Option), including Common
Stock owned jointly with his or her spouse, and acquired at least six (6)
months prior to such tender (excluding restricted stock awarded under CAP
or EIP) and having a Fair Market Value equal to such tax liability.
18. MISCELLANEOUS PROVISIONS.
(a) No Rights to Awards or Employment. No Employee shall have
any claim or right to be granted an Award under the Plan. There shall be
no obligation of uniformity of treatment of Employees under the Plan.
Neither the Plan nor any action taken thereunder shall be construed as
giving any Employee any right to Employment with the Company or any
Subsidiary. In addition, the Company and each Subsidiary expressly reserve
the right at any time to dismiss a Participant free from liability, or any
claim under the Plan, except as provided herein or in an Award Agreement.
(b) Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with
the laws of the State of Delaware.
(c) Securities Law Compliance. No Common Stock or other
securities shall be issued hereunder unless counsel for the Company shall
be satisfied that such issuance will be in compliance with all applicable
Federal and state and international securities statutes, rules and
regulations. The appropriate officers of the Company or its Subsidiaries
shall cause to be filed any reports, returns or other information regarding
Awards or Common Stock issued under the Plan as may be required by Section
13 or 15(d) of the 1934 Act or any other applicable statute, rule or
regulation.
(d) Rule 16b-3 Compliance. The Plan is intended to comply with
all applicable conditions of Rule 16b-3 of the 1934 Act as such rule may be
amended from time to time. All transactions involving any Section 16(a)
Person shall be subject to the conditions set forth in Rule 16b-3,
regardless of whether such conditions are expressly set forth in the Plan.
Any provision of the Plan which is contrary to Rule 16b-3 shall not apply to
Section 16(a) Persons.
(e) Expenses of the Plan. The expenses of the administration of
the Plan shall be borne by the Company and its Subsidiaries.
D-14
<PAGE>
(f) Unfunded Plan. The Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make
any other segregation of assets to assure the issuance of Common Stock
under the Plan and the issuance of Common Stock shall be subordinate to the
claims of the Company's general creditors.
(g) Arbitration. All claims and disputes between the
Participant and the Company or any Subsidiary arising out of the Plan or
any Award granted hereunder shall be submitted to arbitration in accordance
with the then current arbitration policy of the Company or the Subsidiary
with whom the Participant is Employed. Notice of demand for arbitration
shall be given in writing to the other party and shall be made within a
reasonable time after the claim or dispute has arisen. The award rendered
by the arbitrator shall be made in accordance with the provisions of the
Plan, shall be final, and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. The
provisions of this Section 18(g) shall be specifically enforceable under
applicable law in any court having jurisdiction thereof.
19. TERMINATION; AMENDMENT. The Plan shall terminate on the earlier
to occur of (a) a resolution of the Board of Directors terminating the Plan
or (b) April 23, 2006. The Plan may be amended or suspended at any time
and from time to time by the Board, provided that no amendment shall be
made without stockholder approval, if stockholder approval is required
under applicable law. No termination, amendment or suspension of the Plan
shall adversely affect any right of any Participant with respect to any
Award theretofore granted, as determined by the Committee, without such
Participant's written consent. Subject to the foregoing limitations, the
Committee shall have the authority to amend certain Plan provisions to the
extent necessary to permit participation in the Plan by Employees who are
employed outside of the United States on terms and conditions which are
comparable to those afforded to Employees located within the United States.
20. PARTIAL INVALIDITY. If any term or provision of this Plan or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, then the remainder of the Plan, or the
application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision hereof shall be valid and be
enforced to the fullest extent permitted by applicable law.
21. DEFERRALS. The Committee may postpone the exercising of Awards,
the issuance or delivery of Common Stock under any Award or any action
permitted under the Plan to prevent the Company or any Subsidiary from
being denied a Federal income tax deduction with respect to any Award other
than an Incentive Stock Option. In addition, the Committee may determine
that all or a portion of a payment to a Participant, whether to be made in
cash, shares of Common Stock or a combination thereof, shall be deferred.
Deferrals shall be for such periods and upon such terms and conditions as
the Committee shall determine.
D-15
<PAGE>
22. STOCKHOLDER ADOPTION; EFFECTIVE DATE. The Plan shall be
submitted to the stockholders of the Company for their approval and
adoption, and shall become effective upon adoption by stockholders. No
Award shall be granted hereunder unless and until the Plan has been so
approved and adopted.
D-16
<PAGE>
P
R Preliminary Copy
O TRAVELERS GROUP INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X OF TRAVELERS GROUP INC. FOR THE ANNUAL MEETING
APRIL 24, 1996
Y
The undersigned hereby constitutes and appoints Sanford I. Weill, James
Dimon and Charles O. Prince, III, and each of them his or her true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Stockholders of Travelers Group Inc. (the
"Company") to be held at Carnegie Hall, 881 Seventh Avenue, New York, New York
on Wednesday, April 24, 1996 at 8:30 a.m. local time, and at any adjournments or
postponements thereof, on all matters properly coming before said Annual
Meeting, including but not limited to the matters set forth below.
If shares of Travelers Group Inc. Common Stock are issued to or held for
the account of the undersigned under employee plans and voting rights attach to
such shares (any of such plans, a "Voting Plan"), then the undersigned hereby
directs the respective fiduciary of each applicable Voting Plan to vote all
shares of Travelers Group Inc. Common Stock in the undersigned's name and/or
account under such Plan in accordance with the instructions given herein, at the
Annual Meeting and at any adjournments or postponements thereof, on all matters
properly coming before the Annual Meeting, including but not limited to the
matters set forth below.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE BELOW, BUT YOU NEED NOT MARK ANY
BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS. YOUR PROXY CANNOT BE VOTED
UNLESS YOU SIGN, DATE AND RETURN THIS CARD.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE
PROPOSALS AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES (OR, IN THE CASE OF
A VOTING PLAN, WILL BE VOTED IN THE DISCRETION OF THE PLAN TRUSTEE OR
ADMINISTRATOR) UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.
CONTINUED AND TO BE SIGNED BELOW
<PAGE>
IF NO BOXES ARE MARKED, THIS PROXY
|X|Please mark votes WILL BE VOTED IN THE MANNER
as in this example DESCRIBED ABOVE
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR EACH OF THE PROPOSALS
- -------------------------------------------------------------------------------
1. Proposal to elect one class of FOR WITHHELD
directors consisting of six |_| |_|
directors to a three-year term.
NOMINEES: C. Michael Armstrong,
Kenneth J. Bialkin, Dudley C.
Mecum, Sanford I. Weill, Joseph R.
Wright, Jr. and Arthur Zankel
|_| FOR, EXCEPT VOTE WITHHELD FROM
THE FOLLOWING NOMINEE(S):
---------------------------------------
- -------------------------------------------------------------------------------
2. Proposal to ratify the selection of FOR AGAINST ABSTAIN
KPMG Peat Marwick LLP as the |_| |_| |_|
Company's independent auditors for
1996.
FOR AGAINST ABSTAIN
3. Proposal to amend the Certificate |_| |_| |_|
of Incorporation of Travelers Group
Inc. to increase to 1.5 billion the
shares of Common Stock authorized
for issuance.
4. Proposal to increase the number of FOR AGAINST ABSTAIN
shares issuable under the Travelers |_| |_| |_|
Group Capital Accumulation Plan and
to approve certain other amendments.
5. Proposal to adopt the Travelers FOR AGAINST ABSTAIN
Group 1996 Stock Incentive Plan. |_| |_| |_|
- -------------------------------------------------------------------------------
The signer(s) hereby acknowledge(s) receipt of the
Notice of Annual Meeting of Stockholders and
accompanying Proxy Statement.
The signer(s) hereby revoke(s) all proxies
heretofore given by the signer(s) to vote at
said Annual Meeting and any adjournments or
postponements thereof.
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS
HEREIN. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
------------------------------------
SIGNATURE DATE
------------------------------------
SIGNATURE DATE
