SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE TRAVELERS INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of filing fee (Check the appropriate box):
[ ] $125 Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_____________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
(5) Total Fee Paid:
_____________________________________________________________________________
[X] Fee paid previously with preliminary materials.
_____________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
_____________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_____________________________________________________________________________
(3) Filing Party:
_____________________________________________________________________________
(4) Date Filed:
_____________________________________________________________________________
[TRAVELERS LOGO]
THE TRAVELERS INC.
65 East 55th Street
New York, New York 10022
March 31, 1995
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
The Travelers Inc. on Wednesday, April 26, 1995. The meeting will be held at
Carnegie Hall, 881 Seventh Avenue, New York, New York, at 10:00 a.m. local time.
The entrance to Carnegie Hall is on 57th Street just east of Seventh Avenue.
At this meeting of stockholders, we will be voting on a number of matters.
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,
/s/ Sanford I. Weill
Chairman of the Board
and Chief Executive Officer
THE TRAVELERS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of The Travelers Inc. (the "Company")
will be held at Carnegie Hall, 881 Seventh Avenue, New York, New York, on
Wednesday, April 26, 1995 at 10:00 a.m. local time, for the following purposes:
ITEM 1. To elect to the Board for a three-year term one class of
directors, consisting of five directors;
ITEM 2. To consider and vote upon the proposal to amend the Certificate
of Incorporation of The Travelers Inc. to change the corporate
name to Travelers Group Inc.;
ITEM 3. To ratify the selection of the Company's independent auditors for
1995;
ITEM 4. To vote on a proposal submitted by a stockholder which proposal
is opposed by the Board of Directors;
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 10, 1995 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 is maintained at the Company's headquarters, 65 East 55th Street, New
York, New York.
All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ Charles O. Prince, III
Secretary
March 31, 1995
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE, SO THAT YOUR SHARES WILL BE REPRESENTED
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
THE TRAVELERS INC.
65 EAST 55TH STREET
NEW YORK, NEW YORK 10022
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to stockholders of The Travelers
Inc. (the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at Carnegie Hall,
881 Seventh Avenue, New York, New York, on Wednesday, April 26, 1995, at 10:00
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 31, 1995, to stockholders of the Company on March 10, 1995, 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, 1994, will be
delivered prior to or concurrently with the mailing of the proxy material.
Stockholders of the Company are cordially invited to attend the Annual
Meeting. Whether or not you expect to attend, it is important that you complete
the enclosed proxy card, and sign, date and return it as promptly as possible in
the envelope enclosed for that purpose. You have the right to revoke your proxy
at any time prior to its use by filing a written notice of revocation with the
Secretary of the Company prior to the convening of the Annual Meeting, or by
presenting another proxy card with a later date. If you attend the Annual
Meeting and desire to vote in person, you may request that your previously
submitted proxy card not be used.
As a result of prior transactions including the payment of stock dividends
in 1993 and the merger with The Travelers Corporation ("old Travelers"), certain
of the Company's records, including but not limited to those relating to stock
option grants and deferred directors' shares, include fractional share amounts.
The Company cannot issue fractional share interests, however, and accordingly
fractional share amounts have been deleted from the numbers reported in this
proxy statement.
VOTING RIGHTS
As of the Record Date, the outstanding stock of the Company entitled to
receive notice of and to vote at the Annual Meeting consisted of 320,960,465
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock"), and 4,406,431 shares of $4.53 ESOP Convertible Preferred Stock, Series
C, par value $1.00 per share (the "Series C Preferred Stock"). The Series C
Preferred Stock was issued in exchange for the Series A Preference Stock of old
Travelers following the merger of old Travelers with and into the Company (the
"Travelers Merger") effective December 31, 1993. Each share of Common Stock is
entitled to one vote on each matter that is voted on at the Annual Meeting, and
each share of Series C Preferred Stock is entitled to 1.3 votes on each matter
that is voted on at the Annual Meeting. The Common Stock and the Series C
Preferred Stock will vote together as a single class on all matters scheduled to
be voted on at the Annual Meeting. Neither such class is entitled to cumulative
voting.
The Company's other series of preferred stock, $1.00 par value, including
the 8.125% Cumulative Preferred Stock, Series A, the 5.50% Convertible Preferred
Stock, Series B, and the 9.25% Preferred Stock, Series D, have no right to vote
on any of the matters that are scheduled to be voted on at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best knowledge of the Company, as of the Record Date no person
"beneficially owned" (as that term is defined by the Securities and Exchange
Commission (the "SEC")) more than 5% of the Common Stock outstanding and
entitled to vote at the Annual Meeting except:
SHARES OF
COMMON STOCK PERCENTAGE
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(1) CLASS(2)
-------------------------------------------------------------------- ------------ ----------
AXA Assurances I.A.R.D. Mutuelle
AXA Assurances Vie Mutuelle
Alpha Assurances I.A.R.D. Mutuelle
Alpha Assurances Vie Mutuelle
Uni Europe Assurance Vie Mutuelle
AXA
The Equitable Companies Incorporated................................ 18,684,143 5.8%
The Equitable Companies Incorporated
787 Seventh Avenue
New York, New York 10019
FMR Corp............................................................ 22,952,069 7.2%
82 Devonshire Street
Boston, Massachusetts 02109
------------
(1) Based on Schedules 13G filed with the Securities and Exchange Commission by
such beneficial owners in February 1995.
(2) Calculated on the basis of the number of shares of Common Stock outstanding
and entitled to vote at the Annual Meeting as of the Record Date.
All of the Series C Preferred Stock is held of record by Dory & Co., the
nominee of Shawmut Bank Connecticut, National Association, 777 Main Street,
Hartford, Connecticut 06115, as trustee (the "ESOP Trustee") acting on behalf of
the employee stock ownership feature of The Travelers Savings, Investment and
Stock Ownership Plan (the "TESIP Plan"), which was assumed by the Company in
connection with the Travelers Merger and is currently continuing in place. As of
the Record Date, the shares of Series C Preferred Stock were beneficially held
by approximately 19,000 holders through their participation in the TESIP Plan.
QUORUM; VOTING PROCEDURES
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock and Series C Preferred Stock
outstanding and entitled to vote shall constitute a quorum. Pursuant to
applicable Delaware law, and subject to the voting of Series C Preferred Stock
by the ESOP Trustee, described below, only votes cast "for" a matter constitute
affirmative votes. Votes "withheld" or abstaining from voting are counted for
quorum purposes, but since they are not cast "for" a particular matter, they
will have the same effect as negative votes or votes "against" a particular
matter. The votes required with respect to the items set forth in the Notice of
Annual Meeting of Stockholders are set forth in the discussion of each item
herein.
Unless contrary instructions are indicated on the proxy card, all shares of
Common Stock represented by valid proxies will be voted FOR items one, two and
three and AGAINST item four listed on the proxy card and described below, and
will be voted in the discretion of the 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
2
checking the boxes on the proxy card, your shares of Common Stock will be voted
in accordance with such instructions.
The ESOP Trustee, as the record holder of the Series C Preferred Stock, will
vote shares of Series C Preferred Stock that have been allocated to TESIP Plan
participants' accounts in accordance with instructions received from such
participants. Shares of Series C Preferred Stock as to which no instructions are
received and shares that have not been allocated to the accounts of participants
in the TESIP Plan will be voted by the ESOP Trustee in the same proportion as
votes in respect of allocated shares as to which participants in the TESIP Plan
have given instructions.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, the Common Stock and
Series C Preferred Stock ownership of each director and certain executive
officers of the Company. As of the Record Date, the directors and the executive
officers of the Company as a group (25 persons) beneficially owned 9,902,164
shares of Common Stock and 1,163 shares of Series C Preferred Stock (or
approximately 3.1% of the total voting power of the Common Stock and Series C
Preferred Stock outstanding and entitled to vote at the Annual Meeting),
including an aggregate of 2,533,447 shares of Common Stock that such persons may
acquire pursuant to options exercisable within 60 days of the Record Date. As of
the Record Date, all current and former employees as a group, including the
executive officers of the Company, beneficially owned or had acquired through
employee stock incentive or purchase plans an aggregate of approximately 49
million shares of Common Stock and beneficially owned all of the 4,406,431
shares of Series C Preferred Stock, which amount of Common Stock includes an
aggregate of approximately 10.8 million shares of Common Stock that such persons
may acquire pursuant to options exercisable within 60 days of the Record Date.
Had such 49 million shares of Common Stock been held of record on the Record
Date, such shares of Common Stock and Series C Preferred Stock would have
represented approximately 16.7% of the total voting power of the shares of
Common Stock and Series C Preferred Stock then outstanding and eligible to vote.
These amounts are based upon the Company's records of beneficial ownership by
its current officers and ownership by all employees under The Travelers Inc.
Stock Option Plan (the "Option Plan"), The Travelers Inc. 401(k) Savings Plan
(the "Savings Plan"), The Travelers Inc. Capital Accumulation Plan (the "CAP
Plan"), The Travelers Inc. Employee Incentive Plan, The Travelers Inc. Employee
Discount Stock Purchase Plan and The Travelers Inc. Stock Purchase Plan. These
amounts also include beneficial ownership by employees and executive officers
under The Travelers Corporation 1988 Stock Incentive Plan, The Travelers
Corporation 1982 Stock Option Plan and the TESIP Plan, which plans were assumed
by the Company in connection with the Travelers Merger, and the Primerica
Corporation Long-Term Incentive Plan, which was assumed by the Company in
connection with the merger with Primerica Corporation in 1988. The actual
ownership by employees is not determinable by the Company since employees may
own shares of Common Stock in street name.
As of the Record Date, no individual director or executive officer
beneficially owned one percent or more of the Common Stock outstanding and
entitled to vote at the Annual Meeting, except Mr. Weill who beneficially owned
5,357,848 shares (1.7%) of Common Stock, including the 1,546,150 shares that he
had the right to acquire pursuant to options exercisable within 60 days of the
Record Date. As of the Record Date, no individual director or executive officer
beneficially owned one percent or more of the Series C Preferred Stock, and no
director or executive officer beneficially owned any shares of any other series
of the Company's preferred stock. Except as otherwise expressly stated in the
footnotes to the following table, beneficial ownership of shares means that the
beneficial owner thereof has sole voting and investment power over such shares.
3
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------
STOCK OPTIONS
COMMON STOCK EXERCISABLE TOTAL
BENEFICIALLY OWNED WITHIN 60 COMMON STOCK
EXCLUDING DAYS OF BENEFICIALLY
NAME/TITLE OPTIONS RECORD DATE OWNED(1)
------------------------------------------------- ------------------ ------------- ------------
C. Michael Armstrong............................. 6,875 (2) 6,875
Director
Kenneth J. Bialkin............................... 148,919 (2) 148,919
Director
Edward H. Budd(3)................................ 153,232 207,851 361,083
Director
Joseph A. Califano, Jr.(4)....................... 29,265 (2) 29,265
Director
Douglas D. Danforth.............................. 36,005 (2) 36,005
Director
Robert F. Daniell................................ 6,246 (2) 6,246
Director
James Dimon...................................... 471,015 227,076 698,091
Director and Executive Officer
Leslie B. Disharoon.............................. 76,319 (2) 76,319
Director
Gerald R. Ford................................... 21,617 (2) 21,617
Director
Robert F. Greenhill.............................. 1,615,995 266,666 1,882,661
Director and Executive Officer
Ann Dibble Jordan................................ 2,948 (2) 2,948
Director
Robert I. Lipp(5)................................ 422,221 124,601 546,822
Director and Executive Officer
Dudley C. Mecum(6)............................... 39,230 (2) 39,230
Director
Andrall E. Pearson............................... 29,479 (2) 29,479
Director
Frank J. Tasco................................... 8,795 (2) 8,795
Director
Linda J. Wachner................................. 7,295 (2) 7,295
Director
Sanford I. Weill(7).............................. 3,811,698 1,546,150 5,357,848
Director and Chief Executive Officer
Joseph R. Wright, Jr............................. 22,267 (2) 22,267
Director
Arthur Zankel(8)................................. 90,991 (2) 90,991
Director
All Directors and Executive Officers as a group
(25 persons)(9).................................. 7,368,717 2,533,447 9,902,164
------------
(1) This information includes, as of the Record Date, the following shares which
are also deemed "beneficially owned": (i) the following number of shares of
Common Stock granted in payment of directors' fees to nonemployee directors
under the Company's plan, but receipt of which is deferred: Mr. Armstrong,
2,227; Mr. Bialkin, 28,919; Mr. Budd, 3,268; Mr. Califano, 19,829; Mr.
Danforth, 24,983; Mr. Disharoon, 28,919; Mr. Mecum, 28,919; Mr. Pearson,
28,919; Mr. Tasco, 6,795; and Mr. Wright, 14,867; (ii) the following number
of shares of Common Stock issued in exchange for shares of old Travelers
common stock held under the old Travelers Deferred Compensation Plan for
Non-employee Directors, receipt of which is deferred: Mr. Armstrong, 3,787;
Mr. Lipp, 674; and Mr. Weill, 907; (iii) the following number of shares of
Common Stock held (as of February 28,
(Footnotes continued on following page)
4
(Footnotes continued from preceding page)
1995) under the Savings Plan of the Company or its subsidiaries, as to which
the holder has voting power but not dispositive power: Mr. Dimon, 2,716; Mr.
Lipp, 4,499; and Mr. Weill, 4,892; (iv) the following number of shares of
Common Stock under the savings and investment feature of the TESIP Plan: Mr.
Budd, 3,084; and (v) the following number of shares of Common Stock awarded
pursuant to the CAP Plan, and in the case of Mr. Greenhill under his
employment contract, as to which the holder may direct the vote but which
remain subject to forfeiture and restrictions on disposition: Mr. Dimon,
39,945; Mr. Lipp, 41,747; Mr. Weill, 84,863; and Mr. Greenhill, 527,841.
(2) Nonemployee directors are not eligible to receive stock option grants under
the Company's plans.
(3) Includes 703 shares of Common Stock held by Mr. Budd's wife, as to which Mr.
Budd disclaims beneficial ownership. Mr. Budd also owns 1,163 shares of
Series C Preferred Stock awarded under the TESIP Plan. The TESIP Plan was
assumed by the Company in connection with the Travelers Merger. The TESIP
Plan includes a tax-deferred savings and investment feature (similar to the
Savings Plan) that permits investment in the Company's Common Stock. In
addition, the employer match feature of the TESIP Plan is currently made in
the form of Series C Preferred Stock, held of record by the ESOP Trustee,
and convertible into one share of the Company's Common Stock for each $66.21
of stated value of the Series C Preferred Stock. Accordingly, the number of
shares of Series C Preferred Stock set forth in this table (as of February
28, 1995) may (by virtue of such currently exercisable conversion right) be
deemed to represent beneficial ownership of an aggregate of approximately
936 shares of Common Stock. Mr. Budd is the only director or Executive
Officer who owns shares of Series C Preferred Stock.
(4) Includes 800 shares of Common Stock owned by Mr. Califano's wife and 120
shares held by Mr. Califano as custodian, as to which Mr. Califano disclaims
beneficial ownership.
(5) Includes 10,000 shares of Common Stock held by Mr. Lipp's children, as to
which Mr. Lipp disclaims beneficial ownership.
(6) Includes 711 shares of Common Stock owned by Mr. Mecum's wife, as to which
Mr. Mecum disclaims beneficial ownership.
(7) Includes 100 shares of Common Stock owned by Mr. Weill's wife, as to which
Mr. Weill disclaims beneficial ownership.
(8) Includes 3,000 shares of Common Stock owned by Mr. Zankel's wife and 1,200
shares held by a trust of which Mr. Zankel is a trustee, as to which Mr.
Zankel disclaims beneficial ownership.
(9) This information also includes as "beneficially owned" (i) an aggregate of
3,084 shares of Common Stock and 1,163 shares of Series C Preferred Stock
held under the Savings Plan of the Company or under the TESIP Plan, as to
which the holder has voting power but not dispositive power, and (ii) an
aggregate of 828,422 shares of Common Stock awarded under the CAP Plan, as
to which the holder may direct the vote but which shares remain subject to
forfeiture and restrictions on disposition.
-------------------
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, to file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange (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, 1994,
each of its officers, directors and greater than ten percent stockholders
complied with all such applicable filing requirements.
5
ITEM 1:
ELECTION OF DIRECTORS
The Board of Directors of the Company is classified into three classes. The
five directors serving in Class I have terms expiring at the Annual Meeting. The
Class I directors currently serving on the Board, Messrs. Budd, Califano, Dimon
and Tasco and Ms. Jordan, have been nominated by the Board of Directors for
re-election to three-year terms at the Annual Meeting.
Each Class I nominee elected will hold office until the Annual Meeting of
Stockholders to be held in 1998 and until his or her 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. Directors' terms as stated below include periods of Board
membership with Commercial Credit Company ("CCC"), a predecessor corporation of
the Company.
CLASS I: NOMINATED FOR ELECTION AT THE ANNUAL MEETING FOR A TERM ENDING 1998
Edward H. Budd
Mr. Budd, 61, has been a director of the Company since 1992. Mr. Budd joined
The Travelers Corporation in 1955, and was elected President and a director in
1976. He became Chief Executive Officer in 1981 and Chairman of the Board in
1982. Following the completion of the Travelers Merger in 1993, Mr. Budd served
as Chairman of the Travelers insurance operations and as Chairman of the
Executive Committee of the Board of Directors of the Company. In September 1994,
Mr. Budd retired as an officer of the Company and its subsidiaries. He is also a
director of Delta Air Lines, Inc. and GTE Corporation and a member of The
Business Council.
Joseph A. Califano, Jr.
Mr. Califano, 63, has been a director of the Company since 1988. He is
Chairman and President of the Center on Addiction and Substance Abuse at
Columbia University, an independent not-for-profit organization established to
combat all forms of substance abuse. From 1983 to 1992, he was a Senior Partner
at the law firm of Dewey Ballantine, which performs legal services for the
Company from time to time. He is a director of Authentic Fitness Corporation,
Automatic Data Processing, Inc., Chrysler Corporation, Kmart Corporation, New
York and New England Telephone Companies and Warnaco Inc., and a trustee of the
American Ditchley Foundation, New York University and The Twentieth Century
Fund. He serves as Chairman of the Institute for Social and Economic Policy in
the Middle East at the Kennedy School of Government at Harvard University, and
as a Governor of New York Hospital, as a Director of Georgetown University and a
member of the governing council of the Institute of Medicine of the National
Academy of Sciences. Mr. Califano served as Secretary of the United States
Department of Health, Education and Welfare from 1977 to 1979. He was Special
Assistant for Domestic Affairs to the President of the United States for the
period from 1965 to 1969, and held various positions in the United States
Department of Defense from 1961 to 1965. He is the author of nine books.
James Dimon
Mr. Dimon, 38, has been a director of the Company since September 1991. He
is President, Chief Operating Officer and Chief Financial Officer of the
Company. In November 1993, he was named a
6
CLASS I (CONTINUED)
member of the newly-created Office of the Chairman of the Company. He was, from
May 1988 to September 1991, Executive Vice President and Chief Financial Officer
of the Company, and was Senior Executive Vice President and Chief Administrative
Officer of Smith Barney Inc., the Company's investment banking and securities
brokerage subsidiary ("Smith Barney"), from 1990 to 1991. He is also a director,
Chief Operating Officer and a member of the Executive Committee of each of Smith
Barney and of Smith Barney Holdings Inc. ("SB Holdings"), the immediate parent
company of Smith Barney. From 1986 to 1988, Mr. Dimon was Senior Vice President
and Chief Financial Officer of CCC, the Company's predecessor. From 1982 to
1985, he was a Vice President of American Express Company and Assistant to the
President, Sanford I. Weill. Mr. Dimon is a trustee of New York University
Medical Center and Chairman of the Board of the New York Academy of Finance.
Ann Dibble Jordan
Ms. Jordan, 60, has been a director of the Company since 1989. She is a
consultant and serves on the Board of Directors of Johnson & Johnson
Corporation, Capital Cities/ABC, Inc., Hechinger Company, the National Symphony
Orchestra, The Phillips Gallery, Child Welfare League, National Health
Laboratories, Automatic Data Processing, Inc. and the Salant Corp. She was
formerly the Director of the Department of Social Services for the University of
Chicago Medical Center from 1986 to 1987, and was also Field Work Associate
Professor at the School of Social Service Administration of the University of
Chicago from 1970 to 1987. She served as the Director of Social Services of
Chicago Lying-in Hospital from 1970 to 1985.
Frank J. Tasco
Mr. Tasco, 67, has been a director of the Company since 1992. Mr. Tasco is
the retired Chairman of the Board and Chief Executive Officer of Marsh &
McLennan Companies, Inc. and is currently a director. He is also a director of
New York Telephone Company and New England Telephone Company. He was a member of
President Bush's Drug Advisory Council and is at present Chairman of New York
Drugs Don't Work. Mr. Tasco is Chairman of the Board of Directors of Phoenix
House Foundation and a member of the Board of Directors of St. Francis Hospital,
Roslyn, New York. He is a member of the Council on Foreign Relations, the
Lincoln Center Consolidated Corporate Fund Leadership, the Foreign Policy
Association and a trustee of New York University.
CLASS II: TERM ENDING 1996
C. Michael Armstrong
Mr. Armstrong, 56, became a director of the Company in December 1993. He is
Chairman and Chief Executive Officer of Hughes Electronic Corporation, a
designer and manufacturer of advanced electronic systems for automotive,
defense, space communications and industrial applications, located in Los
Angeles, California. Mr. Armstrong was previously an officer of International
Business Machines Corporation ("IBM") where he was a member of IBM's Management
Committee and Chairman of IBM World Trade Corporation. He is a member of the
Board of Trustees of Johns Hopkins University, is chairman of the advisory board
of Johns Hopkins Medical School, and is a member of the CEO Board of Advisors of
the Business School of the University of Southern California. Mr. Armstrong is
Chairman of the President's Export Council, a member of the National Security
Telecommunications Advisory Committee and a member of the Defense Policy
Advisory Committee on Trade. Mr. Armstrong serves on the Board of Directors of
The Times Mirror Company and The Los Angeles World Affairs Council, is Chairman
of Sabriya's Castle of Fun Foundation, and is a member of the Supervisory Board
of the Thyssen-Bornemisza Group. He is also a director of The Conference Board
and the California Business Roundtable.
7
CLASS II (CONTINUED)
Kenneth J. Bialkin
Mr. Bialkin, 65, has been a director of the Company since 1986. He has been
for more than five years a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom, which performs legal services for the Company from time to time.
Mr. Bialkin is also a director of The Municipal Assistance Corporation for the
City of New York, Oshap Technologies, Ltd., Tecnomatix Technologies Ltd. and
Sapiens International Corporation N.V.
Robert F. Greenhill
Mr. Greenhill, 58, became a director of the Company in August 1993. In
November 1993, he was named a member of the newly-created Office of the Chairman
of the Company. He became Chairman and Chief Executive Officer of Smith Barney,
the Company's investment banking and securities brokerage subsidiary, in June
1993. He also serves as Chairman and Chief Executive Officer of SB Holdings. Mr.
Greenhill was President of Morgan Stanley Group, Inc. from January 1991 to June
1993. Morgan Stanley has provided investment banking services to the Company or
its subsidiaries in the ordinary course from time to time. Mr. Greenhill joined
Morgan Stanley in 1962 and became a Partner in 1970. In 1972, he directed Morgan
Stanley's newly-formed Mergers and Acquisitions Department. In 1980, Mr.
Greenhill was named director of Morgan Stanley's Investment Banking Division
with responsibility for domestic and international corporate finance, mergers
and acquisitions, merchant banking, capital market services and real estate. In
1980, he also became a member of Morgan Stanley's Management Committee which was
the firm's policy-making group. He became a Vice Chairman of Morgan Stanley
Group, Inc. in January 1989. Mr. Greenhill is a trustee of the Whitney Museum of
American Art, a trustee of the American Enterprise Institute for Public Policy
Research, and a member of the International Advisory Board of the
British-American Chamber of Commerce.
Dudley C. Mecum
Mr. Mecum, 60, has been a director of the Company since 1986. Since August
1989, Mr. Mecum has been a Partner in the firm of G.L. Ohrstrom & Co. (a
merchant banking firm). Formerly, he was Chairman of Mecum Associates, Inc. (a
management consulting firm) from 1987 to 1989. He was President of Environmental
and Engineering Services and was a senior executive and director of Combustion
Engineering, Inc. from 1985 to December 1987. Mr. Mecum was Managing Partner of
the New York office of Peat Marwick Mitchell & Co. (now KPMG Peat Marwick LLP)
from 1979 to 1985. He served in the United States Government as Assistant
Director of the United States Office of Management and Budget in 1973 and as
United States Assistant Secretary of the Army (Installations and Logistics) from
1971 to 1973. Mr. Mecum is a director of Fingerhut Companies, Inc., Dyncorp,
Vicorp Restaurants, Inc., Lyondell Petrochemical Corp. and Roper Industries,
Inc. Mr. Mecum is also a director and Chairman of Alden Industries, Inc., a
privately held company manufacturing commercial water heaters and boilers.
Sanford I. Weill
Mr. Weill, 61, has been a director of the Company since 1986. He has been
Chairman of the Board and Chief Executive Officer of the Company and its
predecessor, CCC, since 1986; he was also its President from 1986 until 1991. He
was President of American Express Company from 1983 to 1985; Chairman of the
Board and Chief Executive Officer of American Express Insurance Services, Inc.
from 1984 to 1985; Chairman of the Board and Chief Executive Officer, or a
principal executive officer, of Shearson Lehman Brothers Inc. from 1965 to 1984;
Chairman of the Board of Shearson Lehman Brothers Holdings Inc. from 1984 to
1985; and a founding partner of Shearson's predecessor partnership from 1960 to
1965. He is Chairman of the Board of Trustees of Carnegie Hall, and a director
of the Baltimore Symphony Orchestra. Mr. Weill is a member of the Board of
Governors of New York
8
CLASS II (CONTINUED)
Hospital and is Vice Chairman of the Board of Overseers of Cornell University
Medical Center and a member of the Joint Board of New York Hospital--Cornell
University Medical College. He is a member of Cornell University's Johnson
Graduate School of Management Advisory Board and a Board of Trustees Fellow. He
served as Chairman of the Joint Mayoral/City Council Commission on Early Child
and Child Care Programs during the Dinkins Administration.
Joseph R. Wright, Jr.
Mr. Wright, 56, has been a director of the Company since 1990. From 1989 to
1993, he was Executive Vice President and Vice Chairman of W.R. Grace & Co. (an
international specialty chemicals and healthcare company) and President of Grace
Energy Company (an international energy services company). Mr. Wright is
currently Co-chairman and a member of the Board of Directors of Baker & Taylor
Holdings, Inc. (an international book and video distribution company), a member
of the Board of Directors of GRC International, a member of the Board of
Trustees of Hampton University and the Freedom Foundation, and a member of the
President's Export Council, Chief Executives Organization, World Business
Council, National Academy for Public Administration, and the Citizens for a
Sound Economy. He was Director and Deputy Director of the United States Office
of Management and Budget from 1982 to 1989, a member of President Reagan's
Cabinet from 1988 to 1989, and Deputy Secretary of Commerce from 1981 to 1982.
Prior to that, he was president of two Citicorp retail credit card subsidiaries
and a partner of Booz, Allen & Hamilton. He received the President's
"Citizenship Award" in 1989.
Arthur Zankel
Mr. Zankel, 63, has been a director of the Company since 1986. He has been
Co-Managing Partner of First Manhattan Co. (a research and investment management
company) since 1980. He is also a director of Vicorp Restaurants, Inc. and Fund
American Enterprises Holdings, Inc. and a trustee of Skidmore College, Carnegie
Hall and New York Foundation.
CLASS III: TERM ENDING 1997
Douglas D. Danforth
Mr. Danforth, 72, has been a director of the Company since 1987. He has been
the Managing Partner of the Pittsburgh Pirates Baseball Club since 1988. He was
Chairman of the Board and Chief Executive Officer of Westinghouse Electric
Corporation from December 1983 to December 1987, and was Vice Chairman and Chief
Operating Officer of Westinghouse from 1978 to 1983. Mr. Danforth is a director
of The Rubatex Corp., The Sola Corporation and The American European
Association. Mr. Danforth is also a Trustee of Carnegie-Mellon University,
Syracuse University, Allegheny Health Education and Research Foundation, Inc.
and the Pittsburgh Trust for Cultural Resources. He is also a member of the
Executive Committee of the Allegheny Conference on Community Development, and a
director of the Pittsburgh Foundation.
Robert F. Daniell
Mr. Daniell, 61, became a director of the Company in December 1993. He is
Chairman of United Technologies Corporation, a broad based designer and
manufacturer of high technology products, located in Hartford, Connecticut. He
joined the Sikorsky Aircraft Division of United Technologies Corporation in 1956
and served as President of Sikorsky Aircraft from 1981 to 1983. He was a Senior
Vice President of United Technologies from 1983 to 1984 and served as its
President and Chief Operating Officer from 1984 to February 1992. He was elected
a director of United Technologies in 1984 and Chairman in 1987. He served as
Chief Executive Officer of United Technologies from 1986 to
9
CLASS III (CONTINUED)
April 1994. Mr. Daniell is a director of Shell Oil Company. He is also a member
of the Conference Board and The Business Council.
Leslie B. Disharoon
Mr. Disharoon, 62, has been a director of the Company since 1986. He was
Chairman of the Board, President and Chief Executive Officer of Monumental
Corporation (an insurance holding company) from 1978 to 1988. He is a director
of The Johns Hopkins Health System, Aegon USA, Inc., GRC International Inc. and
M.S.D. & T. Funds, Inc., and President of the Caves Valley Club Inc.
Gerald R. Ford
The Honorable Gerald R. Ford, 81, has been a director or an honorary
director of the Company since 1986. Mr. Ford was President of the United States
from August 1974 through January 1977, having served as Vice President of the
United States from December 1973 through August 1974. He is a lecturer and a
business consultant to several corporations. He serves as a director of
Alexander & Alexander Services, Inc. and is an advisory director to Texas
Commerce Bankshares, Inc. and American Express Company.
Robert I. Lipp
Mr. Lipp, 56, has been a director of the Company since 1991, and is a Vice
Chairman and Group Chief Executive of the Company. In November 1993, he was
named a member of the newly-created Office of the Chairman of the Company. Upon
completion of the Travelers Merger, Mr. Lipp was named Chief Executive Officer
of The Travelers Insurance Group Inc. ("TIGI"). From 1991 to 1993, he was
Chairman and Chief Executive Officer of CCC, a wholly owned subsidiary of the
Company. From April 1986 through September 1991, he was an Executive Vice
President of the Company and its corporate predecessor. Prior to joining the
Company in 1986, he was a President and a director of Chemical New York
Corporation and Chemical Bank where he held senior executive positions for more
than five years prior thereto. Mr. Lipp is a director of The New York City
Ballet.
Andrall E. Pearson
Mr. Pearson, 69, has been a director of the Company since 1986. He has been
a Professor at the Harvard Business School since 1985. He was President of
Pepsico, Inc. from 1970 to 1984. He is a director of The May Department Stores
Company, Pepsico, Inc. and Lexmark Inc. Mr. Pearson is also a general partner of
Clayton, Dubilier & Rice, Inc., a private investment firm and the Chairman of
the Board and a Director of Kraft Foodservice Inc., which is owned by Clayton,
Dubilier & Rice, Inc.
Linda J. Wachner
Mrs. Wachner, 49, has been a director of the Company since 1991. She is
Chairman, President and Chief Executive Officer of the Warnaco Group, Inc. and
of Warnaco Inc., a Fortune 500 apparel company, and Chairman and Chief Executive
Officer of Authentic Fitness Corporation, an activewear manufacturer. Mrs.
Wachner is also a director of QVC Network, Inc., the American Apparel
Manufacturers Association, and the New York City Partnership. She currently
serves on the Policy Committee of The Business Roundtable, the Board of Trustees
of The Aspen Institute and Carnegie Hall, and the Board of Overseers of Memorial
Sloan-Kettering Cancer Center. In 1994, Mrs. Wachner was reappointed by
President Clinton to the Advisory Committee for Trade Policy Negotiations, on
which she also served under President Bush and President Reagan. She is a member
of the Council on Foreign Relations.
10
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met six times during 1994. Each director attended at
least 75 percent of the meetings of the Board of Directors and Board Committees
of which he or she was a member during 1994 or the period thereof during which
he or she was a member.
COMMITTEES OF THE BOARD OF DIRECTORS
The following are the current members and functions of the standing
committees of the Board of Directors.
Executive Committee. The members of the Executive Committee are Messrs. Budd
(Chairman), Bialkin, Weill, Wright, and Zankel. The Executive Committee meets in
place of the full Board of Directors when scheduling makes it difficult to
convene all of the directors or when issues arise requiring immediate attention.
The Executive Committee met once during 1994.
Audit Committee. The members of the Audit Committee are Messrs. Mecum
(Chairman), Armstrong, Califano, Danforth, Disharoon, Tasco and Wright. The
primary functions of the Audit Committee, composed entirely of nonmanagement
directors, are to pass upon the scope of the independent certified public
accountants' examination, to review with the independent certified public
accountants and the Company's principal financial and accounting officers the
audited financial statements and matters that arise in connection with the
examination, to review the Company's accounting policies and the adequacy of the
Company's internal accounting controls, and to review and approve the
independence of the independent certified public accountants. The Audit
Committee met seven times during 1994.
Nominations and Compensation Committee. The members of the Committee are
Messrs. Zankel (Chairman), Bialkin, Daniell, Ford and Pearson, Ms. Jordan and
Mrs. Wachner. From time to time, the Committee acts as a nominating committee in
recommending candidates to the Board as nominees for election at the Annual
Meeting of Stockholders or to fill such Board vacancies as may occur during the
year. The 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 represents the full Board of Directors in matters
relating to the compensation of Company officers and, from time to time,
recommends to the full Board of Directors appropriate methods and rates of
director compensation. It also administers the Company's Option Plan, the
Company's CAP Plan and those option plans of old Travelers assumed by the
Company in connection with the Travelers Merger. The Committee is also
responsible for administration of The Travelers Inc. Executive Performance
Compensation Plan (the "Compensation Plan") approved by stockholders at the 1994
Annual Meeting. The Committee met eight times during 1994.
Ethics and Public Affairs Committee. The members of the Committee are
Messrs. Bialkin (Chairman), Budd, Califano, Daniell, Ford, Mecum and Wright, and
Ms. Jordan. This Committee was established in April 1994. The Committee reviews
and approves the Company's compliance programs, relationships with external
constituencies and public activities. The Committee met three times during 1994.
Finance Committee. The members of the Committee are Messrs. Dimon
(Chairman), Armstrong, Danforth, Disharoon, Pearson, Tasco and Zankel, and Mrs.
Wachner. This Committee was established in April 1994. The Committee reviews
issues relating to funding requirements, significant investments, complex
financial instruments and credit rating issues which arise in the Company's
operations. The Committee met three times during 1994.
11
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE FIVE NOMINEES IN CLASS I, EDWARD H. BUDD, JOSEPH A. CALIFANO, JR.,
JAMES DIMON, ANN DIBBLE JORDAN AND FRANK J. TASCO, AS A DIRECTOR OF THE COMPANY
FOR A THREE-YEAR TERM. Assuming the presence of a quorum, directors shall be
elected by a plurality of the votes cast at the Annual Meeting by holders of
Common Stock and Series C Preferred Stock, voting as a single class, for the
election of directors. Under applicable Delaware law, in tabulating the vote,
broker nonvotes will not be considered present at the Annual Meeting and will
have no effect on the vote.
EXECUTIVE COMPENSATION
REPORT OF THE NOMINATIONS AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Statement of Philosophy. The Company seeks to attract and retain highly
qualified employees at all levels, including particularly executive officers
whose performance is critical to the Company's success. In order to accomplish
this, the Company is willing to provide superior compensation for superior
performance. Such performance is measured on either a company-wide or a business
unit basis, or using both criteria, as the nature of an executive's
responsibilities may dictate.
Compensation of executive officers in 1994 consisted of base salary and
performance-based bonuses, a significant portion of which was restricted stock
awarded pursuant to the Company's CAP Plan. Bonuses are generally discretionary,
but for the chief executive officer of the Company and the four most highly
compensated other executive officers they are determined under The Travelers
Inc. Executive Performance Compensation Plan (the "Compensation Plan") discussed
below. In addition, under the Company's long-standing policy of providing
economic incentives to its employees at all levels in the form of stock
ownership, the Company from time to time grants stock options, not only to
executive officers but to a broad range of employees. All executives who are
members of the Company's Planning Group have previously represented that, for so
long as they are members of such group and participate in the reload program
under the Option Plan, they will not dispose of their shares of Common Stock
except for donations to charity or for use in connection with participation in
the stock option and restricted stock plans of the Company.
It is also the Company's policy to take all reasonable steps to obtain the
fullest possible corporate tax deduction for compensation paid to its executive
officers by qualifying for the exemptions from limitations on such deductibility
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). To this end, in 1993 the Company requested and received stockholder
approval for changes to the Option Plan to meet such Code requirements, and in
1994 obtained stockholder approval of the Compensation Plan, which is designed
to have such effect.
Executive Performance Compensation Plan. The Compensation Plan establishes
certain performance criteria for determining the maximum amount of bonus
compensation available, including that portion of bonuses payable in the form of
restricted stock under the Company's CAP Plan, for those executive officers who,
on the last day of the Company's taxable year, consist of the chief executive
officer and the four other most highly compensated executive officers of the
Company or its subsidiaries named in the Summary Compensation Table in the
Company's proxy statement from time to time (the "Covered Employees"). The
Compensation Plan sets forth performance-based criteria based on the
consolidated net income of the Company and its subsidiaries for executive
officers who have wide-ranging responsibilities for the Company's overall
performance and, with respect to Mr. Greenhill, based principally upon the
results of SB Holdings, the corporate entity under his direction as its Chairman
and Chief Executive Officer.
12
The creation of a bonus pool in which the Company's Chief Executive Officer
and four most highly compensated other executive officers, other than Mr.
Greenhill, participate is contingent upon the Company achieving at least a 10%
Return on Equity, as defined in the Compensation Plan. If a Return on Equity of
at least 10% is achieved, a bonus pool of 1.4% of Adjusted Net Income, as
defined in the Compensation Plan, will be established. If Return on Equity
exceeds 10%, the amount of the bonus pool is subject to cumulative increases
based upon the extent to which the Return on Equity exceeds the 10% minimum
threshold. Accordingly, the Return on Equity calculation established under the
Compensation Plan is the basis on which both the availability and size of the
bonus pool is determined.
The Compensation Plan also establishes that up to 31% of any bonus pool
established will be available for bonus awards to the chief executive officer
and up to 23% will be available to each of the other three eligible participants
(other than Mr. Greenhill). Any portion (up to $3 million) of a share of the
bonus pool calculated for any of those four eligible executive officers for a
particular bonus year may be awarded by the Committee to such person in a
succeeding year to the extent not awarded for the bonus year; provided that such
award by the Committee will only be made to reward extraordinary performance by
any such executive officer.
Under the Compensation Plan, Mr. Greenhill will not be entitled to a bonus
unless the After-Tax Earnings, as defined in the Compensation Plan, for a Bonus
Year exceed $100 million. If After-Tax Earnings exceed $100 million, Mr.
Greenhill will be entitled to receive 2% of After-Tax Earnings from $49.75
million up to and including $750 million, 1.5% of After-Tax Earnings in excess
of $750 million up to but not exceeding $1 billion, and 1% of After-Tax Earnings
in excess of $1 billion.
In the event that bonus compensation thresholds are met and the percentages
set forth in the Compensation Plan are applied, the Committee nevertheless
retains discretion to reduce or eliminate payments under the Compensation Plan
for any of the participating executive officers (other than Mr. Greenhill) to
take into account subjective factors, including an individual's performance or
other relevant criteria.
1994 Committee Review Process. Executive compensation, other than the
compensation of the Chief Executive Officer, is reviewed and approved annually
by this Committee, which is composed entirely of nonemployee directors.
Compensation of the Chief Executive Officer of the Company is established by the
Committee. The Committee considered and gave various weights to both qualitative
and quantitative factors, including such factors as earnings, earnings per
share, return on equity and return on assets. In conducting such review, the
Committee has generally examined changes in the Company's financial results over
time, both overall corporate results and on an operating unit basis, and
comparative data for comparable companies, to the extent it is publicly
available. However, the analysis of corporate performance in financial reporting
terms alone is not determinative. The Committee has given significant weight to
qualitative factors in approving 1994 compensation with particular emphasis on
the performance of the Company's executive team in a year in which significant
initiatives were implemented at both Smith Barney and the Travelers insurance
companies following completion of major acquisitions in 1993, several major
dispositions were completed, a major joint venture was established, and the
scope of responsibilities of several of the most senior executive officers was
expanded.
With regard to its consideration of compensation for the chief executive
officer and the four other most highly compensated executive officers of the
Company, the maximum amounts available for bonus awards to each such person were
determined pursuant to the formula set forth in the Compensation Plan. Under the
Compensation Plan, the maximum bonus pool for 1994 for the four eligible
executive officers was approximately $22.4 million. The amounts awarded to such
persons is set forth in the Summary Compensation Table below.
With regard to its consideration of compensation for the chief executive
officer and the three other most highly compensated executive officers of the
Company other than Mr. Greenhill, the Committee
13
utilized the assistance of the Actuarial, Benefits and Compensation Consulting
Services of the accounting firm of Ernst & Young LLP ("Ernst & Young").
Based on the factors considered by the Committee as discussed elsewhere in
this report, and on the views of Ernst & Young, the Committee has concluded that
the compensation of each of the senior executives named in the Summary
Compensation Table was appropriate.
Base Salary. Increases in base salary paid to all executive officers are
determined periodically, based upon the individual's performance, any change in
the scope of responsibilities and the individual's seniority and experience.
Examination of competitors' pay practices in this area is conducted periodically
to ensure that the Company will be in a position to attract new talent and
retain current valuable employees.
Incentive Bonuses. Discretionary bonus awards are generally a substantial
part of total compensation of Company executives. Factors considered included
not only individual performance but also performance of each business unit for
which the executive may be directly responsible, and such individual's
contributions to overall Company policy and strategic decisions through
membership in the corporate Planning Group that consists of the most senior
executives of the Company. Because a percentage of executive compensation is
paid in the form of restricted stock under the Company's CAP Plan, bonus awards
are not only a short-term cash reward but also a long-term incentive that ties
future realization of benefits by such executives to the enhancement of
stockholder values. The restricted period applicable to awards to executive
officers under the CAP Plan was extended from two to three years beginning with
the awards made with respect to 1994, in furtherance of the long-term nature of
such compensation. In addition, the Compensation Plan resulted in determination
of maximum bonuses payable under such plan to the chief executive officer and
the other four most highly compensated executives.
Stock Options. Other than grants of stock options that arose by operation of
the reload feature of the Option Plan approved by stockholders in 1992, no
grants of stock options were made except those to Mr. Plumeri in connection with
his assumption of greater corporate responsibilities as Vice Chairman of the
Company and to Mr. Lipp in connection with his assuming responsibilities as
Chief Executive Officer of TIGI. In making option awards generally, the
Committee considers the number of options previously granted to each executive
in order to determine whether the total number of shares covered by all
outstanding option awards adequately reflects the individual's importance to the
future success and profitability of the Company.
Compensation of the Chief Executive Officer. The Committee believes that
1994 was a year of accomplishment for the Company, marked by another increase in
operating earnings per share compared with 1993. Externally there were a number
of strategic dispositions, as well as the successful consummation on January 3,
1995 of the formation of a joint venture with Metropolitan Life Insurance
Company of the companies' respective group health care businesses. Mr. Weill
provided the leadership for these accomplishments. No grants of additional stock
options were made, other than by operation of the reload feature of the
Company's Option Plan upon Mr. Weill's exercise of his Control Data Options (as
defined herein) and the reload options associated with such exercise.
THE NOMINATIONS AND
COMPENSATION COMMITTEE:
ARTHUR ZANKEL (Chairman) ANN DIBBLE JORDAN
KENNETH J. BIALKIN ANDRALL E. PEARSON
THE HONORABLE GERALD R. FORD LINDA J. WACHNER
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons named above under the caption Election of Directors--Committees
of the Board of Directors--Nominations and Compensation Committee were the only
members of such committee during 1994. Mr. Bialkin, a member of that committee,
is a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom, which
performs legal services for the Company from time to time.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation paid by the
Company and its subsidiaries to the chief executive officer and the four other
most highly compensated executive officers for services rendered to the Company
and its subsidiaries in all capacities during each of the fiscal years ended
December 31, 1994, 1993 and 1992. The format of this table has been established
by the SEC. ALL SHARE NUMBERS IN THE COLUMN ENTITLED "SECURITIES UNDERLYING
STOCK OPTIONS (NUMBER) OF SHARES" AND IN THE FOOTNOTES TO THE TABLE HAVE BEEN
RESTATED TO THE EXTENT NECESSARY TO GIVE EFFECT TO THE TWO STOCK DIVIDENDS
DECLARED AND PAID DURING 1993.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(A)
------------------------------------ -----------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING STOCK ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS (NUMBER COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(B) ($)(C) OF SHARES) ($)(D)
----------------------- ---- ---------- ---------- ------------ ----------- ---------------- ------------
Sanford I. Weill....... 1994 $1,025,000 $2,653,750 $224,219 $ 1,528,327 525,517 $ 3,416
Chairman of the Board 1993 1,018,750 3,030,313 242,290 1,618,515 2,057,219 2,404
and 1992 957,308 1,603,750 190,821 1,028,317 4,871,102 1,900
Chief Executive
Officer
Robert I. Lipp......... 1994 589,167 1,600,208 866,365 96,641 1,982
Vice Chairman and 1993 532,083 1,276,979 666,691 184,541 1,900
Group Chief 1992 503,846 910,000 519,955 400,613 1,576
Executive
James Dimon............ 1994 629,167 2,145,208 12,224 750,894 84,031(E) 1,336
President, Chief 1993 518,750 1,430,312 726,202 450,530 1,132
Financial Officer 1992 453,462 885,000 486,664 483,104 1,132
and Chief Operating
Officer
Robert F. 1994 995,000 4,034,755 50,000 2,128,770 0 44,150
Greenhill(F)........... 1993 516,635 3,448,341 19,982,785 1,333,333 0
Chairman and CEO,
Smith Barney Inc.
Joseph J. Plumeri II... 1994 655,833 1,304,542 5,333 764,600 100,000 293,350
Vice Chairman 1993 187,500 1,175,625 499,166 200,000 0
Ownership of Common Stock as of the Record Date for the named individuals--Mr.
Weill: 3,811,598 shares; Mr. Lipp: 412,221 shares; Mr. Dimon: 471,015 shares;
Mr. Greenhill: 1,615,995 shares and Mr. Plumeri: 35,350 shares.
------------
(A) The shares reflected as grants of stock options for 1992, 1993 and 1994 were in each
case reload options created automatically upon an exercise of outstanding options by a
surrender of previously owned shares, except for options covering: 230,666 shares
granted to Mr. Dimon in 1993; 1,333,333 shares granted to Mr. Greenhill in 1993; 50,000
shares granted to Mr. Lipp in 1994; and 200,000 and 100,000 shares granted to Mr.
Plumeri in 1993 and 1994, respectively.
(Footnotes continued on following page)
15
(Footnotes continued from preceding page)
(B) Except as set forth in this column, none of the executive officers received other
annual compensation during 1994 required to be set forth in this column. The aggregate
amount set forth for Mr. Weill for 1994 includes perquisites of which $52,766 was for
use of Company transportation. The aggregate amount set forth for Mr. Greenhill
represents reimbursement for financial planning services.
(C) Restricted stock awards are made under the Company's CAP Plan. The CAP Plan provides
for payment, mandatory as to senior executives and certain others within the Company,
of a portion of compensation in the form of awards of restricted stock at a discount
(currently 25%) from market value. Under the current award formula in effect under the
CAP Plan for corporate executives, the following percentages of annual compensation are
payable in the form of shares of restricted stock:
ANNUAL COMPENSATION % IN RESTRICTED STOCK
---------------------------------------------------- ---------------------
Up to $200,000...................................... 10%
$200,001 to $400,000................................ 15%
$400,001 to $600,000................................ 20%
Amounts over $600,000............................... 25%
Annual compensation generally consists of salary and incentive awards.
Except under limited circumstances, the recipient of restricted stock is
not permitted to sell or otherwise dispose of such stock (except by will or
the laws of descent and distribution and except in connection with
participation in the reload program) for a period of two years from the
date of grant with respect to grants made for years prior to 1994 and three
years with respect to grants made for 1994 and after (or such other period
as may be determined to be applicable to various classes of participants
in the sole discretion of the Committee). Except as noted in footnote (F),
all of the awards listed in the table for 1992 and 1993 vest on the second
anniversary of the date of grant and for 1994 vest on the third anniversary
of the date of grant if the executive continues employment with the
Company during the vesting period. Upon expiration of such restricted
period, and assuming the recipient's continued employment with the Company,
the shares of restricted stock become fully vested and freely transferable.
From the date of grant, 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, 1994, and including the grants made in
January 1995 in respect of 1994, 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: 84,863 shares ($2,747,439.63); Mr. Lipp: 41,747 shares
($1,351,559.13); Mr. Dimon: 39,945 shares ($1,293,219.38); Mr. Greenhill:
101,174 shares ($3,275,508.25) and Mr. Plumeri: 34,025 shares
($1,101,559.38). The year-end market price was $32.375 per share.
(D) Includes the Company matching grant for 1994 pursuant to the Company's Savings Plan (in
the form of Common Stock having a market value of $1,000 at December 31, 1994) for
Messrs. Weill, Lipp, Dimon and Greenhill and supplemental life insurance paid by the
Company. In the case of Mr. Plumeri, also includes the value of certain incentive
awards and other benefits granted by the seller and assumed and satisfied by Smith
Barney in connection with the acquisition of the domestic retail business of Shearson
Lehman Brothers Inc. by Smith Barney. In the case of Mr. Greenhill, also includes
dividend equivalents on restricted stock.
(E) Includes 32,297 shares covered by options awarded at the election of Mr. Dimon in lieu
of restricted stock awarded to him under the CAP Plan.
(F) Mr. Greenhill joined the Company in June 1993. In addition to the restricted stock
awarded under the CAP Plan (referred to in footnote C above), Mr. Greenhill received a
restricted stock award pursuant to his employment agreement. See "Employment Protection
Agreements," below. Such award covered 533,333 shares and vests at a rate of 20% per
year on the anniversary of the date of grant. At December 31, 1994, 426,666 shares,
with an aggregate year-end market price (at $32.375 per share) of $13,813,312, were
subject to restriction.
STOCK OPTIONS GRANTED
The following table sets forth information with respect to stock options
granted during 1994 to each of the executives named in the Summary Compensation
Table. All options granted arose under the
16
reload feature of the Option Plan except for Mr. Lipp's grant covering 50,000
shares and Mr. Plumeri's grant covering 100,000 shares. For Messrs. Weill, Lipp
(except as noted) and Dimon, these reload options arose upon the exercise of
reload options associated with the stock options granted by Control Data
Corporation ("Control Data Options") in 1986 when it was the parent company of
the Company's corporate predecessor to facilitate the public offering of such
subsidiary's stock.
The "Grant Date Present Value" numbers set forth in the table below were
derived by application of a variation of the Black-Scholes option pricing model.
The following assumptions were used in employing such model:
. stock price volatility was calculated by using the 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 a "3.78-year" Treasury bill on the date of grant, as
reported by the Federal Reserve;
. the dividend yield on the date of the option grant (based upon the actual
dividend rate of either 12.5 cents per share during the first two quarters
of 1994 or 15 cents per share during the last two quarters of 1994) was
assumed to be constant over the life of the option;
. exercise of the option was deemed to occur 3.78 years after the date of
grant, based upon the Company's historical experience of the average
period between the grant date and exercise date for those options that
have vested; and
. a discount of 9.45% was applied to the option value derived from the model
to reflect the nontransferability and risk of forfeiture of such employee
stock options during the average 3.78 years between grant date and
exercise date referred to in the preceding paragraph.
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
commensurately.
OPTION GRANTS IN 1994(A)
INDIVIDUAL GRANTS(B)
--------------------------------------------------------------------------------------------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO ALL EXERCISE OR GRANT DATE
GRANTED EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME (NUMBER OF SHARES) IN 1994 ($ PER SHARE) DATE VALUE ($)
-------------------------------------- ------------------ -------------- ------------- ---------- ----------
Sanford I. Weill...................... 16,798 0.33% 39.625 02/18/03 $ 172,715
508,719 9.94 32.625 10/30/02 4,463,339
Robert I. Lipp........................ 34,370 0.67 32.625 11/02/02 295,914
12,271 0.24 32.625 02/22/03 105,649
50,000 0.98 33.250 11/26/04 442,159
James Dimon........................... 10,267 0.20 39.625 02/19/03 105,564
41,467 0.81 32.625 10/30/02 363,818
Robert F. Greenhill................... 0 -- -- -- --
Joseph J. Plumeri II.................. 100,000 1.95 32.125 10/28/04 858,013
------------
(A) Ownership of Common Stock as of the Record Date for the named
individuals--Mr. Weill: 3,811,598 shares; Mr. Lipp: 412,221 shares;
Mr. Dimon: 471,015 shares; Mr. Greenhill: 1,615,995 shares and Mr.
Plumeri: 35,350 shares.
(Footnotes continued on following page)
17
(Footnotes continued from preceding page)
(B) The option price of each option granted under the Option Plan is not less than the fair
market value of the Common Stock subject to the option, determined in good faith by the
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 (other than certain
reload options) generally vest in cumulative installments of 20% on each anniversary of
the date of grant such that the options are fully exercisable on and after five years
from the date of grant until ten years and one month following such grant (in the case
of non-qualified stock options, which represent all options currently outstanding). The
Committee has discretion to establish a slower vesting schedule for options granted
under the Option Plan.
Participants are entitled to direct the Company to withhold shares otherwise issuable
upon an option exercise to cover in whole or in part the tax liability associated with
such exercise, or participants may cover such liability by surrendering previously
owned shares (other than restricted stock).
Under the reload feature of the Option Plan, participants who tender previously owned
shares (including CAP Plan restricted stock) to pay all or a portion of the exercise
price of vested stock options or tender previously owned shares or have shares withheld
to cover the associated tax liability may be eligible to receive a reload option
covering the same number of shares as are tendered or withheld for such purposes. Such
optionee may choose to receive either (i) unrestricted incremental shares (as defined
below) and no reload option, or (ii) incremental shares subject to a period of
restriction on the ability to sell or otherwise transfer such shares (except in certain
circumstances) and a reload option to be granted in accordance with the applicable
terms of the Option Plan. The initial Committee determination has set the restricted
period at two years. Although the optionee may not transfer his or her incremental
shares during the applicable restricted period, such optionee receives such shares free
and clear upon completion of such restricted period without any risk of forfeiture,
even if such person has retired or is otherwise no longer an employee of the Company.
Unless the Committee in its discretion modifies or eliminates such restrictions,
optionees are permitted to transfer their incremental shares during the restricted
period only under the limited circumstances of (i) a contribution of such shares to a
charitable organization, or (ii) an event of financial hardship demonstrated to the
reasonable satisfaction of the Senior Vice President, Human Resources, of the Company.
If the exercise price of an option is paid by delivery of a number of shares of
restricted stock, then the optionee will receive, in connection with the exercise, an
equal number of identically restricted shares of Common Stock.
Further, in order for an optionee to receive a reload option in connection with his or
her exercise of a vested option, the market price of Common Stock on the date of
exercise must equal or exceed the minimum market price level established by the
Committee from time to time (the "Market Price Requirement"). The Committee has
established that the initial Market Price Requirement shall be a market price on the
date of exercise equal to or greater than 120% of the price of the option being
exercised. If a market price does not equal or exceed the applicable Market Price
Requirement, a vested option may be exercised but no reload option will be granted in
connection with such exercise.
"Incremental shares" are those shares of Common Stock actually issued to an optionee
who exercises an option by surrendering previously owned stock or restricted stock
awarded under the CAP Plan to pay the exercise price of an option, or by surrendering
previously owned stock or requesting the Company to withhold the appropriate number of
shares otherwise issuable, to cover the withholding tax liability associated with
option exercise. The number of incremental shares issued is typically the number of
option shares exercised minus the number of shares deemed "surrendered" to pay for such
exercise and minus the number of shares used or withheld to satisfy any resulting tax
liability in connection with such exercise.
The market value on the date of grant of a reload option establishes the exercise price
of such option, and such option will have a term equal to the remaining term of the
original option, except that the reload option will not be exercisable until six months
after its date of grant.
(Footnotes continued on following page)
18
(Footnotes continued from preceding page)
Reload options are designed 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 recognize future stock price appreciation.
STOCK OPTIONS EXERCISED
The following table sets forth, in the aggregate, the number of shares
underlying options exercised during 1994 and states the value at year-end of
exercisable and unexercisable options remaining outstanding. The "Value
Realized" column reflects the difference between the market price on the date of
exercise and the market price on the date of grant (which establishes the
exercise price for the option) for all options exercised, even though the
executive may have actually received fewer shares as a result of the surrender
of previously owned shares to pay the exercise price or the tax liability, or
the withholding of shares to cover the tax liability associated with option
exercise. Accordingly, the "Value Realized" numbers do not necessarily reflect
what the executive might receive, should he 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.
ALL SHARE NUMBERS HAVE BEEN RESTATED TO THE EXTENT NECESSARY TO GIVE EFFECT
TO THE TWO STOCK DIVIDENDS DECLARED AND PAID DURING 1993.
19
AGGREGATED OPTION EXERCISES IN 1994
AND
1994 YEAR-END OPTION VALUES(A)
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED
SECURITIES VALUE OPTIONS AT VALUE OF UNEXERCISED
UNDERLYING OPTIONS REALIZED ($) 1994 YEAR-END IN THE MONEY OPTIONS
NAME EXERCISED(B) (C) (NUMBER OF SHARES) AT 1994 YEAR-END ($)
-------------------------- ------------------ ------------ --------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -----------
Sanford I. Weill.......... 582,244 $ 6,737,609 725,686 3,522,712 $ 0 $19,478,517
Robert I. Lipp............ 55,111 527,051 47,023 391,460 0 1,629,334
James Dimon............... 62,721 748,369 116,455 524,461 0 2,017,834
Robert F. Greenhill....... 0 0 266,667 1,066,667 0 0
Joseph J. Plumeri II...... 0 0 40,000 260,000 0 25,000
------------
(A) All of the stock options exercised by Messrs. Weill, Lipp and Dimon in 1994 were reload
options arising from Control Data Option exercises.
(B) This column reflects the number of shares underlying options exercised in 1994 by the
named executive officers. The actual number of shares received by each of these
individuals from options exercised in 1994 (net of shares surrendered or withheld to
cover the exercise price and tax liabilities) was: Mr. Weill, 56,727 shares; Mr. Lipp,
8,470 shares; Mr. Dimon, 10,987 shares; Mr. Greenhill, 0 shares; and Mr. Plumeri, 0
shares.
Ownership of Common Stock as of the Record Date for the named individuals: Mr. Weill:
3,811,598 shares; Mr. Lipp: 412,221 shares; Mr. Dimon: 471,015 shares; Mr. Greenhill:
1,615,995 shares; and Mr. Plumeri: 35,350 shares.
(C) "Value Realized" is in each case calculated as the difference between the market price
on the date of exercise and the market price on the date of grant, which establishes
the exercise price for option exercise. Other than shares of Common Stock used in
connection with employee compensation plans or charitable contributions, none of the
above employees has ever disposed of any Common Stock.
PERFORMANCE GRAPH
The following line graph compares annual changes in "Cumulative Total
Return" of the Company (as defined below) with (i) Cumulative Total Return of a
performance indicator of equity stocks in the overall stock market, the S&P 500
Index, and (ii) Cumulative Total Return of a "Peer Index," each for the last
five years. The Peer Index is the S&P Financial Index, which comprises the
following Standard & Poor's industry groups: Money Center Banks, Major Regional
Banks, "Savings & Loan", Life Insurance, Multi-Line Insurance, Property and
Casualty Insurance, Personal Loans and Financial Services (excluding the Company
and both of the government-sponsored entities: the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association). The Peer Index has
been weighted based on market capitalization. "Cumulative Total Return" is
calculated (in accordance with SEC instructions) by dividing (i) the sum of (A)
the cumulative amount of dividends during the relevant period, assuming dividend
reinvestment at the end of the month in which such dividends were paid, and (B)
the difference between the market capitalization at the end and the beginning of
such period, by (ii) the market capitalization at the beginning of such period.
20
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.
THE TRAVELERS INC.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
1989 1990 1991 1992 1993 1994
----- ----- ------ ------ ------ ------
The Travelers Inc. 100.0 81.40 142.18 177.61 289.40 245.03
S&P 100.0 96.89 126.35 135.95 149.64 151.61
Peer Index 100.0 81.14 118.00 147.37 162.58 158.68
---------------------------
Assumes $100 invested at the closing price on December 31, 1989, in
the Company's Common Stock, the S&P 500 Index, and the Peer Index,
representing the S&P Financial Index (excluding the Company, and both
of the government-sponsored entities: the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association). The Peer
Index has been weighted based on market capitalization.
COMPENSATION OF DIRECTORS
Pursuant to the Company's By-Laws, the members of the Board of Directors are
compensated in a manner and at a rate determined from time to time by the Board
of Directors. It has been the practice of the Company since its initial public
offering in 1986 to pay its outside directors in shares of Common Stock, in
order to assure that the directors have an ownership interest in the Company in
common with other stockholders. Compensation of outside directors and designated
honorary directors of the Company currently consists of an annual retainer of
$75,000, payable in shares of Common Stock. A director may elect to defer
receipt of compensation, in which case the annual retainer will be paid entirely
in shares of Common Stock. In the case of directors electing current receipt of
compensation,
21
only such portion that approximates the current tax liability incurred by the
director in respect of such compensation is paid in cash, and the balance in
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 1994. Directors who are
employees of the Company or its subsidiaries do not receive any compensation for
their services as directors.
RETIREMENT PLANS
Prior to January 1, 1994, executive officers and employees generally were
eligible to participate in The Travelers Inc. Pension Plan (the "Retirement
Plan") during their first year of service. Effective January 1, 1994,
eligibility begins on the later of attaining age 21 or completion of one year of
service. Benefits under the Retirement Plan vest after five years of service
with the Company or its subsidiaries. The normal form of retirement benefit is,
in the case of a married participant, a joint and survivor annuity payable over
the life of the participant and his or her spouse, or in the case of an
unmarried participant, an annuity payable over the participant's life. Instead
of such normal form of payment, participants may elect to receive other types of
annuities or a single sum payable at retirement or other termination of service.
When expressed as a single sum payment option, benefits accrue for the first
five years of covered service at an annual rate varying between .75% and 4.0% of
the participant's qualifying compensation, depending upon the participant's age
at the time of accrual. "Qualifying compensation" generally includes base salary
(before pre-tax contributions to the Savings Plan or other benefit plans),
overtime pay, commissions and bonuses. Under rules promulgated by the Internal
Revenue Service (the "Service"), a ceiling of $150,000 for 1994 (subject to
annual adjustment) is imposed on the amount of compensation that may be
considered "qualifying compensation" under the Retirement Plan.
During the period of the sixth through the fifteenth year of covered
service, benefits accrue at an annual rate of between 1.25% and 5.0% of the
participant's qualifying compensation, depending upon the participant's age at
the time of accrual. After a participant has completed 15 years of covered
service, benefits accrue at an annual rate varying between 1.25% and 7.0% of the
participant's qualifying compensation, depending upon the participant's age at
the time of accrual. There are also minimum benefits provided for under the
Retirement Plan.
Subject to the statutory maximum benefits payable by a qualified plan (as
described below), a participant also accrues annually an additional amount
calculated as 1.0% to 2.5% of qualifying compensation (again depending upon his
or her age) for that part of qualifying compensation in excess of the amount of
the Social Security wage base. There is an interest accrual added to the
participant's single sum entitlement. This interest amount is determined by
multiplying the prior year's single sum by a percentage determined annually by
the Company.
The Retirement Plan contains transitional provisions for employees who meet
certain age and service requirements. Employees who by January 1, 1990 either
had reached age 63, or had reached the age of 55 and had more than 20 years of
service, and, in each case, were participants in the Retirement Plan, are
eligible to retire under the provisions of the plans applicable to them prior to
the effective date of the establishment of the Retirement Plan.
The statutory maximum retirement benefit that may be paid to any one
individual by a tax qualified defined benefit pension plan in 1994 is $118,800
annually. Years of service credited under the Retirement Plan to date for each
of the individuals named in the Summary Compensation Table are as follows: Mr.
Weill, 8 years; Mr. Lipp, 8 years; Mr. Dimon, 8 years; Mr. Greenhill, 1 year;
and Mr. Plumeri, 22 years.
22
The Company and certain Company subsidiaries provide certain pension
benefits, in addition to the statutory maximum benefit payable under tax
qualified pension plans, under non-funded, non-qualified retirement benefit
equalization plans ("RBEPs"). The benefits payable under RBEPs are unfunded, and
will come from the general assets of each plan's sponsor. In 1993, the Committee
amended the RBEPs in two respects: first, to exclude certain executives of the
Company and its subsidiaries (including each of the persons named in the Summary
Compensation Table) and employees of certain subsidiaries from further
participation in the RBEPs, and second, to limit the compensation covered by
such plans to a fixed amount of $300,000 (equal to twice the 1994 statutory
maximum qualifying compensation without giving effect to any future adjustments)
less amounts covered by the Retirement Plan, thereby limiting benefits payable
under the RBEPs to all participants. No benefits were accrued in 1994 under any
of the RBEPs for the account of each of the persons named in the Summary
Compensation Table.
Effective at the end of 1993, the 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, 24 individuals were SERP participants, including
each of the individuals named in the Summary Compensation Table other than Mr.
Plumeri. The maximum benefit payable under SERP is also reduced by any benefits
payable under the Retirement Plan (or its predecessor plans, if applicable),
under any applicable RBEP, under any other Company or subsidiary sponsored
qualified or non-qualified defined benefit or defined contribution pension plan
(other than the Savings Plan or other 401(k) plans), and under the Social
Security benefit program.
Estimated annual benefits under the three benefit plans of the Company for
the five executive officers named in the Summary Compensation Table using the
applicable formulas under the Retirement Plan and the frozen RBEP and SERP Plans
and assuming their retirement at age 65, would be as follows: Mr. Weill,
$622,522; Mr. Lipp, $293,616; Mr. Dimon, $245,484; Mr. Greenhill, $134,672; and
Mr. Plumeri, $168,962 (Mr. Plumeri's annuity under the Retirement Plan includes
his accrued annuity transferred from the retirement plan of Shearson Lehman
Brothers Holdings, Inc). These estimates were calculated assuming that the
interest accrual was 8% for 1989 through 1991, and 6% for 1992 through 1993 and
5.5% for 1994 and thereafter until the participant retires at the age of 65, and
that the current salary of the participant, the 1994 dollar ceiling on
qualifying compensation (which was set by legislation adopted in 1993 at
$150,000 annually), the 1994 Social Security wage base and the current
regulatory formula to convert lump-sum payments to annual annuity figures each
remains unchanged.
EMPLOYMENT PROTECTION AGREEMENTS
The Company has entered into employment protection agreements with certain
of its executive officers. Under the agreement with Mr. Weill, the Company
agrees to employ Mr. Weill as its Chief Executive Officer (and Mr. Weill agrees
to serve in such capacity) with an annual salary, incentive participation and
employee benefits as determined from time to time by the Company's Board of
Directors. The agreement contains automatic one-year renewals (unless notice of
nonrenewal is given by either party). In the event of his termination of
employment without cause, the agreement provides that Mr. Weill will be paid and
entitled to receive other employee benefits (as in effect at the termination
date) through the remaining term of the agreement and will be entitled to two
years additional vesting and exercise of his stock options (and a cash payment
based on the value of any portion of the stock options that would not vest
within such additional period). During such period of continuing payments and
stock option vesting and exercise, Mr. Weill would be subject to a
noncompetition agreement in favor of the Company.
Mr. Greenhill entered into an employment agreement dated June 23, 1993 under
which he agreed to serve as Chairman of the Board and Chief Executive Officer of
SB Holdings. The agreement, as
23
amended to date, has a term of seven years and provides for annual compensation
based upon a percentage of the consolidated after-tax earnings of SB Holdings
and its subsidiaries and certain designated Company subsidiaries. Under the
agreement, Mr. Greenhill was granted an option to purchase 1,333,333 shares of
the Company's Common Stock at an option price of the then-current market price
of $34.50 per share (all share numbers and prices in this paragraph have been
restated for the subsequent stock split in August 1993). The option has a ten
year life and vests at a rate of 20% per year on the anniversary date of the
grant. If Mr. Greenhill's employment is terminated because of his death or
disability, by Smith Barney without cause (as defined in the agreement), by Mr.
Greenhill if Smith Barney is in material breach of the agreement, or at the end
of the term of the agreement, that portion of the option that was exercisable on
or within two years after the termination date will remain exercisable during
such two-year period, and Mr. Greenhill will be entitled to receive a cash
payment for the shares covered by the unexercisable portion of the option. Mr.
Greenhill also received a grant of 533,333 shares of restricted stock, vesting
at a rate of 20% per year on the anniversary of the grant date. If Mr.
Greenhill's employment terminates under the circumstances described above, the
restricted stock grant will also be subject to continued vesting during the
two-year period following such termination, and Mr. Greenhill will be entitled
to a cash payment with respect to unvested shares. Mr. Greenhill is entitled to
receive compensation payments calculated for various circumstances under which
his employment may terminate. During any period after termination in which he
receives compensation under the terms of the agreement, Mr. Greenhill will be
subject to a prohibition on hiring certain former employees of Smith Barney and
its subsidiaries.
Mr. Plumeri is a party to an employment agreement with Smith Barney, a
subsidiary of the Company. Under an amendment to the agreement, he has agreed to
serve as Vice Chairman of the Company through July 30, 1996. Under the
agreement, Mr. Plumeri is entitled to an annual base salary and consideration
for an annual discretionary bonus under the Compensation Plan (or, in the event
that Mr. Weill ceases to be chief executive officer of the Company during the
term of the agreement, to specified levels of bonus payments). The agreement
provides that Mr. Plumeri will participate in the CAP Plan, will be reimbursed
for the cost of certain life insurance and will be entitled to participate in
other employee benefit plans generally available to senior executives. The
agreement also provides that Mr. Plumeri will be entitled to specified payments
in the event Mr. Plumeri's employment is terminated. Under the terms of the
agreement, Mr. Plumeri received option grants under the Option Plan which are
reflected in the table of Option Grants above. During any period after
termination in which he receives compensation under the terms of the agreement,
Mr. Plumeri will be subject to a prohibition on hiring certain former employees
of the Company and its subsidiaries.
CERTAIN INDEBTEDNESS
Certain executive officers have from time to time, including periods during
1994, incurred indebtedness to Smith Barney, a wholly owned subsidiary of the
Company and a registered broker-dealer, on margin loans against securities
accounts with Smith Barney. Such margin loans were made in the ordinary course
of Smith Barney's business, were made on substantially the same terms (including
interest rates and collateral) as those prevailing for comparable transactions
for other persons, and did not involve more than the normal risk of
collectability or present other unfavorable features.
CERTAIN TRANSACTIONS
Pursuant to the terms of his employment agreement, Mr. Greenhill is entitled
to be reimbursed for use of personal aircraft for company business at an arms'
length rate charged for air charter by an unaffiliated third party. During 1994,
such reimbursements to two aircraft companies of which Mr. Greenhill is the sole
stockholder totalled approximately $572,000.
24
ITEM 2:
AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously adopted a proposed
amendment to Article FIRST of the Company's Restated Certificate of
Incorporation and recommended that such amendment be submitted to the
stockholders of the Company for approval and adoption. The proposed amendment
would change the name of the Company to Travelers Group Inc. following approval
by the stockholders. A copy of Article FIRST as proposed to be amended is
attached hereto as Annex A.
The Board of Directors believes that the new name will better emphasize the
multiple services provided by the Company and its subsidiaries.
If approved, the proposed amendment to Article FIRST would become effective
upon the filing with the Secretary of State of the State of Delaware of a
Certificate of Amendment to the Company's Restated Certificate of Incorporation,
which filing is expected to take place shortly after approval by the
stockholders. The affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock and Series C Preferred Stock
entitled to vote at the meeting is required to adopt the proposed amendment to
Article FIRST.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
---
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
COMPANY'S NAME. Assuming the presence of a quorum, the affirmative vote of a
majority of the votes entitled to be cast at the Annual Meeting by the holders
of all of the outstanding shares of Common Stock and Series C Preferred Stock,
voting as a single class, is required to adopt the proposed amendment to the
Company's Restated Certificate of Incorporation. Under applicable Delaware law,
in determining whether this item has received the requisite number of
affirmative votes, abstentions and broker nonvotes will be counted and will have
the same effect as a vote against this item.
ITEM 3:
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("Peat Marwick")
as the independent auditors of the Company for 1995. Peat Marwick has served as
the independent auditors of the Company and its predecessors since 1969.
Arrangements have been made for a representative of Peat Marwick to attend the
Annual Meeting. The representative will have an opportunity to make a statement
if he or she desires to do so, and will be available to respond to appropriate
stockholder questions.
25
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
---
THE SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
1995. Assuming the presence of a quorum, the affirmative vote of a majority of
the votes cast by the holders of shares of Common Stock and Series C Preferred
Stock present and entitled to vote on this item at the Annual Meeting, voting as
a single class, is required to ratify the selection of the Company's auditors.
Under applicable Delaware law, in determining whether this item has received the
requisite number of affirmative votes, abstentions and broker non-votes will be
counted and will have the same effect as a vote against this item.
STOCKHOLDER PROPOSAL
The Company has been advised by one holder of Common Stock of its intention
to introduce at the Annual Meeting the proposal and supporting statement set
forth below. The Board of Directors disclaims any responsibility for the content
of the proposal and for the statement made in support thereof, which are
presented as received from the stockholder.
ITEM 4:
STOCKHOLDER PROPOSAL REGARDING NATIONAL HEALTH CARE REFORM
Mr. Jack F. Moore, Secretary of the Board of Trustees of the National
Electrical Benefit Fund, 1125 15th Street, N.W., Washington, D.C. 20005, the
holder of 70,900 shares of Common Stock, has notified the Company that he
intends to present the following proposal at the Annual Meeting:
RESOLVED:
That the shareholders of Travelers' Corporation ("Company")
urge our board of directors to examine the Company's position on
the important public policy issue of national health care reform.
From this examination, the board of directors will produce a
written report that describes how the public policy positions our
Company is advocating on national health care reform will effect
the economic, social and personal welfare of our Company's
shareholders, workers, customers, suppliers, the communities in
which we do business, and the nation as a whole. The report shall
also disclose the scope and the cost of the Company's national
health care reform advocacy activities since 1991.
The report shall exclude any proprietary information, be
prepared at reasonable cost, not impose an undue burden on company
employees, and be available to shareholders within six months
after the 1995 annual meeting of shareholders.
SUPPORTING STATEMENT
National health care reform has been the pre-eminent public
policy issue over the past four years. Today's health care system
has produced 50 million Americans with inadequate insurance and 37
million Americans with no insurance at all. The inability of the
current health care system to provide universal coverage has
produced great personal hardships, billions of dollars per year in
uncompensated care, and an upward cost spiral that threatens the
competitiveness and profitability of our Company and many other
American businesses.
26
Travelers' management has decided to publicly participate in
the national health care debate. Travelers is a member of the
steering committee of HEAL--the Health Care Equity Action League.
HEAL's public policy positions include:
--the creation of a standard benefits package by the
Federal government, "in consultation with states, localities,
businesses, labor, insurers and providers."
--the taxation of employee health care benefits that
exceed "the cost of a standard health care benefit package
when it is established" as a way to control health care costs.
--opposition to employer mandates, payroll taxes to
finance health care premiums, and government price controls.
Travelers' health care reform proposal is highly
controversial. Particularly, attempting to control costs through
the taxation of employee health benefits. Such a policy could
create a large tax burden for our Company's employees, customers,
and working families in America.
We strongly believe that prior to getting our Company involved
in a politically contentious, ideologically charged national
public policy debate, such as health care reform, our Company's
board of directors has a responsibility to examine the impact of
the various national health care reform proposals on our Company's
shareholders, workers and other corporate constituencies and
disclose those findings to shareholders. We believe thorough
analysis and timely disclosure prior to entering into public
policy debates helps insure that our Company acts responsibly.
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION
TO THE STOCKHOLDER PROPOSAL
As the owner of insurance companies providing health care insurance and as
an employer providing health insurance to its employees, the Company has in the
past and continues now to actively study and participate in the development of
policy with respect to health care. The Company participates, both directly and
through health care reform coalitions to support efforts to enact reforms. The
Company also helps various groups of clients, agents, employees and shareholders
to learn about and express their opinions on various reform proposals.
In light of the Company's on-going activities, the Board of Directors views
the proponent's proposal that the Board of Directors examine the Company's
policies with respect to health care as a redundancy and that the time and
expense required to research, prepare and distribute a report would be a
wasteful and inappropriate use of corporate resources.
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 Series C 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 and broker non-votes will be counted and will have the same effect
as a vote against this item.
27
COST OF SOLICITING PROXIES
The cost of soliciting proxies and the cost of the Annual Meeting will be
borne by the Company. In addition to the solicitation of proxies by mail,
proxies may be solicited by personal interview, telephone and similar means by
directors, officers or employees of the Company, none of whom will be specially
compensated for such activities. The Company also intends to request that
brokers, banks and other nominees solicit proxies from their principals and will
pay such brokers, banks and other nominees certain expenses incurred by them for
such activities. The Company has retained Georgeson & Company, Inc., a proxy
soliciting firm, to assist in the solicitation of proxies, for an estimated fee
of $8,500, plus reimbursement of certain out-of-pocket expenses.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the next Annual Meeting
of Stockholders and who wishes such proposal to be included in the Proxy
Statement for that meeting must submit such proposal in writing to the Secretary
of the Company, at the address set forth on the first page of this Proxy
Statement, and such proposal must be received on or before December 1, 1995.
OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Annual Meeting. If other matters should arise
at the Annual Meeting, shares represented by proxies will be voted at the
discretion of the proxy holder.
28
ANNEX A
It is proposed that Article FIRST of the Restated Certificate of
Incorporation of The Travelers Inc. be amended to read in its entirety as set
forth below:
FIRST: The name of the Corporation is:
TRAVELERS GROUP INC.
P
R
O THE TRAVELERS INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
X OF THE TRAVELERS INC. FOR THE ANNUAL MEETING
APRIL 26, 1995
Y
The undersigned hereby constitutes and appoints Sanford I. Weill, James Dimon
and Charles O. Prince, III, and each of them his or her true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Stockholders of The Travelers Inc. (the
"Company") to be held at Carnegie Hall, 881 Seventh Avenue, New York, New
York on Wednesday, April 26, 1995 at 10:00 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 The Travelers 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 The Travelers Inc. Common Stock in the undersigned's name and/or
account under such Plan in accordance with the instructions given herein, at
the Annual Meeting and at any adjournments or postponements thereof, on all
matters properly coming before the Annual Meeting, including but not limited
to the matters set forth on the reverse side.
You are encouraged to specify your choices by marking the
appropriate boxes, SEE REVERSE SIDE, but you need not mark any
boxes if you wish to vote in accordance with the Board of
Directors' recommendations. Your proxy cannot be voted unless you
sign, date and return this card.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,
2, AND 3 AND AGAINST PROPOSAL 4 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
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSALS 1,2, AND 3 AND AGAINST PROPOSAL 4
DIRECTORS RECOMMEND A VOTE "FOR"
1. Proposal to elect one class of FOR WITHHELD
directors consisting of five directors ALL FROM ALL
to a three-year term. NOMINEES NOMINEES
[ ] [ ]
Nominees: Edward H. Budd, Joseph A.
Califano, Jr., James Dimon,
Ann Dibble Jordan and Frank
J. Tasco
[ ] -------------------------------------------
FOR, except authority to vote WITHHELD from
the above nominee(s) (write name(s) on line)
DIRECTORS RECOMMEND A VOTE "FOR"
2. Proposal to amend the Certificate of FOR AGAINST ABSTAIN
of Incorporation of The Travelers Inc. [ ] [ ] [ ]
to change the corporate name to Travelers
Group Inc.
Directors recommend a vote "FOR"
3. Proposal to ratify the selection of FOR AGAINST ABSTAIN
KPMG Peat Marwick LLP as the Company's [ ] [ ] [ ]
independent auditors for 1995.
Directors recommend a vote "AGAINST"
4. Proposal submitted by a stockholder FOR AGAINST ABSTAIN
which proposal is opposed by [ ] [ ] [ ]
the Board of Directors.
MARK HERE FOR ADDRESS CHANGE [ ]
AND NOTE AT LEFT
The signer(s) hereby acknowledge(s) receipt
of the Notice of Annual Meeting of
Stockholders and accompanying Proxy
Statement.
The signer(s) hereby revoke(s) all proxies
heretofore given by the signer(s) to vote
at said Annual Meeting and any adjournments
or postponements thereof.
NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREIN. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
IF NO BOXES ARE MARKED, THIS Signature:__________________ Date________
PROXY WILL BE VOTED IN THE
MANNER DESCRIBED ON THE Signature:__________________ Date________
REVERSE SIDE.