SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
| | Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| 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):
| | $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:
|X| 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>
[TRAVELERS GROUP INC. LOGO ]
TRAVELERS GROUP INC.
388 Greenwich Street
New York, New York 10013
March 26, 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 a new Travelers
WealthBuilder Plan directed to all employees, especially our lower compensated
employees. This Plan, which is being developed for implementation January 1,
1997, 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
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 proxy statement.
Thank you for your continued support of our Company.
Sincerely,
/s/ Sanford I. Weill
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
/s/Charles O. Prince, III
Charles O. Prince, III
Secretary
March 26, 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 26, 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.
VOTING RIGHTS
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 318,719,760
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.
<PAGE>
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><CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED 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
</TABLE>
- ------------
(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 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 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, 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
2
<PAGE>
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.
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 8,373,311
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 2.6% 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 28.2% 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
5,283,369 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.
3
<PAGE>
<TABLE><CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------------
<S> <C> <C> <C>
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)
- ------------------------------------------------- ------------------ -------------- ------------
C. Michael Armstrong............................. 8,580 8,580
Director
Kenneth J. Bialkin............................... 151,078 151,078
Director
Edward H. Budd(3)................................ 194,772 24,127 218,899
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...................................... 548,409 186,884 735,293
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................................... 464,924 92,018 556,942
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).............................. 4,163,572 1,119,797 5,283,369
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 6,746,250 1,627,061 8,373,311
(26 persons)(9)(10)............................
</TABLE>
- ------------
(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
(Footnotes continued on following page)
4
<PAGE>
(Footnotes continued from preceding page)
held (as of February 29, 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, 2,935; Mr. Lipp, 4,801; Mr. Plumeri, 47; and Mr. Weill,
5,149; (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 1,252 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) Nonemployee 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.
(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
24,346 shares of Common Stock and 1,252 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, except that due to an administrative oversight of the Company, Mr.
Plumeri made a late filing for one 1994 transaction in which he acquired
restricted shares of Common Stock through the automatic exchange of shares of a
former employer.
5
<PAGE>
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.
CLASS II: NOMINATED FOR ELECTION AT THE ANNUAL MEETING
FOR A TERM ENDING 1999
<TABLE>
<S> <C>
[PICTURE] C. Michael Armstrong
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.
[PICTURE] Kenneth J. Bialkin
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.
</TABLE>
6
<PAGE>
CLASS II (CONTINUED)
<TABLE>
<S> <C>
[PICTURE] Dudley C. Mecum
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.
[PICTURE] Sanford I. Weill
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, Marc 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 May-
oral/City Council Commission on Early Child and Child Care Programs
during the Dinkins Administration.
</TABLE>
7
<PAGE>
CLASS II (CONTINUED)
<TABLE>
<S> <C>
[PICTURE] Joseph R.Wright, Jr.
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 Inc., 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.
[PICTURE] Arthur Zankel
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 Halpsxl and New York
Foundation.
</TABLE>
CLASS III: TERM ENDING 1997
<TABLE>
<S> <C>
[PICTURE] Douglas D. Danforth
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.
</TABLE>
8
<PAGE>
CLASS III (CONTINUED)
<TABLE>
<S> <C>
[PICTURE] Robert F. Daniell
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.
[PICTURE] Leslie B. Disharoon
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.
[PICTURE] Gerald R. Ford
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.
[PICTURE] Robert I. Lipp
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.
</TABLE>
9
<PAGE>
CLASS III (CONTINUED)
<TABLE>
<S> <C>
[PICTURE] Andrall E. Pearson
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.
[PICTURE] Linda J. Wachner
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.
</TABLE>
CLASS I: TERM ENDING 1998
<TABLE>
<S> <C>
[PICTURE] Edward H. Budd
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.
</TABLE>
10
<PAGE>
CLASS I: (CONTINUED)
<TABLE>
<S> <C>
[PICTURE] Joseph A. Califano, Jr.
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, HealthPlan Services Inc., 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
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 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.
[PICTURE] James Dimon
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. Mr. Dimon is a trustee
of New York University Medical Center and Chairman of the Board of the
New York Academy of Finance.
</TABLE>
11
<PAGE>
CLASS I: (CONTINUED)
<TABLE>
<S> <C>
[PICTURE] Ann Dibble Jordan
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.
[PICTURE] Frank J. Tasco
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.
</TABLE>
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.
12
<PAGE>
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 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.
13
<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 Covered Employees 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.
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 equal to
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
14
<PAGE>
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 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
15
<PAGE>
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.
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.
16
<PAGE>
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:
<TABLE>
<S> <C>
ARTHUR ZANKEL (Chairman)
KENNETH J. BIALKIN ANN DIBBLE JORDAN
ROBERT F. DANIELL ANDRALL E. PEARSON
THE HONORABLE GERALD R. FORD LINDA J. WACHNER
</TABLE>
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.
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
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 Chief 1994 629,167 2,145,208 12,224 750,894 84,031(F) 1,336
Operating Officr 1993 518,750 1,430,312 726,202 450,530 1,132
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>
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(Footnotes for preceding page)
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<TABLE>
<S> <C>
(A) The shares reflected as grants of stock options for 1993, 1994 and 1995 were in each
case reload options created upon an exercise of outstanding options by a surrender of
previously owned shares, except for options covering: 230,666 shares and 100,000 shares
granted to Mr. Dimon in 1993 and 1995, respectively; 50,000 shares granted to Mr. Lipp
in each of 1994 and 1995; 1,333,333 shares granted to Mr. Greenhill in 1993; 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:
</TABLE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION % IN RESTRICTED STOCK
- ---------------------------------------------------- ---------------------
<S> <C>
Up to $200,000...................................... 10%
$200,001 to $400,000................................ 15%
$400,001 to $600,000................................ 20%
Amounts over $600,000............................... 25%
</TABLE>
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.
<TABLE>
<S> <C>
(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.
</TABLE>
(Footnotes continued on following page)
18
<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<S> <C>
(E) In addition to the restricted stock awarded under the CAP Plan (referred to in footnote
C above), in 1993 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.
</TABLE>
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;
. 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; and
. 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.
19
<PAGE>
OPTION GRANTS IN 1995
<TABLE><CAPTION>
INDIVIDUAL GRANTS(B)
--------------------------------------------------------------------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS GRANTED ALL EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME (NUMBER OF SHARES) IN 1995 ($ PER 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
26,650 .22 54.63 11/02/02 121,324
26,985 .22 54.63 05/02/03 122,849
50,000 .41 54.00 12/14/05 589,500
-------- ----- ------------
Total............................ 245,143 2.02 1,378,556
Robert F.Greenhill.................. 0 -- -- -- --
Joseph J. Plumeri II................ 48,527 .40 45.50 07/23/03 138,302
</TABLE>
- ------------
<TABLE>
<C> <S>
(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. This table does not include 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
which are included in the Summary Compensation Table under the caption "Securities
Underlying Stock 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 employees, but
the receipt thereof by any such employee does not result in a net increase in his or
her Equity Position.
</TABLE>
<TABLE>
<C> <S>
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.
</TABLE>
20
<PAGE>
NET CHANGES IN EQUITY POSITION(1)
<TABLE><CAPTION>
ENDING NET EQUITY POSITION
----------------------------------------------------------
BEGINNING NET EQUITY NEW NET
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>
- ------------
<TABLE>
<C> <S>
(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 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.
</TABLE>
(Footnotes continued on following page)
21
<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<C> <S>
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 equal to 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.
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.
</TABLE>
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
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
NUMBER OF OPTIONS AT VALUE OF UNEXERCISED
SECURITIES 1995 YEAR-END IN THE MONEY OPTIONS
UNDERLYING VALUE (NUMBER OF SHARES) AT 1995 YEAR-END($)
OPTIONS REALIZED --------------------------- ---------------------------
NAME EXERCISED(B) ($)(C) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sanford I. Weill(A)....... 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>
(Footnotes on following page)
22
<PAGE>
(Footnotes for preceding page)
- ------------
<TABLE>
<C> <S>
(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 to cover the
exercise price and/or surrendered or withheld to cover the associated tax liabilities)
was: Mr. Weill, 418,069 shares; Mr. Dimon, 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 executives had ever
disposed of any Common Stock.
</TABLE>
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.
23
<PAGE>
TRAVELERS GROUP INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE><CAPTION>
1990 1991 1992 1993 1994 1995
----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
---------------------------
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.
24
<PAGE>
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.
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
25
<PAGE>
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.
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, 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
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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.
Mr. Plumeri, a Covered Person, was indebted to a subsidiary of the Company
during 1995 under a loan program assumed by a subsidiary of the Company from a
former employer of Mr. Plumeri. The loan program provided for loans to key
executives of the former employer to purchase shares of stock of such former
employer. The maximum amount of Mr. Plumeri's indebtedness during 1995 was
$416,893.25 of which $368,107.80 represented principal. The loan bears interest
at the prime rate minus 2 percent and is secured by 7,315 shares of Common
Stock, which Mr. Plumeri received in exchange for his shares of the former
employer. The principal of the loan is payable on December 31, 1996 and, in
accordance with the terms of the program, if Mr. Plumeri's employment continues
through such date, any interest thereon will be forgiven.
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.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
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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.
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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 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, 318,719,760 shares of
Common Stock were issued and outstanding and 17,388,274 shares were 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, issuance of more than
approximately 63 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.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
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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.
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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 of Common Stock
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 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. Because Amendment No. 10 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 option
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
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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 reflects the status of the 1996 Incentive Plan as the
successor to the 1986 Option Plan and 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. 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
participation, to modify within certain limits
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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 is the average of the closing prices on the
NYSE Composite Transactions Tape 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
will forfeit 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), will forfeit his or her restricted stock and will
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 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 will receive, 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. 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.
Stock Options. As an alternative to payment of compensation in the form of
restricted stock, the Compensation Committee may in its sole discretion permit a
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 will 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 will be the
average closing price of the Common Stock for the five trading days prior to the
grant of the option and will 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
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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, his or her 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 will
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, by tendering previously owned shares or shares of restricted stock
(awarded at least six months prior to such use). 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 will 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 will 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, in its discretion, may grant to
any participant who tenders previously owned shares or restricted stock to pay
all or a portion 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. 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 Equity
Position with respect to potential appreciation in the 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 employees, but the receipt thereof by any such employee does
not result in a net increase in his or her Equity Position. Such reload option
would have as its exercise price the closing price of the Common Stock on the
Composite Transactions Tape of 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
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Common Stock that 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.
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%).
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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 ("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 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.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSED
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AMENDMENT NO. 10 TO THE TRAVELERS GROUP 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.
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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 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 immediate 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 a new 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
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number of employees. The Travelers WealthBuilder Plan provides for annual grants
of stock options at fair market value to all eligible employees. Each employee's
option grant will be in an amount equal to a percentage of such employee's
compensation for the year divided by the exercise price. 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.
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. Previously owned shares (including shares of restricted
stock) that are tendered by a Participant to pay the exercise price of an option
and shares tendered to or withheld by the Company to pay withholding taxes shall
not be counted towards the number of shares available for issuance or the
Maximum Allocation. 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").
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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 such appropriate adjustment.
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 that would constitute "Cause," as defined in the 1996
Incentive Plan.
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 that 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 6, 1996 was $67.625 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 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.
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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 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 of 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 Continuing
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.
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
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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 a Participant upon the grant of a Nonqualified
Option (including a reload stock option). Upon the exercise of a Nonqualified
Option, the Participant 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
Participant from the exercise of a Nonqualified Option. The Spread is deductible
by the Company (or the subsidiary engaging the services of the Participant, 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 Participant'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
Participant.
Upon a sale of the shares of Common Stock received by the Participant 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 Participant'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 Participant 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 Participant 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 Participant as compensation.
Additional Shares will have a tax basis equal to the compensation income
recognized by the Participant 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
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 Participant 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 Participant 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
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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 a Participant's ordinary income at the time such
income is recognized by the Participant, 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 a Participant upon the grant or exercise of
an ISO. If shares of Common Stock are issued to a Participant 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 Participant within
two (2) years after the date of grant or within one (1) year after the receipt
of such shares by such Participant, then (a) upon the sale of such shares, any
amount realized in excess of the option exercise price will be taxed to such
Participant 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
Participant.
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
Participant 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 Participant on such
disposition will be taxed as short-term or long-term capital gain, and will not
result in any deduction by the Company. If a Participant 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. A Participant, 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 Participant 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
As with the 1986 Option Plan, 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
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approved by the vote of at least two-thirds of the Continuing 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.
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 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
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.
RECOMMENDATION
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 $8,500, plus reimbursement of certain out-of-pocket expenses.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the next Annual Meeting
of Stockholders and who wishes such proposal to be included in the Proxy
Statement for that meeting must submit such proposal in writing to the Secretary
of the Company, at the address set forth on the first page of this Proxy
Statement, and such proposal must be received on or before November 26, 1996.
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OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Annual Meeting. If other matters should arise
at the Annual Meeting, shares represented by proxies will be voted in the
discretion of the proxy holder.
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ANNEX A
PROPOSED AMENDMENT TO ARTICLE FOURTH
OF THE CERTIFICATE OF INCORPORATION
OF TRAVELERS GROUP INC.
-------------------
The first sentence of paragraph A, Article FOURTH, is hereby amended to read
in its entirety as follows:
The total number of shares of Common Stock which the Corporation shall
have authority to issue is One Billion Five Hundred Million (1,500,000,000)
shares of Common Stock having a par value of one cent ($.01) per share.
-------------------
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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):
"(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
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(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;"
5. 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.
6. Section 6(f)(vii) is hereby deleted in its entirety and replaced with
the following:
"(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."
7. Section 6(g) is hereby amended to add the following language after
the word "Plan" in the third line of such Section:
"or any successor plan"
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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 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
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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.
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
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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.
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.
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(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 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 Committee may specify). In the absence of such an
election, the award will be paid entirely in shares of Restricted Stock.
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(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 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
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(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).
(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;
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(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.
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
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employment 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.
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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.
"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.
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"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.
"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 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.
"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.
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"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).
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 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
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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.
(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 that 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"). As described in
Section 9(f) below, Surrendered Shares and Withheld Shares shall not be counted
towards 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.
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9. OPTIONS.
(a) Grant of Options. At the discretion of the Committee, Options granted
under the Plan may be any type of option permitted under the Code. 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.
(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 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
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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.
(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
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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 limits 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.
(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"). At the
discretion of the Committee, Reload Options granted under the Plan may be any
type of option permitted under the Code.
(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 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%).
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(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 underlying 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 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
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immediately exercisable with respect to one hundred percent (100%) of the Common
Stock subject thereto. "Change of 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, 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 Transferees"). 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
D-9
<PAGE>
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 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 that
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.
(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 a 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,
D-10
<PAGE>
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.
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-11
<PAGE>
P
R
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 on the reverse
side.
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 on the reverse side.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU
WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. 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 ON REVERSE SIDE
<PAGE>
|X|Please mark votes
as in this example
- -------------------------------------------------------------------------------
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 ALL |_| FROM |_|
directors to a three-year term. NOMINEES ALL
NOMINEES
NOMINEES: C. Michael Armstrong,
Kenneth J. Bialkin, Dudley C.
Mecum, Sanford I. Weill, Joseph R. MARK HERE
Wright, Jr. and Arthur Zankel FOR ADDRESS _
CHANGE AND |_|
NOTE BELOW
_
|_| FOR, EXCEPT AUTHORITY TO VOTE WITHHELD FROM
THE ABOVE NOMINEE(S)(WRITE NAMES(S) ON LINE):
---------------------------------------
- -------------------------------------------------------------------------------
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.
IF NO BOXES ARE MARKED THIS PROXY
WILL BE VOTED IN THE MANNER DESCRIBED
ON THE REVERSE SIDE.
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
