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Transamerica Corporation
600 Montgomery Street
LOGO San Francisco, California 94111
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, April 23, 1998
11:00 A.M.
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Transamerica Corporation will be held
at the Giannini Auditorium, Concourse Level, Bank of America Center, 555
California Street, San Francisco, California, on Thursday, April 23, 1998, at
11:00 A.M., for the purpose of:
1. Electing three directors of the Corporation to hold office for
three-year terms;
2. Electing independent auditors to audit the Corporation's financial
statements for 1998;
3. Approving the adoption of an amendment to the Corporation's
Certificate of Incorporation increasing the number of authorized
shares of common stock;
4. Approving the adoption of the 1998 Cash Long-Term Incentive Plan;
and
5. Approving an amendment to the 1995 Performance Stock Option Plan.
All other matters which may properly come before the meeting and any
adjournment thereof will also be considered.
Stockholders of record at the close of business on February 23, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
A list of such stockholders will be available at the meeting and, for any
purpose germane to the meeting, during the ten days prior to the meeting, at the
office of the Secretary of the Corporation, 600 Montgomery Street, San
Francisco, California, during ordinary business hours.
By Order of the Board of Directors
Shirley H. Buccieri
Secretary
San Francisco, California
March 6, 1998
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PROXY STATEMENT
OF
TRANSAMERICA CORPORATION
600 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94111
INFORMATION CONCERNING THE SOLICITATION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Transamerica Corporation of proxies to be voted at the
Annual Meeting of Stockholders to be held on April 23, 1998 and at any
adjournment thereof. Proxies are revocable at any time prior to exercise by
written notice to the Secretary of the Corporation or upon request if the
stockholder is present at the Annual Meeting and chooses to vote in person. If a
proxy is properly signed and not revoked, the shares it represents will be voted
in accordance with the instructions of the stockholder. If no specific
instructions are given, the shares represented by the proxy will be voted for
the election of the nominees listed on page 2 and for Proposals 2, 3, 4 and 5.
This year, stockholders can vote their shares either by mailing a signed
proxy card or by telephone. The "vote-by-phone" option is convenient and easy to
use. The toll-free number and instructions for voting by telephone are included
in the proxy card.
Stockholders of record at the close of business on February 23, 1998 are
entitled to vote at the Annual Meeting. On that date the Corporation had
outstanding 62,883,133 shares of common stock, $1 par value, each share being
entitled to one vote and each one-half share being entitled to one-half vote. A
proxy given by any stockholder participating in the Corporation's Dividend
Reinvestment Plan or in the Corporation's Employees Stock Savings Plan will
govern the voting of all full shares held for such stockholder's account under
those Plans.
A majority of the shares entitled to vote, present in person or represented
by proxy, constitutes a quorum. Abstentions and broker non-votes are counted as
shares present in determining whether the quorum requirement is satisfied. If a
quorum is present, the affirmative vote of a plurality of the shares present in
person or represented by proxy and entitled to vote will be required for the
election of directors. The affirmative vote of a majority of the shares present
in person or represented by proxy and entitled to vote will be required for the
election of independent auditors (Proposal 2) and the approval of Proposals 4
and 5. The affirmative vote of a majority of the outstanding shares entitled to
vote will be required for approval of Proposal 3. Votes may be cast "For" or
"Withheld" for each director nominee; votes withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all other
proposals and will have the same effect as negative votes.
All of the items on the proxy card are considered "routine" under the rules
of the New York Stock Exchange. Under such rules, brokers who hold shares in
street name have the authority to vote in their discretion on "routine" items in
the absence of specific instructions from beneficial owners.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation will reimburse brokerage firms, banks and other nominees, custodians
and fiduciaries for their reasonable expenses incurred in sending proxy
materials to beneficial owners of shares and obtaining their instructions.
Regular employees of the Corporation may solicit proxies personally, by mail or
by telephone. In addition, the Corporation has retained Georgeson & Co., Inc. to
assist in the distribution of the proxies and proxy statements for a fee
estimated not to exceed $16,000 plus out-of-pocket expenses.
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The Corporation has a policy that provides for the confidentiality of
stockholder proxies, ballots and vote tabulations, subject to certain
exceptions. The policy also provides for the tabulation of the vote by an
independent third party.
This proxy statement, the proxy and the Corporation's 1997 Annual Report
were first mailed to stockholders on March 6, 1998.
(1) ELECTION OF DIRECTORS
INFORMATION CONCERNING THE NOMINEES AND CURRENT DIRECTORS
The Corporation's Certificate of Incorporation provides that the members of
the Board of Directors shall be divided into three classes with approximately
one-third of the directors to stand for election each year for three-year terms.
The total number of directors is currently set pursuant to the Corporation's
By-Laws at nine. Of this number, three members of the Board of Directors have
terms expiring, and are nominees for election, at the 1998 Annual Meeting of
Stockholders. Three members have terms expiring at the 1999 Annual Meeting of
Stockholders and three members have terms expiring at the 2000 Annual Meeting of
Stockholders.
Unless instructions to the contrary are given, all proxies received by the
Corporation will be voted for the election of the three nominees named below as
directors of the Corporation to hold office until the 2001 Annual Meeting of
Stockholders and until their respective successors are elected and qualified.
All of the nominees have been recommended by the Board of Directors and all have
indicated a willingness to serve if elected. Should any nominee not be a
candidate at the 1998 Annual Meeting, all proxies received by the Corporation
will be voted in favor of the other nominees and for such substitute nominee (if
any) as shall be designated by the proxy holders named in the enclosed form of
proxy, or the number of directors may be reduced by the Board of Directors.
Certain information concerning each of the three nominees, and each current
director in the classes continuing in office, is set forth below.
NOMINEES FOR THREE-YEAR TERMS EXPIRING IN 2001
ROBERT W. MATSCHULLAT Director since 1996 Age 50
Vice Chairman of the Board, Chief Financial Officer and a director of The
Seagram Company Ltd., a beverage and entertainment/communications company, since
1995. He was a managing director, and head of worldwide investment banking, at
Morgan Stanley & Co., Inc. from 1991 to 1995. He also serves as a director of
USA Networks, Inc.
GORDON E. MOORE Director since 1981 Age 69
Chairman Emeritus of the Board and a director of Intel Corporation, a
semiconductor manufacturing company. He was Chairman of the Board of Intel
Corporation from 1979 until May 1997. He also serves as a director of Gilead
Sciences, Inc.
CONDOLEEZZA RICE Director since 1991 Age 43
Vice President and Provost of Stanford University since 1993. She is Professor
of Political Science at Stanford and has been a member of the Stanford faculty
since 1981. She also serves as a director of Chevron Corporation.
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DIRECTORS CONTINUING IN OFFICE UNTIL 1999
SAMUEL L. GINN Director since 1989 Age 60
Chairman of the Board, Chief Executive Officer and a director of AirTouch
Communications, Inc., a worldwide wireless telecommunications company, since
December 1993. He was Chairman of the Board, President, Chief Executive Officer
and a director of Pacific Telesis Group, a diversified telecommunications
company, from 1988 to 1994. He also serves as a director of Chevron Corporation,
Hewlett-Packard Company and Safeway Inc.
FRANK C. HERRINGER Director since 1986 Age 55
Chairman of the Board, Chief Executive Officer and President of the Corporation.
He has been Chairman since January 1996, Chief Executive Officer since 1991 and
President since 1986. He also serves as a director of The Charles Schwab
Corporation and Unocal Corporation.
CHARLES R. SCHWAB Director since 1989 Age 60
Chairman of the Board, Chief Executive Officer and a director of The Charles
Schwab Corporation, a discount brokerage firm. He also serves as a director of
AirTouch Communications, Inc., The Gap, Inc. and Siebel Systems, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL 2000
TONI REMBE Director since 1995 Age 61
Partner at Pillsbury Madison & Sutro LLP, a law firm. She also serves as a
director of Potlatch Corporation and SBC Communications Inc.
FORREST N. SHUMWAY Director since 1973 Age 70
Retired Vice Chairman of the Board of Allied-Signal Inc., a multi-industry
company. He also serves as a director of Aluminum Company of America.
PETER V. UEBERROTH Director since 1984 Age 60
Managing Director of The Contrarian Group, Inc., a business management company,
since 1989. He also serves as a director of Ambassadors International, Inc., CB
Commercial Real Estate Services Group Inc., The Coca-Cola Company and Promus
Hotel Corporation.
DIRECTOR COMPENSATION AND BENEFITS
Directors who are not employees of the Corporation or its subsidiaries
receive an annual retainer of $30,000 and a fee of $1,000 for each Board or
committee meeting attended. Committee chairs also receive an annual retainer of
$5,000. Directors who are employees of the Corporation do not receive any
compensation for their service as directors.
Directors are eligible annually to defer receipt of $5,000 or more of their
retainers and meeting fees under the Corporation's deferred compensation plan.
Amounts deferred are credited with interest. The interest rate is adjusted
annually and equals an average of rates paid on ten-year U.S. Treasury Notes,
plus a premium of 0 percent to 3 percent, depending on the length of the term of
deferral. The time and method of payment of deferred compensation and other
terms and conditions are set forth in deferred compensation elections made prior
to deferral by each participating director.
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Non-employee directors receive stock options pursuant to The 1985 Stock
Option and Award Plan of Transamerica Corporation (the "1985 Plan"). Under the
1985 Plan, each non-employee director is automatically granted a nonqualified
stock option for 1,500 shares each year. All options are granted at fair market
value on the effective date of the grant and generally have a term not exceeding
ten years and one month. Options issued to non-employee directors are
exercisable in full beginning six months after grant.
On the date of each Annual Meeting of Stockholders, non-employee directors
are granted phantom restricted shares of the Corporation's common stock. The
first such grant was made on May 1, 1997. On any grant date, the number of
phantom shares granted will equal 50 percent of the annual retainer then in
effect divided by the fair market value of a share of the Corporation's common
stock on such date. These phantom restricted shares are in addition to the
regular annual retainer. Phantom restricted shares will be credited with phantom
dividends on the same basis as the Corporation's common stock, and such
dividends will be immediately reinvested in additional phantom restricted shares
at the then fair market value of the Corporation's common stock. The value of a
phantom restricted share on any date will equal the then fair market value of a
share of the Corporation's common stock. Phantom restricted shares will be paid
in cash upon the earlier of the director's termination of service as a director
or a change of control of the Corporation (as defined in the plan).
Effective May 1, 1997, the Corporation's retirement plan for non-employee
directors was terminated and further accrual of benefits under such plan ceased.
The plan provided that non-employee directors with at least five years of
service were eligible upon retirement from the Board to receive annual
retirement payments equal to the annual retainer in effect at the time of
retirement (exclusive of any meeting fees or fees for serving as a committee
chair). Payments will be made to the director or, in the event of the director's
death, his or her spouse, for a period equal to the period of service as a
director through May 1, 1997. Directors had an opportunity prior to May 1, 1997,
to elect to have benefits earned based on service through that date converted
into phantom restricted shares based on the fair market value of the
Corporation's common stock on May 1, 1997. If such an election was made, payment
of the value of such phantom shares will be made as described in the preceding
paragraph.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS HELD
Mr. Moore (Chairman), Ms. Rembe, Ms. Rice and Messrs. Ginn and Schwab are
members of the Corporate Audit Committee of the Board of Directors. The
committee recommends the engagement of independent auditors, reviews the plan
and results of the audit engagement with the independent auditors, reviews all
professional services provided by the independent auditors, determines the
independence of the independent auditors, considers the fees of the independent
auditors, reviews the Corporation's annual financial statements, reviews the
scope and results of the Corporation's internal auditing activities and the
adequacy of internal accounting controls, and directs special investigations.
The Corporate Audit Committee held four meetings in 1997.
Messrs. Ueberroth (Chairman), Ginn, Matschullat and Shumway are members of
the Management Development and Compensation Committee of the Board of Directors.
The Committee establishes corporate compensation objectives, reviews comparative
studies of compensation programs to enable the Corporation to offer the
competitive compensation programs necessary to attract and retain superior
management and reviews and approves cash compensation arrangements and incentive
plans for senior management. The Committee also reviews, approves and
administers the Corporation's annual Value Added Incentive Plan, long-term
incentive plans, including stock option
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plans, the Deferred Compensation Plan and perquisite programs for senior
management. The Committee also grants options, restricted stock and other awards
under the Corporation's stock option plans. The Committee also nominates
corporate officers and reviews succession plans for senior corporate and
subsidiary officer positions. The Management Development and Compensation
Committee held six meetings in 1997.
Mr. Schwab (Chairman), Ms. Rice and Messrs. Herringer and Shumway are
members of the Nominating Committee of the Board of Directors. The Committee
recommends to the Board of Directors the size of the Board and criteria for
qualification as a candidate for Board membership, reviews the qualifications of
candidates for Board membership and directs the search for qualified candidates
to fill Board vacancies that may occur from time to time. The Committee also
recommends to the Board the slate of director candidates to be proposed for
election by the stockholders at the annual meetings and candidates to fill
vacancies which occur between such annual meetings. The Committee also
recommends to the Board the establishment of, and charge of responsibilities to,
various committees of the Board. The Nominating Committee held one meeting in
1997. Subject to the provisions of the Corporation's By-Laws, the Nominating
Committee will consider nominees for directors recommended by stockholders. Any
recommendations should be submitted in writing to the Secretary of the
Corporation, 600 Montgomery Street, San Francisco, California 94111.
In 1997, the Board of Directors held eight meetings. Each director, except
Mr. Schwab, attended 75 percent or more of the meetings of the Board and
committees of which he or she was a member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no "interlocks" (as defined by the rules of the Securities and
Exchange Commission) with respect to any member of the Management Development
and Compensation Committee of the Board of Directors, and such Committee
consists entirely of independent, non-employee directors.
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STOCKHOLDINGS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table indicates, as to each director and each executive
officer named in the Summary Compensation Table on page 19, and as to all
directors and executive officers as a group, the number of shares and percentage
of the Corporation's common stock beneficially owned as of March 6, 1998.
SHARES OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
NAME BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
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Directors
Samuel L. Ginn........................ 10,255(2)(3)(6) *
Frank C. Herringer.................... 1,858,121(3)(4)(5) 2.88%
Robert W. Matschullat................. 3,524(2)(6) *
Gordon E. Moore....................... 13,041(2)(6) *
Toni Rembe............................ 6,671(2)(6) *
Condoleezza Rice...................... 4,000(2)(6) *
Charles R. Schwab..................... 14,475(2)(6) *
Forrest N. Shumway.................... 17,242(2)(3)(6) *
Peter V. Ueberroth.................... 16,000(2)(3)(6) *
Executive Officers
Thomas J. Cusack...................... 593,567(3)(4) *
Richard H. Finn....................... 652,032(3)(4) 1.03%
Richard N. Latzer..................... 376,833(4) *
Robert A. Watson...................... 475,338(4) *
All directors and executive officers
as a group (19 persons)............ 4,866,820(2)(3)(4)(5)(6) 7.21%
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(1) Represents shares held directly and with sole voting and investment power
(or with voting and investment power shared with a spouse) unless otherwise
indicated. An asterisk indicates that the number of shares beneficially
owned represents less than 1 percent of the common stock outstanding at
February 23, 1998.
(2) Includes, as to each of Messrs. Ginn, Moore, Schwab, Shumway and Ueberroth,
6,000 shares, Ms. Rembe, 4,500 shares, Ms. Rice, 3,000 shares, and Mr.
Matschullat, 1,500 shares, which may be acquired upon the exercise of
director stock options, all of which are currently exercisable. These shares
are considered outstanding for purposes of calculating each director's
percentage ownership.
(3) Includes shares held by family trusts as to which each of the following
directors and executive officers and their respective spouses have shared
voting and investment power: Mr. Ginn, 4,255 shares; Mr. Shumway, 11,242
shares; Mr. Ueberroth, 10,000 shares; Mr. Finn, 49,896 shares; Mr. Cusack,
500 shares; as to which Mr. Herringer has either sole, or he and his spouse
have shared, voting and investment power, 123,410 shares; and all directors
and executive officers as a group, 218,484 shares.
(4) Includes shares which may be acquired upon the exercise of stock options
exercisable on March 6, 1998, or within 60 days thereafter, as follows: Mr.
Cusack, 592,633 shares; Mr. Finn, 586,666 shares; Mr. Herringer, 1,726,666
shares; Mr. Latzer, 373,125 shares; Mr. Watson, 475,000 shares; all
directors and executive officers as a group, 4,587,023 shares. These shares
are considered outstanding for purposes of calculating each such executive
officer's percentage ownership. Also includes shares held under the
Corporation's Employees Stock Savings Plan on December 31, 1997 and as to
which the participant has sole voting and investment power, as follows: Mr.
Cusack, 434 shares; Mr. Finn, 15,470 shares; Mr. Herringer, 3,801 shares;
Mr. Latzer, 708 shares; Mr. Watson, 338 shares; all directors and executive
officers as a group, 29,358 shares.
(5) Excludes 14,796 shares held by Mr. Herringer's spouse, as to which he has no
voting or investment power and as to which he disclaims beneficial
ownership.
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(6) Excludes deemed "shares" of phantom restricted stock held by each of the
following directors under the Phantom Restricted Stock Plan for Nonemployee
Directors: Mr. Ginn, 183 shares; Mr. Matschullat, 261 shares; Mr. Moore,
2,981 shares; Ms. Rembe, 584 shares; Ms. Rice, 446 shares; Mr. Schwab, 1,243
shares; Mr. Shumway, 183 shares; Mr. Ueberroth, 1,654 shares; all directors
and executive officers as a group, 7,534 shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than 10
percent of the Corporation's common stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
Based solely on the Corporation's review of the reporting forms received by
it, and written representations from certain persons that no Form 5 reports were
required to be filed by those persons, the Corporation believes that for 1997
all such filing requirements were satisfied.
(2) ELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP to audit the
financial statements of the Corporation for 1998, subject to the election of
such firm by the stockholders at the 1998 Annual Meeting of Stockholders. Ernst
& Young LLP has audited the financial statements of the Corporation annually
since the formation of the Corporation in 1928. If the stockholders do not elect
Ernst & Young LLP, the Board of Directors will consider the selection of other
auditors.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
with the opportunity to make a statement and respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL 2.
(3) AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Corporation's Certificate of Incorporation currently authorizes the
issuance of 150,000,000 shares of common stock, 1,200,000 shares of preferred
stock, and 5,000,000 shares of preference stock. The Board of Directors has
adopted resolutions proposing that the Certificate of Incorporation be amended
to increase the authorized shares of common stock by 100 percent, to
300,000,000. Following is the text of the first paragraph of Article IV of the
Certificate of Incorporation, as proposed to be amended:
The total number of shares of all classes of capital stock which
this Corporation shall have authority to issue is three hundred six
million two hundred thousand (306,200,000) shares, of which one
million two hundred thousand (1,200,000) shares shall be preferred
stock, of the par value of one hundred dollars ($100) per share; five
million (5,000,000) shares shall be preference stock, without par
value, and three hundred million (300,000,000) shares shall be common
stock, of the par value of one dollar ($1) per share.
The Board of Directors believes that it is in the Corporation's best
interest to increase the number of shares of common stock that the Corporation
is authorized to issue in order to provide additional flexibility to effect
stock splits or stock dividends, and to issue common stock for other corporate
purposes which may be identified in the future, such as the raising of equity
capital, adopting of additional employee benefit plans or reserving additional
shares for issuance under such
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plans, and to make acquisitions through the use of stock. As of December 31,
1997, the Corporation has approximately 62.9 million shares of common stock
outstanding and approximately 17.2 million shares reserved for issuance pursuant
to options previously granted under the Corporation's stock option plans. Based
upon the foregoing number of outstanding and reserved shares of common stock,
the Corporation currently has approximately 70,000,000 shares of common stock
available for issuance. Other than as permitted or required under the
Corporation's employee benefit plans and under outstanding options, the Board of
Directors has no immediate plans, agreements, or commitments to issue additional
shares of common stock. No additional action or authorization by the
Corporation's stockholders would be necessary prior to the issuance of
additional shares, unless required by applicable law or the rules of any stock
exchange on which the common stock is then listed or quoted.
Under the Corporation's Certificate of Incorporation, the Corporation's
stockholders do not have preemptive rights with respect to common stock. Thus,
should the Board of Directors elect to issue additional shares of common stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board of Directors elects to issue additional shares
of common stock, such issuance could have a dilutive effect on the earnings per
share, voting power, and holdings of current stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL 3.
(4) ADOPTION OF 1998 CASH LONG-TERM INCENTIVE PLAN
For many years, stock options have been the sole form of long-term
compensation utilized by the Corporation. In June 1997 the Management
Development and Compensation Committee (the "Compensation Committee"), following
a review of competitive long-term compensation programs (with the assistance of
an outside compensation consultant), determined to offer a new element of
competitive compensation that further links senior executive compensation with
stockholder returns.
Based upon the recommendation of the Compensation Committee, therefore, the
Board of Directors has approved the adoption of a long-term value added
incentive plan, the 1998 Cash Long-Term Incentive Plan (the "Cash LTIP"), and is
submitting the Cash LTIP for stockholder approval. This plan will compensate
senior executives for achieving targeted value added results during a multi-year
performance period.
The Board of Directors believes that the Cash LTIP is in the best interests
of stockholders because it bases a portion of long-term incentive compensation
on value added and thus further strengthens the relationship between senior
executive compensation and the long-term interests of stockholders.
DESCRIPTION OF THE CASH LTIP
The Cash LTIP is set forth in its entirety as Exhibit A to this Proxy
Statement and the following description is qualified in its entirety by
reference to Exhibit A.
PURPOSE
The Cash LTIP is intended to motivate participants to increase value for
all stockholders and to provide an element of competitive compensation.
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ELIGIBILITY
The Compensation Committee has the sole discretion to select participants
in the Cash LTIP from executives of the Company and its affiliates. The
Compensation Committee has selected four members of the Corporation's Senior
Executive Committee, which consists of the Chief Executive Officer and the
Executive Vice Presidents, and Mr. Latzer as participants, as shown in the table
on page 10. Non-employee directors are not eligible to participate in the Cash
LTIP.
AWARDS
Prior to September 29, 1997 (the "Determination Date"), the Compensation
Committee established (1) a target award for each participant based on
competitive levels of compensation for 1998 and 1999, (2) the performance goals
which must be achieved in order for the participant to be paid an award, and (3)
a formula for increasing or decreasing a participant's target award depending
upon how actual results compare to the goals. Target awards are expressed as a
unique dollar amount for each individual.
Performance goals are expressed as a targeted level of achievement of
cumulative "value added" over the two and one-half year period beginning on July
1, 1997, and ending on December 31, 1999 (the "Performance Period"). Under the
Cash LTIP, value added is defined as the Corporation's adjusted net income for
each year of the Performance Period minus a capital charge. For this purpose,
adjusted net income is the Corporation's net income available to common
stockholders determined in accordance with generally accepted accounting
principles, as adjusted for (a) the elimination of the cumulative effects of
changes in accounting standards, (b) the amortization of gains or losses on
equipment disposition in lieu of reported gains or losses, (c) amortized bond,
equity and other portfolio gains and losses in lieu of realized gains and losses
as reported, and (d) the economic impact of the amortization of intangibles,
including goodwill, acquired in a business acquisition in lieu of reported
intangible amortization. The capital charge to be subtracted from adjusted net
income is calculated by multiplying the Corporation's average adjusted equity
(as defined in the Cash LTIP) by the Corporation's cost of equity. The
Corporation's cost of equity is based on a formula adopted by the Compensation
Committee prior to the start of the Performance Period. For the Performance
Period, the cost of equity will be determined by adding (a) the Corporation's
risk premium (the long-term market growth in equity securities over the
risk-free rate multiplied by the Corporation's beta) and (b) the trend risk-free
rate.
The Compensation Committee has adopted a payout formula that includes the
level of value added for which participants will receive their target awards, as
well as the awards (if any) payable to participants for value added results that
are greater or less than the performance goals. Before any award is paid, the
Compensation Committee will certify the extent to which performance goals
applicable to each participant were achieved or exceeded. The actual award (if
any) for each participant will be determined by applying the payout formula to
the level of performance that has been certified by the Compensation Committee.
However, under no circumstances will any participant's award under the Cash LTIP
exceed $5,000,000. Also, the Compensation Committee retains discretion to reduce
(or eliminate) any award that would otherwise be payable to a participant. The
Compensation Committee may prospectively amend or terminate the Cash LTIP at any
time and for any reason.
If any awards become payable under the Cash LTIP, they will be paid in
February 2000. The Compensation Committee also has the right to declare that up
to 50 percent of any award shall be paid in restricted shares of the
Corporation's common stock, rather than cash. Any such shares would
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be issued under the Corporation's 1985 Stock Option and Award Plan. The number
of shares issued would equal the cash amount foregone, divided by the fair
market value of a share on the date that the cash payment would otherwise have
been made. If a "change of control" (as defined) of the Corporation occurs
before the end of the Performance Period, each participant will be entitled to
payment of between one-third and 100 percent of his or her target award, based
on the portion of the Performance Period which has been completed. Any such
payment will be made no later than the tenth business day after the change of
control.
Given that payments under the Cash LTIP are determined by comparing actual
performance to the performance goal established by the Compensation Committee,
it is not possible to conclusively state the amount of benefits (if any) which
will be paid under the Cash LTIP. The following table sets forth the target
awards that would be payable to the persons named in the Summary Compensation
Table on page 19 and to all current executive officers as a group if the
performance goals established by the Compensation Committee for the Performance
Period are met. If such goals are exceeded, the actual awards may be greater
than shown (subject to the $5,000,000 maximum noted above); conversely, if the
goals are not met, awards may be eliminated or reduced.
1998 CASH LONG TERM INCENTIVE PLAN
NAME AND POSITION TARGET AWARDS($)
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Frank C. Herringer, Chairman, President and Chief Executive
Officer................................................... 3,200,000
Thomas J. Cusack, Executive Vice President.................. 1,800,000
Robert A. Watson, Executive Vice President.................. 1,800,000
Richard H. Finn, Executive Vice President................... 0
Edgar H. Grubb, Executive Vice President and Chief Financial
Officer................................................... 1,000,000
Richard N. Latzer, Senior Vice President and Chief
Investment Officer........................................ 800,000
All current executive officers as a group................... 8,600,000
CERTAIN TAX ASPECTS
Section 162(m) of the Internal Revenue Code (the "Code") contains special
limits on the federal income tax deductibility of compensation paid to the
Corporation's Chief Executive Officer and to each of the other four most highly
compensated executive officers if the compensation exceeds $1,000,000 in any one
year. However, the Corporation can preserve the deductibility of any
compensation in excess of $1,000,000 if the compensation is paid under a plan
that has been approved by stockholders and otherwise qualifies as
"performance-based" under Section 162(m). The Cash LTIP has been designed to
qualify as performance-based compensation under Section 162(m). Assuming
stockholder approval, therefore, the Corporation believes that it will be able
to fully deduct compensation paid, if any, under the Cash LTIP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL 4.
(5) AMENDMENT TO 1995 PERFORMANCE STOCK OPTION PLAN
In 1995, the Corporation's stockholders approved the 1995 Performance Stock
Option Plan (the "1995 Plan"). Premium-priced and performance-vesting options
covering 5,000,000 shares of common stock were granted in 1995 under the plan
to, among others, the then-members of the Corporation's Senior Executive
Committee. As a condition of such grants, such executives were not
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eligible for additional stock options, or any other long-term compensation, in
1995, 1996 and 1997, and none were granted except in connection with a
promotion.
The Compensation Committee has determined that additional grants of
premium-priced and performance-vesting options are appropriate for 1998, and has
approved an amendment to the 1995 Plan to increase the number of shares
available for issuance thereunder. Stockholders are being asked to approve an
additional 2,000,000 shares for issuance under the 1995 Plan. If the increase is
approved, amendments to the Corporation's five other stock option plans will
also become effective, decreasing by 2,000,000 the number of shares available
for issuance under such plans. Therefore, approval of this proposal will not
result in any increase in shares authorized under the Corporation's option
plans. Furthermore, if the increase is approved, the Senior Executive Committee
members will receive no other stock options pursuant to the 1995 Plan or any
other plan for 1998 and 1999 (except in the event of a promotion), and the Chief
Executive Officer will receive no other stock options prior to 2002.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL 5.
The following description of the options granted for 1998 is qualified in
its entirety by reference to the 1995 Plan as amended, which is attached to this
Proxy Statement as Exhibit B.
OPTIONS
In January 1998, subject to stockholder approval, the Compensation
Committee granted, as shown below, premium-priced and performance-vesting stock
options under the 1995 Plan exercisable for 1,550,000 shares, including 105,000
options with an exercise price of $125 per share (the "$125 Options") and
1,445,000 options with an exercise price of $150 per share (the "$150 Options").
Options were granted to Mr. Herringer on January 2, 1998 and to the other
grantees on January 22, 1998 (in each case, the "Grant Date").
1995 PERFORMANCE STOCK OPTION AWARDS
PER SHARE NUMBER OF OPTION
NAME AND POSITION EXERCISE PRICE SHARES GRANTED
----------------- -------------- -----------------
Frank C. Herringer, Chairman, President and Chief
Executive Officer.............................. $150.00 645,000
Thomas J. Cusack, Executive Vice President....... $150.00 250,000
Robert A. Watson, Executive Vice President....... $150.00 250,000
Richard H. Finn, Executive Vice President........ N/A 0
Edgar H. Grubb, Executive Vice President and
Chief Financial Officer........................ $150.00 200,000
Richard N. Latzer, Senior Vice President and
Chief Investment Officer....................... $125.00 45,000
All current executive officers as a group........ $125.00 105,000
150.00 1,445,000
All current directors who are not executive
officers, as a group........................... N/A(1)
All employees, including current officers who are
not executive officers, as a group............. $125.00 0
150.00 0
Total Options Granted............................ $125.00 105,000
==========
150.00 1,445,000
==========
- ---------------
(1) Non-employee directors are not eligible to receive awards under the 1995
Plan.
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The $125 Options will vest ratably in three equal, annual installments
beginning three years from the Grant Date. The $150 Options will vest only if
(i) for a period of ten trading days out of any thirty consecutive trading days
ending on or before the fifth anniversary of the Grant Date, the reported
closing price of the Corporation's common stock is at least $150 per share
(subject to certain anti-dilution adjustments) and (ii) at or subsequent to the
time the preceding condition is met (but in any event within 10 years following
the Grant Date), the Corporation's total return to stockholders is at or above
the median level of stockholder return for a subset of the S&P Financial Index.
The measurement period for determining total return to stockholders commences
upon the Grant Date (or an earlier date such that the period is a minimum of one
year) and ends on the date the condition in clause (ii) is met.
In determining the exercise prices, the Compensation Committee considered
that, to achieve vesting of the $150 Options within the required time frames,
the Corporation's stock price would have to appreciate in excess of 40 percent
over the Corporation's 1997 year-end closing stock price of $106.50. Moreover,
these exercise prices represent an annual growth rate of more than 10 percent
over the vesting periods from June 1997, when the Compensation Committee first
considered awarding additional options under the 1995 Plan.
$150 Options are forfeited if the performance criteria described above are
not satisfied. Forfeited options will be cancelled and the shares covered by
such options will not be available again for grant. If a $125 Option or $150
Option expires or is cancelled for another reason, such as the resignation of an
optionee, those options will be available for grant again under the 1995 Plan,
but may not be regranted to any Senior Executive Committee member in the absence
of a promotion. The terms of any new option grants will be determined by the
Committee, including appropriate premium-pricing and/or performance-vesting
terms. Furthermore, the 1995 Plan prohibits the repricing of options other than
as appropriate following such actions as stock splits, stock dividends, other
extraordinary transactions or other changes to the capital structure of the
Corporation.
In the event that an individual retires under the Corporation's qualified
pension plan, becomes disabled or dies, and his or her options would have vested
within the following six months, the relevant options will vest as though the
optionee were still employed at the vesting date. If any options would have
vested more than six months following such event, such options will vest pro
rata based on the percentage of the vesting period the individual was employed
by the Corporation. The Compensation Committee may, in its sole discretion, also
apply the foregoing vesting provisions in the event of an individual's early
retirement.
$125 Options and $150 Options generally have a maximum term of ten years.
Vested options may be exercised for (i) up to three months following termination
of employment for a reason other than retirement, disability or death (but not
longer than the maximum term of the option), (ii) up to three years following
termination of employment if the termination is on account of total disability
and (iii) up to five years following termination of employment if the
termination is on account of early or normal retirement (but not longer than the
maximum term of the option). If the optionee dies while the option is
exercisable, such option may be exercised by the individual's estate or
beneficiary for up to three years from the date of death.
CHANGE OF CONTROL
In the event that a "change of control" (as defined in the 1995 Plan) of
the Corporation occurs prior to the exercise of the $150 Options, each
participant will be entitled to surrender his or her options and exercise
related tandem limited stock appreciation rights ("TLSARs"), which were
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granted in tandem with the $150 Options. In the event the corresponding option
is forfeited because it fails to vest within the applicable time frames
described above, the related TLSAR also will be forfeited.
The TLSARs become exercisable only in the event of a change of control and,
upon exercise, result in payments based on a smaller number of shares times the
spread between the market price on the date of grant with respect to the $150
Options, and the highest closing price of the Corporation's common stock during
the 60-day period ending on the date of the change of control (or, if higher,
the highest price per share paid in the transaction which gives rise to the
change of control). Exercise of an option (or portion thereof) granted under the
1995 Plan will result in proportionate cancellation of the corresponding TLSAR,
and vice versa.
The number of shares subject to TLSARs granted under the 1995 Plan for the
$150 Options are as follows: Mr. Herringer -- 235,000 shares; Mr.
Watson -- 106,490 shares; Mr. Cusack -- 106,490 shares; Mr. Grubb -- 85,192
shares; all current executive officers as a group -- 575,768 shares. A total of
1,420,768 shares are subject to TLSARs granted under the 1995 Plan as of the
date hereof. Non-employee directors and employees other than those selected by
the Compensation Committee are not eligible to receive TLSARs.
TRANSFERABILITY OF AWARDS
Options granted under the 1995 Plan generally may not be transferred or
assigned by the optionee. However, in limited circumstances, the optionee may
transfer his or her options pursuant to a court-approved domestic relations
order. In addition, the Committee has the right to permit the optionee to
transfer his or her options in bona fide gift to immediate family members or
certain non-profit organizations. Following the death of an optionee, options
may be transferred pursuant to the optionee's will or a valid beneficiary
designation.
TAX ASPECTS
The current general federal income tax consequences of options and TLSARs
granted under the 1995 Plan are summarized below.
A recipient of a stock option or TLSAR will not have taxable income upon
the grant of the option or TLSAR. The optionee will recognize ordinary income
upon exercise in an amount equal to the excess of the fair market value of the
shares acquired over the exercise price on the date of exercise. Any gain or
loss recognized upon any later disposition of the shares so acquired generally
will be capital gain or loss.
At the discretion of the Committee, the 1995 Plan allows an optionee to
satisfy tax withholding requirements under federal and state tax laws in
connection with the exercise of an option or TLSAR by electing to have shares of
common stock withheld, or by delivering to the Corporation already-owned shares,
having a value equal to the amount of withholding to be satisfied.
The Corporation will be entitled to a tax deduction in connection with an
award under the 1995 Plan only in an amount equal to the ordinary income
realized by the participant and at the time the participant recognizes such
income. In addition, the 1995 Plan has been designed to satisfy the requirements
of Section 162(m) of the Code, which otherwise might limit the federal income
tax deductibility of compensation paid to the Corporation's Chief Executive
Officer and to each of the other four most highly compensated executive
officers.
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ADMINISTRATION, AMENDMENT AND TERMINATION OF THE PLAN
The Compensation Committee will administer the Plan. The members of the
Compensation Committee must qualify as "non-employee directors" under Rule 16b-3
under the Securities Exchange Act of 1934 and as "outside directors" under
Section 162(m) of the Code (for purposes of qualifying the 1995 Plan as
performance-based compensation under such Section 162(m)).
Subject to the terms of the 1995 Plan, the Compensation Committee has the
sole discretion to determine the employees who shall be granted options and
TLSARs, the size of such awards, and the terms and conditions thereof. To date,
22 employees have been granted options or TLSARs under the 1995 Plan. The number
of shares covered by each award will be determined by the Compensation
Committee, but during any fiscal year of the Corporation no participant may be
granted options for more than 1,700,000 shares or TLSARs for more than 235,000
shares. A total of 7,000,000 shares of the Corporation's common stock will be
authorized for issuance under the 1995 Plan, subject to stockholder approval of
Proposal 5. The number of shares authorized, the numerical limitation on
individual grants, and the terms of outstanding options and TLSARs and will be
adjusted as appropriate to reflect any stock splits, stock dividends, other
extraordinary transactions or other changes to the capital structure of the
Corporation. The closing price of the Corporation's common stock on March 3,
1998 was $119 11/16.
The Board of Directors and the Compensation Committee are authorized to
amend the 1995 Plan at any time, but stockholder approval of an amendment is
required if necessary in order to preserve the 1995 Plan's qualification under
Section 162(m) of the Code.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Program
The Corporation's compensation program is designed to enhance shareholder
value by linking a large part of executive compensation directly to share price
and those aspects of performance that are highly correlated with share price.
The objective is to provide executives an opportunity to achieve total
compensation at the 75th percentile or above for exceptional performance. The
primary components of the compensation program are base salary, an annual cash
bonus, a long-term opportunity to participate in increased shareholder value
through grants of stock options and the Cash LTIP, which is being submitted for
stockholder approval.
Responsibilities of the Management Development and Compensation Committee
The Compensation Committee of the Board of Directors was established in
1961 and since that time has consisted solely of independent, non-employee
directors. The Committee establishes corporate compensation objectives, reviews
comparative studies of compensation programs to enable the Corporation to offer
the competitive compensation programs necessary to attract and retain superior
management and reviews and approves cash compensation arrangements and incentive
plans for senior management. The Compensation Committee also grants stock
options, restricted stock and other awards under the Corporation's stock option
plans, approves the terms of such grants and awards and interprets incentive
plans, as required. As administrator of the annual Value Added Incentive Plan,
the Compensation Committee also took certain actions for 1997, including
establishing target awards prior to the beginning of the year and certifying in
writing that performance goals were achieved prior to approving payment of
awards under that plan.
As needed, the Compensation Committee engages an executive compensation
consultant to review competitive levels of total compensation, including base
salary and annual and long-term incentive programs. Additionally, the consultant
provides information on the value of individual option awards, conducts
comparative studies, reviews proposed changes related to the Corporation's
compensation program, and provides information on general compensation trends.
Included in the Corporation's comparator group of companies are a combination of
companies in the S&P Financial Index (excluding banks and savings and loan
associations) and a sampling of companies with stockholders' equity of similar
size to that of the Corporation, for which data is readily available. The
Compensation Committee meets without management present to discuss the Chief
Executive Officer's performance, base salary and target incentive compensation.
Elements of the Compensation Program
The primary elements of the Corporation's compensation program for the
Chief Executive Officer ("CEO") and other executive officers of the Corporation
are described below.
Base Salary. Base salaries are reviewed annually by the Compensation
Committee using competitive data provided by the compensation consultant and
considering industry and national trends. Individual salaries are adjusted based
on this information and the executive's performance for the preceding year and
current responsibilities. On average, salaries of executive officers, including
the salary of the CEO, were between the median and 75th percentile of salaries
of like positions in comparator companies. The CEO last received a base salary
increase in January 1994.
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Annual Incentive Plan. The Value Added Incentive Plan (the "Value Added
Plan"), approved by stockholders in 1994, covers the CEO and the other named
executive officers. The Value Added Plan rewards management for both improving
operating results and efficiently employing the Corporation's capital. Awards
under the Value Added Plan are based on the Corporation's actual Value Added,
which is defined as the Corporation's Adjusted Net Income minus an equity
charge, expressed as a percentage of the Corporation's Average Adjusted Equity,
all as defined in the Value Added Plan. The only annual incentive award that the
Corporation's CEO received in 1997 was an award pursuant to the Value Added
Plan.
The Corporation's Value Added for 1997 generated the maximum of 300 percent
of target bonuses for plan participants. A significant contributor to that
result was the gain on the sale of the consumer finance operations. However, the
Compensation Committee exercised its discretion and reduced bonus amounts to 100
percent of the original target level. The Corporation continues to strengthen
its focus on increasing Value Added and to efficiently manage the capital
utilized in its business. The total amount awarded to other executive officers
named in the Summary Compensation Table on page 19 was based substantially on
Value Added as described above for the CEO. Additionally, the other executive
officers were awarded amounts based on the performance of business units
reporting to them and/or the accomplishment of certain strategic goals.
Stock Option Awards. In 1995, stockholders approved adoption of the 1995
Plan and the grants made pursuant to the 1995 Plan. Under the 1995 Plan, which
is designed to motivate management to achieve superior stockholder returns,
stockholders must realize significant returns on their investment before
management can receive any significant gains on their options. The 1995 Plan,
together with the annual Value Added Incentive Plan and the newly adopted Cash
LTIP (see pages 8-10), focuses the Corporation's senior management on delivering
significant shareholder value.
As approved by the Corporation's stockholders, the CEO received
premium-priced options and performance-vesting options in 1995. The number of
options granted to the CEO was determined in part based on his not receiving any
additional option awards for the three-year period 1995 through 1997.
Long-Term Incentive Plan. In 1997, the Board of Directors approved the
adoption of the Cash LTIP to reward senior management for achieving targeted
value added results during a multi-year performance period. See pages 8-10 for a
complete description of the Cash LTIP. While no executive has yet received any
compensation under the Cash LTIP, and there is no certainty, in light of the
performance goals built into the Cash LTIP, that any payout will occur, the
Compensation Committee nevertheless views the potential awards under such plan
as an integral part of the total compensation payable to the Corporation's
senior management for the specified performance period.
Policy Regarding Deductibility of Compensation
Section 162(m) of the Code limits the federal income tax deductibility of
compensation paid to the Corporation's CEO and to each of the other four most
highly compensated executive officers. The Corporation generally may deduct
compensation paid to such an officer only to the extent the compensation does
not exceed $1 million during any fiscal year or is "performance-based" as
defined in Section 162(m). In addition, Section 162(m) requires that the
Compensation Committee consist entirely of outside directors, as defined in the
Code, and the Corporation's Compensation Committee meets this requirement. The
Compensation Committee considers the net cost to the Corporation in making
compensation decisions. Accordingly, the annual Value Added Incentive Plan, the
Cash LTIP, the 1985 Stock Option and Award Plan, and the 1995 Plan each have
been designed to
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permit the Compensation Committee to make payments under those plans that will
qualify as performance-based compensation under Section 162(m). Thus, the
Corporation will continue to receive a federal income tax deduction for such
compensation.
Compensation Committee Members
Peter V. Ueberroth, Chairman
Samuel L. Ginn
Robert W. Matschullat
Forrest N. Shumway
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STOCK PRICE PERFORMANCE
The following graph shows the cumulative total return (with dividends
reinvested) of the Corporation, the S&P 500, and the S&P Financial Index* over
the years 1993 through 1997, inclusive:
5-YEAR CUMULATIVE TOTAL RETURN
PERFORMANCE CHART
- -------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF DECEMBER 31ST OF EACH YEAR
(ASSUME $100 WAS INVESTED ON DECEMBER 31, 1992)
-------------------------------------------------------------------
COMPANY/INDEX 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------------------------
Transamerica Corporation 122.57 111.76 168.95 188.09 258.81
- -------------------------------------------------------------------------------------------------------------
S&P 500 Index 110.08 111.53 153.45 188.68 251.63
- -------------------------------------------------------------------------------------------------------------
S&P Financial Index* 113.03 112.11 168.46 213.61 317.73
- --------------------------------------------------------------------------------
All data for the performance graph was provided by Standard & Poor's
Compustat Services.
- ---------------
* Adjusted to exclude banks and savings and loan institutions.
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The following tables contain specific compensation information for the
Chief Executive Officer and the next four most highly compensated individuals
serving as executive officers of the Corporation at December 31, 1997.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
---------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- -------- -------- ------------ ---------------
Frank C. Herringer............... 1997 $975,000 $975,000 0 $128,873
Chairman, President and Chief 1996 975,000 756,132 0 125,513
Executive Officer 1995 975,000 708,776 1,585,000 103,657
Robert A. Watson................. 1997 $670,000 $380,000 0 $ 74,141
Executive Vice President (2) 1996 640,000 300,000 50,000 68,466
1995 306,923 200,000 500,000 22,282
Richard H. Finn.................. 1997 $680,000 $300,000 0 $132,971
Executive Vice President 1996 670,000 300,000 0 260,363
1995 640,000 375,000 700,000 202,314
Richard N. Latzer................ 1997 $475,000 $450,000 37,500 $ 90,410
Senior Vice President and Chief 1996 450,000 350,000 35,000 80,132
Investment Officer 1995 430,000 300,000 155,000 48,992
Thomas J. Cusack................. 1997 $575,000 $300,000 0 $133,323
Executive Vice President 1996 500,000 300,000 0 128,797
1995 389,298 296,250 500,000 47,475
- ---------------
(1) For 1997, includes (i) employer matching contributions under the Stock
Savings Plan, a 401(k) plan: $1,125 for each of the named executive
officers; (ii) employer matching contributions under the Stock Savings Plan
Plus, a plan designed to supplement the 401(k) plan: Mr. Herringer, $76,785;
Mr. Watson, $42,525; Mr. Finn, $42,975; Mr. Latzer, $36,008; Mr. Cusack,
$38,358; (iii) employer contributions for additional life, accidental death
and dismemberment, and disability insurance: Mr. Herringer, $39,063; Mr.
Watson, $19,244; Mr. Finn, $88,871; Mr. Latzer, $43,861; Mr. Cusack, $7,128;
(iv) above market interest on deferred compensation: Mr. Herringer, $11,900;
Mr. Watson, $11,247; Mr. Latzer, $9,416; Mr. Cusack, $1,712; (v) forgiveness
of a portion of the principal amount of a loan in connection with relocation
and purchase of a new home: Mr. Cusack, $85,000 (see Certain Transactions on
pages 22-23).
(2) Mr. Watson became an executive officer in June 1995.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) EXPIRATION DATE 5% 10%
---- ---------- ------------- ------------ --------------- ---------- ----------
Frank C. Herringer..... 0
Robert A. Watson....... 0
Richard H. Finn........ 0
Richard N. Latzer...... 37,500 2.38% $86.38 Feb. 14, 2007 $2,037,000 $5,163,000
Thomas J. Cusack....... 0
- ---------------
(1) Options granted for a term of 10 years with an exercise price of $86.38 (the
market price on the date of grant) and become exercisable in four annual
installments commencing one year from the date of grant (assuming continued
employment). No stock appreciation rights were granted in 1997.
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(2) Subject to the discretion of the Management Development and Compensation
Committee, the exercise price and tax withholding obligations may be paid in
stock.
(3) The Corporation's stock price on February 14, 2007, the end of the option
term, would be $140.70 or $224.05 at annual appreciation rates of 5 percent
or 10 percent, respectively. There can be no assurance that such increase,
or any increase, in the price of the stock will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN THE MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997(2)
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
Frank C. Herringer..... 324,700 $18,093,072 1,597,500 462,500 $41,840,000 $21,846,000
Robert A. Watson....... 0 0 462,500 87,500 8,040,000 3,495,000
Richard H. Finn........ 116,700 6,986,305 710,000 220,000 24,652,000 10,411,000
Richard N. Latzer...... 0 0 335,000 92,500 13,913,000 3,082,000
Thomas J. Cusack....... 0 0 550,550 108,750 14,588,000 5,136,000
- ---------------
(1) The value realized is the difference between (a) the mean of the high and
low prices of the Corporation's common stock for New York Stock Exchange
Composite Transactions on the date of exercise and (b) the exercise price of
the option, multiplied by the number of shares exercised.
(2) The value of unexercisable options is the closing price of the Corporation's
common stock for New York Stock Exchange Composite Transactions on December
31, 1997, $106.50, less the exercise price of the option, multiplied by the
number of options outstanding.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
NUMBER OF
SHARES, PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
UNITS OTHER PERIOD UNDER NON-STOCK PRICED PLANS
OR OTHER UNTIL MATURA- ------------------------------------------------
NAME RIGHTS (#) TION OR PAYOUT THRESHOLD($)(2) TARGET($)(3) MAXIMUM($)(2)
---- ------------ -------------- --------------- ------------ -------------
Frank C. Herringer... N/A 2 1/2 years 800,000 3,200,000 4,800,000
Robert A. Watson..... N/A 2 1/2 years 450,000 1,800,000 2,700,000
Richard H. Latzer.... N/A 2 1/2 years 200,000 800,000 1,200,000
Thomas J. Cusack..... N/A 2 1/2 years 450,000 1,800,000 2,700,000
Edgar H. Grubb(4).... N/A 2 1/2 years 250,000 1,000,000 1,500,000
- ---------------
(1) Determinations by the Compensation Committee that the named executive
officers may participate in the Cash LTIP and might receive such
compensation for any such period is an award for purposes of this table.
Awards (i.e., the determination of participation in the Cash LTIP) for the
measurement period from July 1, 1997 to December 31, 1999 were made before
September 29, 1997. Under the Cash LTIP, each named executive officer may
receive compensation payable in cash or in common stock, or a combination
thereof, based upon the Company's achievement of objectives for value added
over the two and one-half year performance period. See Proposal 4 on page 8
for more information concerning the Cash LTIP.
(2) If 75 percent of the value added target established by the Compensation
Committee at the beginning of the period is achieved, the amounts payable
will be 25 percent of the target awards. If the valued added for the period
does not at least equal such minimum level, no amount will be paid. If the
value added target is exceeded, the maximum amounts payable will be 150
percent of the target awards.
(3) Target awards were established by the Compensation Committee based on
competitive levels of long-term compensation for 1998 and 1999.
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(4) Mr. Grubb is Executive Vice President and Chief Financial Officer and a
member of the Corporation's Senior Executive Committee.
PENSION PLAN AND SUPPLEMENTAL PENSION PLANS
The Corporation has had a retirement plan for eligible employees since
1935. Substantially all of the Corporation's subsidiaries participate in the
plan. Since applicable federal laws and the pension plan limit certain
participants' retirement plan benefits to an amount less than the amount
otherwise provided by the formula and prohibit certain compensation from being
counted for pension purposes, the Corporation, in accordance with the terms of
its Supplemental Pension Plan and SSP+ Supplemental Pension Plan, will make
supplemental payments to make up those differences.
YEARS OF SERVICE
---------------------------------------------
REMUNERATION 10 15 20 25 OR MORE
------------ -------- -------- ---------- ----------
$ 200,000 $ 39,000 $ 58,000 $ 78,000 $ 97,000
400,000 79,000 118,000 158,000 197,000
600,000 119,000 178,000 238,000 297,000
800,000 159,000 238,000 318,000 397,000
1,000,000 199,000 298,000 398,000 497,000
1,200,000 239,000 358,000 478,000 597,000
1,400,000 279,000 418,000 558,000 697,000
1,800,000 359,000 538,000 718,000 897,000
2,200,000 439,000 658,000 878,000 1,097,000
2,600,000 519,000 778,000 1,038,000 1,297,000
As of December 31, 1997, the named executive officers had the following
years of benefit service: Mr. Herringer, 19 years; Mr. Watson, 5 years; Mr.
Finn, 19 years; Mr. Latzer, 9 years; Mr. Cusack, 8 years.
The table above shows the total estimated annual retirement benefits
payable under all pension plans to employees, including executive officers, upon
normal retirement on January 1, 1998 after selected periods of benefit service
assuming such employees and their spouses elect a single life annuity rather
than a form of joint and survivor or other form of annuity. If another form of
annuity was selected, the benefits would generally be lower than those shown in
the table.
The pension plans currently provide for a benefit for each participant,
including the named executive officers, (payable as a single life annuity) of 2
percent of his or her final average compensation (average compensation during
the highest 60 consecutive months of his or her final 120 months of employment)
less 0.4 percent of his or her age 65 monthly Social Security-covered
compensation, with the result multiplied by years of benefit service (up to a
maximum of 25 years). Under the pension plans, an executive's pensionable
remuneration or covered compensation means his or her salary and target bonus
under the bonus plan(s) applicable to the executive. For each named executive
officer, covered compensation for 1996 was within 10 percent of the total Annual
Compensation shown in the Summary Compensation Table on page 19. Benefits earned
under the pension plans' prior benefit formulas are protected to the extent they
exceed benefits earned under the current formula. A participant is fully vested
in his or her retirement benefit after five years of service.
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SEVERANCE AGREEMENTS
The Company has entered into severance agreements with each of the
executive officers named in the Summary Compensation Table on page 19. The
agreements provide that, if the executive is terminated other than for cause,
retirement or disability within three years after a change of control of the
Corporation or if the executive terminates his employment for good reason within
such three-year period or voluntarily during the 30-day period following the
first anniversary of the change of control, the executive is entitled to receive
a lump sum severance payment equal to three times the sum of his highest target
annual compensation during the three years immediately preceding the change in
control, together with certain other payments and benefits, including
continuation of employee welfare benefits. An additional payment is required to
compensate the executive for excise taxes imposed with respect to payments or
benefits received due to a change of control (and for any income taxes imposed
with respect to such additional payment).
EMPLOYMENT AGREEMENT
On November 4, 1997, the Corporation entered into an employment agreement
with Mr. Herringer under which Mr. Herringer agreed to remain as Chairman of the
Board and Chief Executive Officer at least until December 31, 2001. The
agreement provides for base salary of not less than $975,000 per year, subject
to review at least annually. Mr. Herringer also will be entitled to participate
in the Corporation's annual Value Added Incentive Plan with a target annual
bonus of at least 100 percent of his base salary, provided that his actual bonus
(if any) will be determined pursuant to the terms of such plan. Mr. Herringer
will participate in the proposed Cash LTIP, which generally provides a target
bonus for him of $3.2 million to be paid in February 2000 if certain cumulative
value added targets for the period from July 1, 1997 through December 31, 1999
are achieved.
The agreement provides that, subject to stockholder approval of the
increase in shares available under the 1995 Plan, Mr. Herringer has been granted
nonqualified stock options to purchase 645,000 shares of the Corporation's
common stock pursuant to 1995 Plan with an exercise price of $150 per share.
Together with such options, Mr. Herringer was granted 235,000 TLSARs with an
exercise price of $105.19, which cannot be exercised unless (among other things)
there is a change of control (as defined in the 1995 Plan) of the Corporation.
As a retention incentive, Mr. Herringer was credited on January 2, 1998 with
105,000 phantom restricted shares of the Corporation's common stock to vest on
December 31, 2001, or his later actual retirement date. In addition to the
benefits available under Mr. Herringer's severance agreement with the
Corporation, a pro rata portion of such phantom restricted shares will vest if
his employment is terminated upon a change of control of the Corporation.
The agreement also provides that Mr. Herringer is entitled to participate
in the employee benefit plans (e.g., health insurance) generally available to
other executives and employees of the Corporation.
CERTAIN TRANSACTIONS
In August 1995, Mr. Cusack entered into an agreement with the Corporation
in connection with his relocation to Los Angeles pursuant to which the
Corporation agreed to loan Mr. Cusack $425,000 to assist him with the purchase
of a home in the Southern California area. The loan, which was made on August
15, 1995, is secured by a deed of trust on Mr. Cusack's residence. The loan is
interest-free and is being forgiven ratably over its five-year term provided
that Mr. Cusack remains an employee of
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the Corporation at each successive anniversary date of the loan. In 1997, the
principal amount of $85,000 was forgiven, and the current balance of the loan is
$255,000. The loan will be forgiven in full if Mr. Cusack dies or becomes
permanently disabled, if he terminates his employment for good reason (as
defined in the agreement), if the Corporation terminates his employment other
than for cause (as defined in the agreement) or if, at the Corporation's
request, he sells his home in the Southern California area and relocates in
connection with his continued employment by the Corporation. If Mr. Cusack dies
or becomes permanently disabled during the term of the loan, the Corporation has
agreed to reimburse him or his estate for taxes paid by him or his estate as a
result of the forgiveness of the loan. If, during the term of the loan, Mr.
Cusack voluntarily terminates his employment with the Corporation (other than
for good reason) or the Corporation terminates his employment for cause, the
principal amount of the loan then outstanding plus interest at 12 percent per
annum from the date of such termination will become due.
In 1997, the Corporation and its subsidiaries obtained legal services from
the law firm of Pillsbury Madison & Sutro LLP, of which Ms. Rembe is a member,
on terms which the Corporation believes were as favorable as would have been
obtained from unaffiliated third parties. It is anticipated that such law firm
will perform additional legal services for the Corporation and its subsidiaries
in 1998.
PRINCIPAL STOCKHOLDERS
Oppenheimer Capital, Oppenheimer Tower, World Financial Center, New York,
New York 10281, has advised the Corporation that it owned, at December 31, 1997,
8,200,732 shares, or 13.04 percent, of the Corporation's outstanding common
stock. Oppenheimer Capital had shared voting power and shared dispositive power
with respect to all 8,200,732 shares. The Corporation does not know of any other
person who is the beneficial owner of more than 5 percent of the Corporation's
outstanding common stock.
OTHER MATTERS
Management does not know of any matters to be brought before the Annual
Meeting except as specified in the Notice of the Annual Meeting. However, as to
any other matters which may properly come before the Annual Meeting, it is
intended that proxies, in the form enclosed, will be voted in accordance with
the judgment of the designated proxy holders.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal intended to be presented at the 1999 Annual
Meeting of Stockholders of the Corporation must be received by the Corporation
no later than November 6, 1998, for inclusion in the Corporation's Proxy
Statement and form of proxy relating to such meeting.
San Francisco, California
March 6, 1998
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EXHIBIT A
TRANSAMERICA CORPORATION
1998 CASH LONG-TERM INCENTIVE PLAN
1. ESTABLISHMENT AND PURPOSE
1.1 Purpose. Transamerica Corporation hereby establishes the Transamerica
Corporation 1998 Cash Long-Term Incentive Plan (the "Plan"). The Plan is
intended to increase shareholder value and the success of the Company by
motivating key executives to achieve the Company's objectives for value added.
1.2 Effective Date. The Plan is effective as of July 1, 1997.
2. DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.2 "Actual Award" means the actual award (if any) payable to a
Participant for the Performance Period. Each Actual Award is determined by the
Payout Formula, subject to the Committee's authority under Section 3.5 to reduce
the award otherwise determined by the Payout Formula.
2.3 "Adjusted Net Income" means the Company's net income in accordance
with Generally Accepted Accounting Principles as reported during the Performance
Period adjusted for (a) the elimination of the cumulative effects of changes in
accounting standards, (b) the amortization of gains or losses on equipment
disposition in lieu of reported gains or losses, (c) amortized bond, equity and
other portfolio gains and losses in lieu of realized gains and losses as
reported, and (d) the economic impact of the amortization of intangibles,
including goodwill, acquired in a business acquisition in lieu of reported
intangible amortization.
2.4 "Adjusted Equity" means the Company's stockholders' equity as reported
during the Performance Period, adjusted to exclude (a) preferred stock and (b)
net unrealized gains and losses on marketable equity and debt securities and
foreign currency translation adjustments, and to include the accumulated
intangibles, including goodwill, amortization adjustment as calculated for
Adjusted Net Income related to assets acquired in a business acquisition that
are still owned by the Company.
2.5 "Average Adjusted Equity" means the "three-point" quarterly average of
the Adjusted Equity for 1997 (the first point being June 30, 1997) and the
"five-point" quarterly average of the Adjusted Equity for each of the other
years in the Performance Period, 1998 and 1999 (the first point of each such
year being December 31 of the preceding year).
2.6 "Affiliate" means (a) any corporation in which the Company owns,
directly or indirectly, twenty-five percent or more of the voting stock, or any
partnership, limited liability company or other entity in which the Company's
ownership interest represents, directly or indirectly, twenty-five percent or
more of the total ownership interests in such partnership, limited liability
company, or entity; or (b) any corporation or any other entity (including, but
not limited to, partnerships, joint
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ventures and limited liability companies) that the Committee, in its sole
discretion, determines to be controlling, controlled by, or under common control
with the Company.
2.7 "Base Salary" means as to any Participant, his or her annualized
salary rate as of the first day of the Performance Period.
2.8 "Board" means the Company's Board of Directors.
2.9 "Change of Control" means the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 20% or more of either (1) the then-outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (2)
the combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this paragraph (a) the following acquisitions shall not
constitute, or be deemed to cause, a Change of Control: (i) any increase in
such percentage ownership of a Person to 20% or more resulting solely from
any acquisition of shares directly from the Company or any acquisition of
shares by the Company, provided, however, that any subsequent acquisitions
of shares by such Person that would add, in the aggregate, 2% or more
(measured as of the date of each such subsequent acquisition) to such
Person's beneficial ownership of Outstanding Company Common Stock or
Outstanding Company Voting Securities shall be deemed to constitute a
Change of Control, (ii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iii) any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
paragraph (c) below; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a Person other than
the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (1) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the then
Outstanding Company Common Stock and Outstanding Company Voting Securities,
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50% of, respectively, the then-outstanding shares
of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting
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Securities, as the case may be, (2) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or of such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then-outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the thenoutstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (3) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
2.10 "Committee" means the Management Development and Compensation
Committee of the Board.
2.11 "Company" means Transamerica Corporation, a Delaware corporation.
2.12 "Cost of Equity" means imputed equity cost based on a formula
approved by the Committee prior to the Determination Date.
2.13 "Cumulative Value Added" means the sum of the Value Added for the
periods (a) July 1, 1997 through December 31, 1997, (b) January 1, 1998 through
December 31, 1998, and (c) January 1, 1999 through December 31, 1999).
2.14 "Determination Date" means September 29, 1997.
2.15 "Disability" means a permanent and total disability determined in
accordance with uniform and nondiscriminatory standards adopted by the Committee
from time to time.
2.16 "Maximum Award" means as to any Participant, $5,000,000. The Maximum
Award is the maximum amount which may be paid to a Participant under the Plan.
2.17 "Participant" means an executive of the Company or an Affiliate who
has been selected by the Committee for participation in the Plan.
2.18 "Payout Formula" means the formula or payout matrix established by
the Committee pursuant to Section 3.4 in order to determine the Actual Awards
(if any) to be paid to Participants.
2.19 "Performance Goal" means the goal determined by the Committee (in its
discretion) to be applicable to Participants for the Performance Period. As
determined by the Committee, the Performance Goal applicable to all Participants
shall provide for a targeted level of achievement of Cumulative Value Added over
the Performance Period.
2.20 "Performance Period" means the two and one-half year period beginning
on July 1, 1997, and ending on December 31, 1999.
2.21 "Retirement" means, with respect to a Participant, Termination of
Employment by reason of the Participant's retirement at or after his or her
earliest permissible retirement date pursuant to and in accordance with his or
her employer's tax-qualified retirement plan.
2.22 "Target Award" means the target award payable under the Plan to a
Participant for the Performance Period, as determined by the Committee in
accordance with Section 3.3.
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2.23 "Termination of Employment" means a cessation of the
employee-employer relationship between a Participant and the Corporation or an
Affiliate for any reason, including, but not by way of limitation, a termination
by resignation, discharge, death, Disability, Retirement, or the disaffiliation
of an Affiliate, but excluding any such termination where there is a
simultaneous reemployment by the Corporation or an Affiliate.
2.24 "Value Added" means Adjusted Net Income minus a capital charge. The
capital charge is determined by multiplying the Company's Average Adjusted
Equity by the Cost of Equity. Prior to the Determination Date, the Committee
shall determine whether any significant item(s) shall be included or excluded
from the calculation of Value Added with respect to one or more Participants.
3. SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS
3.1 Selection of Participants. On or prior to the Determination Date, the
Committee, in its sole discretion, shall select the executives of the Company
and its Affiliates who shall be the initial Participants. After the
Determination Date, the Committee, in its sole discretion, may select one or
more newly hired or promoted executives to be Participants. In selecting
Participants, the Committee shall choose executives who are likely to have a
significant impact on the performance of the Company. Participation in the Plan
is in the sole discretion of the Committee. Accordingly, no executive is in any
way guaranteed or assured of being selected for participation.
3.2 Determination of Performance. The Committee, in its sole discretion,
shall establish the Performance Goal for Participants. For each Participant who
is selected as such prior to the Determination Date, his or her Performance Goal
also shall be established prior to the Determination Date. All Performance Goals
shall be set forth in writing.
3.3 Determination of Target Awards. The Committee shall establish a Target
Award for each Participant. Each Participant's Target Award shall be determined
by the Committee in its sole discretion, and each Target Award shall be set
forth in writing. For each Participant who is selected as such prior to the
Determination Date, his or her Target Award also shall be established prior to
the Determination Date.
3.4 Determination of Payout Formula or Formulae. The Committee, in its
sole discretion, shall establish a Payout Formula or Formulae for purposes of
determining the Actual Award (if any) payable to each Participant. Each Payout
Formula shall (a) be in writing, (b) be based on a comparison of actual
performance to the Performance Goal(s), (c) provide for the payment of a
Participant's Target Award if the Performance Goals are exactly achieved, and
(d) provide for an Actual Award greater than or less than the Participant's
Target Award, depending upon the extent to which actual performance exceeds or
falls below the Performance Goals. For each Participant who is selected as such
prior to the Determination Date, his or her Payout Formula also shall be
established prior to the Determination Date.
3.5 Determination of Actual Awards. After the end of the Performance
Period, the Committee shall certify in writing the extent to which the
Performance Goal applicable to each Participant was achieved or exceeded. The
Actual Award for each Participant shall be determined by applying the Payout
Formula to the level of actual performance which has been certified by the
Committee, subject to the provisions of this Section 3.5. Notwithstanding any
contrary provision of the Plan, no Participant's Actual Award under the Plan may
exceed his or her Maximum Award.
3.5.1 Committee Discretion to Reduce Awards. The Committee, in its
sole discretion, may reduce the Actual Award payable to any Participant to
the lesser of (a) his or her Target Award, or (b) 75% of the Actual Award
which otherwise would be payable under the Payout
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Formula. The Committee's authority under this Section 3.5.1 may, in the
Committee's sole discretion, be applied after any other reduction
provisions of this Section 3.5.
3.5.2 Death or Disability. If a Participant incurs a Termination of
Employment prior to the end of the Performance Period due to his or her
Disability or death, the Committee shall reduce the award which otherwise
would be payable under the Payout Formula to him or her proportionately
based on the portion of the Performance Period which remains after the date
of Termination of Employment.
3.5.3 Retirement or Certain Involuntary Terminations of
Employment. If a Participant incurs a Termination of Employment prior to
the end of the Performance Period (a) due to his or her Retirement or (b)
other than for "cause" or due to Disability or death, the Committee, in its
discretion, may reduce or eliminate the award which otherwise would be
payable to him or her under the Payout Formula. For purposes of this
Section 3.5.3, "cause" has the same meaning as under the standard form of
agreement regarding termination of employment following a change of control
applicable to the Company's senior executives, as such standard form may be
amended from time to time.
3.5.4 Other Terminations of Employment. Except as otherwise expressly
provided in Section 3.5.2 or 3.5.3, if a Participant incurs a Termination
of Employment prior to the end of the Performance Period, he or she shall
not be entitled to the payment of an Actual Award.
3.5.5 Cessation of SMC Status. If a Participant ceases to be a member
of the Company's Senior Management Council (or any successor thereto), but
remains an employee of the Company or an Affiliate, the Committee, in its
sole discretion, may reduce or eliminate the Actual Award payable to the
Participant below that which otherwise would be payable to him or her under
the Payout Formula.
4. PAYMENT OF AWARDS
4.1 Right to Receive Payment. Each Actual Award that may become payable
under the Plan shall be paid solely from the general assets of the Company or
the Affiliate that directly employs the Participant (as the case may be).
Nothing in this Plan shall be construed to create a trust or to establish or
evidence any Participant's claim of any right other than as an unsecured general
creditor with respect to any payment to which he or she may be entitled.
4.2 Timing of Payment. Payment of each Actual Award shall be made in
February 2000, except as provided in Section 4.4.
4.3 Form of Payment. Each Actual Award normally shall be paid in cash in a
single lump sum. However, the Committee, in its sole discretion, may declare up
to 50% of any Actual Award payable in restricted shares of the Company's common
stock granted under the Company's 1985 or 1996 Stock Option and Award Plan. The
number of shares so granted shall be determined by dividing (a) the cash amount
foregone, by (b) the "fair market value" of a share on the date that the cash
payment otherwise would have been made. For this purpose, "fair market value"
shall mean the closing price on the New York Stock Exchange on the day in
question. Any restricted stock so awarded shall vest not later than the date
that is two years after the date of grant (assuming continued employment with
the Company and its Affiliates), subject to 100% acceleration of vesting for (1)
Termination of Employment due to death, Disability, or Retirement, or (2) the
occurrence of a Change of Control.
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4.4 Effect of Change of Control. Notwithstanding any contrary provision of
the Plan, if a Change of Control occurs prior to the end of the Performance
Period, each Participant who was an employee of the Company or an Affiliate
immediately prior to the Change of Control shall be entitled to a payment equal
to the greater of (a) one-third of his or her Target Award, or (b) the
proportion of his or her Target Award determined by dividing (y) the number of
days through the effective date of the Change of Control by (z) the number of
days in the Performance Period. Such payment shall be made (a) in a single cash
lump sum, and (b) no later than the tenth business day after the Change of
Control.
4.5 Payment in the Event of Death. If a Participant dies prior to the
payment of an Actual Award earned by him or her, the Award shall be paid to his
or her beneficiary.
4.5.1 Beneficiary Designations. Each Participant may, pursuant to
such procedures as the Committee may specify, designate one or more
beneficiaries.
4.5.2 Spousal Consent. If a Participant designates a person other
than or in addition to his or her spouse as a primary beneficiary, the
designation shall be ineffective unless the Participant's spouse consents
to the designation. Any spousal consent required under this Section 4.5.2
shall be ineffective unless it (a) is set forth in writing in a form
specified in the discretion of the Committee, and (b) acknowledges the
effect of the Participant's designation of another person as his or her
beneficiary under the Plan. Notwithstanding this consent requirement, if
the Participant establishes to the satisfaction of the Committee that
written spousal consent may not be obtained because the Participant has no
spouse or the spouse cannot be located, his or her designation shall be
effective without a spousal consent. Any spousal consent required under
this Section 4.5.2 shall be valid only with respect to the spouse who signs
the consent. A Participant may revoke his or her beneficiary designation at
any time, provided that such revocation is in writing.
4.5.3 Changes and Failed Designations. A Participant may designate
different beneficiaries (or may revoke a prior beneficiary designation) at
any time by delivering a new designation (or revocation of a prior
designation) in accordance with this Section 4.5. Any designation or
revocation shall be effective only if it is received by the Committee.
However, when so received, the designation or revocation shall be effective
as of the date the notice is executed (whether or not the Participant still
is living), but without prejudice to the Committee on account of any
payment made before the change is recorded. The last effective designation
received by the Committee shall supersede all prior designations. If a
Participant dies without having effectively designated a beneficiary, or if
no beneficiary survives the Participant, the Participant's Actual Award (if
any) shall be paid to his or her estate.
4.5.4 Authorized Plan Administrator. For purposes of beneficiary
designations made by Participants, the Committee may designate an
individual to act on its behalf. Such an Authorized Plan Administrator
shall be the Company's Director of Compensation unless designated otherwise
by the Committee.
5. ADMINISTRATION
5.1 Committee is the Administrator. The Plan shall be administered by the
Committee.
5.2 Committee Authority. The Committee shall have all discretion and
authority necessary or appropriate to administer the Plan and to interpret the
provisions of the Plan. Any determination, decision or action of the Committee
in connection with the construction, interpretation, administra-
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tion or application of the Plan shall be final, conclusive, and binding upon all
persons, and shall be given the maximum deference permitted by law.
5.3 Tax Withholding. The Company shall withhold all applicable taxes from
any payment, including any federal, FICA, state, and local taxes.
6. GENERAL PROVISIONS
6.1 Nonassignability. A Participant shall have no right to assign or
transfer any interest under this Plan.
6.2 No Effect on Employment. The establishment and subsequent operation of
the Plan, including eligibility as a Participant, shall not be construed as
conferring any legal or other rights upon any Participant for the continuation
of his or her employment for the duration of the Performance Period or for any
other period. Employment with the Company is on an at-will basis only. The
Company or the Affiliate employing the Participant expressly reserves the right,
which may be exercised at any time and without regard to when during the
Performance Period such exercise occurs, to terminate any Participant's
employment with or without cause, and to treat him or her without regard to the
effect which such treatment might have upon him or her as a Participant.
6.3 Compensation not Counted under other Plans. Neither Target Awards nor
any Actual Awards paid under the Plan will be considered for purposes of
contributions or benefits under any other employee benefit plan sponsored by the
Company and/or its Affiliates, provided up to 75% of the cash portion of a
Participant's Actual Award (if any) may be deferred in accordance with the
provisions of the Company's Deferred Compensation Plan pursuant to elections
made in accordance with such plan.
6.4 No Individual Liability. No member of the Committee or the Board, or
any officer of the Company or an Affiliate, shall be liable for any
determination, decision or action made in good faith with respect to the Plan or
any award under the Plan.
6.5 Severability; Governing Law. If any provision of the Plan is found to
be invalid or unenforceable, such provision shall not affect the other
provisions of the Plan, and the Plan shall be construed in all respects as if
such invalid provision had been omitted. The provisions of the Plan shall be
governed by and construed in accordance with the laws of the State of
California, with the exception of California's conflict of laws provisions.
7. AMENDMENT AND TERMINATION
7.1 Amendment and Termination. Prior to a change of control, the Board may
amend or terminate the Plan at any time and for any reason provided that no
amendment or termination may, without the consent of the Participant, alter or
impair any rights or obligations under any Target Award of such Participant.
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EXHIBIT B
TRANSAMERICA CORPORATION
1995 PERFORMANCE STOCK OPTION PLAN
SECTION 1
BACKGROUND AND PURPOSE
1.1 Background and Effective Date. The Plan permits the grant of Options
and Tandem Limited Stock Appreciation Rights. The Plan is effective as of
January 26, 1995, subject to ratification by an affirmative vote of the holders
of a majority of the Shares which are present in person or by proxy and entitled
to vote at the 1995 Annual Meeting of Stockholders. Awards may be granted prior
to the receipt of such vote, but such grants shall be null and void if such vote
is not in fact received.
1.2 Purpose of the Plan. The Plan is intended to attract, motivate, and
retain key executives of the Corporation and its Affiliates. The Plan is
intended to motivate Participants to manage the Corporation to provide a
superior return to stockholders. The Plan is further intended to align
Participants' interests with those of the Corporation's stockholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.2 "Affiliate" means (a) any corporation in which the Corporation owns,
directly or indirectly, twenty-five percent or more of the voting stock, or any
partnership, limited liability company or other entity in which the
Corporation's ownership interest represents, directly or indirectly, twenty-five
percent or more of the total ownership interests in such partnership, limited
liability company, or entity; or (b) any corporation or any other entity
(including, but not limited to, partnerships, joint ventures and limited
liability companies) that the Committee, in its sole discretion, determines to
be controlling, controlled by, or under common control with the Corporation.
2.3 "Award" means, individually or collectively, a grant under the Plan of
Options and/or TLSARs.
2.4 "Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award.
2.5 "Board" means the Board of Directors of the Corporation.
2.6 "Change of Control" means the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 20% or more of either (1) the then-
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outstanding shares of common stock of the Corporation (the "Outstanding
Corporation Common Stock") or (2) the combined voting power of the
then-outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that for purposes of this paragraph (a)
the following acquisitions shall not constitute, or be deemed to cause, a
Change of Control: (i) any increase in such percentage ownership of a
Person to 20% or more resulting solely from any acquisition of shares
directly from the Corporation or any acquisition of shares by the
Corporation, provided, however, that any subsequent acquisitions of shares
by such Person that would add, in the aggregate, 2% or more (measured as of
the date of each such subsequent acquisition) to such Person's beneficial
ownership of Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities shall be deemed to constitute a Change of
Control, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (iii) any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
paragraph (c) below; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents, by or on behalf
of a Person other than the Board; or
(c) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless, following
such Business Combination, (1) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the then
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the
then-outstanding shares of common stock and the combined voting power of
the then-outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or
all or substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be, (2) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Corporation or of such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then-outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined
voting power of the then-outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (3) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
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(d) approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
2.7 "Change of Control Value" means the greater of (a) the highest Fair
Market Value of a Share during the period of 60 consecutive days which ends on
the date of a Change of Control, or (b) the highest price per Share paid in the
transaction which gives rise to the Change of Control.
2.8 "Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
2.9 "Committee" means the Management Development and Compensation
Committee of the Board, or any other committee appointed by the Board (pursuant
to Section 3.1) to administer the Plan.
2.10 "Corporation" means Transamerica Corporation, a Delaware corporation,
or any successor thereto.
2.11 "Director" means any individual who is a member of the Board.
2.12 "Disability" means a Termination of Employment by reason of the
Executive's becoming permanently and totally disabled. An Executive shall be
deemed to have become permanently and totally disabled for purposes of the Plan
if (and only if) he or she has become permanently and totally disabled under the
long-term disability plan sponsored by his or her employer.
2.13 "Early Retirement" means a Termination of Employment by reason of the
Executive's early retirement at or after his or her "Early Retirement Date"
under the Retirement Plan for Salaried U.S. Employees of Transamerica
Corporation and Affiliates (or any successor thereto).
2.14 "Executive" means (a) an employee of the Corporation or of an
Affiliate who is a member of the SEC and/or the SMC, whether such employee is a
member at the time the Plan is adopted or becomes a member subsequent to the
adoption of the Plan, or (b) with respect to Options granted pursuant to Section
5.3.3(a) or (b), an employee of the Corporation or of an Affiliate, whether such
employee is so employed at the time the Plan is adopted or becomes so employed
subsequent to the adoption of the Plan.
2.15 "Exercise Price" means the price at which a Share may be purchased by
a Participant pursuant to the exercise of an Option or TLSAR.
2.16 "Fair Market Value" means the last quoted per Share selling price for
Shares on the relevant date, as quoted in the New York Stock Exchange Composite
Transactions Index published in The Wall Street Journal, or if there were no
sales on such date, the last quoted selling price on the nearest day after the
relevant date, as determined by the Committee.
2.17 "Grant Date" means, with respect to an Award, the date that the Award
was granted.
2.18 "Normal Retirement" means a Termination of Employment by reason of
the Executive's retirement at or after his or her "Normal Retirement Date" under
the Retirement Plan for Salaried U.S. Employees of Transamerica Corporation and
Affiliates (or any successor thereto).
2.19 "Option" means an option to purchase Shares which is granted under
Section 5 and which is not intended to be an Incentive Stock Option under
section 422 of the Code.
2.20 "Participant" means an Executive who has an outstanding Award.
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2.21 "Plan" means the Transamerica Corporation 1995 Performance Stock
Option Plan, as set forth in this instrument and as hereafter amended from time
to time.
2.22 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act.
2.23 "SEC" means the Corporation's Senior Executive Committee (or any
successor thereto).
2.24 "SMC" means the Corporation's Senior Management Council (or any
successor thereto).
2.25 "Section 16 Person" means a person who, with respect to the Shares,
is subject to section 16 of the 1934 Act.
2.26 "Shares" means the shares of common stock of the Corporation.
2.27 "Tandem Limited Stock Appreciation Right" or "TLSAR" means an Award
granted under Section 6 in connection with a related Option, the exercise of
which shall require forfeiture of the related Option or portion thereof (and
when the Option is exercised, the TLSAR shall be similarly cancelled).
2.28 "Termination of Employment" means a cessation of the
employee-employer relationship between an Executive and the Corporation or an
Affiliate for any reason, including, but not by way of limitation, a termination
by resignation, discharge, death, Disability, Early Retirement, Normal
Retirement, or the disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment by the Corporation or an
Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board. The Committee shall be comprised solely of Directors who
both are (a) "disinterested persons" under Rule 16b-3, and (b) "outside
directors" under section 162(m) of the Code.
3.2 Authority of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan's provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Executives shall be granted Awards, (b) prescribe the terms
and conditions of the Awards, (c) interpret the Plan and the Awards, (d) adopt
such procedures and subplans as are necessary or appropriate to permit
participation in the Plan by Executives who are foreign nationals or employed
outside of the United States, (e) adopt rules for the administration,
interpretation and application of the Plan as are consistent therewith, and (f)
interpret, amend or revoke any such rules. Except as provided in Section 4.3,
after an Award has been granted, the Committee shall not reduce the Exercise
Price of the Award (or cancel the Award and grant a substitute Award having a
lower Exercise Price).
3.3 Delegation by the Committee. The Committee, in its sole discretion and
on such terms and conditions as it may provide, may delegate all or any part of
its authority and powers under the Plan to one or more directors or officers of
the Corporation; provided, however, that the Committee may not delegate its
authority and powers (a) with respect to Section 16 Persons, or (b) in any way
which would jeopardize the Plan's qualification under section 162(m) of the Code
or Rule 16b-3.
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3.4 Decisions Binding. All determinations and decisions made by the
Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the total number of Shares available for grant under the Plan shall not exceed
7,000,000. Shares granted under the Plan may be either authorized but unissued
Shares or treasury Shares.
4.2 Lapsed Awards. If an Award (or portion thereof) is cancelled,
terminates, expires, or lapses for any reason other than failure of an Option to
become exercisable due to the price of the Shares not reaching the Fair Market
Value specified in the Award Agreement for the required time during the
specified period, any Shares subject to such Award again shall be available to
be the subject of an Award. If an Option (or portion thereof) is cancelled,
terminates, expires, or lapses due to failure of the Option to become
exercisable on account of the price of the Shares not reaching the Fair Market
Value specified in the Award Agreement for the required time during the
specified period, any Shares subject to such Option shall not be available to be
the subject of another Award.
4.3 Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, distribution or other
change in the corporate structure of the Corporation affecting the Shares, the
Committee shall adjust the number and class of securities which may be delivered
under the Plan, the number, class, and price of the securities subject to
outstanding Awards, the prices set forth in Sections 5.3.1, 5.3.2, 5.3.3(a) and
(b), 5.4.1, 5.4.2, and 5.4.6(a) and (b) (and if applicable, of any other Options
granted pursuant to Section 5.3.3 or 5.4.6), and the numerical limit of Sections
5.1 and 6.1, in such manner as the Committee (in its sole discretion) shall
determine to be appropriate to prevent the dilution or diminution of Awards.
Notwithstanding the preceding sentence, the number of Shares subject to any
Award shall always be a whole number.
SECTION 5
OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Executives at any time and from time to time as
determined by the Committee in its sole discretion. The Committee, in its sole
discretion, shall determine the number of Shares subject to each Option,
provided that during any calendar year, no Participant shall be granted Options
covering more than 1,700,000 Shares.
5.2 Option Agreement. Each Option shall be evidenced by an Award
Agreement. The Award Agreement shall specify the Exercise Price, the expiration
date of the Option, the number of Shares to which the Option pertains, any
conditions to exercise of the Option, and such other terms and conditions as the
Committee, in its sole discretion, shall determine.
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5.3 Exercise Price. The Exercise Price for each Option shall be determined
by the Committee in accordance with the provisions of this Section 5.3.
5.3.1 Options Granted to SEC Members. The Exercise Price of Options
that are granted on January 26, 1995, to members of the SEC shall be
determined as follows. (The Fair Market Value of a Share on January 26,
1995, was $50.75 per Share.)
(a) The Exercise Price for one of the Options granted to each such
Executive shall be $60 per Share, The Option shall cover not more than
30% of the total Shares covered by all Options granted to the Executive
on January 26, 1995.
(b) The Exercise Price for one of the Options granted to each such
Executive shall be $82 per Share. The Option shall cover not more than
30% of the total Shares covered by all Options granted the Executive on
January 26, 1995.
(c) The Exercise Price for one of the Options granted to each such
Executive shall be $100 per Share. The Option shall cover not less than
40% of the total Shares covered by all Options granted to the Executive
on January 26, 1995.
(d) Notwithstanding the preceding, in the case of a member of the
SEC who is expected to be eligible for Normal Retirement prior to
January 1, 2002, (1) one of the Options granted to the Executive shall
have an Exercise Price of $60 per Share and shall cover not more than
30% of the Shares covered by all Options granted to the Executive on
January 26, 1995, and (2) the other Option granted to the Executive
shall have an Exercise Price of $82 per Share and shall cover the
remaining balance of the Shares covered by all Options granted to the
Executive on January 26, 1995.
5.3.2 Options Granted to Other SMC Members. In the case of each
Option that is granted on January 26, 1995, to a member of the SMC (but not
of the SEC), the Exercise Price for 100% of the Shares covered by the
Option shall be $100 per Share. (The Fair Market Value of a Share on
January 26, 1995, was $50.75 per Share.)
5.3.3 Other Options. Except as provided in subparagraphs (a) and (b)
of this Section 5.3.3, in the case of each Option that is not granted
pursuant to Section 5.3.1 or Section 5.3.2, the Exercise Price of such
Option shall be determined by the Committee in its discretion, provided
that any such Exercise Prices shall represent an appropriate premium over
the then Fair Market Value of a Share, as determined by the Committee.
(a) Options with an Exercise Price of $125 per Share granted in
January 1998 for 100% of the Shares covered by the Option may be granted
to any Executive designated by the Committee.
(b) Options with an Exercise Price of $150 per Share granted in
January 1998 for 100% of the Shares covered by the Option shall be
granted to any Executive designated by the Committee.
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5.4 Exercisability of Options. Each Option shall become exercisable in
accordance with the provisions of this Section 5.4.
5.4.1 Options Granted to SEC Members. Each Option that is granted on
January 26, 1995, to an Executive who is a member of the SEC shall become
exercisable in accordance with the provisions of this Section 5.4.1, but
subject to the special rules of Sections 5.4.3, 5.4.4., and 5.4.5.
(a) With respect to an Option that has an Exercise Price of $60 per
share, the right to exercise 33 1/3% of the Shares covered by the Option
shall accrue on the third anniversary of the Grant Date, the right to
exercise an additional 33 1/3% of such Shares shall accrue on the fourth
anniversary of the Grant Date, and the right to exercise the remaining
Shares shall accrue on the fifth anniversary of the Grant Date, provided
in each case that the Participant remains an Executive on the applicable
anniversary date.
(b) With respect to an Option that has an Exercise Price of $82 per
share, the right to exercise 100% of the Shares covered by the Option
shall accrue on the tenth trading day (occurring within a period of 30
consecutive trading days) on which the Fair Market Value of a Share is
at least $82, provided that such tenth trading day occurs not later than
five years after the Grant Date, and provided further that the
Participant is an Executive on each such trading day (except to the
extent provided in Sections 5.4.3 and 5.4.4).
(c) With respect to an Option that has an Exercise Price of $100
per share, the right to exercise 100% of the Shares covered by the
Option shall accrue on the tenth trading day (occurring within a period
of 30 consecutive trading days) on which the Fair Market Value of a
Share is at least $100, provided that such tenth trading day occurs not
later than seven years after the Grant Date, and provided further that
the Participant is an Executive on each such trading day (except to the
extent provided in Sections 5.4.3 and 5.4.4).
5.4.2 Options Granted to Other SMC Members. Each Option that is
granted on January 26, 1995, to an Executive who is a member of the SMC
(but not of the SEC) shall become exercisable as to 100% of the Shares
covered by the Option on the tenth trading day (occurring within a period
of 30 consecutive trading days) on which the Fair Market Value of a Share
is at least $100, provided that such tenth trading day occurs within seven
years of the Grant Date, and provided further that the Participant is an
Executive on each such trading day (except to the extent provided in
Sections 5.4.3 and 5.4.4.
5.4.3 Special Rules for Normal and Early Retirement. If a Participant
incurs a Termination of Employment on account of Normal Retirement, the
following special rules shall apply (subject to Section 5.5). If within six
months after the Participant's Normal Retirement, the right to exercise any
particular Shares would have accrued (had the Participant not incurred a
Termination of Employment), by virtue of additional service, changes in the
Fair Market Value of the Shares or the occurrence of a Change of Control,
the right to exercise such Shares shall accrue on the date that such right
otherwise would have accrued. If more than six months following the
Participant's Normal Retirement, the right to exercise any particular
Shares would have accrued (had the Participant not incurred a Termination
of Employment), by virtue of additional service, changes in the Fair Market
Value of the Shares or the occurrence of Change of Control, the right to
exercise a portion of such Shares shall accrue on the date that such right
otherwise would have accrued. The Committee shall determine such portion on
a pro-rata basis, based on the time elapsed from the Grant Date to the date
of Normal Retirement and the vesting date. The Committee, in its sole
discretion and on such terms and conditions as it may
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provide, may apply the special rules of this section 5.4.3 to a Participant
who incurs a Termination of Employment on account of Early Retirement.
5.4.4 Special Rule for Disability or Death. If a Participant incurs a
Termination of Employment on account of Disability or death, the following
special rules shall apply (subject to Section 5.5). If the date of the
Participant's Disability or death is within six months of the date when the
right to exercise any Shares would have accrued (had the Participant not
incurred a Termination of Employment), by virtue of additional service,
changes in the Fair Market Value of the Shares or the occurrence of a
Change of Control, the right to exercise such Shares shall accrue on the
date that such right otherwise would have accrued. If the date of the
Participant's Disability or death is more than six months prior to the date
when the right to exercise any particular Shares would have accrued (had
the Participant not incurred a Termination of Employment), by virtue of
additional service, changes in the Fair Market Value of the Shares or the
occurrence of a Change of Control, the right to exercise a portion of such
Shares shall accrue on the date that such right otherwise would have
accrued. The Committee shall determine such portion on a pro-rata basis,
based on the time elapsed from the Grant Date to the date of Disability or
death and the vesting date.
5.4.5 Special Rule for Change of Control. With respect to each Option
described in Section 5.3.1(a) or 5.3.3(a), if a Change of Control occurs
prior to the Participant's Termination of Employment, the right to exercise
100% of the Shares subject to such Option shall accrue on the date that the
Change of Control occurs.
5.4.6 Other Options. Except as provided in subparagraphs (a), (b) and
(c) of this Section 5.4.6, the periods of exercisability of each Option
that is not granted pursuant to Section 5.3.1 or Section 5.3.2 shall be
determined by the Committee in its sole discretion.
(a) Subject to Section 5.4.5, each Option described in Section
5.3.3(a) shall become exercisable as to 33 1/3% of the Shares covered by
the Option on the third anniversary of the Grant Date, as to an
additional 33 1/3% of such Shares on the fourth anniversary of the Grant
Date, and as to the remaining Shares on the fifth anniversary of the
Grant Date, provided in each case that the Participant is an Executive
on the applicable anniversary date (except to the extent provided in
Section 5.4.6(c)):
(b) Each Option described in Section 5.3.3(b) shall become
exercisable as to 100% of the Shares covered by the Option on the first
date on which both of the following conditions shall have occurred,
provided that the Participant is an Executive on such date (except to
the extent provided in Section 5.4.6(c)).
(i) the tenth trading day (occurring within a period of 30
consecutive trading days) on which the Fair Market Value of a Share
is at least $150, provided that such tenth trading day occurs within
five years of the Grant Date, and
(ii) the Corporation's total stockholder return (as determined
by the Committee in its sole discretion) is at or above the median
level of stockholder return for a subset of the Standard & Poor's
500 Financial Index during the period from the Grant Date to the
tenth trading day referred to in Section 5.4.6(b)(i) and any days
thereafter until such median level is attained or, if such period is
not at least one year, during the period from such date prior to the
Grant Date as will result in a period of at least one year ending on
the tenth trading day referred to in Section 5.4.6(b)(i) and any
days thereafter until such median level is attained.
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(c) Notwithstanding Sections 5.4.3 and 5.4.4, in the case of
Options described in Sections 5.3.3(a) and (b), if a Participant incurs
a Termination of Employment on account of Early Retirement, Normal
Retirement, Disability or death, then subject to Section 5.5.3, the
right to exercise a portion of his or her Shares shall accrue on the
date that such right otherwise would have accrued. The Committee shall
determine such portion on a pro-rata basis, based on the time elapsed
from the Grant Date to the date of Early Retirement, Normal Retirement,
Disability or death and the vesting date.
5.5 Expiration of Options. The expiration date for each Option shall be
determined in accordance with the provisions of this Section 5.5.
5.5.1 Options Granted to SEC and SMC Members. Each Option (or portion
thereof) that is granted on January 26, 1995, to a Participant who is a
member of the SEC or SMC shall terminate upon the first to occur of the
following events:
(a) The expiration of ten years from the Grant Date (12 years in
the case of Options with an Exercise Price of $100 per share); or
(b) Except as provided in 5.5.1(e), the expiration of three months
from the date of the Optionee's Termination of Employment for a reason
other than Early Retirement, Normal Retirement, Disability or death; or
(c) The expiration of three years from the date of the Optionee's
Termination of Employment by reason of Disability; or
(d) The expiration of five years from the date of the Optionee's
Termination of Employment by reason of Early or Normal Retirement; or
(e) The expiration of one year from the date of the Optionee's
Termination of Employment but only for a reason other than Early
Retirement, Normal Retirement, Disability or death if the Optionee's
Termination of Employment occurs within one (1) year after a Change of
Control; or
(f) In the case of an Option referred to in Sections 5.4.1(b),
5.4.1(c) or 5.4.2 which has not been exercised, the date on which the
Option no longer may become exercisable (due to the failure of the
Shares to reach the specified Fair Market Value for the required time
during the specified period).
In addition, an Option (or applicable portion thereof) with respect to
which a related TLSAR has been granted shall terminate upon exercise of the
related TLSAR.
5.5.2 Special Rule for Death. Notwithstanding any contrary provision
of Section 5.5.1, if the Optionee dies prior to the expiration of his or
her Option in accordance with Section 5.5.1, the Option shall terminate
three years after his or her death.
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5.5.3 Other Options. Except as provided in subparagraphs (a) and (b)
of this Section 5.5.3, the provisions for expiration of each Option that is
not granted pursuant to Section 5.3.1 or Section 5.3.2 shall be determined
by the Committee in its sole discretion.
(a) Each Option (or portion thereof) described in Section 5.3.3(a)
or (b) shall terminate upon the first to occur of the following events:
(i) The expiration of ten years from the Grant Date; or
(ii) Except as provided in 5.5.3(a)(v), the expiration of three
months from the date of the Optionee's Termination of Employment for
a reason other than Early Retirement, Normal Retirement, Disability
or death; or
(iii) The expiration of three years from the date of the
Optionee's Termination of Employment by reason of Disability; or
(iv) The expiration of five years from the date of the
Optionee's Termination of Employment by reason of Early or Normal
Retirement; or
(v) The expiration of one year from the date of the Optionee's
Termination of Employment but only for a reason other than Early
Retirement, Normal Retirement, Disability or death if the Optionee's
Termination of Employment occurs within one (1) year after a Change
of Control; or
(vi) In the case of an Option described in Section 5.3.3(b)
which has not been exercised, the date on which the Option no longer
may become exercisable (due to the failure of the conditions of
Section 5.4.6(b) to be met).
In addition, an Option (or applicable portion thereof) with respect
to which a related TLSAR has been granted shall terminate upon exercise
of the related TLSAR.
(b) Notwithstanding any contrary provision of Section 5.5.3(a), if
the Optionee dies prior to the expiration of his or her Option in
accordance with Section 5.5.3(a), the Option shall terminate three years
after his or her death.
5.6 Payment. Options shall be exercised by the Participant's delivery of a
written notice of exercise to the Secretary of the Corporation (or his or her
designee), setting forth the number of Shares with respect to which the Option
is to be exercised, and accompanied by full payment for the Shares. Upon the
exercise of any Option, the Exercise Price shall be payable to the Corporation
in full in cash. The Committee, in its sole discretion, also may permit exercise
(a) by tendering previously acquired Shares having an aggregate Fair Market
Value at the time of exercise equal to the total Exercise Price, or (b) by any
other means which the Committee, in its sole discretion, determines to both
provide legal consideration for the Shares, and to be consistent with the
purposes of the Plan. As soon as practicable after receipt of a written
notification of exercise and full payment for the Shares purchased, the
Corporation shall deliver to the Participant (or the Participant's designated
broker), Share certificates (which may be in book entry form) representing such
Shares.
5.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as
needed to comply with applicable Federal securities laws, the requirements of
any national securities exchange or system upon which Shares are then listed or
traded, or any blue sky or state securities laws.
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SECTION 6
TANDEM LIMITED STOCK APPRECIATION RIGHTS
6.1 Grant of TLSARs. Subject to the terms and provisions of the Plan,
TLSARs may be granted to Executives at any time and from time to time as
determined by the Committee in its sole discretion, provided that such grants
shall be only in conjunction with all or any part of any Option, and may be
granted either at or after the Grant Date of the Option. A TLSAR (or applicable
portion thereof) granted with respect to a given Option shall terminate upon the
termination or exercise of the related Option. The Committee, in its sole
discretion, shall determine the number of Shares subject to each TLSAR, provided
that during any calendar year, no Participant shall be granted TLSARs covering
more than 235,000 Shares.
6.2 TLSAR Agreement. Each TLSAR shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the TLSAR, the
number of Shares to which the TLSAR pertains, any conditions to exercise of the
TLSAR, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.
6.3 Exercise Price. The Committee, subject to the provisions of the Plan,
shall have complete discretion to determine the Exercise Price of each TLSAR,
provided that such Exercise Price shall be not less than 100% of the Fair Market
Value of a Share on the Grant Date.
6.4 Exercisability. Each TLSAR which has not otherwise expired shall
become exercisable immediately upon the occurrence of a Change of Control,
provided that in no event may a TLSAR granted to a Section 16 Person become
exercisable until at least six months after the Grant Date (or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3).
6.5 Expiration of TLSARs. The Committee, in its sole discretion, shall
determine when each TLSAR shall expire, provided that (a) no TLSAR may have a
term longer than would be permitted by applying the rules of Section 5.5
(regarding the expiration of Options), and (b) each TLSAR shall terminate no
later than the last day of the period of 60 consecutive days which begins on the
date of the Change of Control.
6.6 Payment of TLSAR Amount. Upon exercise of a TLSAR, the Participant
shall be entitled to receive payment from the Corporation in an amount
determined by multiplying:
(a) The amount by which the Change of Control Value of a Share on the
date of exercise exceeds the Exercise Price; times
(b) The number of Shares with respect to which the TLSAR is exercised.
Each TLSAR shall be paid in cash, provided that if the Committee determines
that any such payment would cause a Change of Control transaction to be
ineligible for pooling of interests accounting under APB No. 16, which
transaction (but for such payment) otherwise would have been eligible for such
accounting treatment, the Committee, in its sole discretion, may determine that
any TLSAR shall be paid in Shares having a Fair Market Value equal to the cash
amount foregone.
SECTION 7
MISCELLANEOUS
7.1 No Effect on Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Corporation to terminate any Participant's
employment at any time, with or without
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43
cause. For purposes of the Plan, transfer of employment of a Participant between
the Corporation and any one of its Affiliates (or between Affiliates) shall not
be deemed a Termination of Employment.
7.2 Participation. No Executive shall have the right to be selected to
receive an Award, or, having been so selected, to be selected to receive a
future Award.
7.3 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Corporation against and from (a) any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Corporation's
approval, or paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he or she shall
give the Corporation an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Corporation's Certificate of Incorporation or Bylaws, by contract, as a matter
of law, or otherwise, or under any power that the Corporation may have to
indemnify them or hold them harmless.
7.4 Successors. All obligations of the Corporation under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Corporation, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or other acquisition, of all or
substantially all of the business or assets of the Corporation.
7.5 Beneficiary Designations. If permitted by the Committee, a Participant
may name a beneficiary or beneficiaries to whom any vested but unpaid Option
shall be transferred in the event of the Participant's death. Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee. In the
absence of any such designation, and subject to the terms of the Plan and of the
applicable Award Agreement, any unexercised vested Award may be exercised by the
administrator or executor of the Participant's estate. This Section 7.5 shall
not be effective until specifically authorized by the Committee.
7.6 Domestic Relations Orders. If permitted by the Committee, and under
such procedures as the Committee may adopt from time to time, an Award may be
transferred to a Participant's spouse, former spouse or dependent pursuant to a
court-approved domestic relations order which relates to the provision of child
support, alimony payments or marital property rights. This Section 7.6 shall not
be effective until specifically authorized by the Committee.
7.7 Bona Fide Gifts. If permitted by the Committee, and under such
procedures as the Committee may adopt from time to time, an Award may be
transferred, by bona fide gift and not for any consideration, to a member of the
Participant's immediate family or tax-qualified, not for profit organization.
This Section 7.7 shall not be effective until specifically authorized by the
Committee.
7.8 Nontransferability of Awards. No Award granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than (a) by will, (b) by the laws of descent and distribution, or (c) to
the limited extent provided in Sections 7.5, 7.6, and 7.7. Except as provided in
Sections 7.6 and 7.7, all rights with respect to an Award granted to a
Participant shall be available during his or her lifetime only to the
Participant.
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44
7.9 No Rights as Stockholder. No Participant (nor any beneficiary) shall
have any of the rights or privileges of a stockholder of the Corporation with
respect to any Shares issuable pursuant to an Award (or exercise thereof),
unless and until certificates representing such Shares shall have been issued,
recorded on the records of the Corporation or its transfer agents or registrars,
and delivered to the Participant (or beneficiary).
SECTION 8
AMENDMENT, TERMINATION, AND DURATION
8.1 Amendment or Termination. The Board or the Committee, each in its sole
discretion, may amend or terminate the Plan, or any part thereof, at any time
and for any reason. However, (a) if and to the extent required to maintain the
Plan's qualification under Rule 16b-3 and/or Section 162(m) of the Code, any
such amendment shall be subject to stockholder approval, and (b) the amendment
or termination of the Plan shall not, without the consent of the Participant,
alter or impair any rights or obligations under any Award theretofore granted to
any Participant.
8.2 Duration of the Plan. The Plan shall commence on the date specified
herein, and subject to Section 8.1 (regarding the Board's right to amend or
terminate the Plan), shall remain in effect thereafter.
SECTION 9
TAX WITHHOLDING
9.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Corporation shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Corporation, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).
9.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(a) electing to have the Corporation withhold otherwise deliverable Shares, or
(b) delivering to the Corporation already-owned Shares having a Fair Market
Value equal to the amount required to be withheld. The amount of the withholding
requirement shall be deemed to include any amount which the Committee agrees may
be withheld at the time the election is made, not to exceed the amount
determined by using the maximum federal, state or local marginal income tax
rates applicable to the Participant with respect to the Award on the date that
the amount of tax to be withheld is to be determined. The Fair Market Value of
the Shares to be withheld or delivered shall be determined as of the date that
the taxes are required to be withheld.
SECTION 10
LEGAL CONSTRUCTION
10.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
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10.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
10.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
10.4 Securities Law Compliance. With respect to Section 16 Persons and
unless otherwise specifically determined by the Committee, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3.
To the extent any provision of the Plan, Award Agreement or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
10.5 Governing Law. The Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of California.
10.6 Captions. Captions are provided herein for convenience only, and
shall not serve as a basis for interpretation or construction of the Plan.
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46
K
Printed on Recycled Paper
47
(FRONT OF PROXY)
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
TRANSAMERICA CORPORATION
The undersigned hereby appoints Shirley H. Buccieri, Edgar H. Grubb PROXY
and Frank C. Herringer, each with power of substitution, as proxies of
the undersigned, to attend the Annual Meeting of Stockholders of TRANSAMERICA
Transamerica Corporation, to be held at the Giannini Auditorium,
Concourse Level, Bank of America Center, 555 California Street, San
Francisco, California, on April 23, 1998 at 11:00 a.m., and any
adjournment thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present in the manner ANNUAL
indicated on this form and in their discretion on any other matter MEETING OF
which may properly come before the Meeting. STOCKHOLDERS
APRIL 23, 1998
(LOGO)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, WILL BE
VOTED FOR PROPOSALS 1 THROUGH 5. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND
RETURN THIS CARD, VOTE BY TELEPHONE OR ATTEND THE MEETING AND VOTE IN PERSON.
48
(BACK OF PROXY)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, WILL BE
VOTED FOR PROPOSALS 1 THROUGH 5.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 5.
-----
1. Election of Directors.
/ / FOR / / WITHHELD NOMINEES:
R. W. Matschullat
G. E. Moore
C. Rice
For, except vote withheld from the following Nominee(s):
---------------------------------------------------------
2. Election of Ernst & Young LLP as independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
3. Approving the adoption of an amendment to the Corporation's Certificate
of Incorporation increasing the number of authorized shares of common
stock.
/ / FOR / / AGAINST / / ABSTAIN
4. Approving the adoption of the 1998 Cash Long Term Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
5. Approving an amendment to the 1995 Performance Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
Please sign exactly as name(s) appear
hereon. Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
-------------------------------------------
-------------------------------------------
Signature(s) Date
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
/ Proxy control number goes here/
TRANSAMERICA CORPORATION
***IF YOU WISH TO AUTHORIZE A PROXY TO VOTE YOUR SHARES BY TELEPHONE,
PLEASE READ THE INSTRUCTIONS BELOW
HAVE YOUR PROXY CARD IN HAND. DECIDE HOW YOU WISH YOUR SHARES TO BE VOTED.
- - On a Touch Tone Telephone, call toll-free 1-800-652-8683; 24 hours per
day, 7 days a week.
- - You will be asked to enter the control number listed in the box above.
- - Follow the telephone voting instructions.
Your telephone vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares by telephone, there is no need for you to mail
back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.