<PAGE>
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
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CITIGROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
CITIGROUP INC.
153 East 53(rd) Street
New York, New York 10043
March 8, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Citigroup Inc. on Tuesday, April 20, 1999. The meeting will be held at Carnegie
Hall, 881 Seventh Avenue, New York, New York, at 9:00 a.m. local time. The
entrance to Carnegie Hall is on 57th Street just east of Seventh Avenue.
On October 8, 1998 the historic merger of our two companies, Travelers Group
Inc. and Citicorp, was completed. At that time the Company changed its name to
Citigroup Inc. This will be the first Annual Meeting of Stockholders following
the merger.
At this meeting of stockholders, we will be voting on a number of important
matters. Please take the time to read carefully each of the proposals for
stockholder action described in the proxy materials.
Thank you for your continued support of our Company.
Sincerely,
<TABLE>
<S> <C>
[LOGO] [LOGO]
John S. Reed Sanford I. Weill
CHAIRMAN CHAIRMAN
</TABLE>
<PAGE>
CITIGROUP INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Citigroup Inc. (the "Company") will be
held at Carnegie Hall, 881 Seventh Avenue, New York, New York, on Tuesday, April
20, 1999 at 9:00 a.m. local time, for the following purposes:
- To elect seventeen directors to the Board;
- To ratify the selection of the Company's independent auditors for 1999;
- To approve and adopt the Citigroup 1999 Stock Incentive Plan;
- To approve and adopt the Citigroup 1999 Executive Performance Plan;
- To act upon certain stockholder proposals;
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 3, 1999 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, 153 East 53(rd)
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
[LOGO]
Charles O. Prince, III
CORPORATE SECRETARY
March 8, 1999
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE OR THAT YOU REGISTER YOUR VOTE BY TELEPHONE OR
ON THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD, SO THAT YOUR
SHARES WILL BE REPRESENTED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
CITIGROUP INC.
153 EAST 53(RD) STREET
NEW YORK, NEW YORK 10043
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to stockholders of Citigroup 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 Tuesday, April 20, 1999, at 9:00 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 19, 1999,
to stockholders of the Company on March 3, 1999, 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, 1998 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 or vote your shares by telephone or on
the Internet by following the instructions on your proxy card (except under the
very limited circumstances in which telephonic or Internet voting is not
available). 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.
On October 8, 1998 Citicorp ("Citicorp") merged (the "Citicorp Merger") into
a subsidiary of Travelers Group Inc. ("Travelers Group"). At that time Travelers
Group changed its corporate name to Citigroup Inc. References in this Proxy
Statement to the "Company" include Travelers Group prior to the Citicorp Merger.
As a result of prior transactions, including the payment of stock dividends
in 1993, 1996 and 1997 and the merger, as of December 31, 1993, with The
Travelers Corporation ("old Travelers"), the merger, as of November 28, 1997
(the "Salomon Merger"), of a wholly owned subsidiary of the Company with Salomon
Inc ("Salomon"), and the Citicorp Merger, certain of the Company's records,
including but not limited to those relating to stock option grants, restricted
stock awards and deferred shares for directors, 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 2,249,477,588
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), 140,000 shares of the Company's Series I Cumulative Convertible
Preferred Stock (the "Series I Preferred Stock") and 500,000 shares of the
Company's 8.40% Cumulative Preferred Stock, Series K (the "Series K Preferred
Stock"), which is held in the form of depositary shares (the "Series K
Depositary Shares"), each representing an interest in 1/20th of a share of
Series K Preferred Stock. Each share of Common Stock is entitled to one vote on
each matter that is voted on at the Annual Meeting. The Series I Preferred Stock
is entitled to 44.60526 votes per share on each matter that is voted on at the
Annual Meeting. Each share of Series K Preferred Stock is entitled to three
votes per share on each matter that is voted on at the Annual Meeting. The
Series I Preferred Stock and the Series K Preferred Stock (collectively, the
"Voting Preferred Stock") and the Common Stock will vote together as a
<PAGE>
single class on all matters scheduled to be voted on at the Annual Meeting.
Neither the Common Stock nor the Voting Preferred Stock is entitled to
cumulative voting.
None of the Company's other series of preferred stock, the 6.365% Cumulative
Preferred Stock, Series F, the 6.213% Cumulative Preferred Stock, Series G, the
6.231% Cumulative Preferred Stock, Series H, the 5.864% Cumulative Preferred
Stock, Series M, the Graduated Rate Cumulative Preferred Stock, Series O, the
Adjustable Rate Cumulative Preferred Stock, Series Q, the Adjustable Rate
Cumulative Preferred Stock, Series R, the 8.30% Noncumulative Preferred Stock,
Series S, the 8 1/2% Noncumulative Preferred Stock, Series T, the 7 3/4%
Cumulative Preferred Stock, Series U, the Fixed/Adjustable Rate Cumulative
Preferred Stock, Series V, the Cumulative Adjustable Rate Preferred Stock,
Series Y, or the 5.321% Cumulative Preferred Stock, Series YY, have any right to
vote on any of the matters that are scheduled to be voted on at the Annual
Meeting. There are no shares of the Company's 9.50% Cumulative Preferred Stock,
Series L outstanding.
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.
All of the Series I Preferred Stock is held of record by subsidiaries of
Berkshire Hathaway Inc.
All of the Series K Preferred Stock is held of record by Citibank, N.A.
("Citibank"), in its capacity as depositary (the "Depositary"), under the
Deposit Agreement (the "Deposit Agreement") dated February 13, 1996, among the
Company, as successor to Salomon, Citibank, as successor depositary, and the
holders of Series K depositary receipts, representing the Series K Depositary
Shares. As more fully described below, the Series K Preferred Stock is voted
based on instructions received from the holders of the Series K Depositary
Shares. Based on a Schedule 13G filed in February 1999, Lehman Brothers Holdings
Inc. owns 719,592 Series K Depositary Shares (7.2%).
QUORUM; VOTING PROCEDURES
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the voting power of the Common Stock and the Voting 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 or in a vote
registered telephonically or on the Internet, all shares of Common Stock and
Series I Preferred Stock represented by valid proxies will be voted FOR items
1- 4 and AGAINST items 5 and 6 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 or by voting telephonically or on the
Internet, your shares of Common Stock will be voted in accordance with such
instructions.
The Depositary will mail to the record holders of the Series K Depositary
Shares as of the Record Date a notice containing this Proxy Statement and a
statement that the holders of the Series K Depositary Shares may instruct the
Depositary as to the exercise of the voting rights represented by the amount of
Series K Preferred Stock represented by their Series K Depositary Shares
(including an express indication
2
<PAGE>
that instructions may be given to the Depositary to give a discretionary proxy
to a person designated by the Company) and a brief statement as to the manner in
which such instructions may be given. The Depositary will vote or cause to be
voted, in accordance with the instructions received from the holders of the
Series K Depositary Shares, the maximum number of whole shares of Series K
Preferred Stock underlying the Series K Depositary Shares as to which
instructions were received. If no instructions are received from a holder of
Series K Depositary Shares, the Depositary will not vote the corresponding
shares of Series K Preferred Stock represented thereby.
SECURITY OWNERSHIP OF MANAGEMENT
STOCK OWNERSHIP COMMITMENT
The Company has undertaken to continue the best practices and cultural
values of Travelers Group and Citicorp, each of which had long had broad
policies to encourage stock ownership among its directors, officers and
employees to align their interests with the interests of stockholders. The
Company believes that these policies were a significant factor in the excellent
returns achieved by stockholders of each of Travelers Group and Citicorp
historically.
In a spirit of continued commitment to aligning stockholder interests with
those of all Company employees, the Company has adopted a new "Stock Ownership
Commitment" (the "Stock Ownership Commitment") building on the formal and
informal policies and practices of Travelers Group and Citicorp. The new Stock
Ownership Commitment provides that for all members of the Board of Directors and
for members of senior management, at least 75% of all Common Stock currently
owned or previously granted to them or awarded in the future must be held for so
long as they remain directors or members of senior management. For these
purposes, "senior management" includes all of the members of the Company's
Management Committee (the "Management Committee"), comprised of the most senior
executives of the Company and its subsidiaries, all of the members of the
Planning Groups for the Global Consumer and Corporate and Investment Banking
businesses, and the most senior members of the corporate staff, in total
comprising approximately seventy individuals. The only exceptions to this Stock
Ownership Commitment are gifts to charity, limited estate planning transactions
with family members and transactions with the Company itself in connection with
participation in stock option and restricted stock plans. In furtherance of this
Stock Ownership Commitment, a significant portion of both directors' fees and
senior management compensation is paid in Common Stock.
In addition to the Stock Ownership Commitment of directors and senior
management, the Company fosters stock ownership by all of its employees through
various measures. In connection with the Citicorp Merger, the Company awarded
options to over 32,000 employees under the "Founders Grant" (as defined below),
to provide maximum incentive to employees to enhance stockholder value of the
Company. In addition, in the two years prior to the Citicorp Merger, all
eligible full-time former Travelers Group employees, other than Section 16(a)
Persons (as defined below), in the United States and Canada were annually
awarded options through the WealthBuilder Program. Further, there are numerous
other opportunities for employees to own Common Stock through participation in
various stock-based programs such as the Citicorp 1994 Stock Purchase Plan (the
"Citicorp Stock Purchase Plan"), the Travelers Group Stock Purchase Plan (the
"Travelers Stock Purchase Plan", and together with the Citicorp Stock Purchase
Plan, the "Stock Purchase Plans"), the Citicorp Savings Incentive Plan ("SIP"),
the Travelers Group 401(k) Savings Plan (the "Savings Plan") and through
periodic management stock option grants, as well as through participation in the
Travelers Group Capital Accumulation Plan (the "CAP Plan"). As a result, it is
anticipated that close to 50% of the Company's employees will be owners of
Common Stock by year end 1999.
3
<PAGE>
STOCK OWNERSHIP TABLE
The following table sets forth, as of January 31, 1999, the Common Stock
ownership of each director and certain executive officers of the Company. As of
January 31, 1999, the directors and the executive officers of the Company as a
group (31 persons) beneficially owned 36,628,779 shares of Common Stock (or
approximately 1.6% of the total voting power of the Common Stock and Voting
Preferred Stock outstanding and entitled to vote at the Annual Meeting). The
number of shares beneficially owned by such directors and executive officers
includes an aggregate of 12,150,482 shares of Common Stock that such persons may
acquire pursuant to options exercisable within 60 days of the Record Date;
however, such shares, prior to the exercise of the options pursuant to which
they may be acquired, are not entitled to be voted at the Annual Meeting. These
amounts are based upon the Company's records of beneficial ownership by its
current directors under the Citigroup Inc. Amended and Restated Compensation
Plan for Non-Employee Directors (the "Citigroup Directors' Plan"), the old
Travelers Deferred Compensation Plan for Non-employee Directors (the "old
Travelers Directors' Plan") and the Citicorp Directors Deferred Compensation
Plan (the "Citicorp Directors' Plan") and by its current officers under the
Travelers Group 1996 Stock Incentive Plan (the "1996 Incentive Plan"), the
Travelers Group 1986 Stock Option Plan (the "1986 Option Plan"), the Savings
Plan, the CAP Plan and the Travelers Group Employee Incentive Plan ("EIP").
These amounts also include beneficial ownership by executive officers under the
Citicorp 1997 Stock Incentive Plan ("Citicorp 1997 Incentive Plan"), the
Citicorp 1988 Stock Incentive Plan ("Citicorp 1988 Incentive Plan", and together
with Citicorp 1997 Incentive Plan, the "Citicorp Incentive Plans"), the Citicorp
Stock Purchase Plan, the Executive Incentive Compensation/Core Business
Performance Award Plan ("Citicorp EIC") and SIP, which plans were assumed by the
Company in connection with the Citicorp Merger, the Salomon Equity Partnership
Plan for Key Employees ("Salomon EPP"), the Salomon Stock Incentive Plan and the
Salomon Non-Qualified Stock Option Plan of 1984, which plans were assumed by the
Company in connection with the Salomon Merger.
As of January 31, 1999, 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. As of January 31, 1999, no individual
director or executive officer beneficially owned any shares of any series of the
Company's preferred stock, including the Voting Preferred Stock. Except as
otherwise expressly stated in the footnotes to the following table, beneficial
ownership of shares means that the beneficial owner thereof has sole voting and
investment power over such shares.
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK STOCK OPTIONS
BENEFICIALLY EXERCISABLE TOTAL
OWNED WITHIN 60 COMMON STOCK
EXCLUDING DAYS OF BENEFICIALLY
NAME/TITLE OPTIONS(1) RECORD DATE(2) OWNED(1)
- -------------------------------------------------------------- ----------------- -------------- --------------
C. Michael Armstrong.......................................... 35,587 35,587
Director
Alain J.P. Belda.............................................. 4,941 4,941
Director
Kenneth J. Bialkin............................................ 471,934 471,934
Director
Michael A. Carpenter.......................................... 312,931 178,692 491,623
Executive Officer
Kenneth T. Derr............................................... 21,366 21,366
Director
John M. Deutch................................................ 25,460 25,460
Director
The Hon. Gerald R. Ford....................................... 72,891 72,891
Honorary Director
Ann Dibble Jordan............................................. 9,951 9,951
Director
Robert I. Lipp(3)............................................. 1,818,196 591,489 2,409,685
Executive Officer
Reuben Mark................................................... 18,416 18,416
Director
Michael T. Masin.............................................. 3,675 3,675
Director
Deryck C. Maughan............................................. 608,588 180,000 788,588
Executive Officer
Dudley C. Mecum(4)............................................ 138,176 138,176
Director
Richard D. Parsons............................................ 7,750 7,750
Director
Andrall E. Pearson............................................ 108,529 108,529
Director
John S. Reed.................................................. 2,418,963 2,250,000 4,668,963
Director and Co-Chief Executive Officer
Robert B. Shapiro............................................. 6,442 6,442
Director
Franklin A. Thomas............................................ 41,095 41,095
Director
Sanford I. Weill(5)........................................... 15,367,043 5,826,563 21,193,606
Director and Co-Chief Executive Officer
Edgar S. Woolard, Jr.......................................... 85,328 85,328
Director
Arthur Zankel(6).............................................. 250,140 250,140
Director
All Directors and Executive Officers as a group
(31 persons)(7)(8)(9)....................................... 24,478,297 12,150,482 36,628,779
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
5
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
- ------------------------------
(1) This information includes, as of January 31, 1999, 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 non-employee
directors under the Citigroup Directors' Plan, but receipt of which is
deferred: Mr. Armstrong, 20,701; Mr. Belda, 616; Mr. Bialkin, 106,849; Mr.
Derr, 616; Mr. Deutch, 308; Ms. Jordan, 308; Mr. Mark, 616; Mr. Masin,
3,675; Mr. Mecum, 106,849; Mr. Parsons, 616; Mr. Pearson, 106,849; Mr.
Shapiro, 616; Mr. Thomas, 462; and Mr. Woolard, 616; (ii) the following
number of shares of Common Stock issued in exchange for shares of Citicorp
common stock held under the Citicorp Directors' Plan, receipt of which is
deferred: Mr. Belda, 1,825; Mr. Derr, 5,075; Mr. Deutch, 212; Mr. Mark,
5,300; Mr. Parsons, 4,634; Mr. Shapiro, 826; Mr. Thomas, 34,330; and Mr.
Woolard, 69,314; (iii) the following number of shares of Common Stock issued
in exchange for shares of old Travelers common stock held under the old
Travelers Directors' Plan, receipt of which is deferred: Mr. Armstrong,
11,939; Mr. Lipp, 2,217; and Mr. Weill, 2,847; (iv) the following number of
shares of Common Stock held under the Savings Plan, as to which the holder
has voting power but not dispositive power: Mr. Carpenter, 72; Mr. Lipp,
15,836; Mr. Maughan, 5,089; and Mr. Weill, 16,636; (v) the following number
of shares of Common Stock held under SIP as to which the holder has voting
power but not dispositive power: Mr. Reed, 4,096; (vi) 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. Carpenter, 44,486; Mr. Lipp, 27,729; Mr.
Maughan, 30,530; and Mr. Weill, 199,970; and (vii) the following number of
shares of Common Stock awarded pursuant to Salomon EPP, as to which the
holder may direct the vote but a portion of which shares remain subject to
forfeiture: Mr. Maughan, 351,020.
(2) Non-employee directors are not eligible to receive stock option grants under
the Company's plans.
(3) Includes 15,000 shares of Common Stock owned by Mr. Lipp as tenant-in-common
with his wife, 50,900 shares of Common Stock owned by Mr. Lipp as
tenant-in-common with the Robert I. Lipp Grantor Retained Annuity Trust and
39,420 shares of Common Stock owned by Mr. Lipp as tenant-in-common with the
Lipp Family Grantor Retained Annuity Trust.
(4) Includes 2,527 shares of Common Stock owned by Mr. Mecum's wife, as to which
Mr. Mecum disclaims beneficial ownership.
(5) Includes 300 shares of Common Stock owned by Mr. Weill's wife, as to which
Mr. Weill disclaims beneficial ownership and 500,000 shares held by Mr.
Weill as tenant-in-common with the SIW 1998 Grantor Retained Annuity Trust.
(6) Includes 600 shares of Common Stock held by a trust of which Mr. Zankel is a
trustee, as to which Mr. Zankel disclaims beneficial ownership.
(7) This information also includes as "beneficially owned" (i) an aggregate of
52,284 shares of Common Stock held under the Savings Plan, as to which the
respective holders have voting power but not dispositive power, (ii) an
aggregate of 422,683 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, (iii) an aggregate of
4,096 shares held under SIP, as to which the respective holders have voting
power but not dispositive power, (iv) an aggregate of 351,020 shares of
Common Stock awarded under Salomon EPP, as to which the holder may direct
the vote but a portion of which shares remain subject to forfeiture, (v) an
aggregate of 532,500 shares awarded under the Citicorp Incentive Plans, as
to which the respective holders may direct the vote but which remain subject
to forfeiture and restrictions on disposition, (vi) an aggregate of 14,493
shares of Common Stock awarded under EIP, as to which the holder may direct
the vote but which shares remain subject to forfeiture and restrictions on
disposition, (vii) an aggregate of 172,882 shares of Common Stock awarded
under Citicorp EIC, as to which the respective holders do not have voting or
dispositive power, (viii) an aggregate of 4,867 shares of Common Stock as to
which the holders disclaim beneficial ownership and (ix) an aggregate of
708,998 shares of Common Stock held by certain holders with family members
and/or trusts for the benefit of family members as tenants-in-common or in
401(k) plans of family members.
(8) The following officers and directors of the Company beneficially own shares
of the Class A Common Stock of Travelers Property Casualty Corp. ("TAP"), an
approximately 83.8% owned subsidiary of the Company: Kenneth J. Bialkin,
8,394 shares; Robert I. Lipp, 148,126 shares; Dudley C. Mecum, 6,356 shares;
Sanford I. Weill, 4,100 shares; and Arthur Zankel, 6,379 shares.
(9) The table does not reflect the Common Stock beneficially owned by James
Dimon which at January 31, 1999 totaled 1,636,001 shares, consisting of
347,700 shares that were beneficially owned excluding options and 1,288,301
stock options, exercisable within 60 days of the Record Date. Mr. Dimon
resigned from his position as an executive officer of the Company and its
subsidiaries effective as of November 2, 1998.
------------------------------
6
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1998, each of its officers, directors and
greater than ten percent stockholders complied with all such applicable filing
requirements.
ITEM 1:
ELECTION OF DIRECTORS
The Board has set the number of directors at 17. The terms of all of the
directors currently serving on the Board expire at the Annual Meeting. All of
the directors currently serving on the Board have been nominated by the Board of
Directors for re-election to one-year terms at the Annual Meeting.
Each nominee elected will hold office until the Annual Meeting of
Stockholders to be held in 2000 and until a successor has been duly elected and
qualified, unless prior to such meeting a director shall resign, or his or her
directorship shall become vacant due to his or her 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. All of the directors named below who were not previously
directors of Travelers Group have been directors of the Company since October 8,
1998. Set forth below are periods of Board membership with the Company and
Citicorp, as applicable, prior to the Citicorp Merger. Directors' terms with the
Company as stated below include periods of Board membership with the Company
under its prior name, Travelers Group, as well as with Commercial Credit Company
("CCC"), a predecessor corporation of the Company.
Directors are not eligible to stand for re-election after reaching the age
of 72 except for Mr. Pearson who will not be eligible to stand for re-election
after reaching the age of 75.
The following seventeen individuals have been nominated for election at the
Annual Meeting for a term ending 2000:
<TABLE>
<S> <C> <C>
C. MICHAEL ARMSTRONG CHAIRMAN AND CHIEF EXECUTIVE OFFICER
60 AT&T CORP.
- Officer, International Business Machines Corporation--1961 to
1992
Member, IBM Management Committee
Chairman, IBM World Trade Corporation
- Chairman and Chief Executive Officer, Hughes Electronic
Corporation--1992 to 1997
- Chairman and Chief Executive Officer, AT&T Corp.--1997
- Travelers Group director since 1993
- Other Directorships: Thyssen-Bornemisza Group (Supervisory
Board)
[PHOTO] - Other Activities: Board of Trustees of John's Hopkins
University, Yale School of Management (advisory board),
President's Export Council (Chairman), Council on Foreign
Relations, National Security Telecommunications Advisory
Committee, Defense Policy Advisory Committee on Trade and
Carnegie Hall
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
ALAIN J.P. BELDA PRESIDENT AND CHIEF OPERATING OFFICER
55 ALCOA INC.
- Joined Alcoa--1969
President, Alcoa Aluminio SA (Brazil)--1979 to 1994
- Vice President--1982 to 1991
- President, Alcoa (Latin America)--1991 to 1994
- Executive Vice President--1994 to 1995
- Vice Chairman--1995 to 1997
- President and Chief Operating Officer--1997
- Citicorp director 1997 to 1998
[PHOTO] - Other Directorships: Cooper Industries, Inc. and Alcoa Inc.
KENNETH J. BIALKIN PARTNER
69 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
- Joined Skadden, Arps, Slate, Meagher & Flom LLP in 1988
- Travelers Group director since 1986
- Other Directorships: TAP, The Municipal Assistance Corporation
for the City of New York, Oshap Technologies, Ltd., Tecnomatix
[PHOTO] Technologies Ltd. and Sapiens International Corporation N.V.
- Other Activities: Carnegie Hall, New School University (Visiting
Committee, Graduate Faculty), American Jewish Historical Society
(President), America-Israel Friendship League (Chairman) and
Council on Foreign Relations
KENNETH T. DERR CHAIRMAN AND CHIEF EXECUTIVE OFFICER
62 CHEVRON CORPORATION
- Joined Chevron Corporation--1960
- Assistant to the President--1969
- Vice President--1972
- President and Chief Executive Officer, Chevron USA Inc.--1979 to
1984
- Director, Chevron Corporation--1981
- Vice Chairman--1985 to 1988
- Chairman and Chief Executive Officer--1989
- Citicorp director--1987 to 1998
- Other Directorships: AT&T Corp. and Potlatch Corporation
[PHOTO] - Other Activities: American Petroleum Institute (Director), The
Business Council, The Business Roundtable and The California
Business Roundtable
</TABLE>
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JOHN M. DEUTCH INSTITUTE PROFESSOR
60 MASSACHUSETTS INSTITUTE OF TECHNOLOGY
- Director, Energy Research of the U.S. Department of Energy--1978
- Under Secretary, U.S. Department of Energy--1979 to 1980
- Dean of Science, M.I.T.--1982 to 1985
- Provost and Karl T. Compton Professor of Chemistry,
M.I.T.--1985 to 1990
- Institute Professor, M.I.T.--1990
- Under Secretary, Department of Defense--1993
- Deputy Secretary, Department of Defense--1994
- Director of Central Intelligence Agency--1995 to 1996
- Citicorp and Citibank, N.A. director--1987 to 1993 and 1996 to
1998
[PHOTO] - Other Directorships: Ariad Pharmaceuticals, Inc., CMS Energy,
Cummins Engine Company, Inc., Raytheon Company and Schlumberger,
Ltd.
ANN DIBBLE JORDAN CONSULTANT
64 - Director of Social Services of Chicago Lying-in Hospital--1970
to 1985
- Field Work Associate Professor at the School of Social Service
Administration of the University of Chicago--1970 to 1987
- Director of the Department of Social Services for the University
of Chicago Medical Center--1986 to 1987
- Travelers Group director since 1989
[PHOTO] - Other Directorships: Johnson & Johnson Corporation, the National
Symphony Orchestra, The Phillips Gallery, Child Welfare League,
Automatic Data Processing, Inc. and the Salant Corp.
REUBEN MARK CHAIRMAN AND CHIEF EXECUTIVE OFFICER
60 COLGATE-PALMOLIVE COMPANY
- Joined Colgate-Palmolive Company--1963
- President and General Manager (Venezuela and Canada)--1970 to
1974
- Vice President and General Manager--1974 to 1979
- Group Vice President--1979 to 1981
- Executive Vice President--1981 to 1983
- Director, Colgate-Palmolive Company--1983
- President (Chief Operating Officer)--1983 to 1984
- Chief Executive Officer--1984 to 1986
- Chairman of the Board and Chief Executive Officer--1986
- Citicorp and Citibank, N.A. director--1996 to 1998
[PHOTO] - Other Directorships: Pearson plc and Time Warner Inc.
</TABLE>
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MICHAEL T. MASIN VICE CHAIRMAN
54 PRESIDENT INTERNATIONAL
DIRECTOR
GTE CORPORATION
- Partner, O'Melveny and Myers--1976 to 1993
- Vice Chairman, GTE Corporation--1993
- President International, GTE Corporation--1995
- Travelers Group director since 1997
- Other Directorships: Compania Nacional Telefonos de Venezuela,
BCT. Telus Communications, Inc., and Puerto Rican Telephone
Company
[PHOTO] - Other Activities: Board of Trustees of Carnegie Hall, Keck
Foundation and China-American Society; Business Committee of
Board of Trustees of the Museum of Modern Art, and Dean's
Council of Dartmouth College
DUDLEY C. MECUM MANAGING DIRECTOR
64 CAPRICORN HOLDINGS, LLC
- Managing Partner, KPMG LLP (New York office)--1979 to 1985
- Partner, G.L. Ohrstrom & Co.--1989 to 1996
- Managing Director, Capricorn Holdings, LLC--1997
- Travelers Group director since 1986
[PHOTO] - Other Directorships: TAP, Dyncorp, Vicorp Restaurants, Inc.,
Lyondell Companies, Inc., Suburban Propane Partners, MLP and CCC
Information Services, Inc.
RICHARD D. PARSONS PRESIDENT
50 TIME WARNER INC.
- Assistant and First Assistant Counsel to the Governor, State of
New York--1971 to 1974
- Deputy Counsel to the Vice President, Office of the Vice
President of the United States--1975
- General Counsel and Associate Director, Domestic Council, White
House--1975 to 1977
- Associate, Partner and Managing Partner, Patterson, Belknap,
Webb & Tyler--1977 to 1988
- President and Chief Operating Officer, Dime Savings Bank of New
York--1988 to 1990
- Chairman and Chief Executive Officer, Dime Savings Bank of New
York--1991 to 1995
- Director, Time Warner Inc.--1991
- President, Time Warner Inc.--1995
- Citicorp and Citibank, N.A. director 1996 to 1998
[PHOTO] - Other Directorships: Philip Morris Companies, Inc.
</TABLE>
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ANDRALL E. PEARSON CHAIRMAN AND CHIEF EXECUTIVE OFFICER
73 TRICON GLOBAL RESTAURANTS, INC.
- President, Pepsico, Inc.--1970 to 1984
- Professor, Harvard Business School--1985
- General Partner, Clayton, Dubilier & Rice, Inc.--1992 to 1997
Chairman of the Board and Director, Alliant Foodservice Inc., a
subsidiary of Clayton, Dubilier & Rice, Inc.
Director, KINKO's Inc., a subsidiary of Clayton, Dubilier &
Rice, Inc.
- Chairman and Chief Executive Officer, Tricon Global Restaurants,
Inc.--1997
- Travelers Group director since 1986
[PHOTO] - Other Directorships: DBT-On-Line
JOHN S. REED CHAIRMAN
60 CO-CHIEF EXECUTIVE OFFICER
CITIGROUP INC.
CITICORP AND CITIBANK, N.A.
- Joined Citibank, N.A.--1965
- Head, Individual Bank--1975
- Vice Chairman, Citicorp and Citibank, N.A.--1982
- Chairman and Chief Executive Officer, Citicorp and Citibank,
N.A.-- 1984
- Chairman and Co-Chief Executive Officer, Citigroup Inc.--1998
- Director, Citicorp, Citibank, N.A.--1982
- Other Directorships: Monsanto Company and Philip Morris
Companies, Inc.
[PHOTO] - Other Activities: The Business Council and The New York Clearing
House Association, L.L.C.
ROBERT B. SHAPIRO CHAIRMAN AND CHIEF EXECUTIVE OFFICER
60 MONSANTO COMPANY
- Joined G.D. Searle & Co. (subsequently acquired by Monsanto
Company)--1979
- President, The NutraSweet Group (a division of G.D. Searle &
Co.)-- 1982 to 1985
- Chairman and Chief Executive Officer, The NutraSweet Company (a
subsidiary of Monsanto Company)--1985 to 1990
- President, The Agricultural Group (a division of Monsanto
Company)-- 1990 to 1993
- President and Chief Operating Officer, Monsanto Company--1993 to
1995
- Director, Monsanto Company--1993
- Chairman and Chief Executive Officer, Monsanto Company--1995
- Citicorp and Citibank, N.A. director--1994 to 1998
[PHOTO] - Other Directorships: Silicon Graphics, Inc.
</TABLE>
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FRANKLIN A. THOMAS FORMER PRESIDENT
64 THE FORD FOUNDATION
- President, Bedford-Stuyvesant Restoration Corporation--1967 to
1977
- Private practice of law--1978 to 1979
- President, The Ford Foundation--1979 to 1996
- Citicorp and Citibank, N.A. director--1970 to 1998
[PHOTO] - Other Directorships: Alcoa, Inc., Cummins Engine Company, Inc.,
Lucent Technologies, Inc., Pepsico, Inc. and CONOCO Inc.
SANFORD I. WEILL CHAIRMAN
65 CO-CHIEF EXECUTIVE OFFICER
CITIGROUP INC.
- Founding Partner, Shearson Lehman Brothers Inc.'s predecessor
partnership--1960 to 1965
- Chairman of the Board and Chief Executive Officer, or a
principal executive officer, Shearson Lehman Brothers Inc.--1965
to 1984
- Chairman of the Board, Shearson Lehman Brothers Holdings Inc.--
1984 to 1985
- Chairman of the Board and Chief Executive Officer, American
Express Insurance Services, Inc.--1984 to 1985
- President, American Express Company--1983 to 1985
- Chairman of the Board and Chief Executive Officer, Travelers
Group (and its predecessor, CCC)--1986
- President--1986 to 1991
- Chairman and Co-Chief Executive Officer, Citigroup Inc.--1998
- Travelers Group director since 1986
- Other Directorships: TAP, AT&T Corp. and E.I. du Pont de Nemours
& Company
[PHOTO] - Other Activities: The Business Roundtable, The Business Council,
Board of Trustees, Carnegie Hall (Chairman), Baltimore Symphony
Orchestra (director), Board of Governors of New York Hospital,
Board of Overseers of the Joan and Sanford I. Weill Medical
College & Graduate School of Medical Sciences of Cornell
University (Chairman), The New York and Presbyterian Hospitals
(Trustee), Cornell University's Johnson Graduate School of
Management Advisory Board, Cornell University (Trustee
Emeritus), National Academy Foundation (Chairman), United States
Treasury Department's Working Group on Child Care
</TABLE>
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EDGAR S. WOOLARD, JR. FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
64 E.I. DU PONT DE NEMOURS & COMPANY
- Joined E.I. du Pont de Nemours & Company--1957
- Executive Vice President and Director--1983
- Vice Chairman--1985
- President and Chief Operating Officer--1987
- Chairman and Chief Executive Officer--1989
- Chairman--1995 to 1997
- Citicorp director--1987 to 1998
- Other Directorships: Apple Computer, Inc.
[PHOTO] - Other Activities: The Business Council
ARTHUR ZANKEL GENERAL PARTNER
67 FIRST MANHATTAN CO.
- Joined First Manhattan Co.--1965
- Travelers Group director since 1986
- Other Directorships: TAP, Vicorp Restaurants, Inc. and Fund
American Enterprises Holdings, Inc.
[PHOTO] - Other Activities: Skidmore College (Trustee), Carnegie Hall
(Trustee), New York Foundation (Trustee) and UJA-Federation
(Trustee)
THE HONORABLE FORMER PRESIDENT OF THE UNITED STATES
GERALD R. FORD, - Vice President of the United States--December 1973 through
HONORARY DIRECTOR* August 1974
85 - President of the United States--August 1974 through January 1977
- Travelers Group director or Honorary Director since 1986
- Other Positions: National Association of Securities Dealers,
Inc. (Director), Chase Bank of Texas (Advisory Director) and
American Express Company (Advisor to the Board)
[PHOTO] * The Hon. Gerald R. Ford is an honorary director and as such is
appointed by the Board and does not stand for election.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met nine times during 1998, seven times prior to the
Citicorp Merger and twice following the Citicorp Merger. Each director who was
prior to the Citicorp Merger a director of the Company and each director who was
prior to the Citicorp Merger a director of Citicorp attended at least 75 percent
of the aggregate number of the respective meetings of the Board of Directors and
Board Committees of which he or she was a member (during the period that he or
she served as a director) during 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
Following the Citicorp Merger, the Committees of the Board of Directors of
the Company were, in some cases, renamed, and in all cases, reconstituted, with
new Board members replacing departing members. Set forth below are the current
members and functions of the standing committees of the Board of Directors, the
number of meetings of each Committee both before and after the Citicorp Merger,
the number of meetings of the equivalent committees of Citicorp during 1998
prior to the Citigroup Merger and a list of continuing members.
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EXECUTIVE COMMITTEE. The members of the Committee are Messrs. Reed
(Chairman), Weill (Chairman), Bialkin, Derr, Mecum, Thomas, Woolard and Zankel.
The Committee acts on behalf of the Board should an urgent matter arise that
requires a decision before the Board is next scheduled to meet and when
scheduling makes it difficult to convene the entire Board. The Executive
Committee met once during the period between the Citicorp Merger and year end.
Prior to the Citicorp Merger, the Board of Directors had an Executive Committee
with substantially similar responsibilities to the Executive Committee, the
continuing members of which were Messrs. Bialkin, Weill and Zankel and which met
four times during 1998.
AUDIT COMMITTEE. The members of the Committee are Messrs. Mecum (Chairman),
Armstrong, Belda, Derr, Deutch, Mark and Masin. The Committee, composed entirely
of non-management directors, reviews the audit plans and findings of the
independent auditors and the Company's internal audit and risk review staff, the
results of regulatory examinations, and tracks management's corrective action
plans where necessary. It reviews the Company's accounting policies and
controls; compliance programs as well as significant tax and legal matters; and
recommends to the Board the annual appointment of independent auditors. It also
reviews the Company's risk management processes. Subcommittees of the Audit
Committee, composed entirely of members of the Citigroup Audit Committee, cover
the corporate and investment banking businesses, and the consumer business of
Citigroup. In addition, TAP has a separate audit committee, the members of which
are non-management directors of TAP. The Audit Committee met once during the
period between the Citicorp Merger and year end. Prior to the Citicorp Merger,
the Board of Directors had an Audit Committee with substantially similar
responsibilities to the Committee, the continuing members of which were Messrs.
Armstrong and Mecum and which met four times during 1998. Citicorp's Audit
Committee, the continuing members of which were Messrs. Belda, Deutch and Mark,
met twice during 1998 prior to the Citicorp Merger.
RISK, CAPITAL AND SUBSIDIARIES COMMITTEE. The members of the Committee are
Messrs. Derr (Chairman), Armstrong, Belda, Mecum, Parsons, Pearson, Woolard and
Zankel. The Committee, composed entirely of non-management directors, reviews,
on a periodic basis, certain substantive risks identified to it by the Company's
senior management; the Company's capital structure and significant investments;
and the financial position of principal subsidiaries, the Company's subsidiary
structure, processes for managing subsidiaries and the conduct of subsidiaries
and affiliates in providing fiduciary and investment services. The Committee did
not meet during the period between the Citicorp Merger and year end. Prior to
the Citicorp Merger, the Board of Directors had a Finance Committee with
substantially similar responsibilities to the Committee, the continuing members
of which were Messrs. Armstrong, Pearson and Zankel and which met once.
Citicorp's Committee on Subsidiaries/Capital, the continuing members of which
were Messrs. Belda, Derr, Parsons and Woolard, met twice during 1998 prior to
the Citicorp Merger.
PUBLIC AFFAIRS COMMITTEE. The members of the Committee are Messrs. Thomas
(Chairman), Bialkin, Deutch, Mark, Masin and Shapiro and Ms. Jordan. The
Committee, composed entirely of non-management directors, reviews the Company's
relationship with external constituencies and the Company's policies, postures
and programs which relate to public issues of significance to the Company and
the public at large. The Committee did not meet during the period between the
Citicorp Merger and year end. Prior to the Citicorp Merger, the Board of
Directors had an Ethics and Public Affairs Committee with substantially similar
responsibilities to the Committee, the continuing members of which were Messrs.
Bialkin and Masin and Ms. Jordan and which met once during 1998. Citicorp's
Public Issues Committee, the continuing members of which were Messrs. Deutch and
Thomas, met twice during 1998 prior to the Citicorp Merger.
PERSONNEL, COMPENSATION AND DIRECTORS COMMITTEE. The members of the
Committee are Messrs. Zankel (Chairman), Bialkin, Parsons, Pearson, Shapiro,
Thomas and Woolard and Ms. Jordan. The Committee, composed entirely of
non-management directors, is responsible, among other things, for evaluating the
efforts of the Company and of the Board of Directors to maintain effective
corporate
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governance practices and identifying candidates for election to the Board of
Directors. The 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 Committee for
consideration. The Committee sets the compensation of the Chief Executive
Officers and reviews the compensation actions for senior management, which
includes the Management Committee, members of the business planning groups and
the most senior members of corporate staff. Further, the Committee approves
broad-based and special compensation plans across the Company. The Committee met
three times during the period between the Citicorp Merger and year end. Prior to
the Citicorp Merger, the Board of Directors had a Nominations, Compensation and
Corporate Governance Committee with substantially similar responsibilities to
the Committee, the continuing members of which were Messrs. Bialkin, Pearson and
Zankel and Ms. Jordan and which met six times during 1998. Citicorp's Personnel
Committee, the continuing members of which were Messrs. Thomas and Woolard, met
four times during 1998 prior to the Citicorp Merger.
INCENTIVE COMPENSATION SUBCOMMITTEE. The members of the Subcommittee are
Messrs. Zankel (Chairman), Parsons, Pearson, Shapiro, Thomas and Woolard and Ms.
Jordan. The Subcommittee, comprised of "outside directors" (as such term is used
in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"))
who are also "Non-Employee Directors" (as such term is defined in Rule 16b-3 of
the Securities Exchange Act of 1934, as amended) establishes compensation for
the Chief Executive Officers and certain other senior executives and has the
exclusive authority to approve all compensation for Section 16(a) Persons and
the executives required to be named in the Summary Compensation Table in the
Company's annual proxy statement (the "Covered Employees"). The Subcommittee met
three times during the period between the Citicorp Merger and year end. Prior to
the Citicorp Merger, the Board of Directors had an Incentive Compensation
Subcommittee with substantially similar responsibilities to the Subcommittee,
the continuing members of which were Messrs. Pearson and Zankel and Ms. Jordan
and which met three times during 1998.
PERSONNEL, COMPENSATION AND DIRECTORS COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION AND CERTAIN RELATIONSHIPS
The persons named above under the caption "Election of Directors--Committees
of the Board of Directors--Personnel, Compensation and Directors Committee" were
the only members of such committee during 1998, other than the Honorable Gerald
R. Ford, who became an honorary director in October 1998 and does not serve on
any committees of the Board; Linda Wachner, who retired from the Board of
Directors on October 8, 1998; and Mr. Masin who, following the Citicorp Merger,
became a member of the Audit Committee. Mr. Bialkin, a member of the Committee,
is a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, which
performs legal services for the Company and its subsidiaries from time to time.
Mr. Shapiro, a member of the Committee, is an executive officer of Monsanto
Company of which Mr. Reed is a director. Mr. Weill's son, Marc P. Weill, is an
executive officer of the Company.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES AS A DIRECTOR OF THE COMPANY. 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 Voting Preferred Stock, voting as
a single class, for the election of directors. Under applicable Delaware law, in
tabulating the vote, broker nonvotes, if any, will be disregarded and will have
no effect on the vote.
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<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE PERSONNEL, COMPENSATION AND DIRECTORS COMMITTEE ON EXECUTIVE
COMPENSATION
COMMITTEE RESPONSIBILITIES. The Personnel, Compensation and Directors
Committee is responsible, among other things, for evaluating the efforts of the
Company and of the Board of Directors to maintain effective corporate governance
practices and identifying candidates for election to the Company's Board of
Directors. The 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 Committee for
consideration. The Committee sets the compensation of the Chief Executive
Officers and reviews the compensation actions for senior management, which
includes the Management Committee, members of the business planning groups and
the most senior members of corporate staff. Further, the Committee approves
broad-based and special compensation plans across the Company. In executing its
compensation responsibilities, the Committee utilizes the assistance of an
independent compensation consulting firm.
No member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries. One member, Mr. Bialkin, is a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP, which performs legal
services for the Company and its subsidiaries from time to time. Therefore,
decisions regarding compensation actions for any executives covered by Section
16(a) of the Securities Exchange Act are made by the Incentive Compensation
Subcommittee of which Mr. Bialkin is not a member.
STATEMENT OF PHILOSOPHY. The Company seeks to attract and retain highly
qualified employees at all levels, and in particular, those whose performance is
most critical to the Company's success. To accomplish this, the Company is
willing to provide superior compensation for superior performance. Such
performance is generally measured on the performance of a business unit or on
the performance of the Company as a whole, or using both criteria, as the nature
of an executive's responsibilities may dictate. In assessing performance, the
Committee considers both quantitative and qualitative factors. Factors
considered include earnings, earnings per share, return on equity, return on
capital, return on assets, balance sheet and capital strength, risk containment,
franchise expansion, customer satisfaction, adherence to corporate values and
contributions to both operating unit and Company-wide achievement. In conducting
its assessment, the Committee reviews changes in the Company's and its
individual business units' overall financial results over time, as well as
similar data for comparable companies to the extent available. The Co-Chief
Executive Officers present to the Committee their assessment of executives,
their accomplishments, and individual and corporate performance.
STOCK OWNERSHIP COMMITMENT. It is the Company's longstanding policy to
strongly encourage stock ownership by both directors and senior management as it
serves to closely align the interests of management with those of the
stockholders. As such, ownership is encouraged in the following ways:
- at least 50% of the director fees are paid in Company stock
- a broad group of employees, including all members of senior management,
are paid a significant portion of annual bonus in the form of forfeitable,
restricted Company stock
- more than 32,000 employees were provided the opportunity to own stock
through participation in the recent "Founders Grant" under which they
received stock options to mark the establishment of Citigroup
- employees below the senior executive group are provided the opportunity to
own stock through various programs such as the Stock Purchase Plans, the
Savings Plan, the Savings Incentive Plan and the WealthBuilder Program
As noted above, to further underscore the Company's commitment to stock
ownership, all members of the Board of Directors and senior executives have
committed to hold at least 75% of any Company
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stock previously granted, currently owned or awarded to them in the future as
long as they remain directors or senior executives (the "Stock Ownership
Commitment"). Charitable gifts, limited estate planning transactions, and
transactions with the Company in connection with participation in stock option
and restricted stock plans are exempted from this commitment. The Committee
believes that this long-term commitment to employee stock ownership has played,
and will continue to play a significant part in driving the Company's success in
creating value for its stockholders.
COVERED EMPLOYEE COMPENSATION. To secure the deductibility of bonuses
awarded to the five continuing executives (the "Covered Employees") named in the
Summary Compensation Table that follows this report, bonuses to these executives
have been awarded under the Executive Performance Compensation Plan (the
"Compensation Plan"). The plan was approved by stockholders in 1994 and
establishes certain performance criteria for determining the maximum amount of
bonus compensation available for the Covered Employees. Under the Compensation
Plan, the creation of any bonus pool for Covered Employees is contingent upon
the Company achieving at least a 10% return on equity, as defined in the plan.
The amount of the bonus pool is calculated based upon the extent to which the
return on equity equals or exceeds the 10% minimum threshold.
The Compensation Plan further establishes that the maximum award for the
Chief Executive Officer is 25.2% of the bonus pool, and for awards to each of
the other Covered Executives, 18.7%. The Committee nevertheless has the
discretion to reduce or eliminate payments under the Compensation Plan to
account for results relative to subjective factors, including an executive's
individual performance.
The maximum bonus pool for 1998 for the Chief Executive Officers and the
three other most highly compensated executives of the Company was approximately
$94.6 million. The amounts awarded to these Covered Executives is set forth in
the Summary Compensation Table below and totals approximately $29 million.
Pending approval by stockholders of Item 4 contained in the Proxy Statement,
the Compensation Plan will be superseded by the Citigroup 1999 Executive
Performance Plan.
COMPONENTS OF COMPENSATION. Compensation of executive officers consists of
base salary, discretionary bonus awards, a significant portion of which is paid
in forfeitable restricted stock, and stock option grants. Executive officers
also participate in benefit plans available to employees generally. Examination
of competitors' pay practices is conducted periodically to ensure that the
Company's compensation policies continue to enable it to attract outstanding new
people, and motivate and retain current valuable employees. As 1998 was a
transition year, and consistent with Citicorp's and Travelers Group's prior
practices, for former Citicorp and Travelers Group executives, approximately 25%
of their bonus was paid in restricted stock units and restricted stock,
respectively.
Bonuses are discretionary (subject to certain maximum amounts as specified
above for the executive officers under the Compensation Plan) and generally
represent a substantial part of total compensation for the Company's executives.
Because a percentage of the bonus is awarded in the form of forfeitable
restricted stock, bonus awards are not only a short-term cash reward but also a
long-term incentive related directly to the enhancement of stockholder value.
The restricted period applicable to awards of restricted stock to executives has
been three years in furtherance of the long-term nature of such compensation.
The Company also takes all reasonable steps to obtain the fullest possible
corporate tax deduction for all forms of compensation paid to its executives by
qualifying under Section 162(m) of the Code, provided such steps are in the best
interests of stockholders.
1998 COMPENSATION. 1998 was a milestone year for the Company, marked by the
merger of two successful companies, Citicorp and Travelers Group, into a
financial services firm of great product and marketplace breadth, and financial
strength. With the merger, the Company became the world's leading financial
services firm, with approximately 100,000,000 customers and equity
capitalization of nearly
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$43 billion at year-end 1998. The most critical objective for the year was the
successful completion of the merger, which was followed by intense efforts by
all senior executives working together to achieve the transition.
In addition to the merger, and its effects, as well as the factors discussed
in the "STATEMENT OF PHILOSOPHY," the Committee considered the following in
determining senior executive compensation: disappointing earnings performance
for the Company as a whole; continued strong growth in the Consumer businesses,
and the early and active implementation of cross-selling initiatives across
them; and aggressive restructuring and expense reduction efforts initiated
across all businesses.
The Committee believes that the leadership of Mr. Reed and Mr. Weill was
central to executing the merger and for laying the foundation for capitalizing
on the business promise envisaged in bringing Citicorp and Travelers Group
together. As 1998 was a transition year, and consistent with Citicorp's and
Travelers Group's prior practices, approximately 25% of Mr. Reed's bonus was
deferred into restricted stock units under a former Citicorp deferral plan, and
approximately 25% of Mr. Weill's total cash was deferred into forfeitable
restricted stock under the CAP Plan. Further, Mr. Reed and Mr. Weill each
received options under the Founders Grant in which over 32,000 employees
participated globally in recognition of the inauguration of Citigroup.
THE PERSONNEL, COMPENSATION AND DIRECTORS COMMITTEE:
<TABLE>
<S> <C>
ARTHUR ZANKEL (Chairman) ANDRALL E. PEARSON
KENNETH J. BIALKIN ROBERT B. SHAPIRO
ANN DIBBLE JORDAN FRANKLIN THOMAS
RICHARD D. PARSONS EDGAR S. WOOLARD, JR.
</TABLE>
COMPENSATION
The tables on pages 19 to 32 set forth a profile of the Company's executive
compensation and show, among other things, salaries and bonuses paid during the
last three years, options granted with respect to 1998 and aggregate option
exercises in 1998 for each Chairman and Co-Chief Executive Officer, each of the
three other most highly compensated executive officers who were serving as
executive officers at the end of the last completed fiscal year (the "Named
Executive Officers") and one individual who would have been a Named Executive
Officer but for the fact that such individual was not serving as an executive
officer at the end of the last completed fiscal year (the "Former Executive
Officer"). These tables are specified by current SEC requirements.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation paid by the
Company and its subsidiaries to each Chairman and Co-Chief Executive Officer,
the Named Executive Officers and the Former Executive Officer for services
rendered to the Company and its subsidiaries in all capacities during each of
the fiscal years ended December 31, 1998, 1997 and 1996. 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 1996 and the stock dividend paid during
1997.
18
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ------------------------------------
---------------------------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
ANNUAL STOCK STOCK OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION COMPENSATION AWARDS (NUMBER OF SATION
AT 12/31/98 YEAR SALARY ($) BONUS ($) ($)(A) ($)(B) SHARES) (C) ($)(D)
- ------------------------------------- --------- ------------ ------------ ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
John S. Reed (E)(F).................. 1998 $ 1,666,667 $ 7,858,333 $0 $0 1,750,000 $ 90,400
Chairman and 1997 1,500,000 2,500,000 0 0 750,000 90,000
Co-Chief Executive Officer 1996 1,466,667 2,000,000 0 0 455,000 88,000
Sanford I. Weill..................... 1998 1,025,000 6,167,816 237,253 3,109,579 7,611,865 2,520
Chairman and 1997 1,025,000 6,168,034 260,269 3,109,288 12,044,127 1,404
Co-Chief Executive Officer 1996 1,025,000 5,053,786 250,921 2,594,952 10,445,242 2,404
Michael A. Carpenter................. 1998 600,000 1,560,027 0 853,297 738,801 576
Co-Chief Executive Officer, Global 1997 600,000 1,110,000 0 653,289 250,496 576
Corporate and Investment Bank 1996 600,000 772,500 0 503,296 174,742 348
Robert I. Lipp (G)(H)................ 1998 600,000 2,985,034 113,402 1,486,621 1,215,349 1,404
Co-Chief Executive Officer, 1997 600,000 2,985,003 145,347 1,486,662 1,052,042 900
Global Consumer Businesses 1996 600,000 2,685,022 5,333 1,353,301 1,067,181 1,900
Deryck C. Maughan (I)(J)............. 1998 850,385 3,072,407 0 1,636,790 500,000 0
Vice Chairman 1997 825,000 3,875,000 0 2,498,990 900,000 0
1996 825,000 8,595,000 0 1,874,998 0 0
James Dimon (K)...................... 1998 650,000 4,300,000 0 0 1,082,457 204
1997 650,000 4,599,750 5,653 2,200,286 2,747,116 204
1996 650,000 3,845,643 5,333 1,872,476 1,812,939 1,204
</TABLE>
- ------------------------
(A) Except as set forth in this column, none of the executive officers received
other annual compensation during 1998 required to be set forth in this
column. The aggregate amount set forth for Mr. Weill for 1998 includes
$42,952 for use of Company transportation and for Mr. Lipp includes $33,573
for housing expenses while away from home and $19,389 for use of Company
transportation. Amounts shown do not include amounts expended by the Company
pursuant to plans (including group life, health and international service)
that do not discriminate in scope, terms or operation in favor of executive
officers or directors of the Company and that are generally available to all
salaried employees.
(B) Restricted stock awards are made under the Company's CAP Plan, other than
those made to Mr. Lipp for 1996 and 1997, which were made under the TAP
Capital Accumulation Plan ("TAP CAP") and to Mr. Maughan for 1997 which was
made under Salomon EPP. 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 discounted (currently 25%) from market value in order to
reflect the impact of the restrictions on the value of the restricted stock
as well as the possibility of forfeiture. Under the current award formula in
effect under the CAP Plan
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
19
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
for corporate executives, the following percentages of annual compensation
are payable in the form of shares of restricted stock:
<TABLE>
<CAPTION>
% IN RESTRICTED
ANNUAL COMPENSATION 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, assign or otherwise
dispose of such stock (except by will or the laws of descent and
distribution) for a period of three years from the date of award. Upon
expiration of the applicable restricted period, and assuming the recipient's
continued employment with the Company, the shares of restricted stock become
fully vested and freely transferable, subject to the Stock Ownership
Commitment. 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, 1998, including the awards made
in January 1999 in respect of 1998, but excluding awards which vested in
January 1999, 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: 199,970 shares
($9,936,009.38); Mr. Carpenter: 44,486 shares ($2,210,398.13); Mr. Lipp:
27,729 shares ($1,377,785.69); Mr. Maughan: 30,530 shares ($1,516,959.38);
and Mr. Dimon: 101,550 shares ($5,045,765.63). The year-end market price was
$49.6875 per share. Mr. Reed did not receive an award of restricted stock in
1998. The number of shares and value of his aggregate restricted stock
holdings at December 31, 1998 was 175,000 ($8,695,312.50). To the extent
dividends are declared on Common Stock, dividends will be paid on his
restricted stock holdings. For 1996 and 1997, Mr. Lipp received restricted
stock awards under TAP CAP. See footnote H below.
(C) Prior to the 1,750,000 options awarded him under the Founders Grant (as
defined below) in November 1998, Mr. Weill had not received any new option
grants since the Company's initial public offering in 1986 except for reload
options. The grant of reload options does not change Mr. Weill's net equity
position.
(D) Includes supplemental life insurance paid by the Company. With respect to
Mr. Reed, includes cash compensation earned in accordance with SIP. Amounts
in excess of contribution limits established by the IRS are paid in cash to
Mr. Reed.
(E) Mr. Reed became an officer and director of the Company in October 1998
following the Citicorp Merger. As the Citicorp Merger was accounted for as a
pooling of interests, the information set forth in this Proxy Statement
assumes Mr. Reed's employment by the Company for 1998, 1997 and 1996.
(F) Under the 1994 Citicorp Deferred Compensation Plan, Mr. Reed's annual
incentive awards are paid 75% in cash and 25% in share units whose return is
equivalent to the return on shares of Common Stock for a period of five
years from the date the award was granted, at which time the deferred award
is payable in cash unless further deferred. To the extent dividends are
declared on the Common Stock, dividend equivalents will be credited on the
share units in the form of additional units, which will automatically be
reinvested.
(G) It is estimated that approximately 80% of such amounts payable to Mr. Lipp
reflect compensation for services provided to TAP and approximately 20% of
such amounts reflect compensation for services
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
20
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
rendered to the Company and its affiliates (other than TAP and its
subsidiaries). Until October 1998, Mr. Lipp served as Chairman of the Board,
Chief Executive Officer and President of TAP. He continues to serve as
Chairman of TAP in addition to serving as Co-Chief Executive Officer, Global
Consumer Businesses of the Company.
(H) Mr. Lipp is a Covered Employee under the Compensation Plan. The bonus
compensation Mr. Lipp received pursuant to the Compensation Plan is
inclusive of bonus compensation paid to him for services rendered to both
the Company and TAP; however, the portion of his bonus that was payable in
restricted stock and awarded for the years 1996 and 1997 was made in shares
of Class A Common Stock, $.01 par value per share, of TAP ("TAP Common
Stock"), under TAP CAP rather than in shares of Common Stock under the CAP
Plan. The terms and provisions of TAP CAP are substantially identical to
those of the CAP Plan. As of December 31, 1998, the total holdings of TAP
Common Stock under TAP CAP and the market value at such date of such shares
for Mr. Lipp were 70,026 shares ($2,170,806). The year-end market price of
TAP Common Stock was $31.00 per share.
(I) Mr. Maughan became an officer and director of the Company in December 1997
following the Salomon Merger. As the Salomon Merger was accounted for as a
pooling of interests, the information set forth in this Proxy Statement
assumes Mr. Maughan's employment by the Company for 1997 and 1996.
(J) In 1997, Mr. Maughan received an award of 53,172 shares of restricted Common
Stock under Salomon EPP. Awards under Salomon EPP represent an unfunded,
unsecured promise of the Company to deliver shares of Common Stock in the
future. Awards made in 1996 and thereafter are generally distributable to
participants three years after the date of grant, subject to acceleration in
some circumstances and further deferral or forfeiture in others. Salomon EPP
incorporates a dividend reinvestment feature, pursuant to which the Company
contributes an additional 17.65% of any dividend in order to effect a 15%
discount on all dividend reinvestments with respect to awards made prior to
1996. Salomon EPP does not provide a discount for dividend reinvestments
with respect to awards made in 1996 and thereafter. Participants' accounts
in Salomon EPP are held in a grantor trust. As of December 31, 1998, the
total holdings of Common Stock under Salomon EPP and the market value at
such date of such shares for Mr. Maughan were 351,020 shares
($17,441,306.25). The year-end market price of Common Stock was $49.6875 per
share.
(K) Effective as of November 2, 1998, Mr. Dimon resigned from his position as an
executive officer of the Company and its subsidiaries. The Company has
entered into a separation agreement with Mr. Dimon dated as of November 2,
1998, certain terms of which are described below.
STOCK OPTIONS GRANTED
The following table sets forth information with respect to stock options
granted during 1998 to each of the executives named in the Summary Compensation
Table. The table includes options described as "regular" or "reload"; reload
options do not change a participant's equity position. See the description of
the reload feature in footnote B to the table below. 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 estimated option life, as reported by the
Federal Reserve;
21
<PAGE>
- the dividend yield (based upon the actual annual dividend rate during
1998) was assumed to be constant over the life of the option;
- exercise of the option was deemed to occur approximately six months
after the date of grant with respect to options that vest six months
after the date of grant based upon each individual's historical
experience of the average period between the grant date and exercise
date and approximately three and one-half years after the date of grant
with respect to options that vest at a rate of 20% per year based upon
an estimate of the average period between the grant date and exercise
date; 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 for senior management due
to the holding requirements under the Stock Ownership Commitment. For
purposes of calculating the discount, a five year holding period was
assumed even though each of the individuals may be a member of senior
management 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.
In connection with the Citicorp Merger, the Company granted options (the
"Founders Grant") to over 32,000 employees. The terms of the options granted
under the Founders Grant do not differ from other options granted under the
option plans of the Company or Citicorp, except that Citicorp options did not
include the reload feature carried by the options granted under the Founders
Grant. The reload feature is more fully described in footnote B below. The
intent of the Founders Grant is to incent the recipients to continue to
contribute to the maximization of stockholder value.
22
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN 1998
INDIVIDUAL GRANTS(B)(C)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
% OF
NUMBER OF SECURITIES TOTAL OPTIONS EXERCISE OR
UNDERLYING OPTIONS GRANTED TO ALL BASE PRICE GRANT DATE
GRANTED EMPLOYEES ($ PER EXPIRATION PRESENT VALUE
NAME (NUMBER OF SHARES)(A) IN 1998 SHARE) DATE ($)(D)
- ------------------------------- ------------------------- -------------------------- ------------ ----------- -------------
<CAPTION>
RELOAD REGULAR RELOAD REGULAR
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
John S. Reed................... 1,750,000 1.53 $ 47.0000 11/2/08 16,930,178
---------- --- -------------
---------- --- -------------
Sanford I. Weill............... 35,302 .03 50.6875 2/18/03 113,884
30,270 .03 54.3750 2/18/03 114,467
635,636 .55 62.5000 10/30/02 2,569,580
1,533,604 1.34 62.0000 10/30/02 6,161,507
1,021,423 .89 62.0000 4/30/03 4,103,735
26,035 .02 60.0000 2/18/03 100,405
608,622 .53 73.0000 10/30/02 2,947,877
409,811 .36 73.0000 4/30/03 1,984,931
674,031 .59 61.2500 10/30/02 2,689,900
48,660 .04 61.8750 2/18/03 190,498
808,405 .70 69.2500 4/30/03 3,550,085
30,066 .03 71.6875 2/18/03 135,839
1,750,000 1.53 47.0000 11/02/08 16,930,178
------------- ---------- --- --- -------------
Sub-Total...................... 5,861,865 1,750,000 5.11 1.53
------------- ---------- --- ---
Total.......................... 7,611,865 6.64 41,592,886
------------------------- ------------- -------------
------------------------- ------------- -------------
Michael A. Carpenter........... 60,109 .05 53.5000 2/03/05 231,052
14,810 .01 55.7500 2/03/05 58,147
37,158 .03 56.0625 2/03/05 145,536
46,169 .04 60.5625 2/03/05 188,782
52,432 .05 70.3750 2/03/05 241,811
12,628 .01 70.3750 11/01/06 58,239
15,495 .01 47.0000 11/01/06 57,800
500,000 .44 47.0000 11/02/08 4,837,194
------------- ---------- --- --- -------------
Sub-Total...................... 238,801 500,000 .20 .44
------------- ---------- --- ---
Total.......................... 738,801 .64 5,818,561
------------------------- ------------- -------------
------------------------- ------------- -------------
Robert I. Lipp................. 23,171 .02 50.0000 2/22/03 80,855
100,000 .09 49.3750 1/28/08 913,930
19,842 .02 54.1250 2/22/03 75,497
109,944 .10 61.2500 11/02/02 429,495
53,687 .05 61.2500 5/02/03 209,728
45,849 .04 61.6250 11/02/02 179,054
16,582 .01 61.6250 2/22/03 64,757
22,663 .02 61.6250 5/02/03 88,505
29,274 .03 61.6250 11/26/04 114,323
34,092 .03 61.6250 12/14/05 133,139
13,553 .01 61.6250 11/01/06 52,928
89,050 .08 69.2500 11/02/02 396,060
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(B)(C)
-----------------------------------------------------------------------------------------------
% OF
NUMBER OF SECURITIES TOTAL OPTIONS EXERCISE OR
UNDERLYING OPTIONS GRANTED TO ALL BASE PRICE GRANT DATE
GRANTED EMPLOYEES ($ PER EXPIRATION PRESENT VALUE
NAME (NUMBER OF SHARES)(A) IN 1998 SHARE) DATE ($)(D)
- ------------------------------- ------------------------- -------------------------- ------------ ----------- -------------
RELOAD REGULAR RELOAD REGULAR
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
29,665 .03 69.2500 2/22/03 131,939
41,817 .04 69.2500 5/02/03 185,986
12,304 .01 69.2500 11/26/04 54,724
19,786 .02 69.0000 2/22/03 88,100
17,868 .02 46.6250 11/26/04 66,385
15,513 .01 47.0000 11/01/06 56,984
500,000 .44 47.0000 11/02/08 4,837,194
20,689 .02 43.3750 12/14/05 71,604
------------- ---------- --- --- -------------
Sub-Total...................... 615,349 600,000 .56 .53
------------- ---------- --- ---
Total.......................... 1,215,349 1.09 8,231,187
------------------------- ------------- -------------
------------------------- ------------- -------------
Deryck C. Maughan.............. 500,000 .44 47.0000 11/2/08 4,837,194
---------- --- -------------
---------- --- -------------
James Dimon.................... 21,594 0 .02 50.6875 2/19/03 70,559
11,943 .01 48.0000 1/25/05 39,617
18,278 .02 55.7500 2/19/03 70,400
81,032 .07 55.7500 8/28/03 312,105
10,237 .01 55.7500 1/25/05 39,429
194,515 .17 62.0000 10/30/02 791,495
80,187 .07 62.0000 4/30/03 326,286
69,074 .06 62.0000 8/28/03 281,067
15,875 .01 60.0000 2/19/03 62,006
27,092 .02 73.0000 10/30/02 132,882
13,910 .01 73.0000 2/19/03 68,226
32,175 .03 73.0000 4/30/03 157,814
125,599 .11 73.0000 8/28/03 616,043
8,479 .01 73.0000 1/25/05 41,588
54,938 .05 61.2500 10/30/02 222,050
14,856 .01 61.2500 2/19/03 60,046
36,228 .03 61.6250 12/14/05 141,481
27,635 .02 61.6250 11/01/06 107,923
32,186 .03 69.2500 10/30/02 143,151
63,473 .06 69.2500 4/30/03 282,303
32,351 .03 69.2500 12/14/05 143,885
18,391 .02 71.6875 2/19/03 84,155
82,213 .07 67.5000 8/28/03 355,896
10,196 .01 67.5000 1/25/05 44,138
------------- ---------- --- -------------
Total.......................... 1,082,457 0 .95 4,594,545
------------- ---------- --- -------------
------------- ---------- --- -------------
- ------------------------
(A) The number of options outstanding at December 31, 1998 for each person named
above is set forth under the heading "Number of Securities Underlying
Unexercised Options at 1998 Year-End (Number of Shares)--Unexercisable" in
the table entitled "Aggregated Option Exercises in 1998 and 1998 Year-End
Option Value."
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
</TABLE>
24
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(B) All regular options granted to Messrs. Carpenter, Lipp and Maughan as well
as all reload options granted to Messrs. Carpenter, Dimon, Lipp, and Weill
were granted under the 1996 Incentive Plan. As more fully described below,
the grant of reload options is not automatic, rather it is subject to
certain minimum price requirements on the option exercise giving rise to the
reload option grant. In addition, if a participant elects to receive a
reload option upon an option exercise, the shares issued upon the exercise
will be subject to restrictions on transfer for a longer period than if the
participant had not elected to receive a reload option.
The option price of each option granted under the 1996 Incentive Plan is not
less than the fair market value of the Common Stock subject to the option,
determined in good faith by the Personnel, Compensation and Directors
Committee. Under current rules established by the 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 following
such grant (in the case of non-qualified stock options, which represent all
options currently outstanding). The Committee has discretion to establish a
different vesting schedule for options granted under the 1996 Incentive
Plan. Participants are entitled to tender previously owned shares to pay the
exercise price of an option and may 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. During the term of the 1996
Incentive Plan, the aggregate number of shares of Common Stock for which
option awards may be granted to any one employee under the 1996 Incentive
Plan (including reload options) will not exceed thirty six million shares.
In connection with the Citigroup 1999 Stock Incentive Plan that is the
subject of Item 3 being voted upon by stockholders, the Company has proposed
to renew this amount.
Under the reload feature of the 1996 Incentive Plan, participants who tender
shares to pay all or a portion of the exercise price of vested stock options
and/or elect to have shares withheld to cover the associated tax liability
may be eligible to receive a reload option covering the same number of
shares as are tendered and/or withheld for such purposes. Under the 1996
Incentive Plan, such participant may choose to receive either (i)
Incremental Shares subject to restrictions on transferability for a period
of one year, or such other shorter or longer period as determined by the
Committee and no reload option or (ii) Incremental Shares subject to
restrictions on transferability for a period of two years, or such other
shorter or longer period as determined by the Committee and a reload option.
"Incremental Shares" are 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
shares of Common Stock ("Surrendered Shares") to pay the exercise price,
and/or the participant authorizes the Company to withhold shares to cover
the withholding tax liability ("Withheld Shares"), the number of Incremental
Shares will equal the number of options exercised minus the sum of the
number of Surrendered Shares and the Withheld Shares. Participants may, at
the discretion of the Committee, be permitted to transfer their Incremental
Shares during the restricted period only under limited circumstances related
to estate planning. Further, in order for a participant 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 Committee from time to time
(the "Market Price Requirement"). The Committee has established that the
initial Market Price Requirement will 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.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
25
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
The Committee determines the exercise price for the reload option at the
time such reload option is granted, provided that the exercise price may
not be less than the fair market value of a share of Common Stock on the
date of exercise of the underlying option, and such reload 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 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 with respect to all of the shares exercised.
However, the participant may not receive a reload option upon an option
exercise unless the Market Price Requirement is met for such exercise and
his or her Incremental Shares will be subject to restrictions on
transferability for a longer period of time than had such participant not
elected to receive a reload option.
(C) The Citicorp 1997 Incentive Plan, under which certain Founders Grant options
were awarded, provides for the issuance of options to purchase shares of
Common Stock at prices not less than 100% of the market value at the date of
grant, incentive stock options, stock appreciation rights, or any other
award based on or related to Common Stock, any of which may be granted
singly, in combination, or in tandem. Under the Citicorp 1997 Incentive Plan
and two predecessor plans, options have been granted to employees for terms
of up to 10 years. Generally, 50% of the options granted prior to 1995 are
exercisable beginning on the first anniversary and 50% beginning on the
second anniversary of the date of grant, and, generally, 50% of the options
granted in 1995 and thereafter are exercisable beginning on the third
anniversary and 50% beginning on the fourth anniversary of the date of
grant. The options granted to Messrs. Reed and Weill under the Citicorp 1997
Incentive Plan have terms of 10 years, vesting 20% per year beginning on the
first anniversary of the date of grant. These options also carry a reload
feature as described in footnote B above.
(D) 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.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
26
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
The table below sets forth the Equity Position of each of the above
named continuing executives with respect to options exercised and reload
options granted in 1998. The Equity Position of each of such executives
has remained constant.
NET CHANGES IN EQUITY POSITION
RESULTING FROM EXERCISES OF RELOAD OPTIONS(1)
<TABLE>
<CAPTION>
ENDING NET EQUITY POSITION
-------------------------------------------------------------
<S> <C> <C> <C> <C>
NET
NEW CHANGE
NET RELOAD IN EQUITY
OPTIONS SHARES OPTIONS POSITION FROM GRANTS
NAME EXERCISED RECEIVED GRANTED OF RELOAD OPTIONS
---- ---------- ---------- ---------- -------------------------
John S. Reed.................................. 0 0 0 0
Sanford I. Weill.............................. 7,100,165 1,238,300 5,861,865 0
Michael A. Carpenter.......................... 309,477 70,675 238,801 0
Robert I. Lipp................................ 751,826 136,477 615,349 0
Deryck C. Maughan............................. 0 0 0 0
- ------------------------
</TABLE>
(1) The "Options Exercised" column sets forth the number of options
exercised by such executive. The "Net Shares Received" sets forth the
number of shares such executive actually received upon exercise of
the option after subtracting the number of previously owned shares
tendered to pay the exercise price and/or withheld to pay taxes on
the exercise. The "New Reload Options Granted" 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 from Exercises of Reload Options" is
the difference between the number of options exercised less the sum
of the net shares received and the number of reload options granted
(exclusive of fractional shares which cannot be issued).
STOCK OPTIONS EXERCISED
The following table sets forth, in the aggregate, the number of shares
underlying options exercised during 1998 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 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.
27
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1998
AND
1998 YEAR-END OPTION VALUE
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
SHARES 1998 YEAR-END IN THE MONEY OPTIONS
ACQUIRED VALUE (NUMBER OF SHARES) AT 1998 YEAR-END($)(C)
ON EXERCISE REALIZED ------------------------- ----------------------------
NAME (A) ($) (B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- -------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John S. Reed....................... 0 $0 1,957,500 2,955,000 $ 70,430,469 $ 17,571,031
Sanford I. Weill (D)............... 7,100,165 156,553,251 4,988,092 2,588,471 0 4,703,125
Michael A. Carpenter............... 309,477 7,448,867 98,138 850,555 0 10,907,268
Robert I. Lipp..................... 751,826 14,956,621 345,487 996,692 0 6,015,137
Deryck C. Maughan.................. 0 0 180,000 1,220,000 0 1,343,750
James Dimon........................ 1,370,465 32,214,174 1,030,111 1,157,568 1,901,288 7,985,211
</TABLE>
- ------------------------
(A) This column reflects the number of shares underlying options exercised in
1998 by the named executive officers. The actual number of shares received
by each of these individuals from options exercised in 1998 (net of shares
surrendered to cover the exercise price and/or surrendered or withheld to
cover the exercise price and tax liabilities) was: Mr. Weill, 1,238,296
shares; Mr. Carpenter, 70,675 shares; Mr. Lipp, 136,474 shares; and Mr.
Dimon, 256,566 shares.
(B) "Value Realized" is in each case calculated as the difference between the
market price on the date of the exercise and the market price on the date of
the grant, which establishes the exercise price for option exercise,
multiplied by the number of options exercised. In order to receive a reload
option upon an option exercise, the exercise price must equal or exceed the
Market Price Requirement. All of the above executives who continue to serve
as such have made the Stock Ownership Commitment (as described above)
pursuant to which such executives commit to hold at least 75% of their
Company stock while they continue to be members of senior management. In
addition, if such executives elect to receive reload options in connection
with an option exercise, their Incremental Shares are subject to
restrictions on transferability for a longer period of time than had such
executives not elected to receive reload options.
(C) "Value of Unexercised In the Money Options" is the aggregate, calculated on
a grant by grant basis, of the product of the number of unexercised options
on the last day of the year multiplied by the difference between the closing
undiscounted market price on the last day of the year and the exercise price
for each grant, excluding grants for which such difference is equal to or
less than zero.
(D) All of the stock options exercised by Mr. Weill in 1998 were reload options.
PERFORMANCE GRAPH
The following line graph compares annual changes in "Cumulative Total
Return" (as defined below) of the Company with (i) Cumulative Total Return of a
performance indicator of equity stocks in the overall stock market, the S&P 500
Index, (ii) Cumulative Total Return of a "Previous Travelers Group Peer Index,"
and (iii) Cumulative Total Return of a "New Peer Index", each for the last five
years. The Previous Travelers Group 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 New Peer Index, included to more accurately reflect the
Company's peers in the industries in which it operates following the Citicorp
Merger, comprises
28
<PAGE>
ABN Amro Holding N.V., The Chase Manhattan Corporation, The Hartford Financial
Services Group, Inc., HSBC Holdings plc, MBNA Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley Dean Witter & Co. Each
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.
CITIGROUP INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CITIGROUP PREVIOUS TRV INDEX S&P 500 NEW PEER INDEX
<S> <C> <C> <C> <C>
12/31/93 100.00 100.00 100.00 100.00
12/31/94 84.67 95.06 101.32 83.63
12/31/95 167.38 142.90 139.35 128.65
12/31/96 245.75 192.77 171.32 194.52
12/31/97 441.99 292.86 228.46 269.33
12/31/98 411.72 326.22 293.75 315.07
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Citigroup Inc............................... 100.00 84.67 167.38 245.75 441.99 411.72
S&P......................................... 100.00 101.32 139.35 171.32 228.46 293.75
Previous Travelers Group Peer Index......... 100.00 95.06 142.90 192.77 292.86 326.22
New Peer Index.............................. 100.00 83.63 128.65 194.52 269.33 315.07
- ------------------------
ASSUMES $100 INVESTED AT THE CLOSING PRICE ON DECEMBER 31, 1993, IN THE COMPANY'S COMMON STOCK, THE S&P 500
INDEX, THE PREVIOUS TRAVELERS GROUP 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) AND THE NEW PEER INDEX (AS DESCRIBED ABOVE). EACH PEER INDEX HAS BEEN WEIGHTED
BASED ON MARKET CAPITALIZATION.
</TABLE>
29
<PAGE>
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 and honorary
directors of the Company currently consists of an annual retainer of $125,000,
payable either in shares of Common Stock, receipt of which may be deferred at
the election of a director, or up to 50% of such retainer in cash to cover taxes
and the remainder 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 1998. Directors who are
employees of the Company or its subsidiaries do not receive any compensation for
their services as directors.
Each of the members of the Board has agreed to the Stock Ownership
Commitment, as described above, pursuant to which each has committed to hold at
least 75% of the Common Stock previously granted, currently owned or awarded to
them in the future while they serve on the Board of Directors.
RETIREMENT PLANS
On December 31, 1998 the Citibank Retirement Plan (as defined below) was
merged into the TRV Pension Plan (as defined below) which was then renamed the
Citigroup Inc. Pension Plan. Benefits payable under these plans did not change
as a result of the plan merger. The following discussion describes the benefits
accrued and/or payable to the Covered Employees under the terms of the relevant
plans as they existed prior to the plan merger. None of such benefits were
impacted by the plan merger.
TRAVELERS GROUP
Individuals employed by those subsidiaries that were affiliates or
subsidiaries of Travelers Group immediately prior to the Citicorp Merger
participate in the Travelers Group Pension Plan (the "TRV Pension Plan") for
1998. All employees are eligible to participate in TRV Pension Plan on
completion of one year of service. Benefits under the TRV Pension 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 benefits at termination of
service.
When accrued as a single sum payment option, benefits accrue at an annual
rate varying between .75% and 7.0% of the participant's qualifying compensation
dependent upon the participant's age and years of service. Qualifying
compensation generally includes (with certain limited exceptions) a
participant's total pay. The Code imposed a ceiling of $160,000 in 1998 (subject
to adjustment by the Internal Revenue Service) on the amount of compensation
that may be considered "qualifying compensation" under the TRV Pension 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.
30
<PAGE>
The statutory maximum retirement benefit that may be paid to any one
individual by a tax qualified defined benefit pension plan in 1998 is $130,000
annually. Years of service credited under the TRV Pension Plan to date for each
of the individuals named in the Summary Compensation Table are as follows: Mr.
Weill, 12 years; Mr. Carpenter, 3 years; Mr. Lipp, 12 years; Mr. Maughan, 0
years; and Mr. Dimon, 12 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
come from the general assets of each plan's sponsor. In 1993, the Company
excluded certain executives (including each of the persons named in the Summary
Compensation Table) from further participation in the RBEPs, and limited the
compensation covered by such plans to a fixed amount of $300,000 for any
participation, less amounts covered by the TRV Pension Plan. No benefits were
accrued in 1998 under any of the RBEPs for the account of any of the persons
named in the Summary Compensation Table.
Effective at the end of 1993, the 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. Messrs. Weill
and Lipp are SERP participants. The maximum benefit payable under SERP is also
reduced by any benefits payable under the TRV Pension 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 these three benefit plans of the Company for
the continuing executive officers named in the Summary Compensation Table using
the applicable formulas under the TRV Pension Plan and the frozen RBEP and SERP
Plans and assuming their retirement at age 65, would be as follows: Mr. Weill,
$618,581; Mr. Carpenter, $21,495; Mr. Lipp, $289,430; and Mr. Maughan, $22,656.
Mr. Dimon's estimated benefit under the TRV Pension Plan and the frozen RBEP
Plan, accrued through December 31, 1998 which would be payable at age 65, is
$102,978. 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. In
calculating these estimates it was also assumed that each of the following
remain unchanged: the current salary of the participant, the 1998 dollar ceiling
on qualifying compensation of $160,000, the 1998 Social Security wage base and
the current regulatory formula to convert lump-sum payments to annual annuity
figures.
CITICORP
Individuals employed by Citibank or subsidiaries of the Company that were
subsidiaries of Citibank ("Citibank") immediately prior to the date of the
Citicorp Merger participate in the Retirement Plan of Citibank, N.A. and
Participating Companies ("Citibank Retirement Plan") for 1998 provided they have
completed one year of service. The following table sets forth the estimated
annual retirement benefits as of December 31, 1998 as provided by the Citibank
Retirement Plan and supplemental non-qualified pension plans payable upon
retirement to employees in specified remuneration and year of service
classifications.
31
<PAGE>
The estimated amounts are based upon the assumption that payments under the
Citibank Retirement Plan will commence upon retirement at age 65.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT AT AGE 65
BASED ON YEARS OF SERVICE SHOWN BELOW
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FINAL AVERAGE COMPENSATION 10 15 20 25 30 35
- -------------------------- ---------- ---------- ---------- ---------- ---------- ----------
1,000,000........... 200,000 300,000 400,000 500,000 600,000 637,500
3,000,000........... 600,000 900,000 1,200,000 1,500,000 1,800,000 1,912,500
5,000,000........... 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,187,500
8,000,000........... 1,600,000 2,400,000 3,200,000 4,000,000 4,800,000 5,100,000
10,000,000.......... 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 6,375,000
11,000,000.......... 2,200,000 3,300,000 4,400,000 5,500,000 6,600,000 7,012,500
</TABLE>
The years of credited service under the Retirement Plan as of December 31,
1998 for Mr. Reed were approximately 33. Covered Compensation under the Citibank
Retirement Plan and supplemental non-qualified pension plans is the
participant's base salary plus awards granted under EIC, and, for years
beginning with 1991, any bonus paid under any annual performance program.
Amounts include estimated Social Security benefits, which will be deducted in
calculating benefits under the Citibank Retirement Plan. With respect to Mr.
Reed, covered compensation does not differ substantially (by more than 10%) from
the compensation set forth under the headings "Salary" and "Bonus" in the
Summary Compensation Table. The benefit payable at retirement is based on a
specified percentage of the average of covered compensation for the five highest
paid years of the last ten years of employment. Mr. Reed will be credited with
35 years of service upon normal retirement at age 65.
EMPLOYMENT PROTECTION AGREEMENTS
In 1986 the predecessor of Travelers Group entered into an agreement with
Mr. Weill (amended in 1987), which provides that Mr. Weill will serve as the
Company's Chief Executive Officer 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 termination of his
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.
SEPARATION AGREEMENT
The Company has entered into a separation agreement with Mr. Dimon dated as
of November 2, 1998 pursuant to which, in consideration of certain agreements by
Mr. Dimon, including a non-solicit agreement, the Company has agreed to pay Mr.
Dimon (i) a bonus for 1998 as set forth in the Summary Compensation Table and
(ii) a separation payment of $1.3 million payable in equal installments on
December 31, 1999 and 2000. In addition, the agreement provides for continued
vesting and exercisability for existing options and for continued vesting for
existing restricted stock awards.
CERTAIN INDEBTEDNESS
Certain executive officers have from time to time, including periods during
1998, incurred indebtedness to Salomon Smith Barney, a wholly owned subsidiary
of the Company and a registered broker-dealer, and/or any other broker/dealer
subsidiary of the Company, on margin loans against securities accounts with such
broker/dealers. Such margin loans were made in the ordinary course of 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.
32
<PAGE>
Certain transactions involving loans, deposits and sales of commercial
paper, certificates of deposit and other money market instruments and certain
other banking transactions occurred during 1998 between Citicorp and Citibank,
N.A. on the one hand and certain directors or executive officers of the Company,
members of their immediate families or associates of the directors, the
executive officers or their family members on the other. All such transactions
were made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, that prevailed at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features.
Mr. Jones, an executive officer, is indebted to the Company pursuant to a
forgivable loan made to him by the Company in an original principal amount of
$1.2 million. The maximum amount of Mr. Jones' indebtedness to the Company
during 1998 was $1.2 million, which was reduced to $800,000 in September 1998.
The principal of the loan is forgiven in equal annual installments of $400,000
during the three year term of the loan. The loan was made in connection with Mr.
Jones' agreement to leave his prior position to join the Company. In the event
Mr. Jones resigns or is terminated for any reason, the outstanding principal
amount of the loan will become immediately due and payable together with
interest thereon at the rate of 10% accruing from the date of termination. The
loan is otherwise non-interest bearing.
ITEM 2:
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG LLP (formerly KPMG Peat Marwick
LLP) ("KPMG") as the independent auditors of the Company for 1999. KPMG has
served as the independent auditors of the Company and its predecessors since
1969. Arrangements have been made for a representative of KPMG 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
THE SELECTION OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1999.
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 Voting 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 will have the same effect as
a vote against this item and broker nonvotes, if any, will be disregarded and
have no effect on the outcome of such vote.
ITEM 3:
APPROVAL AND ADOPTION OF
CITIGROUP 1999 STOCK INCENTIVE PLAN
On January 19, 1999, the Board of Directors of the Company unanimously
approved the Citigroup 1999 Stock Incentive Plan (the "1999 Incentive Plan")
providing for the issuance of a maximum of 110 million shares of Common Stock in
connection with the grant of options and/or other stock-based or
stock-denominated awards and recommended that the 1999 Incentive Plan be
submitted to stockholders for approval at the Annual Meeting. The 1999 Incentive
Plan, if approved, will become effective on April 30, 1999. The following
summary is qualified in its entirety by reference to the complete text of the
1999 Incentive Plan, which is attached hereto as Annex A. Capitalized terms used
but not defined herein shall have the meanings set forth in the 1999 Incentive
Plan.
Each of Travelers Group and Citicorp have had long-standing policies,
continued by the Company, of encouraging employees at all levels to become
stockholders of the Company in order to share with other
33
<PAGE>
stockholders both the perspective of, and the rewards experienced by,
non-employee owners of the Company. See the discussion of the Stock Ownership
Commitment in "Security Ownership of Management--Stock Ownership Commitment"
above. This policy has been effected in part through grants of options under the
1986 Option Plan, the 1996 Incentive Plan and the Citicorp Stock Incentive Plans
(collectively, the "Prior Plans"). The Company believes that adoption of the
1999 Incentive Plan will enable the Company to continue to provide an effective
source of incentives to reward the efforts of highly motivated employees and
attract new personnel with a flexible program of stock-based awards designed to
meet the varying business needs of a global, diversified financial services
company.
The 1999 Incentive Plan and the allocation of shares thereunder is intended
to supersede and replace the 1996 Incentive Plan and the allocation of shares
under the 1996 Incentive Plan. Upon approval and adoption of the 1999 Incentive
Plan, the 1996 Plan will terminate and the remaining allocation of shares under
the 1996 Incentive Plan will no longer be available for grant. The provision
contained in the 1996 Incentive Plan prohibiting the grant of options from the
1996 Incentive Plan, if the grant would cause the number of shares subject to
outstanding options under the 1996 Incentive Plan and other similar option plans
of the Company to exceed ten percent (10%) of the total number of shares
outstanding, will not apply to the 1999 Incentive Plan and upon termination of
the 1996 Incentive Plan will no longer apply to the operation of any of the
Company's stock option or stock incentive plans.
The 110 million shares available for grant under the 1999 Incentive Plan
will be in addition to the remaining allocation of shares under all existing
plans of the Company, other than the 1996 Incentive Plan, including the CAP
Plan, EIP, the Citicorp 1997 Stock Incentive Plan, and all other plans which
were assumed by the Company in connection with the Citicorp Merger. The Citicorp
1997 Stock Incentive Plan provides for the grant of non-qualified options,
reload options, ISOs, SARs, restricted stock and other stock-based or
stock-denominated awards. The number of shares available for grant under this
plan equals 1.5% of the number of outstanding shares of Common Stock, treasury
shares and common share equivalents of the Company, calculated on an annual
basis. Shares which have not been granted in any given year may be carried
forward from year to year.
The 1999 Incentive Plan includes the following features:
- The 1999 Incentive Plan provides for the grant of non-qualified stock
options, reload options, incentive stock options, stock appreciation
rights, restricted stock and other stock-based or stock-denominated
awards to employees of the Company and its subsidiaries.
- The 1999 Incentive Plan will become effective on April 30, 1999 and
have a ten-year term.
- The Personnel, Compensation and Directors Committee or an authorized
subcommittee thereof (the "Committee") will have the authority to
determine the type of awards to be granted and the participation level
of each award recipient.
- The Committee will determine the vesting and exercisability provisions
and all other features of awards and will have the discretion to
accelerate, waive or extend vesting.
- Options will be granted with an exercise price which shall not be less
than the fair market value of the Common Stock.
- The 1999 Incentive Plan sets the maximum number of options that may be
granted to any one employee during the term of the Plan.
- Unless the Committee determines otherwise, restricted stock awards will
have a minimum one-year vesting requirement.
- If a Participant is no longer employed by the Company and conducts
himself in a manner detrimental to the Company, he or she will forfeit
his or her awards.
- The 1999 Incentive Plan contains a prohibition against repricing of
options.
34
<PAGE>
Awards may be granted by the Committee in its discretion, and therefore
future benefits to be allocated to any individual or group of individuals under
the 1999 Incentive Plan are not presently determinable.
DESCRIPTION OF THE CITIGROUP 1999 STOCK INCENTIVE PLAN
AWARDS. The 1999 Incentive Plan provides for the issuance of stock-based
and stock-denominated awards to officers and other employees and agents of the
Company and its participating subsidiaries, including nonqualified stock
options, reload options, incentive stock options ("ISOs"), stock appreciation
rights ("SARs"), restricted stock, deferred stock, stock units and other
stock-based or stock-denominated awards. Participants will not be required to
make any payments to the Company or a Subsidiary as consideration for the
granting of an award.
PLAN ADMINISTRATION. Awards made to Section 16(a) Persons and Covered
Employees will be granted by the Incentive Compensation Subcommittee of the
Personnel, Compensation and Directors Committee. Awards made to all other
Participants may be granted by the Personnel, Compensation and Directors
Committee or the Incentive Compensation Subcommittee. As used herein, the term
"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 Personnel, Compensation and Directors Committee or the
Incentive Compensation Subcommittee, as the case may be. The number of employees
selected to receive awards will likely vary from year to year. No awards will be
granted from the 1999 Incentive Plan until it has been approved by stockholders
and has become effective.
COMMITTEE AUTHORITY. The Committee will have the authority, in its
discretion, to determine when awards will be granted, to select the employees to
whom awards will be made under the 1999 Incentive Plan and to determine the type
and size of each award, the exercise price for each award, the fair market value
of the Common Stock and whether and under what circumstances such fair market
value should be discounted and all other provisions relating to payment of the
exercise price and exercisability of options, ISOs and SARs, the terms and
conditions for vesting, cancellation and forfeiture of awards and the other
features applicable to each award or type of award granted under the 1999 Stock
Incentive Plan. Subject to certain limitations set forth below, the Committee
will also have the authority to modify, waive, extend or accelerate the terms
and conditions for vesting, exercisability, cancellation and forfeiture of
awards, to modify or cancel awards and 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.
SHARES AVAILABLE FOR ISSUANCE. The maximum number of shares of Common Stock
that may be issued to Participants under the 1999 Incentive Plan is 110 million.
The market price of the Common Stock on March 5, 1999 was $61.75. Common Stock
issued pursuant to the 1999 Incentive Plan may consist of shares that are
authorized but unissued, or previously issued shares reacquired by the Company,
or both. If an award is forfeited, canceled, terminated or expires prior to the
issuance of shares to the Participant, the shares of Common Stock underlying
such award will be available for future grants under the 1999 Incentive Plan.
Previously owned shares that are tendered by a Participant to pay the exercise
price of an award and shares used to pay withholding taxes will not be counted
towards the maximum number of shares available for issuance under the Plan. The
1996 Incentive Plan contained a limitation on the granting of options, if the
grant would cause the number of shares subject to outstanding options under such
plan and other similar option plans of the Company to exceed ten percent (10%)
of the total number of shares outstanding. Upon termination of the 1996
Incentive Plan, this provision will no longer apply to the operation of any of
the Company's stock option or stock incentive plans.
PRIOR PLANS. The share allocation set forth above for the 1999 Incentive
Plan is in addition to the number of shares, if any, which remain available for
issuance under the existing stock plans of the Company (other than the 1996
Incentive Plan) including, without limitation, the CAP Plan, EIP, the Citicorp
1997 Stock Incentive Plan and all other plans which were assumed by the Company
in connection
35
<PAGE>
with the Citicorp Merger. The Citicorp 1997 Stock Incentive Plan provides for
the grant of non-qualified options, reload options, ISOs, SARs, restricted stock
and other stock-based or stock-denominated awards. The number of shares
available for grant under this plan is equal to 1.5% of the number of
outstanding shares of Common Stock, treasury shares and common share equivalents
of the Company, calculated on an annual basis. Shares which have not been
granted in any given year may be carried forward from year to year.
MAXIMUM NUMBER OF SHARES THAT MAY BE GRANTED TO ANY ONE EMPLOYEE. Effective
as of April 30, 1999 and during the term of the 1999 Incentive Plan, the
aggregate number of shares of Common Stock that may be granted to any one
employee pursuant to nonqualified stock options, ISOs and/or SARs granted under
the 1999 Incentive Plan (including reload options) will not exceed 36 million
shares (the "Maximum Allocation"). The 1996 Incentive Plan provided for the same
maximum number of shares that could have been granted to any one employee.
ADJUSTMENTS. The maximum number of shares available for issuance under the
1999 Incentive Plan, the Maximum Allocation, the maximum number of shares which
may be granted as ISOs, the number of shares of Common Stock covered by
outstanding awards and the exercise price applicable to outstanding options,
ISOs and SARs may be adjusted by the Committee, if the 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. However, the Committee may
not amend an outstanding Award for the sole purpose of reducing the exercise
price thereunder.
EXERCISE PRICE. The Committee will determine the exercise price applicable
to each option, ISO and SAR, which will not be less than the fair market value
of the Common Stock at the time of the grant.
PAYMENT OF EXERCISE PRICE. Upon the exercise of an option or ISO, payment
of the exercise price may be made in cash or, if permitted by the Committee, by
tendering Common Stock owned by the Participant (or the Participant and his or
her spouse jointly) and acquired at least six (6) months prior to such tender,
having a fair market value equal to the exercise price, by a combination of cash
and Common Stock or by authorizing the Company to sell, on behalf of the
Participant, the number of shares otherwise issuable upon exercise, with the
sale proceeds applied towards the exercise price. If shares of Common Stock are
so used, 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 used to pay the withholding taxes
applicable to an option exercise. Reload options do not increase the net equity
position of a Participant. Their purpose is to facilitate continued stock
ownership in the Company by Participants. Upon the exercise of an option granted
under the 1999 Incentive Plan or under any other stock plan of the Company which
may be designated by the Committee from time to time (including but not limited
to the CAP Plan, EIP, the 1996 Incentive Plan, the Citicorp 1997 Incentive Plan,
any other plan assumed by the Company or any prior or successor plans of the
Company) 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.
EXERCISE PRICE AND FEATURES OF RELOAD OPTIONS. The Committee will determine
the exercise price of reload options, provided that the exercise price will not
be less than the fair market value of the Common Stock at the time of grant.
Reload options will be subject to such other terms, conditions and limitations
as the Committee may determine from time to time regarding the vesting,
exercisability, cancellation and forfeiture.
CHANGE OF CONTROL. Upon a "Change of Control," as defined in the 1999
Incentive Plan and as determined by the Committee, the Committee, may, in its
discretion, accelerate, purchase, adjust or modify awards or cause the awards to
be assumed by the surviving corporation in a corporate transaction.
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ADDITIONAL FORFEITURE PROVISIONS. Awards granted under the 1999 Incentive
Plan are subject to forfeiture if, after a termination of employment, the
Participant engages in certain activities which are materially injurious to or
in competition with the Company.
TRANSFERABILITY. The Committee may permit Participants to transfer certain
awards and, during any period of restriction on transferability, shares issued
as a result of an option exercise, one time to an immediate family member or a
trust for the benefit of immediate family members; otherwise, awards granted
under the 1999 Incentive Plan and sale restricted shares will not be
transferable other than by will or the laws of descent and distribution.
DEFERRALS. The Committee may postpone the exercise of options, ISOs and
SARs, or the issuance or delivery of Common Stock or cash pursuant to any award
for such periods and upon such terms and conditions as the Committee determines.
In addition, the 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 in order to prevent the Company or any Subsidiary from being
denied a Federal income tax deduction with respect to an award granted under the
1999 Incentive Plan.
AMENDMENT AND TERMINATION. The 1999 Incentive Plan may be amended or
terminated by the Committee at any time, without the approval of stockholders or
Participants, provided that no such action may, without a Participant's written
consent, adversely affect any previously granted award, and no amendment that
would require stockholder approval under applicable law or under the Code,
including but not limited to Section 162(m), may become effective without
stockholder approval. No grants may be made under the 1999 Incentive Plan after
a date which is ten (10) years following the effective date of such plan, unless
the Plan has been terminated prior to such date.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal United States Federal
income tax consequences of transactions under the 1999 Incentive Plan, based on
current United States Federal income tax laws. This summary is not intended to
be exhaustive, does not constitute tax advice and, among other things, does not
describe state, local or foreign tax consequences.
NON-QUALIFIED OPTIONS. No taxable income is realized by a Participant upon
the grant of an option (including a reload option). Upon the exercise of an
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 exercised over the aggregate option exercise price (the "Spread"), even
though such Common Stock may be subject to a restriction on transferability or
may be subsequently forfeited, in limited circumstances, as more particularly
described in the 1999 Incentive Plan. Income and payroll taxes are required to
be withheld by the Participant's employer on the amount of ordinary income
resulting to the Participant from the exercise of an option. The Spread is
generally deductible by the Participant's employer 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 Participant'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
Participant.
Upon a sale of the shares of Common Stock received by the Participant 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 Participant'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 adjusted net capital
gain is subject to a statutory maximum tax rate of twenty percent (20%) or ten
percent (10%) for taxpayers in the fifteen percent (15%) tax bracket. After the
year 2000, lower capital gains rates may apply.
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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 value of the
remaining shares received by the Participant will be taxable to the Participant
as compensation, even though such shares may be subject to limited restrictions.
The remaining shares will have a tax basis equal to the fair market value
recognized by the Participant as compensation income 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 gain or loss depending on the holding
period of the shares surrendered. Where the shares tendered to pay applicable
income and payroll taxes arising from such exercise generate a 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 loss may not be currently
recognizable if, within a period beginning thirty (30) days before the exercise
date and ending thirty (30) days after that date, the Participant acquires or
enters into a contract or option, including a reload option, to acquire
additional Common Stock.
STOCK APPRECIATION RIGHTS ("SAR"). Upon the exercise of a SAR, the
Participant will recognize compensation income, in an amount equal to the cash
received plus the fair market value of the Common Stock received from the
exercise. The Participant's tax basis in the shares of Common Stock received in
the exercise of the SAR will be equal to the compensation income recognized with
respect to the Common Stock. The Participant's holding period for shares
acquired pursuant to the exercise of a SAR begins on the exercise date. Income
and payroll taxes are required to be withheld on the amount of compensation
attributable to the exercise of the SAR, whether the income is paid in cash or
shares. Upon the exercise of a SAR, the Participant's employer will generally be
entitled to a deduction in the amount of the compensation income recognized by
the Participant.
INCENTIVE STOCK OPTIONS ("ISO"). 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
1999 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
(l) 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 on 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 to 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 will have the same basis and holding
period for 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
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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 a disqualifying disposition of such Common
Stock if the holding periods discussed above have not been met.
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 a termination of employment.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION. With
certain exceptions, Section 162(m) of the Code limits the deduction to either
the Company or the Participant's employer, as applicable, for compensation paid
to the Covered Employees in excess of $1 million dollars per executive per
taxable year. 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). Compensation
to be paid to the Covered Employees under this Plan is intended to be qualified
performance-based compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ADOPTION OF
THE CITIGROUP 1999 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 Voting 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 Citigroup 1999 Stock Incentive Plan. Under applicable Delaware
law, in determining whether this item has received the requisite number of
affirmative votes, abstentions will have the same effect as a vote against this
item and broker nonvotes, if any, will be disregarded and have no effect on the
outcome of such vote.
ITEM 4:
APPROVAL AND ADOPTION OF
1999 CITIGROUP EXECUTIVE PERFORMANCE PLAN
On January 19, 1999, the Board of Directors of the Company unanimously
approved the adoption of the Citigroup 1999 Executive Performance Plan (the
"1999 Executive Performance Plan") and recommended that the 1999 Executive
Performance Plan be submitted to stockholders for approval at the Annual
Meeting. The 1999 Executive Performance Plan is intended to supersede and
replace the Compensation Plan and the 1994 Citicorp Annual Incentive Plan for
Selected Executive Officers. The following summary is qualified in its entirety
by reference to the complete text of the 1999 Executive Performance Plan, which
is attached hereto as Annex B. Capitalized terms used but not defined herein
shall have the meanings set forth in the 1999 Executive Performance Plan.
The 1999 Executive Performance Plan is intended to address certain
limitations on the deductibility of executive compensation under Section 162(m)
of the Code, which limits the deductibility of certain compensation in excess of
$1 million per year paid by a publicly traded corporation to Covered Employees.
Certain types of compensation may be excluded from the limitation on
deductibility, including compensation that qualifies as "performance-based
compensation".
The Internal Revenue Service in the regulations promulgated under Section
162(m) of the Code has indicated that four conditions must be satisfied in order
for compensation to qualify as performance-based. Compensation will not be
subject to the deduction limit if (i) it is payable on account of the attainment
of one or more pre-established, objective performance goals; (ii) the
performance goals are established by a compensation committee of the board of
directors that is comprised solely of two or more outside directors; (iii) the
material terms of the compensation and the performance goals are disclosed to
and
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approved by stockholders before payment; and (iv) the compensation committee
certifies that the performance goals have been satisfied before payment. In an
effort to comply with the provisions of the Code and to qualify the compensation
payable to Covered Employees under the 1999 Executive Performance Plan (and any
related restricted stock, deferred stock, stock options or other stock-based or
stock-denominated awards that may be granted under the 1999 Incentive Plan or
any prior or successor stock plan adopted by the Company) as performance-based
compensation eligible for exclusion from the deduction limit, the 1999 Executive
Performance Plan is being submitted to stockholders for approval and adoption at
the Annual Meeting.
The 1999 Executive Performance Plan establishes certain performance criteria
based upon overall Company performance for determining the maximum amount of
bonus compensation available under the 1999 Executive Performance Plan,
including that portion of bonuses payable in the form of stock awards as
described above, for the Covered Employees, each of whom, as an executive
officer, has wide ranging responsibilities for the Company's overall
performance. Bonuses based upon the formulas established under the 1999
Executive Performance Plan may be subject to significant variations from year to
year, given the potential volatility of certain of the financial services
businesses in which the Company engages.
The 1999 Executive Performance Plan includes the following features:
- Bonus Pool: The creation of a bonus pool in which the Covered Employees
will participate is contingent on the Company achieving at least a ten
percent (10%) Return on Equity.
- Return on Equity: Return on Equity will be determined by dividing the
Company's Net Income by Common Equity for a particular Performance
Period.
- Maximum Bonus Award: The maximum percentage of the bonus pool that may
be awarded to a Covered Employee in any Performance Period is thirty
percent (30%). The Committee may award a bonus to each of the Co-Chief
Executive Officers in an amount equal to a maximum of thirty percent
(30%) of the bonus pool. The total of the maximum percentages for all
Covered Employees shall not exceed 100% of the bonus pool.
- Committee Discretion: The Committee will have the right to award
bonuses in amounts less than the maximum allocated percentages of the
bonus pool.
Return on Equity shall be the percentage equivalent to the fraction
resulting from dividing Net Income by Common Equity. Net Income, for any
Performance Period, will be the Company's consolidated net income, before
extraordinary items and the cumulative effect of tax law changes and/or
accounting changes, reduced by the aggregate amount of dividends on the
Company's preferred stock, determined in accordance with generally accepted
accounting principles, consistently applied, as reported by management to the
Board following the end of the Performance Period and as it will be reflected in
the audited financial statements for the Performance Period, or other books and
records of the Company if the Performance Period does not correspond to the
calendar year.
"Performance Period" shall mean the taxable year of the Company or any other
period designated by the Committee with respect to which an award may be
granted. "Common Equity" will equal the common stockholders' equity appearing on
the Consolidated Statement of Changes in Stockholders' Equity in the Company's
Annual Report as of the end of the year immediately preceding the Performance
Period.
The Return on Equity must be at least ten percent (10%) in order for a bonus
pool to be created. The amount of the bonus pool will increase based upon the
extent to which the Return on Equity exceeds the ten percent (10%) minimum
threshold. If the Return on Equity is equal to or greater than ten percent (10%)
but does not exceed twelve percent (12%), the bonus pool will equal one percent
(1%) of Net Income. If the Return on Equity is greater than twelve percent (12%)
but does not exceed fifteen percent (15%), the bonus pool will equal one and
one-half percent (1.5%) of Net Income. If the Return on Equity is greater than
fifteen percent (15%) but does not exceed eighteen percent (18%), the bonus pool
will be
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increased by the addition of two percent (2%) of the amount by which additional
Net Income exceeds fifteen percent (15%) but not eighteen percent (18%) of
Common Equity. If the Return on Equity is greater than eighteen percent (18%),
the bonus pool will be further increased by the addition of two and one-half
percent (2.5%) of the amount by which additional Net Income exceeds eighteen
percent (18%) of Common Equity. Accordingly, the Return on Equity calculation
established under the 1999 Executive Performance Plan will be the basis on which
both the availability and size of the bonus pool is determined.
Prior to the beginning of each Performance Period, or at such later time as
may be permitted by the applicable provisions of the Code, the Committee shall
establish a maximum award, expressed as a percentage of the bonus pool amount,
for each of the Covered Employees. The maximum percentage of the bonus pool
which may be awarded to any Covered Employee is thirty percent (30%), and the
Committee may award up to such maximum percentage to each of the Co-Chief
Executive Officers of the Company. The total of the maximum percentages for all
Covered Employees shall not exceed one hundred percent (100%) of the bonus pool.
Awards may be paid in the form of cash, stock, restricted stock, options or
other stock-based or stock-denominated awards or any other form of consideration
or any combination thereof as may be determined by the Committee, in its
discretion.
The Return on Equity calculation applicable to the Covered Employees
represents what the Company believes to be performance-based compensation in
accordance with the requirements of Section 162(m) of the Code. If the
applicable minimum performance-based requirement is not met, no bonus payments
will be made under the 1999 Executive Performance Plan to the Covered Employees.
In the event that bonus compensation thresholds are met, the Committee
nevertheless retains discretion to reduce or eliminate payments under the 1999
Executive Performance Plan for any of the Covered Employees to take into account
subjective factors, including an individual's performance or other relevant
criteria.
Since the Committee may, and in fact, historically has awarded less than the
maximum percentage of the bonus pool to each of the Covered Employees, even
though the maximum amount of such benefits may be determined, the exact amount
of any future benefit that may be allocated to any one individual or group of
individuals under the 1999 Executive Performance Plan is not presently
determinable.
Subject to any restrictions imposed under Section 162(m) of the Code, the
Committee may, at any time, terminate or amend the Plan, provided that any
amendment that would require consent of the stockholders of the Company under
the Code or the Exchange Act shall not be effective without such consent.
The 1999 Executive Performance Plan will take effect as of January 1, 1999,
subject to receipt of stockholder approval. If the 1999 Executive Performance
Plan is not approved by stockholders, it will not have any effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE CITIGROUP 1999 EXECUTIVE PERFORMANCE 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 Voting Preferred Stock present and entitled to
vote on this item at the Annual Meeting, voting as a single class, is required
to approve and adopt the Plan. Under applicable Delaware law, in determining
whether this item has received the requisite number of affirmative votes,
abstentions will have the same effect as a vote against this item and broker
nonvotes, if any, will be disregarded and have no effect on the outcome of such
vote.
STOCKHOLDER PROPOSALS
The Company has been advised by certain holders of Common Stock of their
intention to introduce at the Annual Meeting the respective proposals and
supporting statements set forth below. The Board of
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Directors disclaims any responsibility for the content of the proposals and for
the statements made in support thereof, which are presented as received from the
respective stockholders.
ITEM 5:
Sr. Laurie Michalowski, on behalf of the Congregation of the Passion, 5700
N. Harlem Avenue, Chicago, Illinois 60631-2342, beneficial owners of 250 shares
and School Sisters of St. Francis, 4127 N. Central Park, Chicago, Illinois
60618, beneficial owners of 10,025 shares; Sr. Barbara Aires, Sisters of Charity
of the Incarnate Word, 6510 Lawndale, Houston, TX 77223-0969, beneficial owners
of 4100 shares; Sr. Ruth A. Mitchell, Sisters of Saint Dominic of Blauvelt, New
York, 496 Western Highway, Blauvelt, NY 10913-2097, beneficial owners of 500
shares; Sr. Barbara Glendon, Mercy Consolidated Asset Management Program, 20
Washington Square North, New York, NY 10011, beneficial owners of 100 shares;
Sr. Annette M. Sinagra, Adrian Dominican Sisters, 1257 East Siena Heights Drive,
Adrian, Michigan 49221-1793, beneficial owners of 75,250 shares; Sr. Katherine
Marie Glosenger, Sisters of Mercy of the Americas, 2039 North Geyer Road, St.
Louis, Missouri 63131-4313, beneficial owners of 95,000 shares; Sr. Virginia
Unsworth, Sisters of Charity of St. Vincent de Paul of New York, Mount St.
Vincent-on-Hudson, 6301 Riverdale Avenue, Bronx, NY 10471-1093, beneficial
owners of 6,146 shares; Sr. Susan Jordan, School Sisters of Notre Dame, 336 East
Ripa Ave., St. Louis, Missouri 63125, beneficial owners of 232 shares; Sr. Susan
Mika, Benedictine Sisters, 530 Bandera Road, San Antonio, TX 78240, beneficial
owners of 1,273 shares; and Dcn. Paul K. Grimm, Diocese of Green Bay, P.O. Box
23825, Green Bay, Wisconsin 54305, beneficial owners of 5,250 shares have
notified the Company that they intend to present the following proposal at the
Annual Meeting:
EFFICIENT USE OF CAPITAL AND FINANCIAL STABILIZATION
WHEREAS recent financial crises in less economically developed countries
(LDCs) have been exacerbated if not triggered by short-term capital flows and
the large amount of foreign portfolio investment relative to their small equity
markets;
WHEREAS our corporation's balance sheet has been adversely affected by the
debt crisis of the 1980's as well as the more recent crises culminating in the
current East Asian melt-down, and therefore we believe that our Corporation
should take steps that encourage the LDCs to develop better policies to minimize
these cyclic financial crises;
WHEREAS we believe that the economic development of LDCs is often hampered
by a lack of internal investment by their own nationals, by poor regulation of
financial intermediaries and by the inefficient use of capital through
corruption and the lack of transparency in transactions, with the result of a
lack of indigenous business development required for stability;
WHEREAS UNCTAD maintains that in Latin America much of the increase in
capital flows in the 1990s has been used for private consumption rather than
investment for development, and much of these capital in-flows have been short
term: for Mexico that short-term foreign debt increased to 16% of GDP by the
time of the 1994 crisis;
WHEREAS economic crises have played havoc with small and medium sized
businesses in the LDCs because the high interest rates imposed by the IMF
arrangements have dried up the small amount of business credit for these
domestic firms and have resulted in massive bankruptcies and unemployment;
WHEREAS in order to stem these flows while maintaining domestic interest
rates low enough to prevent massive bankruptcies in the present East Asia
crisis, the MIT economist Paul Krugman has taken the radical step to suggest
that exchange controls be used;
WHEREAS we believe that our corporation can set policies which both serve
the long-term interests of our corporation in the LDCs and foster their balanced
economic growth;
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WHEREAS one goal should be to perform due diligence and lend to creditworthy
borrowers and provide services only to businesses with good business practices;
WHEREAS we also believe that controls on short-term capital flows could
diminish the extent of these recurring crises and thus provide for more stable
development, reducing our corporation's losses on loans and diminished profits
on services during crises; an example of such controls would be some variation
of those imposed by Chile which required a portion of all short-term funds to be
deposited with the central bank for a period of up to one-year.
RESOLVED that, in order to diminish the effects on the corporation's balance
sheet of the cyclical financial crises of less developed countries, the Board of
Directors develop a policy for its lending and services to, and operations in,
LDCs to actively encourage the efficient use of capital and financial
stabilization, including the corporation's encouragement, support of and
continued services to LDCs that institute short-term capital controls.
MANAGEMENT COMMENT
The Board of Directors believes it would be inappropriate for Citigroup to
establish formal policies for less economically developed countries that would
limit all short-term capital flows. Citigroup certainly supports countries'
efficient use of capital, which may involve encouraging and discouraging
different forms of capital inflow from abroad.
There are many forms of short-term capital that promote growth in emerging
markets and the successful development of those economies. These include, for
example, short-term investments that promote the growth of equity and money
markets and the growth of exports within emerging markets. Emerging markets as
well as foreign investors and lenders must discriminate between desirable
capital for efficient use within these economies and undesirable capital for
speculative purposes.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL. Proxies solicited by the Board of Directors will
be so voted unless stockholders specify otherwise. 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 Voting Preferred Stock present and entitled to vote
on this item at the Annual Meeting, voting as a single class, is required to
adopt the stockholder proposal. Under applicable Delaware law, in determining
whether this item has received the requisite number of affirmative votes,
abstentions will have the same effect as a vote against this item and broker
nonvotes, if any, will be disregarded and have no effect on the outcome of such
vote.
ITEM 6:
Roger J. Rath, Trustee, 1950 Kingsforth Drive, Fallston, Maryland 21047,
beneficial owner of 200 shares; and Judith Weiss, 21 Orchard Street, Cambridge,
MA 02140, beneficial owner of 334 shares, have notified the Company that they
intend to present the following proposal at the Annual Meeting:
A SHAREHOLDER RESOLUTION CONCERNING EXECUTIVE COMPENSATION
WHEREAS, increases in CEO compensation continue to dwarf the compensation
increases enjoyed by employees. Between 1990 and 1997, CEO cash compensation
rose 82% and average total compensation (including stock options) rose 298% to
$7,800,000, vastly exceeding the 22% increase in factory wages and S&P earnings
growth of 110% (Business Week Survey of Executive Compensation; Bureau of Labor
Statistics);
WHEREAS, in 1997, U.S. CEOs earned on average 326 times the average factory
workers' pay, a dramatic rise from the 42 times reported in 1980;
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WHEREAS, considering executive pay in the global context, U.S. CEOs make on
average 1,871 times the average wage of Mexican maquiladora workers ($4,168 a
year) and 15,600 times the minimum wage of workers in Vietnam ($500 a year), two
of the many countries in which our company does business;
WHEREAS, in 1997 Citigroup's Co-CEO Sanford Weill was the highest paid CEO
in the United States receiving $230,725,000 in total compensation. Mr. Weill has
been among the top ten highest paid CEOs for the last six years. In each year
since 1994 BUSINESS WEEK magazine has rated Mr. Weill as among the top five CEOs
who "gave shareholders the least for their pay". Citigroup's other co-CEO, John
Reed, has also shown up on lists of highest paid CEOs in recent years;
WHEREAS, during this period of skyrocketing costs in the executive suites,
our company's leaders have been aggressively eliminating jobs in the name of
cost-cutting and efficiency. Since 1987, Citigroup's predecessor Travelers
Corporation cut nearly one-third of its workforce. The merger between Citicorp
and Travelers is expected to eliminate a further 8,000 workers, or 5% of the
combined company's workforce;
WHEREAS, growing research on effective organizations stresses the importance
of empowering front-line workers, a goal undermined by compensation policies
that reward top executives at the expense of workers closest to the customer;
WHEREAS, business leaders and thinkers ranging from J.P. Morgan to Peter
Drucker have argued against wide pay gaps within enterprises and called for
limits on executive pay based on multiples of worker compensation;
THEREFORE, BE IT RESOLVED, that shareholders urge the Board of Directors to
address the issue of runaway remuneration of CEOs and the widening gap between
highest and lowest paid workers by:
1) Establishing a cap on total CEO compensation expressed as a multiple
of pay of the lowest paid worker at Citigroup;
2) Preparing a report for shareholders explaining the factors used to
determine the appropriate cap.
SUPPORTING STATEMENT: In asking Citigroup to establish a cap on executive
compensation, we have not sought to impose our own arbitrary cap on executive
pay. Instead we have asked our company to wrestle with the issue of the rising
wage gap that exists between corporate executives and those they seek to lead.
By imposing the financial discipline of a pay cap, we hope our company can help
reverse a long standing trend that is neither good for business nor society.
Please vote YES.
MANAGEMENT COMMENT
Citigroup's compensation decisions are designed to attract and retain high
caliber employees at all levels of the Company. The formulation of a corporate
pay scale is a complex management function, taking into account numerous factors
including experience, value to the Company, the prevailing market for
similarly-skilled employees, and expertise in pertinent areas. Employees at all
levels, in turn, are evaluated by management against these criteria and
compensated through a number of channels, such as salary, discretionary bonus
and various stock incentive programs, which have varying vesting features, and
are open to many employees. Compensation decisions arising from this complex
framework are core management functions. Compensation decisions with respect to
the Company's executive officers are even more complex given the various means
and methods available for such compensation.
The structure of compensation at Citigroup reflects various management
decisions made during the current year as well as decisions from prior years
because, for example, prior option grants may vest in the current year (and may
be "in the money" or "under water") and option exercises of previously granted
options may result in a new grant of reload options. The proposal inaccurately
reports as "total compensation" a combination of disparate elements of past and
present compensation and stock option exercises
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(which relate solely to options granted at then market values by the Company's
prior owner, an unrelated party, in connection with the Company's initial public
offering in 1986).
The proposal would require the Board of Directors to establish an arbitrary
cap on the total compensation of the chief executive officers, thereby
diminishing the significance of more pertinent factors, such as corporate and
individual performance, which ordinarily and logically go into such decisions.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL. Proxies solicited by the Board of Directors will
be so voted unless stockholders specify otherwise. 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 Voting Preferred Stock present and entitled to vote
on this item at the Annual Meeting, voting as a single class, is required to
adopt the stockholder proposal. Under applicable Delaware law, in determining
whether this item has received the requisite number of affirmative votes,
abstentions will have the same effect as a vote against this item and broker
nonvotes, if any, will be disregarded and have no effect on the outcome of such
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 Morrow & Co. Inc., a proxy soliciting
firm, to assist in the solicitation of proxies, for an estimated fee of $20,000,
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 9, 1999.
OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Annual Meeting. If a stockholder proposal that
was excluded from this Proxy Statement in accordance with Rule 14a-8 of the
Securities Exchange Act of 1934 is properly brought before the meeting, it is
intended that the proxy holders will use their discretionary authority to vote
the proxies against such proposal. If any other matters should arise at the
Annual Meeting, shares represented by proxies will be voted at the discretion of
the proxy holders.
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ANNEX A
CITIGROUP
1999 STOCK INCENTIVE PLAN
(EFFECTIVE APRIL 30, 1999)
1. PURPOSE
The purposes of the Citigroup 1999 Stock Incentive Plan (the "Plan") are to
(i) attract and retain employees by providing compensation opportunities that
are competitive with other companies; (ii) provide incentives to those employees
who contribute significantly to the long-term performance and growth of the
Company and its Subsidiaries and (iii) align employees' long-term financial
interests with those of the Company's shareholders. The Plan is intended to
supersede and replace the Travelers Group 1996 Stock Incentive Plan.
2. EFFECTIVE DATE
The Plan will become effective April 30, 1999, subject to approval by the
stockholders of the Company.
3. DEFINITIONS
"AWARD" shall mean an Option, SAR or other form of Stock Award 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.
"CHANGE OF CONTROL" shall have the meaning set forth in Section 13.
"COMMON STOCK" shall mean the common stock of the Company, par value $.01
per share.
"COVERED EMPLOYEE" shall mean "covered employee" as such term is defined in
Section 162(m) of the Code.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, including
any rules and regulations promulgated thereunder.
"COMPANY" shall mean Citigroup Inc., a Delaware corporation.
"COMMITTEE" shall mean, with respect to Section 16(a) Officers and Covered
Employees, the Incentive Compensation Subcommittee, and with respect to all
other Participants, the Personnel, Compensation and Directors Committee of the
Board or the Incentive Compensation Subcommittee, as the case may be.
"DEFERRED STOCK" shall mean an Award payable in shares of Common Stock at
the end of a specified deferral period that is subject to the terms, conditions
and limitations described or referred to in Section 7(c)(iv).
"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, or any successor form or statute, as determined by the Committee.
"FAIR MARKET VALUE" shall mean the fair market value of the Common Stock, as
determined by the Committee.
"INCENTIVE COMPENSATION SUBCOMMITTEE" shall mean the subcommittee of the
Personnel, Compensation and Directors Committee, appointed by Personnel,
Compensation and Directors Committee, the
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members of which subcommittee shall satisfy the requirements of 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.
"ISO" shall mean an incentive stock option as defined in Section 422 of the
Code.
"OPTION" shall mean the right to purchase a specified number of shares of
Common Stock at a stated exercise price for a specified period of time. The term
"Option" as used in this Plan, shall include the terms "Reload Option" and
"ISO".
"PARTICIPANT" shall mean an Employee who has been granted an Award under the
Plan.
"PLAN YEAR" shall mean a twelve-month period beginning with January 1 of
each year, or any other twelve month period (or, with respect to the year in
which the Plan is adopted or terminates, such shorter period) as determined by
the Committee to be a Plan Year.
"PRIOR PLANS" shall mean the Citicorp 1997 Stock Incentive Plan, the
Travelers Group 1996 Stock Incentive Plan, the Travelers Group Capital
Accumulation Plan, the Travelers Group Employee Incentive Plan and all other
stock plans adopted or assumed by the Company.
"RELOAD OPTION" shall have the meaning set forth in Section 7(a)(ii).
"RESTRICTED STOCK" shall mean an Award of Common Stock that is subject to
the terms, conditions, restrictions and limitations described or referred to in
Section 7(c)(iii).
"SAR" shall mean a stock appreciation right that is subject to the terms,
conditions, restrictions and limitations described or referred to in Section
7(b).
"SECTION 16(A) OFFICER" shall mean an Employee who is subject to the
reporting requirements of Section 16(a) of the 1934 Act.
"STOCK AWARD" shall have the meaning set forth in Section 7(c)(i).
"STOCK UNIT" shall have the meaning set forth in Section 7(c)(v).
"SUBSIDIARY" shall mean any entity that is directly or indirectly controlled
by the Company or any entity, including an acquired entity, in which the Company
has a significant equity interest, as determined by the Committee, in its
discretion.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended,
including the rules and regulations promulgated thereunder and any successor
thereto.
4. THE COMMITTEE
(A) COMMITTEE AUTHORITY. The Committee shall have full and exclusive power
to administer and interpret the Plan, to grant Awards and to adopt such
administrative rules, regulations, procedures and guidelines governing the Plan
and the Awards as it may deem necessary in its discretion, from time to time.
The Committee's authority shall include, but not be limited to the authority to
(i) determine the type of Awards to be granted under the Plan; (ii) select Award
recipients and determine the extent of their participation; (iii) determine the
method or formula for establishing the fair market value of the Common Stock for
various purposes under the Plan; (iv) determine whether and under what
circumstances such fair market value may be discounted; and (v) establish all
other terms, conditions, restrictions and limitations applicable to Awards and
the shares of Common Stock issued pursuant to Awards, including, but not limited
to those relating to a Participant's retirement, death, disability, leave of
absence or termination of employment. The Committee may accelerate or defer the
vesting or payment of Awards, cancel or modify outstanding Awards, waive any
conditions or restrictions imposed with respect to Awards or the Common Stock
issued pursuant to Awards and make any and all other determinations which it
deems necessary with respect to the administration of the Plan, subject to the
limitations contained in Section 4(d) with respect to all Participants and
subject to the provisions of Section 162(m) of the Code with respect to Covered
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Employees. The Committee's right to make any decision or determination under the
Plan shall be in its sole and absolute discretion.
(B) ADMINISTRATION OF THE PLAN. The administration of the Plan shall be
managed by the Committee. The Committee shall have the power to prescribe and
modify, as necessary, the 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 Committee deems appropriate in its discretion. Any decision of the
Committee in the administration of the Plan, as described herein, shall be
final, binding and conclusive on all parties concerned, including the Company,
its stockholders and Subsidiaries and all Participants. The administration of
the Plan with respect to Section 16(a) Officers and Covered Employees, to the
extent required or appropriate under the 1934 Act and/or Section 162(m) of the
Code, shall be managed by the Incentive Compensation Subcommittee.
(C) DELEGATION OF AUTHORITY. The Committee may at any time delegate to one
or more officers or directors of the Company some or all of its authority over
the administration of the Plan, with respect to persons who are not Section
16(a) Officers or Covered Employees.
(D) PROHIBITION AGAINST REPRICING. In no event shall the Committee have the
right to amend an outstanding Award for the sole purpose of reducing the
exercise price thereunder.
(E) INDEMNIFICATION. No member of the Committee shall be personally liable
for any action or determination made with respect to the Plan, except for his or
her own willful misconduct or as expressly provided by statute. The members of
the Committee shall be entitled to indemnification and reimbursement. In the
performance of its functions under the Plan, the Committee shall be entitled to
rely upon information and advice furnished by the Company's officers,
accountants, counsel and any other party the Committee deems necessary, and no
member of the Committee shall be liable for any action taken or not taken in
reliance upon any such advice.
5. PARTICIPATION
(A) ELIGIBLE EMPLOYEES. The Committee shall determine which Employees shall
be eligible to receive Awards under the Plan.
(B) PARTICIPATION BY SUBSIDIARIES. Employees of Subsidiaries may participate
in the Plan upon approval of the Awards by the Committee. A Subsidiary's
participation in the Plan may be terminated at any time by the Committee. If a
Subsidiary's participation in the Plan shall terminate, such termination shall
not relieve it of any obligations theretofore incurred by it under the Plan,
except with the approval of the Committee.
(C) PARTICIPATION OUTSIDE OF THE UNITED STATES. The Committee or its
designee shall have the authority to amend the Plan and/or the terms and
conditions relating to an Award to the extent necessary to permit participation
in the Plan by Employees who are located outside of the United States on terms
and conditions comparable to those afforded to Employees located within the
United States, provided that any such action taken with respect to a Covered
Employee shall be taken in compliance with Section 162(m) of the Code.
(D) CANCELLATION AND MODIFICATION OF AWARDS. In the event of a change in a
Participant's duties and responsibilities, or a transfer of the Participant to a
different position, the Committee may cancel or modify any Award granted to such
Participant or adjust the number of shares of Common Stock subject thereto
commensurate with the transfer or change in responsibility, as determined by the
Committee, in its discretion, provided that no such action shall violate the
provisions of Section 4(d), and further provided that any such action taken with
respect to a Covered Employee shall be taken in compliance with Section 162(m)
of the Code.
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6. AVAILABLE SHARES OF COMMON STOCK
(A) SHARES SUBJECT TO THE PLAN. Common Stock issued pursuant to Awards
granted under the Plan may be shares which have been authorized but unissued, or
have been previously issued and reacquired by the Company, or both. Reacquired
shares may consist of shares purchased in open market transactions. Subject to
the following provisions of this Section 6, the aggregate number of shares of
Common Stock that may be issued to Participants pursuant to Awards granted under
the Plan shall not exceed one hundred ten million (110,000,000) shares.
(B) PRIOR PLANS. Shares available for grant under the Prior Plans shall not
count towards the maximum number of shares that may be issued under the Plan as
set forth in Section 6(a). Upon approval and adoption of this Plan by the
stockholders of the Company, no further grants will be made under the Travelers
Group 1996 Stock Incentive Plan.
(C) FORFEITED AWARDS. Awards or portions of Awards made under the Plan which
are forfeited, expire or are canceled or settled without issuance of shares
shall not count towards the maximum number of shares that may be issued under
the Plan as set forth in Section 6(a).
(D) SHARES USED TO PAY EXERCISE PRICE AND WITHHOLDING TAXES. If a
Participant pays the exercise price of an Option by surrendering previously
owned shares, as may be permitted by the Committee and/or arranges to have the
appropriate number of shares otherwise issuable upon exercise withheld or sold
to cover the withholding tax liability associated with the Option exercise, such
surrendered shares and shares used to pay taxes shall not count towards the
maximum number of shares that may be issued under the Plan as set forth in
Section 6(a).
(E) OTHER ITEMS NOT INCLUDED IN ALLOCATION. The maximum number of shares
that may be issued under the Plan as set forth in Section 6(a) shall not be
affected by (i) the payment in cash of dividends or dividend equivalents in
connection with outstanding Awards; (ii) the granting or payment of
stock-denominated Awards which by their terms may be settled only in cash; or
(iii) Awards that are granted through the assumption of, or in substitution for,
outstanding awards previously granted to individuals who have become Employees
as a result of a merger, consolidation, or acquisition or other corporate
transaction involving the Company or a Subsidiary.
(F) OTHER LIMITATIONS ON SHARES WHICH MAY BE GRANTED UNDER THE PLAN.
(i) The aggregate number of shares of Common Stock that may be granted
to any single individual during the term of the Plan in the form of Options
(including Reload Options and ISOs) and/or SARs shall not exceed thirty six
million (36,000,000).
(ii) The aggregate number of shares of Common Stock that may be granted
in the form of ISOs shall not exceed fifty million (50,000,000).
(G) ADJUSTMENTS. In the event of any stock dividend, stock split,
combination or exchange of equity securities, merger, consolidation,
recapitalization, reorganization, divestiture or other distribution (other than
ordinary cash dividends) of assets to stockholders, or any other similar event
affecting the Common Stock, the Committee may make such adjustments as it may
deem appropriate, in its discretion, to (i) the maximum number of shares of
Common Stock that may be issued under the Plan as set forth in Section 6(a);
(ii) to the extent permitted under Section 162(m) of the Code, the maximum
number of shares that may be granted pursuant to Section 6(f)(i); (iii) to the
extent permitted under Section 422 of the Code, the maximum number of shares
that may be granted pursuant to Section 6(f)(ii); (iv) the number or kind of
shares subject to an Award; (v) subject to the limitation contained in Section
4(d), the Exercise Price applicable to an Award; and/or (vi) any measure of
performance that relates to an Award in order to reflect such change in the
Common Stock.
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7. AWARDS UNDER THE PLAN
Awards under the Plan may be granted as Options, SARs or Stock Awards, as
described below. Awards may be granted singly, in combination or in tandem as
determined by the Committee, in its discretion.
(A) OPTIONS. Options granted under the Plan, including Reload Options, may
be non-qualified stock options, ISOs or any other type of stock option permitted
under the Code.
(I) ISOS. The terms and conditions of any ISOs granted hereunder shall
be subject to the provisions of Section 422 of the Code and the terms,
conditions, limitations and administrative procedures established by the
Committee, from time to time. At the discretion of the Committee, ISOs may
be granted to any Employee of the Company and its subsidiaries, as such term
is defined in Section 424(f) of the Code.
(II) RELOAD OPTIONS. If a Participant tenders shares of Common Stock to
pay the exercise price of an Option, and/or arranges to have a portion of
the shares otherwise issuable upon exercise withheld or sold to pay the
applicable withholding taxes, the Participant may receive, at the discretion
of the Committee, a new "Reload Option" equal to the sum of the number of
shares tendered to pay the exercise price and the number of shares used to
pay the withholding taxes. Reload Options may be any type of option
permitted under the Code and will be granted subject to such terms,
conditions, restrictions and limitations as may be determined by the
Committee, from time to time. Reload Options may also be granted in
connection with the exercise of options granted under any other plan of the
Company which may be designated by the Committee, from time to time.
(III) EXERCISE PRICE. The Committee shall determine the exercise price
per share for each Option, which shall not be less than 100% of the Fair
Market Value at the time of grant.
(IV) EXERCISE OF OPTIONS. Upon satisfaction of the applicable conditions
relating to vesting and exercisability, as determined by the Committee, and
upon payment in full of the Exercise Price and applicable taxes due, the
Participant shall be entitled to exercise the Option and receive the number
of shares of Common Stock issuable in connection with the Option exercise.
The shares issued in connection with the Option exercise may be subject to
such conditions and restrictions as the Committee may determine, from time
to time. The exercise price of an Option and applicable withholding taxes
relating to an Option exercise may be paid by methods permitted by the
Committee from time to time including (1) a cash payment in US dollars; (2)
tendering (either actually or by attestation) shares of Common Stock owned
by the Participant for at least six (6) months, valued at the Fair Market
Value at the time of exercise; (3) arranging to have the appropriate number
of shares of Common Stock issuable upon the exercise of an Option withheld
or sold; or (4) any combination of the above.
(B) STOCK APPRECIATION RIGHTS. A stock appreciation right ("SAR") represents
the right to receive a payment in cash, Common Stock, or a combination thereof,
in an amount equal to the excess of the Fair Market Value of a specified number
of shares of Common Stock at the time the SAR is exercised over an amount which
shall be no less than the Fair Market Value of the same number of shares at the
time the SAR was granted, except that if a SAR is granted retroactively in
substitution for an Option, the Fair Market Value established by the Committee
may be the Fair Market Value at the time such Option was granted. Any such
substitution of a SAR for an Option granted to a Covered Employee may only be
made in compliance with the provisions of Section 162(m) of the Code.
(C) STOCK AWARDS.
(I) FORM OF AWARDS. The Committee may grant Awards ("Stock Awards")
which are payable in shares of Common Stock or denominated in units
equivalent in value to shares of Common Stock or are otherwise based on or
related to shares of Common Stock, including, but not limited to Awards of
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Restricted Stock, Deferred Stock and Stock Units, subject to such terms,
conditions, restrictions and limitations as the Committee may determine to
be applicable to such Awards, in its discretion, from time to time. In order
to reflect the impact of the conditions, restrictions or limitations
applicable to a Stock Award, as well as the possibility of forfeiture or
cancellation, the Fair Market Value may be discounted at a rate determined
by the Committee, from time to time, for purposes of determining the number
of shares of Common Stock allocable to a Stock Award.
(II) STOCK PAYMENT. Shares of Common Stock may be used as payment for
compensation which otherwise would have been delivered in cash (including
without limitation any compensation that is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Code),
and unless otherwise determined by the Committee, no minimum vesting period
will apply to such shares. Any Shares used for such payment will be valued
at Fair Market Value at the time of payment and shall be subject to such
terms, conditions, restrictions and limitations as shall be determined by
the Committee at the time of payment.
(III) RESTRICTED STOCK. Awards of Restricted Stock shall be subject to
the conditions, limitations, restrictions, vesting and forfeiture provisions
determined by the Committee, in its discretion, from time to time. The
number of shares of Restricted Stock allocable to an Award under the Plan
shall be determined by the Committee, pursuant to a formula approved by the
Committee from time to time. In order to reflect the impact of the
restrictions on the value of the Restricted Stock, as well as the
possibility of forfeiture of the Restricted Stock, the Fair Market Value may
be discounted at a rate to be determined by the Committee, for purposes of
determining the number of shares allocable to an Award of Restricted Stock.
Unless the Committee determines otherwise, Awards of Restricted Stock will
carry a minimum vesting period of one (1) year.
(IV) DEFERRED STOCK. Awards of Deferred Stock shall be subject to the
conditions, limitations and cancellation provisions determined by the
Committee, in its discretion, from time to time. A Participant who receives
an Award of Deferred Stock shall be entitled to receive the number of shares
of Common Stock allocable to his or her Award, as determined by the
Committee, pursuant to a formula approved by the Committee from time to
time, at the end of a specified deferral period determined by the Committee.
In order to reflect the impact of the deferral conditions on the value of an
Award of Deferred Stock, as well as the possibility of cancellation of the
Deferred Stock Award, the Fair Market Value may be discounted at a rate to
be determined by the Committee, for purposes of determining the number of
shares allocable to an Award of Deferred Stock. Awards of Deferred Stock
represent only an unfunded, unsecured promise to deliver shares in the
future and do not give Participants any greater rights than those of an
unsecured general creditor of the Company.
(V) STOCK UNITS. A Stock Unit is an Award denominated in shares of
Common Stock, pursuant to a formula determined by the Committee, which may
be settled either in shares of Common Stock or in cash, in the discretion of
the Committee, subject to such other terms, conditions, restrictions and
limitations determined by the Committee from time to time.
8. FORFEITURE PROVISIONS FOLLOWING A TERMINATION OF EMPLOYMENT
In any instance where the rights of a Participant with respect to an Award
extend past the date of termination of a Participant's employment, all of such
rights shall terminate and be forfeited, if, in the determination of the
Committee, the Participant, at any time subsequent to his or her termination of
employment engages, directly or indirectly, either personally or as an employee,
agent, partner, stockholder, officer or director of, or consultant to, any
entity or person engaged in any business in which the Company or its affiliates
is engaged, in conduct that breaches his or her duty of loyalty to the Company
or a Subsidiary or that is in material competition with the Company or a
Subsidiary or 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
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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
falls within the scope activities contemplated by this Section shall be made by
the Committee, in its discretion. For purposes of this paragraph, a Participant
shall not be deemed to be a stockholder of a competing entity if the
Participant's record and beneficial ownership amount to not more than one
percent (1%) of the outstanding capital stock of any company subject to the
periodic and other reporting requirements of the Securities Exchange Act of
1934, as amended.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Stock Awards shall earn dividends or dividend
equivalents. Such dividends or dividend equivalents may be paid currently or may
be credited to an account maintained on the books of the Company. Any payment or
crediting of dividends or dividend equivalents will be subject to such terms,
conditions, restrictions and limitations as the Committee may establish, from
time to time, including reinvestment in additional shares of Common Stock or
common share equivalents. Unless the Committee determines otherwise, Section
16(a) Officers may not participate in dividend reinvestment programs established
under the Plan. The Committee shall determine the Participants' rights under the
Plan with respect to extraordinary dividends or distributions on the Common
Stock.
10. VOTING
The Committee shall determine whether a Participant shall have the right to
direct the vote of shares of Common Stock allocated to a Stock Award. If the
Committee determines that an Award shall carry voting rights, the shares
allocated to such Award shall be voted by the Company's Senior Human Resources
Officer, or such other person as the Committee may designate in accordance with
instructions received from Participants (unless to do so would constitute a
violation of 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 fiduciary duties).
11. PAYMENTS AND DEFERRALS
Payment of Awards may be in the form of cash, Common Stock, other Awards, or
combinations thereof as the Committee shall determine, subject to such terms,
conditions, restrictions and limitations as it may impose. The Committee may
postpone the exercise of Options or SARs, and may require or permit Participants
to elect to defer the receipt or issuance of shares of Common Stock pursuant to
Awards or the settlement of Awards in cash under such rules and procedures as it
may establish, in its discretion, from time to time. It also may provide for
deferred settlements of Awards including the payment or crediting of earnings on
deferred amounts, or the payment or crediting of dividend equivalents where the
deferred amounts are denominated in common share equivalents. In addition, the
Committee may stipulate in an Award Agreement, either at the time of grant or by
subsequent amendment, that a payment or portion of a payment of an Award be
delayed in the event that Section 162(m) of the Code (or any successor or
similar provision of the Code) would disallow a tax deduction by the Company for
all or a portion of such payment. The period of any such delay in payment shall
be until the payment, or portion thereof, is tax deductible, or such earlier
date as the Committee shall determine in its discretion.
12. TRANSFERABILITY
Unless otherwise determined by the Committee, Awards granted under the Plan,
and during any period of restriction on transferability, shares of Common Stock
issued in connection with the exercise of
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an Option, may not be sold, pledged, hypothecated, assigned, margined or
otherwise transferred, other than by will or the laws of descent and
distribution. The Committee may permit (on such terms, conditions and
limitations as it shall establish) non-qualified Options (including
non-qualified Reload Options) and/or shares issued in connection with an Option
exercise which are subject to restrictions on transferability, to be transferred
one time to a member of a Participant's immediate family or to a trust or
similar vehicle for the benefit of a Participant's immediate family members.
Except to the extent required by law, no Award or interest of any Participant in
the Plan shall be subject to any lien, levy, attachment, pledge, obligation,
liability or bankruptcy of a Participant. During the lifetime of a Participant,
all rights with respect to Awards shall be exercisable only by such Participant
or, if applicable, a permitted transferee.
13. CHANGE OF CONTROL
(a) The Committee may, in its discretion, at the time an Award is made
hereunder or at any time prior to, coincident with or after the time of a Change
of Control:
(i) provide for the acceleration of any time periods relating to the
exercise or realization of such Awards so that such Awards may be exercised
or realized in full on or before a date fixed by the Committee;
(ii) provide for the purchase of such Awards, upon the Participant's
request, for an amount of cash equal to the amount which could have been
obtained upon the exercise or realization of such rights had such Awards
been currently exercisable or payable;
(iii) make such adjustment to the Awards then outstanding as the
Committee deems appropriate to reflect such transaction or change; or
(iv) cause the Awards then outstanding to be assumed, or new rights
substituted therefore, by the surviving corporation in such change.
The Committee may, in its discretion, include such further provisions and
limitations in any Award Agreement as it may deem equitable and in the best
interests of the Company.
(b) A "Change of Control" shall be deemed to occur if and when:
(i) any person, including a "person" as such term is used in Section
14(d)(2) of the 1934 Act (a "Person"), is or becomes a beneficial owner (as
such term is defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(ii) any transaction occurs with respect to the Company which is subject
to the prior notice requirements of the Change in Bank Control Act of 1978;
(iii) any transaction occurs with respect to the Company which will
require a "company" as defined in the Bank Holding Company Act of 1956, as
amended, to obtain prior approval of the Federal Reserve Board under
Regulation Y;
(iv) any plan or proposal for the liquidation of the Company is adopted
by the stockholders of the Company;
(v) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in
A-8
<PAGE>
Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board;
(vi) all or substantially all of the assets of the Company are sold,
liquidated or distributed; or
(vii) there occurs a reorganization, merger, consolidation or other
corporate transaction involving a Company (a "Transaction"), in each case,
with respect to which the stockholders of the Company immediately prior to
such Transaction do not, immediately after the Transaction, own more than 50
percent of the combined voting power of the Company or other corporation
resulting from such Transaction.
Any good faith determination by the Committee as to whether a Change of
Control within the meaning of this Section has occurred shall be conclusive and
binding on the Participants.
14. AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by a document (an "Award
Agreement") in writing setting forth the terms, conditions, restrictions and
limitations applicable to the Award, including, but not limited to the
provisions governing vesting, exercisability, payment, amendment, cancellation,
forfeiture, and termination of employment and the Company's authority to amend
or terminate the Plan and to amend, cancel, or rescind an Award, at any time.
The Committee need not require the execution of such document by the
Participant, in which case acceptance of the Award by the Participant shall
constitute agreement by the Participant to the terms, conditions, restrictions
and limitations set forth in the Plan and the Award Agreement as well as the
administrative guidelines and practices of the Company in effect from time to
time.
15. TAX WITHHOLDING
The Company and its Subsidiaries shall have the right to require payment of,
or may deduct from any payment made under the Plan, or may permit shares to be
tendered or sold including shares of Common Stock delivered or vested in
connection with an Award, in an amount sufficient to cover withholding of any
federal, state, local, foreign or other governmental taxes or charges required
by law or such greater amount of withholding as the Committee shall determine
from time to time and to take such other action as may be necessary to satisfy
any such withholding obligations. The value of any shares allowed to be withheld
or tendered for tax withholding may not exceed the amount allowed consistent
with fixed plan accounting in accordance with generally accepted accounting
principles. It shall be a condition to the obligation of the Company to issue
Common Stock upon the exercise of an Option or a SAR that the Participant pay to
the Company, on demand, such amount as may be requested by the Company for the
purpose of satisfying any tax withholding liability. If the amount is not paid,
the Company may refuse to issue shares or settle the SAR.
16. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise determined by the Committee, Awards received by
Participants under the Plan shall not be deemed a part of a Participant's
regular, recurring compensation for purposes of calculating payments or benefits
from any Company benefit plan or severance program. 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. Further, the
Company and its Subsidiaries may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary. The adoption of the Plan
shall not confer upon any Employee any right to continued employment in any
particular position or at any particular rate of compensation, nor shall it
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of its Employees at any time, free from any claim or liability
under the Plan.
A-9
<PAGE>
17. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded and
shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any Participant or other person. To the extent any Participant holds
any rights by virtue of an Award granted under the Plan, such rights shall
constitute general unsecured liabilities of the Company and shall not confer
upon any participant any right, title, or interest in any assets of the Company.
18. EXPENSES OF THE PLAN
The expenses of the administration of the Plan shall be borne by the Company
and its Subsidiaries. The Company may require Subsidiaries to pay for the Common
Stock issued under the Plan.
19. RIGHTS AS A STOCKHOLDER
Unless the Committee determines otherwise, a Participant shall not have any
rights as a stockholder with respect to shares of Common Stock covered by an
Award until the date the Participant becomes the holder of record with respect
to such shares. No adjustment will be made for dividends or other rights for
which the record date is prior to such date, except as provided in Section 9.
20. FUTURE RIGHTS
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company or a Subsidiary or to participate in any
other compensation or benefit plan, program or arrangement of the Company or a
Subsidiary.
21. AMENDMENT AND TERMINATION
The Plan may be amended, suspended or terminated at any time by the
Committee, provided that no amendment shall be made without stockholder
approval, if stockholder approval is required under then applicable law,
including tax and/or accounting rules. No termination, suspension or amendment
of the Plan shall adversely affect the right of any Participant with respect to
any Award theretofore granted, as determined by the Committee, without such
Participant's written consent. Unless terminated earlier by the Board, the Plan
will terminate on April 30, 2009.
22. SUCCESSORS AND ASSIGNS
The Plan and any applicable Award Agreement entered into under the Plan
shall be binding on all successors and assigns of a Participant, including,
without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.
23. GOVERNING LAW
The Plan and all agreements entered into under the Plan shall be construed
in accordance with and governed by the laws of the State of Delaware.
A-10
<PAGE>
ANNEX B
CITIGROUP
1999 EXECUTIVE PERFORMANCE PLAN
(EFFECTIVE JANUARY 1, 1999)
1. PURPOSE
The purpose of the Plan is to permit the Company, through awards of annual
incentive compensation qualifying for federal income tax deductions, to attract
and retain executives and to motivate these executives to promote the
profitability and growth of the Company.
2. DEFINITIONS
"AWARD" shall mean the amount granted to a Participant by the Committee for
a Performance Period under the Plan, whether paid in cash, stock, restricted
stock, options, other stock-based or stock-denominated units or any other form
of consideration.
"AWARD PAYMENT DATE" shall mean, for each Performance Period, the date that
the amount of the Award for that Performance Period shall be paid to the
Participant under Section 5 of the Plan.
"BOARD" shall mean the Board of Directors of the Company.
"CAP PLAN" shall mean the Travelers Group Capital Accumulation Plan or any
successor or future similar plans.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
references to particular provisions of the Code shall include any amendments
thereto or successor provisions and any rules and regulations promulgated
thereunder.
"COMMITTEE" shall mean the Personnel, Compensation and Directors Committee
of the Board of Directors of the Company or any other duly established committee
or subcommittee meeting the requirements of Section 162(m)(4)(C) of the Code.
"COMMON EQUITY" shall mean the Common Stockholders' Equity appearing on the
Consolidated Statements of Changes in Stockholders' Equity in the Company's
Annual Report as of the end of the year immediately preceding the Performance
Period.
"COMPANY" shall mean Citigroup Inc., a Delaware corporation.
"DEFERRED COMPENSATION PLAN" shall mean the Citicorp Deferred Compensation
Plan, or any successor or future similar plans.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXECUTIVE" shall mean any executive officer of the Company as defined in
Section 16 of the Securities Exchange Act of 1934, as amended.
"NET INCOME," for any Performance Period, shall mean the Company's
consolidated net income for the Performance Period, before extraordinary items
and the cumulative effect of tax law changes and/or accounting changes, reduced
by the aggregate amount of dividends on the Company's preferred stock determined
in accordance with generally accepted accounting principles consistently
applied, and as reported by management of the Company to the Board following the
end of the Performance Period as will be reflected in the audited financial
statements for the Performance Period, or other books and records of the Company
if the Performance Period does not correspond to the calendar year.
B-1
<PAGE>
"PARTICIPANT" for a Performance Period shall mean each Executive who is a
"covered employee" (as defined in Section 162(m) of the Code) for that
Performance Period.
"PERFORMANCE PERIOD" shall mean the taxable year of the Company or any other
period designated by the Committee with respect to which an Award may be
granted.
"PERFORMANCE GOALS" shall mean the financial measures of the Company's
performance as defined in Section 4(b) of this Plan that must be met for any
Participant to receive any Award under this Plan.
"PLAN" shall mean this Citigroup 1999 Executive Performance Plan, as it may
be amended from time to time.
"POOL AMOUNT," for any Performance Period, shall mean the total amount
available to all Participants as defined in Section 4(b).
"RETURN ON EQUITY" shall mean the percentage equivalent to the fraction
resulting from dividing Net Income by Common Equity.
"STOCK PLANS" shall mean the Citicorp 1997 Stock Incentive Plan, the
Citigroup 1999 Stock Incentive Plan and/or any prior or successor stock plans
adopted or assumed by the Company.
"SUBSIDIARY" shall mean any entity that is directly or indirectly controlled
by the Company or any entity, including an acquired entity, in which the Company
has a significant equity interest, as determined by the Committee, in its
discretion.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which, subject to Section
9(f) of this Plan, shall have full authority to interpret the Plan, to establish
rules and regulations relating to the operation of the Plan, to select
Participants in the Plan, to determine the amounts of any Awards (subject to the
limitations of Section 4) and to make all determinations and take all other
actions necessary or appropriate for the proper administration of the Plan.
Before any payments are made under the Plan, the Committee shall be responsible
for certifying in writing to the Company that the applicable Performance Goals
have been met. The Committee's interpretation of the Plan, and all actions taken
within the scope of its authority, shall be final and binding on the Company,
its stockholders and Participants, Executives, former Executives and their
respective successors and assigns. No member of the Committee shall be eligible
to participate in the Plan.
4. ELIGIBILITY AND PARTICIPATION--DETERMINATION OF AWARDS
(a) Prior to the beginning of each Performance Period, or at such later time
as may be permitted by applicable provisions of the Code, the Committee
shall establish for each Participant a maximum Award, expressed as a
percentage of the Pool Amount for that Performance Period, provided that
the total of all such maximum percentages shall not exceed 100%, and the
maximum percentage for any single Participant shall not exceed 30%.
B-2
<PAGE>
(b) The Pool Amount for any Performance Period shall be determined as
follows:
<TABLE>
<CAPTION>
IF RETURN ON EQUITY IS: THE MAXIMUM POOL AMOUNT WILL BE:
- ---------------------------------- -----------------------------------------------
<S> <C>
- - Less than 10.0%................. (a) 0.0%
- - Equal to or greater than 10.0%
up to and including 12.0%....... (b) 1.0% of Net Income
- - Greater than 12.0% up to and
including 15.0%................. (c) 1.5% of Net Income
- - Greater than 15.0% up to and
including 18.0%................. (d) the amount determined under (c) + 2.0% of
the amount by which additional Net Income
exceeds 15% of Common Equity, up to and
including 18%
- - Greater than 18.0%.............. (e) the amount determined under (d) + 2.5%
of the amount by which additional Net Income
exceeds 18% of Common Equity
</TABLE>
(c) Following the end of each Performance Period, the Committee may
determine to grant to any Participant an Award, which may not exceed the
maximum amount specified in Section 4(a) of this Plan for such
Participant. The aggregate amount of all Awards under the Plan for any
Performance Period shall not exceed the applicable Pool Amount.
5. PAYMENT OF AWARDS
Each Participant shall be eligible to receive, as soon as practicable after
the amount of such Participant's Award for a Performance Period has been
determined, all or a portion of that Award. Awards may be paid in cash, stock,
restricted stock, options, other stock-based or stock-denominated units or any
other form of consideration or any combination thereof determined by the
Committee. Equity or equity-based awards may be granted under the terms and
conditions of the applicable Stock Plans, the CAP Plan or the Deferred
Compensation Plan, or any successor or future similar plans of the Company.
Payment of the award may be deferred at the discretion of the Committee.
6. LIMITATION ON RIGHT TO PAYMENT OF AWARD
No Participant shall have any right to receive payment of an Award under the
Plan if, subsequent to the commencement of the Performance Period and prior to
the Award Payment Date, if, in the determination of the Committee, the
Participant engages--directly or indirectly, either personally or as an
employee, agent, partner, stockholder, officer or director of, or consultant to,
any entity or person engaged in any business in which the Company or its
affiliates is engaged--in conduct that breaches his or her duty of loyalty to
the Company or a Subsidiary or that is in material competition with the Company
or a Subsidiary or 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 falls within the scope of activities contemplated by this Section
6 shall be made by the Committee, in its discretion. For the purpose of this
paragraph, a Participant shall not be deemed a stockholder of a competing entity
if the Participant's record and beneficial ownership amount to not more than one
percent of the outstanding capital stock of any
B-3
<PAGE>
company subject to the periodic and other reporting requirements of the
Securities Exchange Act of 1934, as amended.
7. AMENDMENTS
Subject to any restrictions imposed under Section 162(m) of the Code, the
Committee may at any time amend any provision of the Plan, provided that no such
amendment that would require the consent of the stockholders of the Company
pursuant to the Code or the Exchange Act, or any other applicable law, rule or
regulation, shall be effective without such consent. No such amendment which
adversely affects a Participant's rights to, or interest in, an Award granted
prior to the date of the amendment shall be effective unless the Participant
shall have agreed thereto in writing.
8. TERMINATION
(a) The Committee may terminate this Plan at any time, and in the case of
such termination, the following provisions of this Section 8 shall apply
notwithstanding any other provisions of the Plan to the contrary.
(b) Subject to requirements of Section 162(m) of the Code, payment of
deferred amounts plus any earnings may be accelerated with respect to
any affected Participant in the discretion of the Committee and paid as
soon as practicable, but in no event shall the termination of the Plan
adversely affect the rights of any Participant to deferred amounts plus
any earnings thereon previously awarded such Participant.
9. OTHER PROVISIONS
(a) This Plan is not a contract between the Company and its Executives. No
Executive or other person shall have any claim or right to be granted an
Award under this Plan until such Award is actually granted. Neither the
establishment of this Plan, nor any action taken hereunder, shall be
construed as giving any Executive any right to be retained in the employ
of the Company. Nothing contained in this Plan shall limit the ability
of the Company to make payments or awards to Executives under any other
plan, agreement or arrangement.
(b) A Participant's right and interest under the Plan may not be assigned or
transferred and any attempted assignment or transfer shall be null and
void and shall extinguish, in the Company's sole discretion, the
Company's obligation under the Plan to pay Awards with respect to the
Participant.
(c) The Plan shall be unfunded. The Company shall not be required to
establish any special segregation of assets to assure payment of Awards.
(d) The Company shall have the right to deduct from Awards paid any taxes or
other amounts required by law to be withheld.
(e) All questions pertaining to the construction, regulation, validity and
effect of the provisions of the Plan shall be determined in accordance
with the laws of the State of Delaware.
(f) If any provision of this Plan would cause Awards not to constitute
"qualified performance-based compensation" under Section 162(m) of the
Code, that provision shall be severed from, and shall be deemed not to
be a part of, the Plan, but the other provisions hereof shall remain in
full force and effect. Any specific action by the Committee that would
be violative of Section 162(m) of the Code and the regulations
thereunder shall be void.
(g) No member of the Board of the Company or the Board of Directors of any
affiliate of the Company, and no officer, employee or agent of the
Company or an affiliate of the Company shall be liable for any act or
action hereunder, whether of commission or omission, taken by any other
B-4
<PAGE>
member, or by any officer, agent, or employee, or, except in
circumstances involving bad faith, for anything done or omitted to be
done in the administration of the Plan.
10. EFFECTIVE DATE
The Plan shall be effective for the Performance Period beginning on January
1, 1999, subject to approval by the stockholders of the Company in accordance
with Section 162(m) of the Code.
11. REPLACEMENT
The Plan shall supersede and replace The Travelers Group Amended and
Restated Executive Performance Compensation Plan and the 1994 Citicorp Annual
Incentive Plan for Selected Executive Officers.
B-5
<PAGE>
[LOGO]
<PAGE>
CITIGROUP INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CITIGROUP INC. FOR THE ANNUAL MEETING
APRIL 20, 1999
The undersigned hereby constitutes and appoints John S. Reed, Sanford I.
P Weill and Charles O. Prince, III, and each of them his or her true and lawful
R agents and proxies with full power of substitution in each, to represent the
O undersigned at the Annual Meeting of Stockholders of Citigroup Inc. (the
X "Company") to be held at Carnegie Hall, 881 Seventh Avenue, New York, New
Y York on Tuesday, April 20, 1999 at 9:00 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 Citigroup 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 Citigroup 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 or follow the
instructions for telephone or internet voting set forth on the reverse side.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR Proposals 1-4
and AGAINST Proposals 5 and 6 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
CITIGROUP INC.
----------------------
----------------------
<PAGE>
THREE WAYS TO VOTE
VOTE BY PHONE: 1-800-690-6903
1. Call toll free 1-800-690-6903.
2. Enter your 12 digit Control Number, shown below.
3. Follow the simple recorded instructions.
VOTE BY INTERNET: WWW.PROXYVOTE.COM
1. Go to website WWW.PROXYVOTE.COM
2. Enter your 12 digit Control Number, shown below.
3. Follow the simple recorded instructions.
VOTE BY MAIL
1. Mark, sign and date your proxy card.
2. Return it in the enclosed postage paid envelope.
YOUR VOTE IS IMPORTANT
Do not return this proxy card if you vote by telephone or Internet.
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF PROPOSALS 1-4.
Vote on Directors
1. Proposal to elect seventeen directors to a
one-year term.
Nominees: 01 C. Michael Armstrong FOR | | WITHHOLD | | FOR ALL | | To withhold authority to vote, mark
02 Alain J.P. Belda ALL | | ALL | | EXCEPT | | "For All Except" and write the
03 Kenneth J. Bialkin | | | | | | nominee's number on the line below.
04 Kenneth T. Derr ----- ----- -----
05 John M. Deutch ----------------------------------
06 Ann Dibble Jordan
07 Reuben Mark
08 Michael T. Masin
09 Dudley C. Mecum
10 Richard D. Parsons
11 Andrall E. Pearson
12 John S. Reed
13 Robert B. Shapiro
14 Franklin A. Thomas
15 Sanford I. Weill
16 Edgar S. Woolard, Jr.
17 Arthur Zankel
Vote on Proposals
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection | | | | | |
of KPMG LLP as the Company's | | | | | |
independent auditors for 1999. | | | | | |
---- ---- ----
FOR AGAINST ABSTAIN
3. Proposal to approve and adopt | | | | | |
the Citgroup 1999 Stock | | | | | |
Incentive Plan. | | | | | |
---- ---- ----
FOR AGAINST ABSTAIN
4. Proposal to approve and adopt | | | | | |
the Citigroup 1999 Executive | | | | | |
Performance Plan. | | | | | |
---- ---- ----
<PAGE>
THE BOARD OF DIRECTORS RECEOMMENDS A VOTE AGAINST EACH OF PROPOSALS 5 AND 6.
FOR AGAINST ABSTAIN
5. Stockholder proposal regarding | | | | | |
less developed countries. | | | | | |
---- ---- ----
FOR AGAINST ABSTAIN
6. Stockholder proposal regarding | | | | | |
executive compensation. | | | | | |
---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
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 (Please sign within box) Date Signature (Joint Owners) Date
</TABLE>
