[LOGO] CIT
CIT GROUP INC.
1211 Avenue of the Americas
New York, NY 10036
April 6, 2005
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders on
Wednesday, May 11, 2005, at 11:00 a.m., Eastern time at our offices at 1 CIT
Drive, Livingston, New Jersey 07039.
The notice of meeting and proxy statement following this letter describe
the business to be transacted. You are asked to elect your Board of Directors
for the upcoming year and to ratify the appointment of PricewaterhouseCoopers
LLP as our independent auditors.
Whether or not you are personally able to attend the Annual Meeting,
please complete, sign and date the enclosed proxy card and return it in the
enclosed envelope as soon as possible, or follow the enclosed instructions to
vote electronically. Your vote is very important. This will not limit your right
to attend the meeting and vote in person.
Sincerely yours,
/s/ Jeffrey M. Peek
------------------------
Jeffrey M. Peek
Chairman and
Chief Executive Officer
[LOGO] CIT
CIT GROUP INC.
1211 Avenue of the Americas
New York, NY 10036
-----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 2005
-----------------------------------------
TO OUR STOCKHOLDERS:
The annual meeting of stockholders of CIT Group Inc. will be held at the
offices of CIT, 1 CIT Drive, Livingston, New Jersey 07039, on Wednesday, May 11,
2005 at 11:00 a.m. Eastern time, for the following purposes:
1. to elect 10 directors to serve for one year or until the next
annual meeting of stockholders; and
2. to ratify the appointment of PricewaterhouseCoopers LLP as CIT's
independent auditors for 2005.
The CIT Board of Directors has fixed the close of business on March 25,
2005 as the record date for determining holders of CIT Common Stock entitled to
notice of and to vote at the meeting.
You are cordially invited to attend the meeting. Whether or not you are
personally able to attend the meeting, please complete, sign, date and return
the accompanying proxy card, or cast your vote electronically, as soon as
possible.
By Order of the Board of Directors,
/s/ Robert J. Ingato
-----------------------------
Robert J. Ingato
Executive Vice President,
General Counsel and Secretary
Livingston, New Jersey
April 6, 2005
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD.
CIT GROUP INC.
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PROXY STATEMENT
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We are mailing this proxy statement, form of proxy and voting instructions
starting April 6, 2005.
Who is soliciting my vote?
The Board of Directors of CIT Group Inc. is soliciting your vote for our 2005
Annual Meeting of Stockholders.
What will I vote on?
You are being asked to vote on:
o The election of 10 directors for a one year term; and
o The ratification of the selection of our independent auditor for 2005.
What is the record date for the Annual Meeting?
The record date is the close of business on March 25, 2005. The record date is
used to determine those shareholders who are entitled to vote at the Annual
Meeting and at any adjournment or postponement.
How many votes can be cast by all shareholders?
A total of 212,109,440 votes may be cast on each matter presented, consisting of
one vote for each share of our common stock, par value $0.01 per share, which
were outstanding on the record date. CIT's common stock is listed on the New
York Stock Exchange ("NYSE"), and CIT is subject to its rules and regulations.
There is no cumulative voting.
How many votes must be present to hold the Annual Meeting?
A quorum of a majority of the votes that may be cast, or 106,054,720 votes, must
be present in person or represented by proxy to hold the Annual Meeting. We urge
you to vote by proxy even if you plan to attend the meeting. That will help us
to know as soon as possible that enough votes will be present to hold the
meeting. In determining whether a quorum exists, we will include shares
represented by proxies that reflect abstentions and shares referred to as
"broker non-votes" (i.e., shares held by brokers or nominees for which
instructions have not been received from the beneficial owners or persons
entitled to vote and that are not voted by that broker or nominee).
How do I vote?
You may vote at the Annual Meeting by proxy or in person.
If you are a holder of record (that is, if your shares are registered in your
own name with our transfer agent), you may vote by mail using the enclosed proxy
card, by telephone, on the Internet or by attending the meeting and voting in
person as described below.
If you hold your shares in street name (that is, you hold your shares through a
broker, bank or other holder of record), please refer to the information on the
voting instruction form forwarded to you by your bank, broker or other holder of
record to see which voting options are available to you.
Vote by Mail
If you choose to vote by mail, simply mark, sign and date your proxy card and
return it in the enclosed postage pre-paid envelope.
Vote by Telephone
You can vote by calling the toll-free number on your proxy card or voting
instruction form.
Vote on the Internet
You can also choose to vote on the Internet. The website and directions for
internet voting are on your proxy card or voting instruction form.
Vote at the Annual Meeting
If you want to vote in person at the meeting and you are a holder of record, you
must register with the Inspector of Election at the meeting and produce valid
identification. If you want to vote in person at the meeting and you hold your
shares in street name, you must obtain an additional proxy from your bank,
broker or other holder of record authorizing you to vote. You must bring this
proxy to the meeting.
How many votes will be required to elect a director or to adopt the proposals?
o To elect directors to the Board, a plurality of the votes cast at the annual
meeting is required. A plurality means that the ten nominees receiving the
largest number of votes cast will be elected.
o To ratify the selection of our independent auditors and approve any other
matters properly raised at the meeting, a majority of the shares represented
at the meeting and entitled to vote is required.
Can I change or revoke my proxy?
Yes, you may change your vote or revoke your proxy at any time before it is
exercised. To do so, you should:
o send in a new proxy card with a later date;
o send a written revocation to the Corporate Secretary;
o cast a new vote by telephone or internet; or
o attend the annual meeting and vote in person.
Written revocations or a prior vote must be sent by mail to the Secretary of CIT
at our address shown above, or by delivering a duly executed proxy bearing a
later date. If you attend the annual meeting and vote in person, your vote will
revoke any previously submitted proxy. If you hold your shares in street name,
you must contact your broker if you wish to change your vote.
What if I do not indicate my vote for one or more of the matters on my proxy
card?
If you return a signed proxy card without indicating your vote, your shares will
be voted:
o for the election of the ten persons named under the caption "Election of
Directors;" and
o for the ratification of the selection of our independent auditor.
What if I withhold my vote or I vote to abstain?
In the election of directors, you can vote for the ten directors named on the
proxy card, or you can indicate that you are withholding your vote from one or
more of the directors. Withheld votes will not affect the vote on the election
of directors.
In connection with the proposals to ratify the selection of our independent
auditor, you may vote for or against the proposals, or you may abstain from
voting on the proposals. Abstentions on the proposal to ratify the selection of
our independent auditor will have the same effect as a vote against the
proposal.
What happens if I do not vote?
If you are a record holder and you do not vote shares held in your name, those
shares will not be voted.
If you hold your shares in street name, your broker can vote your shares on the
election of directors and the ratification of the selection of our independent
auditor in your broker's discretion.
If your broker votes your shares on some, but not all, of the proposals, the
votes will be "broker non-votes" for any proposal on which they are not voted.
Broker non-votes will have no effect on the election of directors or the
ratification of the selection of the independent auditor. Brokers who are
members of the National Association of Securities Dealers, Inc. may vote shares
held by them in nominee name if they are permitted to do so under the rules of
any national securities exchange to which they belong. Under New York Stock
Exchange rules, a member broker that has transmitted proxy soliciting materials
to a beneficial owner may not vote on matters that are not routine if the
beneficial owner has not provided the broker with voting instructions.
Will my vote be confidential?
Yes. We have a policy of confidentiality in the voting of shareholder proxies
and your vote will not be disclosed to our directors or employees.
What if there is voting on other matters?
Our By-Laws provide that business may be transacted at the Annual Meeting only
if it is (a) stated in the Notice of Annual Meeting, (b) proposed at the
direction of our Board, or (c) proposed by any CIT stockholder who is entitled
to vote at the meeting and who has complied with the notice procedures in our
By-Laws. The deadline for shareholders to notify us of any proposals has passed,
and we have not received any notifications. If other matters properly arise at
the meeting for consideration, the persons named in the proxy will have the
discretion to vote on those matters for you, unless you indicate contrary
instructions in our proxy.
Will the Company's independent auditor be present at the annual meeting?
Yes, representatives of PricewaterhouseCoopers LLP will attend the meeting to
answer your questions and
2
will have the opportunity to make a statement, if they desire to do so. The
Board of Directors has approved the appointment of PricewaterhouseCoopers LLP as
our independent auditor for the 2005 fiscal year, subject to ratification by
shareholders.
Will the directors attend the annual meeting?
Yes. Our Corporate Governance Guidelines provide that directors are expected to
attend the Annual Meeting. In addition, a Board meeting is scheduled immediately
following the Annual Meeting. At the 2004 Annual Meeting of Stockholders, 10
directors were present, out of the 11 directors on the Board at that time.
How can I attend the annual meeting?
Only shareholders as of the record date, March 25, 2005 (or their proxy holders)
may attend the annual meeting. If you plan to attend the meeting or appoint
someone to attend as your proxy, please check the box on your proxy card, or, if
you are voting by telephone or internet, follow the instructions provided to
indicate that you or your proxy plan to attend. You or your proxy holder will
then need to show photo identification at the shareholders' admittance desk to
gain admittance to the meeting.
If you do not inform us in advance that you plan to attend the meeting, you will
need to bring with you:
o photo identification and,
o if you hold your shares in street name, proof of ownership of your shares as
of the record date, such as a letter or account statement from your broker or
bank.
What happens if the annual meeting is postponed or adjourned?
Your proxy will still be valid and may be voted at the postponed or adjourned
meeting. You will still be able to change or revoke your proxy until it is
voted.
Do any shareholders beneficially own more than 5% of our common stock?
Yes. According to public filings, there are two holders that beneficially own
more than 5% of our common stock:
o Dodge & Cox; and
o J.P.Morgan Chase & Co.
How can I review the list of shareholders eligible to vote?
A list of shareholders as of the record date will be available from May 1, 2005
to the date of the Annual Meeting for inspection and review by any shareholder
at our offices at 1 CIT Drive, Livingston, New Jersey 07039. We will also make
the list available at the Annual Meeting.
Who will pay the expenses incurred in connection with the solicitation of my
vote?
The Company pays the cost of preparing proxy materials and soliciting your vote.
Proxies may be solicited on our behalf by our directors, officers or employees
by telephone, electronic or facsimile transmission or in person. We also may pay
brokers, nominees, fiduciaries, and other custodians their reasonable fees and
expenses for sending proxy materials to beneficial owners and obtaining their
instructions.
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PROPOSAL 1
ELECTION OF DIRECTORS
Our Board met 11 times during 2004. The Audit Committee met 9 times, the
Compensation Committee met 3 times, and the Nominating and Governance Committee
met 2 times during 2004. All of the nominees listed below attended at least 75%
of the aggregate of the meetings of the Board and of any committee on which he
or she served (or for those directors who first joined the Board in 2004, held
during the periods that he or she served), except for Mr. Butler, who attended
60% of the meetings.
The directors elected at the Annual Meeting will each serve for a term of
one year, or until the next annual meeting of stockholders. Should any nominee
become unavailable for election, the Board may designate another nominee, in
which case the persons acting under duly executed proxies will vote for the
election of the replacement nominee. Management is not aware of any
circumstances likely to render any nominee unavailable. Election of directors
will be by a plurality of the votes cast.
Nominees
The following individuals are the ten nominees for election as directors
at the Annual Meeting. The information below includes each nominee's age as of
February 15, 2005 and business experience during the past five years, and was
provided to CIT by the nominees. CIT knows of no family relationship among the
nominees. In addition to the information reported below, certain directors may
also be directors or trustees of privately held businesses or not-for-profit
entities that are not referred to below.
Name Age Position
---- --- --------
Jeffrey M. Peek ....... 57 Chairman and Chief Executive Officer of CIT
Gary C. Butler ........ 58 President and Chief Operating Officer of
Automatic Data Processing, Inc.
William A. Farlinger .. 75 Retired, Former Chairman of Ontario Power
Generation Inc.
William M. Freeman .... 52 Former Chief Executive Officer of Leap Wireless
International, Inc.
Hon. Thomas H. Kean ... 69 President of Drew University and Former Governor
of New Jersey
Marianne Miller Parrs.. 60 Executive Vice President of International Paper
Company
Timothy M. Ring ....... 47 Chairman and Chief Executive Officer of
C.R. Bard, Inc.
John R. Ryan .......... 59 President of Maritime College, State University
of New York
Peter J. Tobin ........ 60 Special Assistant to the President of
St. John's University
Lois M. Van Deusen .... 65 Managing Partner of McCarter & English, LLP
Jeffrey M. Peek has served as Chief Executive Officer since July 2004 and
as Chairman since January 1, 2005. Previously, he served as President and Chief
Operating Officer and as a director of CIT since September 2003. Prior to
September 2003, Mr. Peek served as Vice Chairman of Credit Suisse First Boston
LLC and was responsible for the firm's Financial Services Division, including
Credit Suisse Asset Management and Private Client Services. Immediately prior to
joining Credit Suisse First Boston in 2002, Mr. Peek was with Merrill Lynch
since 1983, where he rose to the level of Executive Vice President of Merrill
Lynch & Co., Inc. and was President of Merrill Lynch Investment Managers. He
also served on the Executive Management Committee of Merrill Lynch & Co. Mr.
Peek is also a director of the St. Paul Travelers Companies, although he will
not stand for re-election at their next annual meeting.
Gary C. Butler has served as a director of CIT since February 2004. Mr.
Butler has served as President and Chief Operating Officer of Automatic Data
Processing, Inc. ("ADP") since 1998. Previously, Mr. Butler served as Group
President, Employer Services at ADP since 1995, as President of ADP's Dealer
Services Division since 1989, and in a number of other executive and management
positions at ADP since 1975. Mr. Butler is a director of ADP and Liberty Mutual
Corporation.
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William A. Farlinger has served as a director of CIT since July 1, 2002,
and previously from November 1999 to June 1, 2001. Mr. Farlinger retired from
Ontario Power Generation Inc. (formerly Ontario Hydro) in December 2003.
Previously, Mr. Farlinger served as Chairman of Ontario Power Generation since
November 1995, including as Chairman, President and Chief Executive Officer from
August 1997 to March 1998. Prior to joining Ontario Hydro, Mr. Farlinger spent
his entire business career with the accounting and management consulting firm of
Ernst & Young, Canada, including serving as Chairman and Chief Executive Officer
from 1987 to 1994. Mr. Farlinger is also a member of the Order of Canada.
William M. Freeman has served as a director of CIT since July 2003. Mr.
Freemen resigned on February 24, 2005 as Chief Executive Officer and Director of
Leap Wireless International, Inc., where he had served since June 2004.
Previously, Mr. Freeman retired from Verizon Communications Inc. in February
2004, where he served as President and Chief Executive Officer of the Public
Communications Group since 2000. Previously, Mr. Freeman served as President and
Chief Executive Officer of Bell Atlantic-New Jersey from 1998 to 2000, President
and Chief Executive Officer of Bell Atlantic- Washington, D.C. from 1994 to
1998, and in a number of other executive and management positions at Verizon
since 1974. Mr. Freeman serves on the Board of Trustees of Drew University and
the Board of Directors of Junior Achievement Worldwide. Mr. Freeman is also a
director of VAC Holding, Inc., a privately held communications company.
Hon. Thomas H. Kean has served as a director of CIT since July 1, 2002,
and previously from November 1999 to June 1, 2001. Mr. Kean has served as
President of Drew University since February 1990, and is a former Governor of
the State of New Jersey. He is also a director of Amerada Hess Corporation,
ARAMARK Corporation, Franklin Resources, Inc., The Pepsi Bottling Group, and
UnitedHealth Group Incorporated. Mr. Kean is also a trustee of The Robert Wood
Johnson Foundation, a non-profit foundation.
Marianne Miller Parrs has served as a director of CIT since January 2003.
Ms. Parrs has served as Executive Vice President of International Paper Company
since 1999, with current responsibility for Information Technology, Global
Sourcing, Global Supply Chain - Deliver, a major supply chain project, Investor
Relations and IP Realty. From 1995 to 1999, Ms. Parrs served as Senior Vice
President and Chief Financial Officer of International Paper. Previously, she
served in a number of other executive and management positions at International
Paper since 1974, and was a security analyst at a number of firms prior to
joining International Paper Company. Additionally, Ms. Parrs sits on the board
the Women's Forum, a non-profit organization. Ms. Parrs also serves on the board
of Liaison Technologies (formerly Forest Express), a private e-business company
that provides a real time transactions network (EDI/XML) and product information
solutions.
Timothy M. Ring has served as a director of CIT since January 2005. Mr.
Ring has served as Chairman and Chief Executive Officer of C.R. Bard, Inc. since
August 2003. Previously, he served as Group President from April 1997 to August
2003, as Group Vice President from December 1993 to April 1997, and Corporate
Vice President - Human Resources from June 1992 to December 1993. Prior to
joining C.R. Bard in 1992, Mr. Ring served in a number of executive and
management positions at Abbott Laboratories.
Vice Admiral John R. Ryan has served as a director of CIT since July 2003.
Mr. Ryan has served as President of the State University of New York Maritime
College since June 2002, and has also served as the Interim President of the
State University of New York at Albany from February 2004 until February 2005.
From 1998 to 2002, Mr. Ryan was Superintendent of the U.S. Naval Academy. Mr.
Ryan served in the U.S. Navy from 1967 to July 2002, including as Commander of
the Fleet Air Mediterranean in Naples, Italy from 1995 to 1998, Commander of the
Patrol Wings for the U.S. Pacific Fleet in Pearl Harbor from 1993 to 1995, and
Director of Logistics for the U.S. Pacific Command in Aiea, Hawaii from 1991 to
1993. Mr. Ryan is also a director of Cablevision Systems Corp. and the Center
for Creative Leadership.
Peter J. Tobin has served as a director of CIT since July 1, 2002, and
previously from May 1984 to June 1, 2001. Mr. Tobin has been Special Assistant
in Corporate Relations and Development to the President of St. John's University
since September 2003, and previously was Dean of the Peter J. Tobin College of
Business at St. John's University since August 1998. From March 1996 to December
1997, Mr. Tobin was Chief Financial Officer of The Chase Manhattan Corporation.
From January 1992 to March 1996, Mr. Tobin served as Chief Financial Officer of
Chemical Banking Corporation, a predecessor of The Chase Manhattan Corporation,
and prior to that he served in a number of executive positions at Manufacturers
Hanover Corporation, a predecessor
5
of Chemical Banking Corporation. He is also a director of AXA Financial,
Alliance Capital Management, L.P., a subsidiary of AXA Financial that manages
mutual funds, PA Consulting Group and H.W. Wilson, a publishing company.
Lois M. Van Deusen has served as a director of CIT since January 2003. Ms.
Van Deusen is the Managing Partner of McCarter & English, LLP, a regional law
firm based in Newark, New Jersey, and is a partner in the Real Estate
Department. Ms. Van Deusen joined McCarter & English in 1977 and was named a
partner in 1986. Additionally, Ms. Van Deusen sits on the board of Habitat for
Humanity Newark, Inc.
Departing Director
Edward J. Kelly, III, who has served as a director since July 1, 2002,
notified CIT on February 22, 2005 of his decision not to stand for re-election
to the Board of Directors of CIT at its 2005 Annual Meeting of Stockholders due
to the increasing demands on his time at Mercantile Bankshares Corporation,
where he is Chairman, President and Chief Executive Officer. We would like to
thank Mr. Kelly for his dedicated service to CIT since our initial public
offering in 2002.
CIT'S CORPORATE GOVERNANCE
Independence of Directors
Our Corporate Governance Guidelines require that a substantial majority of
the Board shall be composed of directors who meet the independence criteria
established by the New York Stock Exchange. The criteria set by the New York
Stock Exchange in order for a director to qualify as independent are:
o The director can have no material relationship with CIT (either
directly or as a partner, shareholder or officer of an organization
that has a relationship with CIT), including commercial, industrial,
banking, consulting, legal, accounting, charitable and familial
relationships, among others;
o The director cannot have been an employee, or have an immediate family
member who was an executive officer, of CIT during the preceding three
years;
o The director cannot receive, or have an immediate family member who has
received, more than $100,000 per year in direct compensation from CIT,
other than director and committee fees and pension or other forms of
deferred compensation for prior service (provided such compensation is
not contingent on continued service) during the preceding three years;
o The director cannot be affiliated with or employed by, or have an
immediate family member who was affiliated with or employed in a
professional capacity by, a present or former internal or external
auditor of CIT during the preceding three years;
o The director cannot be employed, or have an immediate family member who
was employed, as an executive officer of another company if any of
CIT's executives have served on that company's compensation committee
during the preceding three years; and
o The director cannot be an executive officer or an employee, or have an
immediate family member who was an executive officer, of a company that
made payments to or received payments from CIT for property or services
in an amount per year in excess of the greater of $1 million or 2% of
such company's consolidated gross revenues during the preceding three
years.
On an annual basis, each director is asked to complete a questionnaire
regarding his or her compliance with the above independence criteria. For
purposes of determining the impact of payments to or from CIT for property or
services on director independence, we do not include payments made in the
ordinary course of business, such as for utilities, or payments for property or
services awarded as a result of a competitive bid. In addition to the above
criteria, the Nominating and Governance Committee reviews all of CIT's
charitable contributions in any calendar year that exceed the lesser of $25,000
or 2% of the charity's annual consolidated gross revenues to an organization
with which a director is affiliated to consider the contribution's potential
impact on the applicable director's independence.
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Except for Mr. Peek, the Board has determined that all of the directors
are independent as defined by the New York Stock Exchange and CIT's Corporate
Governance Guidelines. The independent directors meet in executive session
during each regularly scheduled meeting of the Board. The Board named Mr. Tobin
as Lead Director and, in such capacity, he presides at executive sessions of the
independent directors, reviews and provides input with respect to the agenda for
Board meetings and coordinates communications between the Board and the Chief
Executive Officer. A current copy of the Corporate Governance Guidelines is
available on our website at www.cit.com, or a hard copy is available by written
request to our General Counsel and Secretary, 1 CIT Drive, Livingston, New
Jersey 07039.
Board Committees
During 2004, our Board maintained an Audit Committee, a Compensation
Committee, and a Nominating and Governance Committee. The Audit Committee is
comprised of four directors and the Compensation Committee and the Nominating
and Governance Committee each are comprised of three directors. Each director
serving on either the Audit Committee, the Compensation Committee or the
Nominating and Governance Committee is independent as defined by the New York
Stock Exchange and applicable law. Current copies of the written charter of each
committee are available on our website at www.cit.com.
Audit Committee
The Audit Committee conducts its duties consistent with a written charter,
which includes:
o monitoring the integrity of our financial accounting and reporting
process and systems of internal controls, including reviewing our
quarterly and annual filings with the SEC;
o reviewing our corporate compliance policies and monitoring compliance
with our Code of Business Conduct and other compliance policies,
including reviewing any significant case of employee conflict of
interest or misconduct;
o reviewing the budget, plan and activities of the Internal Audit
Department and the performance of the Director of Internal Audit;
o monitoring the independence of the independent auditors, including
approving in advance all audit and non-audit engagements;
o retaining and determining the compensation of the independent auditors;
and
o reporting to our Board as appropriate.
Peter J. Tobin (Chairman), Edward J. Kelly, III, William A. Farlinger, and
Marianne Miller Parrs serve as members of the Audit Committee. The charter for
our Audit Committee complies with New York Stock Exchange requirements and
applicable law. The Board of Directors has determined that Mr. Tobin, Mr.
Farlinger and Ms. Parrs each meets the standard of "Audit Committee Financial
Expert" as defined by the SEC, and that each member of the Audit Committee is
independent from management and financially literate. Mr. Kelly has notified CIT
that he will not stand for re-election to the Board of Directors at CIT's 2005
Annual Meeting of Stockholders.
Compensation Committee
The Compensation Committee conducts its duties consistent with a written
charter, which includes:
o recommending to the independent directors the annual salary, bonus and
stock-based compensation of the Chief Executive Officer;
o reviewing and approving salaries, bonuses and stock-based compensation
for other executive officers;
o facilitating the performance evaluation of the Chief Executive Officer
by the Board;
o approving compensation plans and programs for directors; and
o approving any equity compensation plans, and reviewing and approving
the aggregate equity awards that may be granted to all participants.
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Hon. Thomas H. Kean (Chairman), William M. Freeman and Timothy M. Ring
serve as members of the Compensation Committee.
Nominating and Governance Committee
The Nominating and Governance Committee conducts its duties consistent
with a written charter, which includes:
o identifying and recommending qualified candidates to fill Board and
committee positions;
o overseeing the evaluation of the structure, duties, size, membership
and functions of the Board and its Committees, as appropriate;
o overseeing the evaluation of the Board and its committees and members,
including the self-evaluation of the Nominating and Governance
Committee; and
o overseeing corporate governance, including developing and recommending
corporate governance guidelines and policies.
John R. Ryan (Chairman), Gary C. Butler, and Lois M. Van Deusen serve as
members of the Nominating and Governance Committee.
The Nominating and Governance Committee will consider and evaluate all
director candidates recommended by our shareholders in accordance with the
procedures set forth in our Corporate Governance Guidelines. Shareholders may
propose qualified nominees for consideration by the Nominating and Governance
Committee by submitting the names and supporting information in writing to:
Office of the General Counsel, CIT Group Inc., 1 CIT Drive, Livingston, New
Jersey 07039. Such supporting information shall include (1) a statement
containing the notarized signature of the nominee whereby such nominee consents
to being nominated to serve as a director of CIT and to serving as a director if
elected by the shareholders; (2) information in support of the nominee's
qualifications to serve on CIT's Board and the nominee's independence from
management; (3) the name or names of the stockholders who are submitting such
proposal, the number of shares of CIT's Common Stock held by each such
stockholder, and the length of time such shares have been beneficially owned by
such stockholders; and (4) such other information as the stockholder believes to
be pertinent. To be considered for nomination, any such nominees shall be
proposed as described above no later than December 15th of the calendar year
preceding the applicable annual shareholders meeting.
Our Corporate Governance Guidelines set forth the following general
criteria for nomination to our Board:
o directors should possess senior level management and decision-making
experience;
o directors should have a reputation for integrity and abiding by
exemplary standards of business and professional conduct;
o directors should have the commitment and ability to devote the time and
attention necessary to fulfill their duties and responsibilities to CIT
and its shareholders;
o directors should be highly accomplished in their respective fields,
with leadership experience in corporations or other complex
organizations, including government, educational and military
institutions;
o in addition to satisfying the independence criteria described in our
Corporate Governance Guidelines, non-management directors should be
able to represent all shareholders of CIT;
o directors who are expected to serve on a board committee shall satisfy
the New York Stock Exchange and legal criteria for members of the
applicable committee; and
o directors should have the ability to exercise sound business judgment
and to provide advice and guidance to the Chief Executive Officer with
candor.
The Board's assessment of a director candidate's qualifications includes
consideration of diversity, age, skills and experience in the context of the
needs of the Board. The foregoing general criteria apply equally to the
evaluation of all potential, non-management director nominees, including those
individuals recommended by stockholders.
8
Communicating with Directors
Any person who has a concern about CIT's governance, corporate conduct,
business ethics or financial practices may communicate that concern to the
non-management directors. In addition, CIT's stockholders may communicate with
the Board regarding any topic of current relevance to CIT's business. The
foregoing communications may be submitted in writing to the Lead Director, the
Audit Committee, or the non-management directors as a group in care of CIT's
General Counsel and Secretary, 1 CIT Drive, Livingston, New Jersey 07039, or by
email to directors@cit.com. Concerns and stockholder communications may also be
directed to the Board by calling the CIT Hotline in the U.S. or Canada at
1-877-530-5287. To place calls from other countries in which CIT has operations,
individuals may call 703-259-2284 collect. These concerns can be reported
confidentially or anonymously. Concerns and issues communicated to the Board
will be addressed through CIT's regular procedures:
o Depending on the nature of the concern or issue, it may be initially
referred to CIT's Director of Internal Audit, General Counsel, Head of
Human Resources or other appropriate officer for processing,
investigation, and follow-up action.
o Concerns relating to CIT's accounting, internal accounting controls or
auditing matters will be referred to the Audit Committee.
o All other concerns will be referred to either CIT's Lead Director or to
one or more non-management members of the Board.
o At its regular meetings (or more frequently if deemed appropriate by
management), the Board, or the appropriate committee of the Board, will
be provided with a summary and/or copies of the communications
described above.
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships between any member of our
Compensation Committee and any of our executive officers that would require
disclosure under the rules of the SEC.
Executive Officers
The following table sets forth information as of February 15, 2005
regarding our executive officers, other than Mr. Peek, whose information is
provided above under "Nominees". The executive officers were appointed by and
hold office at the discretion of the Board. No family relationship exists among
CIT's executive officers or with any director. The executive officers are
subject to CIT's Code of Ethical Conduct, which is available on our website at
www.cit.com. In addition to the information reported below, certain executive
officers may also be directors or trustees of privately held or not-for-profit
organizations that are not referred to below.
Name Age Position
---- --- --------
Thomas B. Hallman ....... 52 Vice Chairman - Specialty Finance
Robert J. Ingato ........ 44 Executive Vice President, General Counsel
and Secretary
Joseph M. Leone ......... 51 Vice Chairman and Chief Financial Officer
Lawrence A. Marsiello ... 54 Vice Chairman and Chief Lending Officer
William J. Taylor ....... 53 Executive Vice President, Controller and
Principal Accounting Officer
Frederick E. Wolfert .... 50 Vice Chairman - Commercial Finance
Thomas B. Hallman has served as CIT's Vice Chairman - Specialty Finance
since September 2003. Previously, Mr. Hallman served as Group Chief Executive
Officer of CIT's Specialty Finance Group since July 2001. Mr. Hallman served as
Chief Executive Officer of the Consumer Finance business unit, the home equity
unit of Specialty Finance, since joining CIT in 1995, and held a number of
executive and management positions with other financial services companies prior
to 1995.
9
Robert J. Ingato has served as CIT's Executive Vice President and General
Counsel since June 2001, and additionally as Secretary since August 14, 2002.
Previously, Mr. Ingato served as Executive Vice President and Deputy General
Counsel since November 1999. Mr. Ingato served as Executive Vice President of
Newcourt Credit Group Inc., which was acquired by CIT, since January 1998, as
Executive Vice President and General Counsel of AT&T Capital Corporation, a
predecessor of Newcourt, since 1996, and in a number of other legal positions
with AT&T Capital since 1988.
Joseph M. Leone has served as CIT's Vice Chairman and Chief Financial
Officer since September 2003. Previously, Mr. Leone served as Executive Vice
President and Chief Financial Officer since July 1995. Mr. Leone served as
Executive Vice President of Sales Financing, a business unit of CIT, from June
1991, Senior Vice President and Controller since March 1986, and in a number of
other executive positions with Manufacturers Hanover Corporation since May 1983.
Mr. Leone is a certified public accountant and a member of the American
Institute of Certified Public Accountants.
Lawrence A. Marsiello has served as Vice Chairman and Chief Lending
Officer of CIT since September 2003. Previously, Mr. Marsiello served as Group
Chief Executive Officer of CIT's Commercial Finance Group since August 1999. Mr.
Marsiello served as Chief Executive Officer of the Commercial Services business
unit, the factoring unit of Commercial Finance, since August 1990, and in a
number of other executive positions with CIT and Manufacturers Hanover
Corporation since 1974.
William J. Taylor has served as Executive Vice President and Controller of
CIT since November 1999. Previously, Mr. Taylor served as Senior Vice President
and Controller since 1993, as Vice President and Controller since 1991, and
joined CIT as Vice President and Assistant Controller in 1989. Prior to joining
CIT, he served as Senior Vice President and Controller of Crossland Savings FSB
and as a Senior Audit Manager with KPMG specializing in financial services. Mr.
Taylor is a certified public accountant and a member of the American Institute
of Certified Public Accountants.
Frederick E. Wolfert has served as Vice Chairman - Commercial Finance
since September 2004. Prior to joining CIT, Mr. Wolfert served as President and
Chief Executive Officer of GE Healthcare Financial Services since 2001. Prior to
joining GE, Mr. Wolfert was President and Chief Operating Officer and a member
of the Board of Directors of Heller Financial, Inc., which was acquired by GE in
2001, since 1998. Prior to 1998, Mr. Wolfert held a number of executive and
management positions with other financial services companies.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on CIT's records and other information, CIT believes that its
directors and executive officers complied with the applicable SEC filing
requirements for reporting beneficial ownership of CIT's equity securities for
the year ended December 31, 2004. In January 2005, Gary C. Butler filed a Form 4
with respect to a purchase of 4,000 shares of CIT's common stock on the open
market one day late, due to a delay in confirming the purchase information with
the broker.
2005 Audit Committee Report
The Board appointed the members of the Audit Committee. The Audit
Committee is governed by a written charter that was approved and adopted by the
Board and is periodically reviewed and reassessed by the Audit Committee. The
Audit Committee is comprised of four members, each of whom meets the
independence and experience requirements of the New York Stock Exchange and
applicable law.
The Audit Committee (i) monitors the integrity of CIT's financial
accounting and reporting process and systems of internal controls, (ii) reviews
CIT's corporate compliance policies and monitors the compliance by CIT with its
Code of Business Conduct, its Code of Ethical Conduct, and its other compliance
policies and with legal and regulatory requirements, (iii) monitors the
independence and performance of CIT's internal and independent auditors, and
(iv) retains and determines the compensation of the independent auditors.
Management has primary responsibility for the preparation and integrity of the
financial statements and the reporting process. CIT's independent auditors are
responsible for expressing an opinion on the conformity of the audited financial
statements to accounting principles generally accepted in the United States.
10
The Audit Committee reviewed CIT's audited financial statements and
related SEC filings for the year ended December 31, 2004 and met with management
and PricewaterhouseCoopers LLP ("PwC"), CIT's independent auditors, to discuss
those financial statements. Management has represented to the Audit Committee
that the financial statements were prepared in accordance with generally
accepted accounting principles.
The Audit Committee has discussed with PwC the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committee), as amended. In addition, the Audit Committee has received from PwC
its written disclosures and letter regarding its independence from CIT as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with PwC its independence
from CIT and management. The Audit Committee has also determined, based on such
disclosures, letter and discussions, that PwC's provision of other non-audit
services to CIT is compatible with the auditors' independence.
Based upon these reviews and discussions, the Audit Committee has
recommended to the Board that the audited financial statements be included in
CIT's Annual Report on Form 10-K for the fiscal year ended December 31, 2004.
February 23, 2005 Audit Committee
Peter J. Tobin, Chairman
William A. Farlinger
Edward J. Kelly, III
Marianne Miller Parrs
2005 Compensation Committee Report on Executive Compensation
The Compensation Committee, which consists solely of independent directors
as defined by the New York Stock Exchange rules, administers the compensation
and benefit programs of the Company's directors and executive officers and other
key members of management. CIT's compensation programs are designed to attract,
retain and motivate high performance executives and professionals. Our
compensation strategy for executives emphasizes performance based pay over fixed
salary and uses stock-based awards to align the interests of CIT's executives
with our shareholders. In executing its compensation responsibilities, the
Committee utilizes the assistance of an independent compensation consulting firm
to advise on market trends and best practices.
You can find more information about the Committee in this Proxy Statement
under the caption "Board Committees", and the Charter is available on CIT's
website at www.cit.com/main/InvestorRelations/ CorporateGovernance under the
caption "Board Committees".
Compensation Philosophy and Strategy
CIT's compensation strategy emphasizes the belief that compensation should
vary with the Company's financial and operating performance so that executives
are well rewarded when performance meets or exceeds objectives and there are
downside risks to compensation when performance objectives are not met. Annual
performance is generally measured on the performance of the Company as a whole
or a business unit, or using both criteria, as the nature of an executive's
responsibilities may dictate. Stock options, restricted stock, and performance
shares are used to provide management with long-term incentives contingent on
CIT's financial success.
We recognize the competitive environment in which we must compete for
senior level talent and as such look at diversified financial services companies
and banks with assets similar to that of CIT. The companies considered are not
necessarily those represented in the stock performance graph that follows this
Report, because the Committee believes CIT's competitors for executive talent
are a broader group of companies. CIT periodically benchmarks its compensation
practices and its financial results against its peer group. CIT's compensation
guidelines are aligned against our competitive employment market to achieve on
average a median percentile position for base salary and an above median
position for total compensation, by emphasizing variable performance incentive
compensation.
We continue to believe that the quality, skills and leadership of our
executive team are critical factors affecting the long-term value of our
Company. Therefore, we strive to maintain an executive compensation program that
will attract, motivate and retain our high caliber of leadership, and in
particular, those whose performance is most critical to the Company's success.
11
In conducting its performance assessment for compensation purposes, the
Committee evaluates the Chief Executive Officer's performance in light of
pre-determined goals and objectives and approves his compensation based on this
evaluation. For other executives and key management members, the Committee
evaluates and approves compensation after the Chief Executive Officer presents
to the Committee his assessment of the executives, their accomplishments and
individual and corporate performance.
CIT's Compensation Program
Cash compensation paid to the executive officers for 2004 consisted of
base salary and annual cash bonuses. Equity based incentive compensation for
2004 was generally provided in the form of performance shares and stock option
awards.
Base Salary. As described above, CIT's philosophy is to provide base
salaries to its executive team members within ranges where the midpoint
approximates the median of the peer group. The base salaries of individual
executives can and do vary from this salary benchmark based on such factors as
scope of responsibility and accountability, individual performance, potential
for future advancement, and length of time in their current position.
Annual Bonus Plan. Bonuses are generally paid in February for the prior
year's performance and are based upon each executive officer's individual
performance in the prior year in the context of the overall performance of CIT
and the executive's business unit, if applicable. This performance assessment
includes the executive's contribution to the achievement of financial
performance and other key goals established for the Company. For fiscal year
2004, corporate performance was based on consolidated pre-tax income goals.
Individual business unit executives were awarded bonuses based on the
achievement of pre-tax income goals for their respective business unit as well
as the overall corporate CIT performance. Also included in the determination of
bonuses is an assessment of the executive's contribution to the achievement of
key non-financial goals established during the year. The Annual Bonus Plan
includes minimum performance thresholds required to earn any incentive
compensation, as well as maximum payouts rewarding extraordinary business
performance. Based on the Company's fiscal year 2004 performance, bonuses for
the executive officers were paid between target and maximum because the Company
and most business units exceeded the targeted pre-tax income goals. The Company
also maintains a Discretionary Bonus Plan, which rewards executives for
non-financial measures such as the successful integration of new portfolios,
expense reduction initiatives, acquisition and development of talent, and cross
sell initiatives. The bonuses described under the Summary Compensation Table on
page 15 include both bonuses.
Long-Term Incentives. CIT maintains a stock-based incentive plan, the CIT
Group Inc. Long-Term Equity Compensation Plan (the "ECP") for directors and
employees of CIT and its subsidiaries. The Company's ECP rewards executives for
Company and individual performance over more than one year. The ECP provides for
the grant of various forms of long-term incentives such as stock options,
restricted stock, performance shares and performance units.
In 2004, the Company granted stock options and performance shares.
Performance shares are intended to link the Company's financial performance with
the executive's compensation while also increasing employee stock ownership. For
the 2004 - 2006 performance cycle, the Compensation Committee granted
performance shares to a select group of executives. These awards will be payable
only if the Company achieves specified goals for earnings per share growth and
return on tangible equity established for 2004 through 2006. Executives are
granted the right to receive these shares (or a cash equivalent) following the
end of a performance period.
Members of executive management received grants of stock options in
January and July unless otherwise noted below. These options were granted with
an exercise price equal to the fair market value of the Company's stock on the
date of grant and vest over a three year period of time. The Compensation
Committee believes that these stock option awards create a strong link to
long-term financial results.
Stock Ownership Requirements. CIT encourages stock ownership by its
executives to align their interests with the interests of shareholders. Required
ownership levels vary by position and range from one times to five times base
salary, depending on the level of the executive. The Chief Executive Officer has
a requirement of five times base salary.
12
CEO Compensation
Albert R. Gamper, Jr., former Chairman and Chief Executive Officer of CIT,
resigned as Chief Executive Officer in July 2004 and retired as Chairman
effective December 31, 2004. Mr. Peek was elected Chief Executive Officer by the
Board of Directors in July 2004.
The Compensation Committee established Mr. Gamper's 2004 total
compensation package after reviewing his performance and compensation with the
independent directors of the Board. Following Mr. Peek's election to CEO, his
compensation was also presented to the Board by the Compensation Committee. In
setting the compensation of Messrs. Gamper and Peek for 2004, the Compensation
Committee considered the total amount of compensation provided to each such
individual, as well as each of the major components of compensation, including
base salary, annual bonus, and long-term incentive awards. In addition, the
Compensation Committee periodically reviews other components of compensation,
including qualified and non-qualified retirement benefits, and the value of
fringe benefits and perquisites. The Committee considered the Company's overall
performance, recognizing that 2004 was an excellent year for CIT. CIT posted
strong pre-tax income earnings growth, achieved over 25% appreciation in stock
value and was once again listed on the S & P 500. Evidence of CIT's performance
for 2004 can be viewed on the Performance Graph on page 14. In addition, CIT
experienced a seamless transition to new leadership. The Committee believes that
the outstanding performance and leadership provided by Mr. Gamper and Mr. Peek
were critical to the flawless execution of this transition, as well as the
realization of strong financial results.
In connection with Mr. Peek's election to CEO, the Compensation Committee
reviewed and approved an amendment to Mr. Peek's employment agreement, which
increased the amount of severance payable to him in connection with an
involuntary termination of employment with CIT. You can find more information
about the amended employment agreement in this Proxy Statement under the caption
"Employment Agreements".
Base Salary. Mr. Gamper's base salary was increased by the Committee to
$1.0 million in January 2004. As described in Mr. Peek's employment agreement,
his base salary was increased to $800,000 in September 2004.
Annual Bonus. The Committee awarded Mr. Gamper an annual bonus of $2.8
million and Mr. Peek an annual bonus of $2.7 million for 2004. Mr. Gamper's and
Mr. Peek's awards were based on the criteria set forth in the Annual Bonus Plan
that applied to all executive officers. The Committee determined these awards
based on their annual incentive award targets and the Company's financial
results against pre-tax income goals established for CIT at the beginning of
2004. Additional qualitative factors that the Committee considered when
determining the performance of each of Mr. Gamper and Mr. Peek included their
leadership during the transition, achievement of high ratings by independent
ratings services on corporate governance, and strong improvement in a variety of
financial metrics, including improved return on tangible equity, strong pre-tax
income growth, continued progress in corporate credit quality and the
significant appreciation in CIT share value in 2004.
Long-Term Incentives. In January, Mr. Gamper was awarded 205,000 stock
options. Mr. Peek was awarded 230,000 stock options, which were provided for in
his employment agreement. The stock options were granted at the fair market
value at the time of grant. In addition, Mr. Gamper was awarded 113,000
performance shares for the 2004 - 2006 performance cycle. The final number of
performance shares earned by Mr. Gamper will be prorated based on the date of
his retirement and the performance of the Company against previously described
financial targets. Mr. Peek was granted 67,000 performance shares for the 2004 -
2006 cycle as provided in his employment agreement. These awards were consistent
with the Company's compensation philosophy described above for all executive
officers.
In recognition of Mr. Gamper's seventeen year leadership of CIT, the Board
of Directors approved CIT's donation of $1.0 million to Rutgers University to
establish the Albert R. Gamper, Jr. Chair at the Rutgers School of Business.
This donation was in lieu of a stock option grant to Mr. Gamper in July 2004.
Mr. Gamper will donate a matching sum toward establishing the Chair.
Policy on Deductibility
The Committee's policy is to provide performance-based compensation to its
executive officers that is tax deductible under current tax law. To this end,
CIT's Annual Bonus Plan and equity compensation plan were approved by
Shareholders and are administered in accordance with Section 162(m). The
Committee will deviate from this policy only when it believes there are
overriding objectives to be achieved in the shareholder's interest.
13
To that end, CIT has established a Discretionary Bonus Plan to reward
individuals based upon qualitative achievements. The Compensation Committee
determines bonuses granted under the Discretionary Bonus Plan for the CEO and
other executive officers. The Discretionary Bonus Plan is not intended to comply
with Section162(m).
This Report has been furnished on behalf of the Board of Directors by the
members of its Compensation Committee.
February 25, 2005 Honorable Thomas H. Kean, Chair
William M. Freeman
Timothy M. Ring
Stock Performance Graph
The following graph compares the yearly percentage change in the
cumulative total stockholder return of our Common Stock to the cumulative total
return of the S&P Financial Index and the S&P 500 Index for the period
commencing with our IPO on July 2, 2002 and ending December 31, 2004. The
results are based on an assumed $100 invested on July 2, 2002, and reinvestment
of dividends.
[The following table depicts the information contained in the graph]
7/1/02 12/31/02 6/30/03 12/31/03 6/30/04 12/31/04
------ -------- ------- -------- ------- --------
CIT 100.00 85.78 109.21 160.58 172.18 207.43
S&P 500 100.00 91.66 102.44 117.95 122.01 130.77
S&P Financials 100.00 90.59 101.84 118.70 121.53 131.61
Director Compensation
Directors who are also CIT employees do not receive any fees or other
compensation for service on the Board or its committees. Non-employee directors
of CIT currently are paid an annual retainer of $60,000, which they may elect to
receive in one or more of the following forms:
o Cash
o Stock Options
o Restricted Stock
The number of shares of Common Stock underlying options that a director
may elect to receive instead of cash remuneration is based on the Black-Scholes
option pricing model. Any options that directors elect to receive as part of
their annual retainer are immediately vested, but are not exercisable until the
one year anniversary of the date of grant. These options have a term of ten
years and an exercise price equal to the closing price of CIT Common Stock on
the date of grant. Any amount that a director elects to receive in restricted
stock
14
is converted into shares of Common Stock based upon a market value equal to the
closing price of Common Stock on the date awarded. The stock vests and
restrictions on sale lapse on the first anniversary of the grant date.
In addition to the annual retainer, each non-employee director is entitled
to an annual grant of stock options having a Black-Scholes value of $45,000,
except that the committee chairmen are entitled to grants with a $55,000
valuation. These options vest and become exercisable in three equal, annual
installments. These options have a term of ten years and an exercise price equal
to the closing price of our Common Stock on the date of the grant.
Effective February 23, 2005, at the time of appointment to the Board,
non-employee directors are each awarded a one-time grant of restricted stock
with a $100,000 valuation (in lieu of the prior policy of granting 10,000
options). The restricted stock granted at the time of appointment, which is in
addition to the annual retainer and the annual grant of stock options, vests in
three equal annual installments.
We reimburse all directors for reasonable out-of-pocket expenses incurred
in attending Board or committee meetings.
Executive Compensation
The table below sets forth the annual compensation, including bonuses and
deferred compensation, of Messrs. Peek, Gamper (retired December 31, 2004),
Hallman, Leone, Marsiello, and Wolfert (the "Named Executive Officers") for
services rendered in all capacities to CIT during the years ended December 31,
2004 and 2003, the transition period ended December 31, 2002, and the twelve
months ended September 30, 2002.
SUMMARY COMPENSATION TABLE
(U.S. DOLLARS)
Annual Compensation Long-Term Compensation
-------------------------------- -----------------------
Other Annual Restricted Securities All Other
Name and Compensa- Stock Underlying Compensa-
Principal Positions Period Salary(1) Bonus(2) tion(3) Awards(4) Options(5) tion(6)
------------------- ------ --------- -------- ------------ ---------- ---------- ---------
Jeffrey M. Peek ........ Jan - Dec 2004 $765,000 $2,700,000 $ 78,000 $ 0 230,000 $ 8,808
Chairman and Chief Jan - Dec 2003 $230,769 $1,300,000 $ 18,000 $4,147,500 450,000 $ 0
Executive Officer
Albert R. Gamper, Jr. .. Jan - Dec 2004 $996,154 $2,800,000 $170,753 $ 0 205,000 $10,250
Chairman and Chief Jan - Dec 2003 $900,000 $2,200,000 $136,730 $3,744,900 400,000 $10,000
Executive Officer Oct 2002 - Dec 2002 $242,308 $ 500,000 $ 27,603 $ 0 0 $ 0
(Retired) Oct 2001 - Sept 2002 $900,000 $1,668,832 $ 15,000 $ 0 1,519,560 $10,000
Thomas B. Hallman ...... Jan - Dec 2004 $492,308 $ 950,000 $ 32,567 $ 0 155,000 $10,250
Vice Chairman - Jan - Dec 2003 $454,231 $ 675,000 $ 22,563 $1,664,400 125,000 $10,000
Specialty Finance Oct 2002 - Dec 2002 $115,769 $ 275,000 $ 2,721 $ 0 0 $ 0
Oct 2001 - Sept 2002 $430,000 $ 356,000 $ 1,209 $ 0 379,890 $ 9,197
Joseph M. Leone ........ Jan - Dec 2004 $490,385 $ 975,000 $ 32,722 $ 0 155,000 $10,250
Vice Chairman and Jan - Dec 2003 $441,346 $ 675,000 $ 24,291 $1,664,400 160,000 $10,000
Chief Financial Officer Oct 2002 - Dec 2002 $109,038 $ 155,000 $ 3,297 $ 0 0 $ 0
Oct 2001 - Sept 2002 $405,000 $ 390,500 $ 1,346 $ 0 454,890 $ 9,237
Lawrence A. Marsiello .. Jan - Dec 2004 $490,385 $ 950,000 $ 32,857 $ 0 155,000 $10,250
Vice Chairman and Jan - Dec 2003 $444,231 $ 775,000 $ 23,204 $1,664,400 125,000 $10,000
Chief Lending Officer Oct 2002 - Dec 2002 $113,077 $ 275,000 $ 2,934 $ 0 0 $ 0
Oct 2001 - Sept 2002 $420,000 $ 260,000 $ 1,465 $ 0 379,890 $ 9,246
Frederick E. Wolfert ... Jan - Dec 2004 $138,461 $1,750,000 $ 4,919 $1,400,006 72,728 $ 0
Vice Chairman -
Commercial Finance
----------
(1) The salary shown for Mr. Wolfert in 2004 is for the period from his start
date, September 13, 2004, through December 31, 2004. The salary shown for
Mr. Peek in 2003 is for the period from his start date, September 3, 2003,
through December 31, 2003.
(2) Bonus payments made for the year ending December 31, 2004 relate to
performance during the twelve months from January 1, 2004 through December
31, 2004. Bonus payments made for the year ending December 31, 2003 relate
to performance during the twelve month period from January 1, 2003 through
December 31, 2003. The amounts shown for 2004 and 2003 represent cash paid
under CIT's Annual Bonus Plan and Discretionary Bonus Plan. Bonus payments
made under CIT's Annual Bonus Plan for the three months ended December 31,
2002 related to performance during the six-month period from July 1, 2002
through December 31, 2002. Bonus payments made under CIT's Annual Bonus
Plan for the twelve months ended September 30, 2002 related to performance
during the nine-month period from October 1, 2001 through June 30, 2002.
15
Mr. Wolfert received a $1,000,000 sign-on bonus, which was paid in 2004,
and a 2004 bonus under CIT's Annual Bonus Plan of $750,000, which was
guaranteed based on the terms of his employment agreement.
Mr. Peek's 2003 bonus of $1,300,000 is based on a guaranteed bonus amount
in his employment agreement.
For the period from October 2001 through June 2002, the Named Executive
Officers received a portion of their annual bonus as CIT restricted stock.
The amounts shown include the value of the restricted stock. The number of
shares was based on a price of $22.20, the closing price of CIT Common
Stock on August 14, 2002, the date of the grant. All shares were awarded
with a one-year restriction on sale. The number and value of shares awarded
were as follows: Mr. Gamper - 50,675 shares ($1,124,985), Mr. Hallman -
12,162 shares ($269,996), Mr. Leone - 15,765 shares ($349,983) and Mr.
Marsiello - 11,711 shares ($259,984). The balance of the listed bonus
amounts relate to cash bonuses paid under a quarterly corporate bonus plan
of our former parent, Tyco International Ltd. ("Tyco"), which was
discontinued after our IPO.
Of the $1,668,832 in annual bonus that Mr. Gamper received for the period
from October 2001 through September 2002, $918,832 was awarded for his
performance under the Tyco corporate bonus plan, of which $750,000 was paid
out in two quarterly payments consisting of $375,000 in cash and $375,000
in CIT restricted stock as discussed above, and $168,832 was awarded in
unrestricted shares of Tyco common stock (3,521 shares at a Tyco share
price of $47.95). The additional $750,000 was awarded by CIT for his
performance from January 1 through June 30, 2002, of which $749,985 was
paid in CIT restricted stock.
(3) The payments set forth for 2004 under Other Annual Compensation for Messrs.
Peek, Hallman, Leone, Marsiello, and Wolfert represent dividends paid on
restricted stock. The payment set forth for 2004 under Other Annual
Compensation for Mr. Gamper represents dividends paid on restricted stock,
and the value of certain perquisites consisting of aircraft usage, car
service, and financial advisory services, including $22,675 for aircraft
usage and $26,800 for tax planning services. The payments set forth for all
other periods under Other Annual Compensation represent the dividends paid
on restricted stock held in each of those periods. All dividends on
restricted stock were payable at the same rate applicable to all other
issued and outstanding shares.
(4) Recipients of restricted stock have the right to vote such shares and
receive dividends.
On September 13, 2004, Mr. Wolfert was granted 37,838 shares of restricted
stock under the Long-Term Equity Compensation Plan ("ECP") pursuant to the
terms of his employment agreement. The value is based on the fair market
price of CIT Common Stock on the grant date of $37.00 per share. This grant
vests 100% on the second anniversary of the award.
On February 25, 2004, performance shares were awarded under the ECP. The
number of shares awarded were as follows: Mr. Peek - 67,000 shares, Mr.
Gamper - 113,000 shares, Mr. Hallman - 30,000 shares, Mr. Leone, 30,000
shares, and Mr. Marsiello - 30,000 shares. On September 13, 2004, Mr.
Wolfert received 27,028 units of performance shares pursuant to the terms
of his employment agreement. A participant receives a target award that
leverages up or down from 0% to 150% of target depending on CIT's
achievement of pre-established financial performance targets based on
return on tangible equity ("ROTE") and diluted earnings per share ("diluted
EPS").
On September 3, 2003, Mr. Peek received 150,000 shares of restricted stock
as part of his employment agreement. The value is based on the fair market
value of CIT Common Stock on the grant date of $27.65 per share. This grant
vests 100% on the third anniversary of the award.
On July 25, 2003, restricted stock grants were awarded to Messrs. Gamper,
Hallman, Leone and Marsiello under the ECP. The value of this grant is
based on the fair market price of CIT Common Stock on the grant date of
$27.74 per share. Awards were as follows: Mr. Gamper 135,000 shares; Mr.
Hallman 60,000 shares; Mr. Leone 60,000 shares; and Mr. Marsiello 60,000
shares. These grants vest 100% on the third anniversary date of the award.
The number and value at December 31, 2004 of restricted stock holdings,
which excludes performance shares, based upon the closing market price of
$45.82 per share of CIT Common Stock was as follows: Mr. Peek - 150,000
shares ($6,873,000), Mr. Gamper - 135,000 shares ($6,185,700), Mr. Hallman
- 60,000 shares ($2,749,200), Mr. Leone - 60,000 shares ($2,749,200), Mr.
Marsiello - 60,000 shares ($2,749,200), and Mr. Wolfert - 37,838 shares
($1,733,737).
(5) On September 13, 2004, 72,728 options were awarded under the ECP to Mr.
Wolfert pursuant to the terms of his employment agreement. These options
vest one third per year on each anniversary date of the grant.
On January 21, 2004, option grants were awarded under the ECP to Messrs.
Peek, Gamper, Hallman, Leone, and Marsiello. On July 21, 2004, option
grants were awarded to Messrs. Hallman, Leone, and Marsiello. These grants
have a vesting schedule of one-third per year on each anniversary date of
the grant.
Pursuant to the terms of Mr. Peek's employment agreement, 450,000 options
were granted to him under the ECP effective September 3, 2003. These
options vest one-third per year on each anniversary date of the grant.
On January 21, 2003, option grants were awarded under the ECP to Messrs.
Gamper, Hallman, Leone and Marsiello. These grants have a vesting schedule
of one-third per year on each anniversary date.
During the three months ended December 31, 2002, no options were granted to
the Named Executive Officers.
16
Options that were originally granted to Messrs. Gamper, Hallman, Leone and
Marsiello to purchase Tyco common stock, or to purchase CIT Common Stock
prior to the acquisition of CIT by Tyco, are reported in the table as
current options to purchase CIT Common Stock. Options to purchase CIT
Common Stock prior to the acquisition of CIT by Tyco were converted in June
2001, in connection with such acquisition, into options to purchase shares
of Tyco common stock based on a conversion rate of .6907 of a share of Tyco
common stock for each share of CIT Common Stock. Except as set forth below,
options to purchase Tyco common stock were converted in July 2002, in
connection with our IPO, into options to purchase CIT Common Stock based on
a conversion rate of .5978 of a share of CIT Common Stock for each share of
Tyco common stock.
Two new option awards were granted to Messrs. Gamper, Hallman, Leone, and
Marsiello during the twelve months ended September 30, 2002. The first
grant was awarded on February 5, 2002 under the Tyco International Ltd.
Long Term Incentive Plan and the Tyco International Ltd. Long Term
Incentive Plan II. These options were converted into options to purchase
shares of CIT Common Stock at the time of our IPO. The second grant was
awarded under the ECP on July 2, 2002 to coincide with our IPO.
(6) For the years ending December 31, 2004 and December 31, 2003, as
applicable, the payments set forth under "All Other Compensation" for
Messrs. Peek, Gamper, Hallman, Leone and Marsiello represent the matching
employer contribution to each participant's account under the CIT Group
Inc. Savings Incentive Plan (the "CIT Savings Plan"). The matching employer
contribution was made pursuant to a compensation deferral feature of the
CIT Savings Plan under Section 401(k) of the Internal Revenue Code of 1986.
For the three months ended December 31, 2002, no amounts required to be
disclosed under "All Other Compensation" were paid to any Named Executive
Officer.
For the twelve months ended September 30, 2002, the payments set forth
under "All Other Compensation" for Messrs. Gamper, Hallman, Leone and
Marsiello represent the matching employer contribution to each
participant's account and the employer flexible retirement account
contribution to each participant's flexible retirement account under the
CIT Savings Plan. The matching employer contribution was made pursuant to a
compensation deferral feature of the CIT Savings Plan under Section 401(k)
of the Internal Revenue Code of 1986.
17
Stock Option Awards During 2004
The following table sets out awards of stock options to the Named
Executive Officers during the year ended December 31, 2004.
OPTION GRANTS IN 2004
Percent
Number of of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Date of Options/SARs Employees in Base Price Expiration Present
Name Grant(1) Granted Fiscal Year(2) ($/Sh)(3) Date Value(4)
---- -------- ------------ -------------- --------- ---------- --------
Jeffrey M. Peek. ............ 01/21/2004 230,000 5.32% $39.22 01/21/2014 $1,713,914
Chairman and
Chief Executive Officer
Albert R. Gamper, Jr. ....... 01/21/2004 205,000 4.74% $39.22 01/21/2014 $1,527,619
Chairman and
Chief Executive Officer
(Retired)
Thomas B. Hallman ........... 01/21/2004 70,000 1.62% $39.22 01/21/2014 $521,626
Vice Chairman - 07/21/2004 85,000 1.97% $37.60 07/21/2014 $620,024
Specialty Finance
Joseph M. Leone ............. 01/21/2004 70,000 1.62% $39.22 01/21/2014 $521,626
Vice Chairman and 07/21/2004 85,000 1.97% $37.60 07/21/2014 $620,024
Chief Financial Officer
Lawrence A. Marsiello ....... 01/21/2004 70,000 1.62% $39.22 01/21/2014 $521,626
Vice Chairman and 07/21/2004 85,000 1.97% $37.60 07/21/2014 $620,024
Chief Lending Officer
Frederick E.Wolfert ......... 09/13/2004 72,728 1.68% $37.00 09/13/2014 $506,793
Vice Chairman -
Commercial Finance
----------
(1) The options reported above are for the year ended December 31, 2004. All
options listed represent options to purchase CIT Common Stock awarded under
the ECP. These grants vest one-third on each anniversary of the grant date,
subject to earlier vesting under conditions described in the individual
award agreements.
(2) Represents the percentage of all employee options granted in 2004 under the
ECP.
(3) Each option grant is awarded with a strike price equal to the fair market
value of CIT Common Stock on the date of grant.
(4) The ultimate value of the options will depend on the future market price of
CIT Common Stock, which cannot be forecast with reasonable accuracy. The
actual value, if any, an optionee will realize upon exercise of an option
will depend on the excess of the market value of CIT Common Stock over the
exercise price on the date the option is exercised. The values shown are
based on the Black-Scholes option-pricing model, which is a method of
calculating a theoretical value of the options based upon a mathematical
formula using certain assumptions. For the calculation, the following
assumptions were used: an assumed life of three to five years; interest
rate of 2.2% to 3.72%, which represents the risk free rate with a maturity
date similar to the assumed exercise period; assumed annual volatility of
underlying shares of 20.5% to 23.4%, calculated based on a historical share
price movement analysis of peer organizations over periods generally
commensurate with the expected life of the option; quarterly dividend
payment of $0.13 per share; and the vesting schedule indicated for the
grant.
18
The following table gives additional information on option exercises by
the Named Executive Officers during the year ended December 31, 2004, and on the
number of options and value of in-the-money options held by the Named Executive
Officers on December 31, 2004.
AGGREGATED OPTION EXERCISES IN 2004
AND YEAR-END OPTION VALUES
(U.S. Dollars)
Number of
Securities Underlying Value of Unexercised
Unexercised In-the-Money
Options at 12/31/2004(1) Options at 12/31/2004
------------------------ ---------------------
Shares (#) ($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
Jeffrey M. Peek .................. 0 $0 150,000/530,000 $2,725,500/$6,969,000
Chairman and
Chief Executive Officer
Albert R. Gamper, Jr. ............ 0 $0 1,251,288/1,211,520 $19,750,883/$24,169,451
Chairman and
Chief Executive Officer
(Retired)
Thomas B. Hallman ................ 0 $0 236,593/423,297 $5,144,124/$7,277,659
Vice Chairman -
Specialty Finance
Joseph M. Leone .................. 0 $0 374,368/484,130 $6,288,866/$8,711,367
Vice Chairman and
Chief Financial Officer
Lawrence A. Marsiello ............ 0 $0 338,332/423,297 $5,144,124/$7,277,659
Vice Chairman and
Chief Lending Officer
Frederick E. Wolfert ............. 0 $0 0/72,728 $0/$641,461
Vice Chairman -
Commercial Finance
----------
(1) The options reported are non-qualified stock options to purchase CIT Common
Stock awarded under the ECP, including all options converted from Tyco
options or prior CIT options. The exercise price of the options ranges from
$21.05 to $74.47 per share and the closing trading price on the New York
Stock Exchange of CIT Common Stock at December 31, 2004 was $45.82.
19
CIT granted performance shares to the Named Executive Officers in 2004 in
the following amounts:
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts Under
Non-Stock Price-Based Plans
-------------------------------------------------------------
Minimum
Target Number of Target Maximum
Performance Shares/$ Value Performance Shares Number of
Shares Performance at Threshold on Grant/$ Value Shares/$ Value
Name Grant Period Date of Grant(1) on Date of Grant on Date of Grant
---- ----------- ----------- ---------------- ---------------- ----------------
Jeffrey M. Peek ............ 67,000 January 1, 2004 - 16,750/$652,915 67,000/$2,611,660 100,500/$3,917,490
Chairman and December 31, 2006
Chief Executive Officer
Albert R. Gamper, Jr. ...... 113,000 January 1, 2004 - 28,250/$1,101,185 113,000/$4,404,740(2) 169,500/$6,607,110
Chairman and December 31, 2006
Chief Executive Officer
(Retired)
Thomas B. Hallman .......... 30,000 January 1, 2004 - 7,500/$292,350 30,000/$1,169,400 45,000/$1,754,100
Vice Chairman - December 31, 2006
Specialty Finance
Joseph M. Leone ............ 30,000 January 1, 2004 - 7,500/$292,350 30,000/$1,169,400 45,000/$1,754,100
Vice Chairman and December 31, 2006
Chief Financial Officer
Lawrence A. Marsiello ...... 30,000 January 1, 2004 - 7,500/$292,350 30,000/$1,169,400 45,000/$1,754,100
Vice Chairman and December 31, 2006
Chief Lending Officer
Frederick E. Wolfert ....... 27,028 January 1, 2004 - 6,757/$250,009 27,028/$1,000,036 40,542/$1,500,054
Vice Chairman - December 31, 2006
Commercial Finance
----------
(1) Assumes the lowest threshold attainable of 25% for the diluted EPS
threshold is met, but the ROTE threshold is not met.
(2) Mr. Gamper was awarded 113,000 performance shares for the 2004-2006
performance cycle. Under the terms of his performance share agreement, the
final number of performance shares earned by Mr. Gamper will be prorated
based on the date of his retirement and the performance of the Company
against previous described financial targets, such that he will be entitled
to 1/3 of his target grant.
Performance share payouts may increase or decrease from the target grant,
with actual payouts ranging from 0% to 150% of the target grant based on
performance against pre-established ROTE and diluted EPS performance measures.
Each of the performance measures has a threshold level of performance that must
be achieved to trigger a payout for that performance measure. If the threshold
level of performance is achieved for the ROTE performance measure, then the
payout for the ROTE performance measure is 35% of the performance share target.
If the threshold level of performance is achieved for the diluted EPS
performance measure, then the payout for the diluted EPS performance measure is
25%. The payout for each performance measure is calculated independently of the
other performance measure. Shares for Messrs Peek, Gamper, Hallman, Leone and
Marsiello are valued based on a $38.98 share price, the fair market share price
on the date of grant, February 25, 2004. Mr. Wolfert's shares are valued based
on a $37.00 share price, the fair market share price on his date of hire,
September 13, 2004. Additional Information Regarding Equity Compensation Plans
The following table summarizes the options outstanding under equity
compensation plans as of December 31, 2004.
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted average equity compensation plans
exercise of exercise price of (excluding securities
outstanding options(1) outstanding options reflected in column (a)(2)
---------------------- ------------------- --------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders ..... 19,863,907 $33.07 9,797,410
----------
(1) Excludes 1,269,641 unvested restricted shares and 688,928 performance shares
outstanding under the ECP.
(2) Does not consider 688,928 performance shares outstanding under the ECP.
Options that are not exercised or whose value is used to exercise other
options are returned to the pool of securities available for future issuance.
All equity compensation plans were approved by our sole stockholder prior to our
IPO. We have no equity compensation plans that were not approved by
stockholders.
20
Employment Agreements
General
Mr. Peek entered into an employment agreement effective September 3, 2003,
which extends until September 3, 2006 and provides for him to serve as the Chief
Executive Officer of CIT and as a member of the Board. The employment agreement
provides for an annual base salary of $750,000, which was increased to $800,000
on the first anniversary of his employment, and a guaranteed annual bonus of
$1,300,000 for 2003. Mr. Peek's annual bonus for 2004 was $2,700,000, since the
Company exceeded its pre-tax income goal for 2004.
Pursuant to his employment agreement, in 2003, CIT granted Mr. Peek
450,000 stock options and 150,000 shares of restricted stock, and in 2004, CIT
granted Mr. Peek 230,000 stock options and 67,000 performance shares.
Messrs. Hallman, Leone, Marsiello, and Wolfert have employment agreements
that extend until December 31, 2007. The agreements of Messrs. Hallman, Leone,
and Marsiello provide for the payment of an annual base salary of not less than
the amount received prior to the effective date of September 1, 2004, to be
reviewed when the salaries of all executive officers of CIT are reviewed. The
agreement of Mr. Wolfert provides for him to receive an annual base salary of
$500,000, to be reviewed when the salaries of all executive officers of CIT are
reviewed. They are also entitled to an annual bonus opportunity based on the
performance of CIT and their business units, in accordance with CIT's incentive
plans and programs (with a target bonus of at least 150% of annual base salary).
For the partial 2004 calendar year, Mr. Wolfert is entitled to a guaranteed
bonus of $750,000, unless his employment is terminated for cause or by him for
good reason prior to payment of such bonus. Pursuant to his agreement, CIT
granted to Mr. Wolfert stock options, performance shares, and restricted stock
having an aggregate fair market value of $800,000, $1,000,000 and $1,400,000,
respectively. In addition, Mr. Wolfert received a hiring bonus of $1,000,000.
The employment agreements of Messrs. Peek, Hallman, Leone, Marsiello, and
Wolfert provide for their participation in all employee pension, welfare,
perquisites, fringe benefit and other benefit plans generally available to
senior executives. The employment agreements of Messrs. Peek, Hallman, Leone,
Marsiello, and Wolfert provide for continued participation in CIT's Executive
Retirement Program and all other supplemental and excess retirement plans on
terms no less favorable than provided immediately prior to the effective date of
the agreement. They are also eligible to receive benefits under the CIT retiree
medical and life insurance plan. In addition, Mr. Peek is entitled to be
reimbursed for certain expenses and to receive certain additional benefits
during the term of his employment.
Termination and Change-In-Control Arrangements
Following his retirement on December 31, 2004, Mr. Gamper is entitled to
an office, attorney and accountant fee reimbursement up to $25,000 per year,
officer's and director's insurance and indemnification, and a car and driver.
Mr. Gamper is entitled to each of the items described in the previous sentence
for two years following the date of retirement, except for the insurance, which
would extend for five years. Mr. Gamper's employment agreement was amended in
January 2005 to provide for an office for five years following any such
termination instead of two years.
Mr. Gamper's employment agreement provided that he will not, for two years
after the date of retirement, without the written consent of the Board (i)
engage or be interested in any business in the U.S. that is in competition with
any lines of business actively being conducted by CIT on the date of
termination, (ii) hire any person who was employed by CIT or its affiliates
within the six-month period preceding the date of such hiring or solicit,
entice, persuade or induce any person or entity doing business with CIT or its
affiliates to terminate such relationship or to refrain from extending or
renewing the same, or (iii) disparage or publicly criticize CIT or any of its
affiliates.
The employment agreements of Messrs. Peek, Hallman, Leone, Marsiello, and
Wolfert provide that, under certain circumstances, if the executive's employment
is terminated by him for "good reason" or by CIT without "cause" (in each case,
as these terms are defined in his employment agreement), then he would be
entitled to receive: (i) the sum of (1) his unpaid annual base salary through
the termination date and (2) a pro-rated Severance Bonus based on the portion of
the fiscal year completed prior to termination, payable upon
21
termination; and (ii) the sum of (1) the greater of (x) his annual base salary
payable for the remainder of the employment agreement, or (y) 2.5 times (three
times in the case of Mr. Peek) his annual base salary, and (2) 2.5 times (three
times in the case of Mr. Peek) his Severance Bonus, payable over a period of 2.5
years (three years in the case of Mr. Peek), provided that he continues to
comply with the confidentiality and non-compete provisions of his employment
agreement. "Severance Bonus" means the greater of (i) the executive's average
annual bonus over the two calendar years preceding the date of termination, or
(ii) the executive's target bonus.
In addition, under certain circumstance, upon termination of employment,
all unvested stock options and the performance share target grant amount would
vest immediately and all restrictions on restricted stock held by Messrs. Peek,
Hallman, Leone, Marsiello, and Wolfert would lapse. Each of them would also
receive life insurance and medical, dental and disability benefits for up to 2.5
years (three years in the case of Mr. Peek) after termination, any other amounts
or benefits required to be paid or provided (to the extent not paid) and
outplacement services. They also would be credited with two additional years of
age and service credit under all relevant CIT retirement plans.
In the event of a change of control (as defined in his employment
agreement) during the term of the employment agreements of Messrs. Peek,
Hallman, Leone, Marsiello, and Wolfert, the term of each such agreement would be
extended to the second anniversary of the change of control. In addition, should
the employment of Messrs. Hallman, Leone, Marsiello, and Wolfert be terminated
without cause or by the executive for good reason during the two year extension
period, the executive would receive the compensation and benefits described
under a good reason termination, except that this payment would be payable in a
lump sum within 30 days of the termination. In the event Mr. Peek's employment
should be terminated without cause or by him for good reason during the two year
extension period in the event of a change of control, he would receive the
compensation and benefits described under a good reason termination except that
this payment would be payable in a lump sum within 30 days of the termination.
The employment agreements of Messrs. Peek, Hallman, Leone, Marsiello, and
Wolfert also provide that each of them will not, while employed by CIT under the
employment agreement and for one year after termination (two years in the event
Mr. Peek terminates without good reason or the Company terminates for cause),
without the written consent of the Board, (i) engage or be interested in any
business in the United States which is in competition with any lines of business
actively being conducted by CIT on the date of termination, (ii) hire any person
who was employed by CIT within the six-month period preceding the date of such
hiring or solicit, entice, persuade or induce any person or entity doing
business with the Company to terminate such relationship or to refrain from
extending or renewing the same (two years in the case of Mr. Peek for
termination for any reason), or (iii) disparage or publicly criticize CIT or any
of its affiliates.
In the event that Mr. Peek or the other Named Executive Officers become
subject to excise taxes under Section 4999 of the Internal Revenue Code, each
employment agreement provides for a gross up payment equal to the amount of such
excise taxes.
Retirement Plan and Supplemental Retirement Plan
The CIT Group Inc. Retirement Plan (the "Retirement Plan'') is a qualified
defined benefit pension plan that covers all officers and salaried employees in
the United States who have one year of service and are 21 years of age or older.
We also maintain a supplemental retirement plan (the "Supplemental Retirement
Plan") for employees whose benefit in the Retirement Plan is subject to Internal
Revenue Code limitations.
The Retirement Plan was revised in 2000 with a new "cash balance''
formula, which became effective January 1, 2001. Under this new formula, each
member's accrued benefits as of December 31, 2000 were converted to a lump sum
amount and each year thereafter the member's account balance is to be credited
with a percentage of the member's "Benefits Pay'' (comprised of base salary,
plus certain annual bonuses, sales incentives and commissions) depending on the
member's period of service as follows:
Period of Service % of "Benefits Pay"
----------------- -------------------
1 - 9 years 5
10 - 19 years 6
20 - 29 years 7
30 years or more 8
22
These account balances are also to receive annual interest credits,
subject to certain government limits. For 2004, the interest credit was 5.11%
and for 2003 it was 5.01%. Upon termination after 5 years of employment orupon
retirement, the amount credited to a member's account is to be paid in a lump
sum or converted into an annuity. Certaineligible members had the option of
remaining under the Retirement Plan formula as in effect prior to January1,2001.
Messrs Hallman, Leone and Marsiello are earning benefits under the "cash
balance'' formula effective January 1, 2001. Mr. Peek began earning benefits
under the "cash balance" plan effective September 3, 2004. Mr. Wolfert will
begin earning benefits under the "cash balance" plan after his first year
anniversary of employment, September 13, 2005. The following table shows the
estimated annual retirement benefits (including the benefits under the
Supplemental Retirement Plan) which would be payable to each Named Executive
Officer if he retired at normal retirement age (age 65) at his normalized 2004
"Benefits Pay". The projected amounts include annual interest credits at 5.11%.
Year of Estimated
Name Normal Retirement Annual Benefit
---- ----------------- --------------
Jeffrey M. Peek ..................... 2012 $ 94,240
Thomas B. Hallman ................... 2017 $160,847
Joseph M. Leone ..................... 2018 $229,999
Lawrence A. Marsiello ............... 2015 $234,522
Frederick E. Wolfert ................ 2019 $110,957
Mr. Gamper, who retired on December 31, 2004, will receive lump sum
distributions in 2005 of his earned benefit under both the Retirement Plan and
the Supplemental Retirement Plan totaling $5,223,631. He will also receive lump
sum distributions totaling $333,076, which represent payment of supplemental
benefits earned from participating in the Retirement Plan prior to his electing
the new "cash balance" formula.
Executive Retirement Plan
Messrs. Peek, Hallman, Leone, Marsiello and Wolfert are entitled to
benefits under an executive retirement plan (the "Executive Retirement Plan"),
which provides a death benefit equal to approximately three times a
participant's base salary if such participant dies while being actively
employed, with a life annuity option payable monthly by CIT upon retirement. CIT
purchases life insurance to fund most of these benefits. The participant pays a
portion of the annual premium, which is calculated based on the death benefit
provided under the Executive Retirement Plan. We are entitled to recoup our
portion of the premium payments from the proceeds of any policy in excess of the
death benefit. Upon the participant's retirement, a life annuity will be payable
out of CIT's general assets and we anticipate recovering the cost of the life
annuity out of the proceeds of any insurance policy payable to CIT upon the
death of the participant. CIT is currently in the process of purchasing a life
insurance policy covering Mr. Wolfert.
In addition to the table of pension benefits shown above, we are
conditionally obligated to make annual payments under our Executive Retirement
Plan in the amounts indicated to the Named Executive Officers at retirement: Mr.
Peek, $345,760; Mr. Hallman, $195,375; Mr. Leone, $260,592, Mr. Marsiello,
$261,608, and Mr. Wolfert, $179,043.
Mr. Gamper, upon his retirement, started receiving an annual annuity
benefit of $443,243 payable on a monthly basis. This benefit has a survivor
feature payable to his spouse equal to 50% of his benefit. He also received a
lump sum payment of $82,552 to cover certain tax liabilities due on the present
value of the annuity.
Other Employee Benefits
We maintain a defined contribution plan with a 401(k) feature. In
addition, we maintain a supplemental unfunded defined contribution plan for
employees in a grandfathered defined benefit plan. Retiree medical and dental
coverage is offered on a contributory basis to certain eligible employees who
meet specified age and service requirements.
Long-Term Equity Compensation Plan
The ECP allows for the granting of stock options, non-qualified stock
options, stock appreciation rights, restricted stock, performance shares and
performance units (each, an "Award") to employees and directors of CIT and its
subsidiaries. The ECP is administered by the Compensation Committee of the
Board, and by the full Board
23
(the "Administrator") with respect to grants of Awards to non-employee
directors. The Administrator has the discretion to select the participants to
whom Awards will be granted and the type, size and terms and conditions
applicable to each Award, and the authority to interpret, construe and implement
the provisions of theECP.
Annual Incentive Compensation
Annual Bonus Plan. CIT has an Annual Bonus Plan, under which cash awards
may be made to any employees of CIT and its subsidiaries. It is a
performance-based plan in which payments are based on the achievement of
performance goals in accordance with the requirements of Internal Revenue Code
Section 162(m).
Discretionary Bonus Plan. CIT also has a Discretionary Bonus Plan, under
which awards may be made to any employees of CIT and its subsidiaries. Bonuses
under this plan are purely discretionary and are not contingent upon the
achievement of performance goals under the Annual Bonus Plan or other
performance based arrangements of the Company. Bonuses under this plan will be
determined by the Compensation Committee, provided that the Compensation
Committee may delegate to the Chief Executive Officer the discretion to
determine bonuses for employees other than the Chief Executive Officer and the
executive officers named in this proxy statement or otherwise designated by the
Compensation Committee.
Employee Stock Purchase Plan
CIT's Employee Stock Purchase Plan (the "ESPP") covers United States and
Canadian employees of CIT and participating subsidiaries customarily employed at
least 20 hours per week. Under the ESPP, eligible employees can choose to have
between 1% and 10% of their base salary withheld to purchase shares of Common
Stock quarterly at a purchase price equal to 85% of the fair market value of our
Common Stock on either the first business day or the last business day of the
quarterly offering period, whichever is lower. The fair market value of a share
of Common Stock is the closing trading price on the New York Stock Exchange for
that day. The amount of Common Stock that may be purchased by a participant
through the plan is generally limited to $25,000 per year.
Deferred Compensation Plan
In 2005, CIT adopted the Deferred Compensation Plan ("DCP"), which allows
approximately 150 senior officers the opportunity to elect to defer payment of a
portion of their base salary and certain incentive payments. Participant's
deferrals under this plan will be payable upon a separation from service, or in
an elected calendar year, or in the event of a participant's death, disability
or an unforeseeable emergency. CIT's obligations under the DCP are unsecured
general obligations to pay the deferred compensation in the future in accordance
with the terms of the DCP.
Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The table below shows, as of the most recent practicable date, the name
and address of each person or company known to CIT that beneficially owns in
excess of 5% of any class of voting stock. Information in this table is as of
December 31, 2004, based upon reports on Schedule 13G filed with the SEC on or
before February 15, 2005.
Percentage
of
Title of Class Name and Address of Amount and Nature of Common
of Stock Beneficial Owner Beneficial Ownership Stock
-------- ---------------- -------------------- ----------
Common Stock ........ Dodge & Cox(1) 19,153,550 9.1%
One Sansome Street, 35th Floor
San Francisco, CA 94104
Common Stock ........ JPMorgan Chase & Co.(2) 12,203,864 5.8%
270 Park Avenue
New York, NY
----------
(1) Dodge & Cox reports sole voting power over 17,964,450 shares, shared
voting power over 289,300 shares and sole dispositive power over
19,153,550 shares.
(2) JPMorgan Chase & Co. reports sole voting power over 8,186,535 shares,
shared voting power over 813,606 shares, sole dispositive power over
11,251,719 shares, and shared dispositive power over 921,260 shares.
24
Security Ownership of Directors and Executive Officers
The table below shows, as of February 15, 2005, the number of shares of
CIT Common Stock owned by each director, by the Named Executive Officers and by
the directors and executive officers as a group.
Amount and Nature
of Beneficial Ownership
(CIT Common Stock and Percentage
Name of Individual Exchangeable Shares)(1)(2)(3)(4) of Class
------------------ -------------------------------- ----------
Jeffrey M. Peek ................... 378,178 *
Albert R. Gamper, Jr. ............. 1,668,068 *
Gary C. Butler .................... 13,380 *
William A. Farlinger .............. 18,751 *
William M. Freeman ................ 5,262 *
Hon. Thomas H. Kean ............... 40,780 *
Edward J. Kelly, III .............. 14,345 *
Marianne Miller Parrs ............. 14,192 *
Timothy Ring ...................... 309 *
John R. Ryan ...................... 5,327 *
Peter J. Tobin .................... 19,205 *
Lois M. Van Deusen ................ 12,494 *
Thomas B. Hallman ................. 395,188 *
Joseph M. Leone ................... 549,678 *
Lawrence A. Marsiello ............. 493,399 *
Frederick E. Wolfert .............. 37,838 *
All Directors and Executive
Officers as a group (17 persons) .. 3,917,448 1.8%
----------
* Represents less than 1% of the total outstanding Common Stock.
(1) Includes shares of Restricted Stock issued under the ECP, for which the
holders have voting rights, but for which ownership has not vested, in the
following amounts: Mr. Peek - 150,000 shares, Mr. Gamper - 135,000 shares,
Mr. Butler - 1,694 shares, Mr. Farlinger - 1,694 shares, Mr. Freeman - 593
shares, Mr. Kean - 1,694 shares, Ms. Parrs - 1,694 shares, Mr. Ring - 309
shares, Mr. Ryan - 509 shares, Ms. Van Deusen - 1,356 shares, Mr. Hallman -
60,000 shares, Mr. Leone - 60,000 shares, Mr. Marsiello - 60,000 shares,
and Mr. Wolfert - 37,838 shares.
(2) Includes shares of CIT Common Stock issuable pursuant to stock options
awarded under the ECP that have vested or will vest within 60 days after
February 15, 2005 in the following amounts: Mr. Peek - 226,666 shares, Mr.
Gamper - 1,315,141, Mr. Butler - 3,686 shares, Mr. Farlinger - 16,057
shares, Mr. Freeman - 4,669 shares, Mr. Kean - 27,350 shares, Mr. Kelly -
10,281 shares, Ms. Parrs - 9,772 shares, Mr. Ryan - 4,669 shares, Mr. Tobin
- 19,205 shares, Ms. Van Deusen - 9,772 shares, Mr. Hallman - 301,593
shares, Mr. Leone - 451,034 shares, and Mr. Marsiello - 403,332 shares.
(3) Excludes Performance Shares issued under the ECP, for which the holders do
not have voting rights, and for which ownership has not vested, in the
following amounts: Mr. Peek - 149,000 shares, Mr. Gamper - 113,000 shares,
Mr. Hallman - 60,000 shares, Mr. Leone - 60,000 shares, Mr. Marsiello -
60,000 shares, and Mr. Wolfert - 57,028 shares.
(4) Includes 542,072 shares of Restricted Stock issued under the ECP to all
executive officers and directors as a group for which they have voting
rights, but for which ownership has not vested, and 3,006,959 shares of
Common Stock issuable pursuant to stock options awarded under the ECP to
all executive officers and directors as a group that have vested or will
vest within 60 days after February 15, 2005, but excludes 511,028
Performance Shares issued under the ECP to all executive officers as a
group, for which the holders do not have voting rights and for which
ownership has not vested.
Certain Relationships and Related Transactions
We have in the past and may in the future enter into certain transactions
with affiliates, other than directors and executive officers. Such transactions
have been, and it is anticipated that such transactions will continue to be,
entered into on an arms length basis at a fair market value for the transaction.
Dodge & Cox, a shareholder of CIT, provides investment management services
to CIT in conjunction with employee benefit and retirement plans. These services
are provided in the ordinary course of business. The CIT Group Inc. Retirement
Plan invests in certain funds managed by Dodge & Cox. At December 31, 2004,
CIT's Retirement Plan had total assets of $205.7 million, of which $112.6
million were invested in two Dodge & Cox funds. Dodge & Cox charges a fee for
these investment management services based on a percentage of the asset balance
in the funds. This fee was approximately $410 thousand during 2004.
J.P.Morgan Chase & Co., a shareholder of CIT, provides banking and
investment banking services to CIT. These services are provided in the ordinary
course of business. During 2004, CIT paid JPMorgan Chase approximately $14.1
million for services rendered, including fees for cash management services,
underwriting fees for issuing unsecured debt and asset backed securities,
facility fees for bank credit facilities, fees for hedging activities to protect
against certain risks, such as interest rate and currency exchange fluctuations,
and investment fees primarily for overnight investments.
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PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has appointed the firm of PricewaterhouseCoopers LLP
("PwC"), 300 Madison Avenue, New York, New York 10017, as independent auditors
to audit CIT's financial statements, to review management's assessment of the
effectiveness of internal control over financial reporting as of and for the
year ending December 31, 2005, and to perform appropriate auditing services. A
resolution will be presented at the meeting to ratify the appointment. The
affirmative vote of a majority of the number of votes entitled to be cast by the
Common Stock represented at the meeting is needed to ratify the appointment. If
the stockholders do not ratify the appointment of PwC, the Audit Committee will
reconsider the selection of independent auditors.
PwC has audited our financial statements since June 2001. A member of PwC
will be present at the meeting, will have the opportunity to make a statement if
he or she desires to do so, and will be available to respond to appropriate
questions by stockholders.
Fees for Professional Services
The table below shows the aggregate fees for professional services billed
by PwC during the years ended December 31, 2004 and December 31, 2003 (in
millions):
Year ended Year ended
December 31, 2004 December 31, 2003
----------------- -----------------
Audit fees (a) ....................... $10.83 $8.24
Audit-related fees (b) ............... $ 0.08 $1.10
Tax fees (c) ......................... $ 0.35 $0.41
All other fees (d) ................... $ -- $0.01
------ -----
Total Fees ........................... $11.26 $9.76
----------
(a) Audit fees include fees for the audit of CIT's consolidated financial
statements and effectiveness of internal controls over financial reporting,
including limited reviews of CIT's unaudited interim financial statements,
and as appropriate, statutory and subsidiary audits, issuances of comfort
letters, consents, income tax provision procedures and assistance with
review of documents filed with the SEC.
(b) Audit related fees include fees for assurance and related services,
including audits of employee benefit plans, risk and controls assessments
(pre-2004), review of our service centers, and guidance related to emerging
accounting standards.
(c) Tax fees include fees for tax services rendered for tax return preparation.
(d) All other fees include fees for user licenses for access to a technical
reference library.
The Audit Committee has determined that CIT will not retain PwC for any
professional services without the prior approval of the Audit Committee, except
that the Audit Committee has delegated to the Audit Committee Chairman the
authority to authorize management to retain PwC for professional services in
which the aggregate fees are expected to be less than $200,000 in any year. In
general, CIT does not retain PwC to provide information systems, tax consulting,
or other consulting services. The Audit Committee has determined that the
professional services provided by PwC as described above are compatible with the
independent auditor maintaining its independence. The Audit Committee gave prior
approval to all audit and non-audit professional services provided by PwC in
2004.
The Board of Directors recommends a vote "For" the ratification of
PricewaterhouseCoopers LLP as CIT's independent auditors for 2005.
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OTHER BUSINESS
CIT's management does not intend to bring any business before the Annual
Meeting other than the matters referred to in this proxy statement. If, however,
any other matters properly come before the Annual Meeting, it is intended that
the persons named in the accompanying proxy will vote pursuant to the proxy in
accordance with their best judgment on such matters to the extent permitted by
applicable law and regulations. The discretionary authority of the persons named
in the accompanying proxy extends to matters which the Board does not know are
to be presented at the meeting by others and any proposals of stockholders
omitted from the proxy material pursuant to Rule 14a-8 of the SEC.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2005 ANNUAL MEETING
Stockholder proposals to be included in the proxy statement for CIT's next
annual meeting must be received by the Secretary of CIT not later than December
6, 2005.
Also, under CIT's By-Laws, nominations for director or other business
proposals to be addressed at the meeting may be made by a stockholder entitled
to vote who has delivered a notice to the Secretary of CIT not later than the
close of business on February 11, 2006 and not earlier than January 12, 2006.
The notice must contain the information required by CIT's By-Laws.
These advance notice provisions are in addition to, and separate from, the
requirements which a stockholder must meet in order to have a proposal included
in the proxy statement under the rules of the SEC.
Copies of CIT's By-Laws may be obtained from the Secretary.
By Order of the Board of Directors
/s/ Robert J. Ingato
-------------------------------
Robert J. Ingato
Executive Vice President
General Counsel and Secretary
April 6, 2005
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