<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TRAVELERS PROPERTY CASUALTY CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
TRAVELERS PROPERTY CASUALTY CORP.
One Tower Square
Hartford, Connecticut 06183
March 24, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Travelers Property Casualty Corp. on Wednesday, April 22, 1998. The meeting will
be held in the auditorium at the headquarters of Travelers Group Inc., 388
Greenwich Street, New York, New York, at 2:30 p.m. local time.
At this meeting of stockholders, we will be voting on the election of
directors and the appointment of auditors. Please take the time to read
carefully each of the proposals for stockholder action described in the proxy
materials.
Thank you for your continued support of our Company.
Sincerely,
[LOGO]
Robert I. Lipp
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
TRAVELERS PROPERTY CASUALTY CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Travelers Property Casualty Corp. (the
"Company") will be held in the auditorium at the headquarters of Travelers Group
Inc., 388 Greenwich Street, New York, New York, on Wednesday, April 22, 1998 at
2:30 p.m. local time, for the following purposes:
ITEM 1. To elect eight directors to the Board;
ITEM 2. To ratify the selection of the Company's independent auditors for
1998;
and to transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has set the close of business on March 4, 1998 as the
record date for determining stockholders entitled to notice of and to vote at
the Annual Meeting. A list of stockholders entitled to vote at the Annual
Meeting will be maintained at the headquarters of Travelers Group Inc., 388
Greenwich Street, New York, New York prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
[LOGO]
James M. Michener
SECRETARY
March 24, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE OR THAT YOU REGISTER YOUR VOTE BY TELEPHONE BY
FOLLOWING THE INSTRUCTIONS FOR TELEPHONIC VOTING ON YOUR PROXY CARD, SO THAT
YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING.
<PAGE>
TRAVELERS PROPERTY CASUALTY CORP.
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to stockholders of Travelers
Property Casualty Corp. (the "Company") in connection with the solicitation by
the Board of Directors of the Company of proxies for use at the Annual Meeting
of Stockholders of the Company (the "Annual Meeting") to be held in the
auditorium at the headquarters of Travelers Group Inc. ("Travelers Group"), 388
Greenwich Street, New York, New York, on Wednesday, April 22, 1998, at 2:30 p.m.
local time, and at any adjournments or postponements of such meeting. This Proxy
Statement and the accompanying proxy card are being mailed beginning on or about
March 24, 1998, to stockholders of the Company on March 4, 1998, the record date
for the Annual Meeting (the "Record Date"). Employees of the Company who are
participants in one or more of the Company's benefit plans and/or who purchased
shares of Class A Common Stock (as defined below) in the Company's Directed
Share Program in connection with the Company's initial public offering of Class
A Common Stock in April 1996 may receive this Proxy Statement and their proxy
cards separately. The Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1997 will be delivered to stockholders prior to or
concurrently with the mailing of the proxy material.
Stockholders of the Company are cordially invited to attend the Annual
Meeting. Whether or not you expect to attend, it is important that you complete
the enclosed proxy card, and sign, date and return it as promptly as possible in
the envelope enclosed for that purpose or vote your shares by telephone by
following the instructions for telephonic voting on your proxy card (except
under the very limited circumstances in which telephonic voting is not
available). You have the right to revoke your proxy at any time prior to its use
by filing a written notice of revocation with the Secretary of the Company prior
to the convening of the Annual Meeting, or by presenting another proxy card with
a later date. If you attend the Annual Meeting and desire to vote in person, you
may request that your previously submitted proxy card not be used.
VOTING RIGHTS
As of the Record Date, the outstanding stock of the Company entitled to
receive notice of and to vote at the Annual Meeting consisted of 65,828,627
shares of the Company's Class A common stock, par value $.01 per share (the
"Class A Common Stock") and 328,020,170 shares of the Company's Class B common
stock, par value $.01 per share (the "Class B Common Stock"; and, together with
the Class A Common Stock, the "Common Stock"). All of the issued and outstanding
shares of Class B Common Stock are held by The Travelers Insurance Group Inc.
("TIGI"), an indirect wholly owned subsidiary of Travelers Group. Each share of
Class A Common Stock is entitled to one vote on each matter that is voted on at
the Annual Meeting, and each share of Class B Common Stock is entitled to 10
votes on each matter that is voted on at the Annual Meeting. The Class A Common
Stock and the Class B Common Stock will vote together as a single class on all
matters scheduled to be voted on at the Annual Meeting. Neither the Class A
Common Stock nor the Class B Common Stock is entitled to cumulative voting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best knowledge of the Company, as of the Record Date no person
"beneficially owned" (as that term is defined by the Securities and Exchange
Commission (the "SEC")) more than 5% of any class of the Common Stock
outstanding and entitled to vote at the Annual Meeting except:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE PERCENTAGE OF
BENEFICIALLY OWNED OF CLASS (2) PERCENTAGE OF VOTING POWER OF
NAME AND ADDRESS ----------------------- ------------------------ OUTSTANDING OUTSTANDING
OF BENEFICIAL OWNER (1) CLASS A CLASS B CLASS A CLASS B COMMON STOCK COMMON STOCK
- ----------------------------------------------- --------- ------------ ----------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Travelers Group Inc. (3)....................... 328,020,170 100% 83.3% 98%
388 Greenwich Street
New York, New York 10013
Aetna Inc. (4)................................. 4,647,697 7.06% 1.18% *
151 Farmington Avenue
Hartford, Connecticut 06156
Alpha Assurances Vie Mutuelle.................. 4,472,927 6.79% 1.14% *
AXA Assurances I.A.R.D. Mutuelle
AXA Assurances Vie Mutuelle
AXA Courtage Assurance Mutuelle
AXA-UPA
The Equitable Companies Incorporated
c/o The Equitable Companies Incorporated
1290 Avenue of the Americas
New York, New York 10104
J.P. Morgan Capital Corporation (5)............ 4,649,238 7.06% 1.18% *
60 Wall Street
New York, New York 10260
</TABLE>
- ------------------------
* Less than 1%
(1) Based on Schedules 13G filed with the SEC by such beneficial owners in
February 1998 and/or information otherwise available to the Company.
(2) Calculated on the basis of the number of shares of each class of Common
Stock outstanding and entitled to vote at the Annual Meeting as of the
Record Date.
(3) The record owner of these shares is TIGI. Travelers Group indirectly owns
100% of the outstanding capital stock of TIGI. The 328,020,170 shares of
Class B Common Stock are immediately convertible into 328,020,170 shares of
Class A Common Stock.
(4) The record owner of these shares is Aetna Services, Inc. (formerly known as
Aetna Life and Casualty Company), a wholly owned subsidiary of Aetna Inc.
(5) The record owner of 50,997 of these shares is Sixty Wall Street Fund, L.P.,
an affiliate of J.P. Morgan Capital Corporation.
QUORUM; VOTING PROCEDURES
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the aggregate voting power of the Common Stock issued, outstanding
and entitled to vote shall constitute a quorum. Pursuant to applicable Delaware
law, only votes cast "for" a matter constitute affirmative votes. Votes
"withheld" or abstaining from voting are counted for quorum purposes, but since
they are not cast "for" a particular matter, they will have the same effect as
negative votes or votes "against" a particular
2
<PAGE>
matter. The votes required with respect to the items set forth in the Notice of
Annual Meeting of Stockholders are set forth in the discussion of each item
herein.
As of the Record Date, TIGI owned shares representing more than 98% of the
total voting power of the Common Stock. As such, the affirmative vote of the
shares of Common Stock held by TIGI is sufficient to ensure the election of the
nominees to the Board of Directors named herein and ratification of the
selection of KPMG Peat Marwick LLP as the Company's independent auditors for
1998. The Company has been advised that TIGI intends to vote all of its shares
of Common Stock in favor of each of the proposals set forth in this Proxy
Statement.
Unless contrary instructions are indicated on the proxy card or a vote
registered telephonically, all shares of Common Stock represented by valid
proxies will be voted FOR all of the items listed on the proxy card and
described below, and will be voted in the discretion of the persons designated
as proxies in respect of such other business, if any, as may properly be brought
before the Annual Meeting. As of the date hereof, the Board of Directors knows
of no other business that will be presented for consideration at the Annual
Meeting other than those matters referred to herein. If you give specific voting
instructions by checking the boxes on the proxy card or by voting
telephonically, your shares of Common Stock will be voted in accordance with
such instructions.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, the Common Stock
ownership of each director and certain executive officers of the Company. As of
the Record Date, the directors and the executive officers of the Company as a
group (19 persons) beneficially owned 258,502 shares of Class A Common Stock (or
approximately .0077% of the total voting power of the Common Stock outstanding
and entitled to vote at the Annual Meeting).
As of the Record Date, no individual director or executive officer
beneficially owned one percent or more of the Class A Common Stock outstanding
and entitled to vote at the Annual Meeting. As of the Record Date, no individual
director or executive officer beneficially owned any shares of Class B Common
Stock. Except as otherwise expressly stated in the footnotes to the following
table, beneficial ownership of shares means that the beneficial owner thereof
has sole voting and investment power over such shares.
No options have been granted to any officer or director of the Company which
are exercisable for shares of Common Stock of the Company.
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP
----------------------------------------
NUMBER OF SHARES
OF CLASS A COMMON
NAME STOCK BENEFICIALLY OWNED(1)
- ------------------------------------------------------------------------ ----------------------------------------
<S> <C>
Kenneth J. Bialkin...................................................... 6,961
Director
John J. Byrne........................................................... 2,586
Director
Charles J. Clarke....................................................... 15,834
Executive Officer
James Dimon............................................................. 2,000
Director
Jay S. Fishman.......................................................... 25,559
Executive Officer
Robert I. Lipp.......................................................... 115,126
Director and Chief Executive Officer
Stanton F. Long......................................................... 6,358
Executive Officer
Jon C. Madonna.......................................................... 500
Executive Officer
Dudley C. Mecum......................................................... 4,336
Director
Roberto G. Mendoza (2).................................................. 1,540
Director
Frank J. Tasco.......................................................... 5,211
Director
Sanford I. Weill........................................................ 4,100
Director
Arthur Zankel........................................................... 5,540
Director
All Directors and Executive Officers as a group
(19 persons)(3)....................................................... 258,502
</TABLE>
- ------------------------
(1) This information includes, as of the Record Date, the following shares which
are also deemed "beneficially owned": (i) the following number of shares of
Class A Common Stock granted in payment of directors' fees to nonemployee
directors under the Company's plan, but receipt of which is deferred: Mr.
Bialkin, 2,586, Mr. Byrne, 2,586, Mr. Mecum, 2,586 and Mr. Tasco, 2,586;
(ii) the following number of shares of Class A Common Stock held (as of
January 31, 1998) under the Travelers Group 401(k) Savings Plan (the
"Savings Plan"), as to which the holder has voting power but not dispositive
power: Mr. Clarke, 4,246 and Mr. Fishman, 3,437 and (iii) the following
number of shares of Class A Common Stock awarded pursuant to the Travelers
Property Casualty Corp. Capital Accumulation Plan (the "CAP Plan"), as to
which the holder may direct the vote but which remain subject to forfeiture
and certain restrictions on disposition: Mr. Clarke, 11,588; Mr. Fishman,
22,122; Mr. Lipp, 70,026 and Mr. Long, 6,358.
(2) All of such shares are held by J.P. Morgan Capital Corporation, a subsidiary
of Mr. Mendoza's employer, in accordance with its corporate policy.
(3) This information also includes as "beneficially owned" (i) an aggregate of
24,102 shares of Class A Common Stock held under the Savings Plan, as to
which the respective holders have voting power but not dispositive power,
and (ii) an aggregate of 145,226 shares of Class A Common Stock awarded
under the CAP Plan, as to which the respective holders may direct the vote
but which shares remain subject to forfeiture and certain restrictions on
disposition.
------------------------
4
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities ("Section 16(a) Persons"), to file reports of ownership and changes
in ownership with the SEC and the New York Stock Exchange, Inc. (the "NYSE"),
and to furnish the Company with copies of all such forms they file. Based solely
on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that,
during the year ended December 31, 1997, each of its officers, directors and
greater than ten percent stockholders complied with all such applicable filing
requirements.
ITEM 1:
ELECTION OF DIRECTORS
The Board has set the number of directors at 8. The terms of all of the
directors currently serving on the Board expire at the Annual Meeting. All of
the directors currently serving on the Board have been nominated by the Board of
Directors for re-election to one-year terms at the Annual Meeting, other than
Mr. Byrne who has indicated to the Company his decision to retire from the Board
and not stand for re-election.
Each nominee elected will hold office until the Annual Meeting of
Stockholders to be held in 1999 and until a successor has been duly elected and
qualified, unless prior to such meeting a director shall resign, or his or her
directorship shall become vacant due to his or her death or removal.
The following information with respect to the principal occupation and
business experience and other affiliations of the directors during the past five
years has been furnished to the Company by the directors. All ages are given as
of the Record Date.
The mandatory retirement age for all members of the Board of Directors is
75.
The following eight individuals have been nominated for election at the
Annual Meeting for a term ending 1999:
<TABLE>
<S> <C>
[photo] KENNETH J. BIALKIN
Mr. Bialkin, 68, has been a director of the Company since 1996. Mr.
Bialkin has been a director of Travelers Group since 1986. He has been
for more than five years a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom LLP, which performs legal services for the
Company and Travelers Group from time to time. Mr. Bialkin is also a
director of The Municipal Assistance Corporation for the City of New
York, Oshap Technologies, Ltd., Tecnomatix Technologies Ltd. and
Sapiens International Corporation N.V.
[photo] JAMES DIMON
Mr. Dimon, 41, has been a director of the Company since 1996. He is
President, Chief Operating Officer and a director of Travelers Group.
He is also Co-Chairman of the Board and Co-Chief Executive Officer of
each of Smith Barney Inc. ("Smith Barney") and Salomon Brothers Inc
("Salomon Brothers"), Travelers Group's major investment banking and
securities brokerage subsidiaries. He is also the Co-Chief Executive
Officer and Co-Chairman of the Board of Salomon Smith Barney Holdings
Inc. ("Salomon Smith Barney"), the immediate parent company of Smith
Barney and Salomon Brothers. From May 1988 to June 1995 he was Chief
Financial Officer of Travelers Group. He was, from May 1988 to
September 1991, Executive Vice President of Travelers Group.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Mr. Dimon was Chief Operating Officer of Smith Barney until January
1996 and was Senior Executive Vice President and Chief Administrative
Officer of Smith Barney from 1990 to 1991. From March 1994 to January
1996 he was Chief Operating Officer of the predecessor to Salomon Smith
Barney. From 1986 to 1988, Mr. Dimon was Senior Vice President and
Chief Financial Officer of Commercial Credit Company ("CCC"), Travelers
Group's predecessor. From 1982 to 1985, he was a Vice President of
American Express Company and Assistant to the President, Sanford I.
Weill. Mr. Dimon is a trustee of New York University Medical Center and
a director of the Center on Addiction and Substance Abuse, the National
Association of Securities Dealers, Inc. and Tricon Global Restaurants,
Inc. and a member of the Nominating Committee of the New York Stock
Exchange, Inc.
[photo] ROBERT I. LIPP
Mr. Lipp, 59, has been the Chairman of the Board, Chief Executive
Officer and President of the Company since January 1996. Mr. Lipp is
currently and has been a director of Travelers Group since 1991, and is
a Vice Chairman of Travelers Group. Mr. Lipp has been Chairman of the
Board and Chief Executive Officer of The Travelers Insurance Group Inc.
since December 1993. From 1991 to 1993, he was Chairman and Chief
Executive Officer of Travelers Group's Consumer Finance Services group.
From April 1986 through September 1991, he was an Executive Vice
President of Travelers Group and its corporate predecessor. Prior to
joining Travelers Group in 1986, he was a President and a director of
Chemical New York Corporation and Chemical Bank where he held senior
executive positions for more than five years prior thereto. Mr. Lipp is
a director of The New York City Ballet, the Wadsworth Atheneum and the
Massachusetts Museum of Contemporary Art and Chairman of Dance-On Inc.,
a private foundation.
[photo] DUDLEY C. MECUM
Mr. Mecum, 63, has been a director of the Company since 1996. Mr. Mecum
has been a director of Travelers Group since 1986. Since July 1997, Mr.
Mecum has been a Managing Director of Capricorn Holdings, LLC, a firm
specializing in the leveraged acquisition of various businesses. From
August 1989 to December 1996, Mr. Mecum was a Partner in the firm of
G.L. Ohrstrom & Co. (a merchant banking firm). Mr. Mecum was Managing
Partner of the New York office of Peat Marwick Mitchell & Co. (now KPMG
Peat Marwick LLP) from 1979 to 1985. Mr. Mecum is a director of
Fingerhut Companies, Inc., Dyncorp, Vicorp Restaurants, Inc., Lyondell
Petrochemical Corp., the Metris Companies, Inc. and Suburban Propane
Partners, MLP.
[photo] ROBERTO G. MENDOZA
Mr. Mendoza, 52, has been a director of the Company since 1996. Mr.
Mendoza has been Vice Chairman and a director of J.P. Morgan & Co.
Incorporated ("J.P. Morgan & Co.") and a member of the firm's senior
policy and planning group since January 1990. Mr. Mendoza has held
various positions at J.P. Morgan & Co. since 1967. Mr. Mendoza is also
a director of Mid Ocean Limited.
[photo]
In 1996 Mr. Mendoza was appointed to the Board of Directors by The
Trident Partnership, L.P. ("Trident") pursuant to its rights under the
Shareholders Agreement (the "Shareholders Agreement") dated as of April
2, 1996, among the
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Company and TIGI and J.P. Morgan Capital Corporation ("J.P. Morgan"),
Trident, Fund American Enterprises Holdings, Inc. ("Fund American") and
Aetna Life and Casualty Company ("Aetna"; and collectively with J.P.
Morgan, Trident and Fund American, the "Private Investors") which
provided that so long as the Private Investors continue to beneficially
own at least 52% of the shares of Class A Common Stock purchased
pursuant to certain stock purchase agreements, Mr. Mendoza would be
nominated to the Board of Directors by Trident. TIGI agreed to vote its
shares of Class B Common Stock in favor of such nominee. Following the
sale, in November 1997, by the Private Investors of a portion of their
shares of Class A Common Stock, the Private Investors beneficially own
fewer than 52% of the shares of the Class A Common Stock purchased
pursuant to the stock purchase agreements and Trident no longer has the
right to nominate a director.
[photo] FRANK J. TASCO
Mr. Tasco, 70, has been a director of the Company since 1996. Mr. Tasco
has been a director of Travelers Group since 1992. Mr. Tasco is the
retired Chairman of the Board and Chief Executive Officer and is
currently a director of Marsh & McLennan Companies, Inc. He is also a
director of New York Telephone Company, New England Telephone and
Telegraph Company and Mid Ocean Limited. Mr. Tasco is Chairman of the
Board of Angram Inc. He was a member of President Bush's Drug Advisory
Council and was founder of New York Drugs Don't Work. Mr. Tasco is a
director of Phoenix House Foundation. He is Chairman of the Catholic
Health Council of the Archdiocese of Rockville Centre. He is a member
of the Council on Foreign Relations, the Lincoln Center Consolidated
Corporate Fund Leadership Committee, the Foreign Policy Association, a
trustee of New York University and a trustee emeritus of the Inner-City
Scholarship Fund.
[photo] SANFORD I. WEILL
Mr. Weill, 64, has been a director of the Company since 1996. He has
been Chairman of the Board, Chief Executive Officer and a director of
Travelers Group and its predecessor, CCC, since 1986; he was also its
President from 1986 until 1991. He was President of American Express
Company from 1983 to 1985; Chairman of the Board and Chief Executive
Officer of American Express Insurance Services, Inc. from 1984 to 1985;
Chairman of the Board and Chief Executive Officer, or a principal
executive officer, of Shearson Lehman Brothers Inc. from 1965 to 1984;
Chairman of the Board of Shearson Lehman Brothers Holdings Inc. from
1984 to 1985; and a founding partner of Shearson's predecessor
partnership from 1960 to 1965. Mr. Weill is a member of the Business
Roundtable and the Business Council. Mr. Weill is Chairman of the Board
of Trustees of Carnegie Hall, and a director of the Baltimore Symphony
Orchestra. Mr. Weill is a member of the Board of Governors of New York
Hospital, Chairman of the Board of Overseers of Cornell University
Medical College and a member of the Joint Board of New York
Hospital-Cornell University Medical College. He is on the Board of
Overseers of Memorial Sloan-Kettering Cancer Center and is a Director
of The New York and Presbyterian Hospitals Care Network, Inc. He is a
member of Cornell University's Johnson Graduate School of Management
Advisory Board and a Board of Trustees Fellow Emeritus of Cornell
University. Mr. Weill is Chairman of the National Academy Foundation
whose member programs include the Academy of Finance, the Academy of
Travel and Tourism and the Academy of Public Service. Mr. Weill is a
member of the United States Treasury Department's Working Group on
Child Care.
[photo]
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
ARTHUR ZANKEL
Mr. Zankel, 66, has been a director of the Company since 1996. Mr.
Zankel has been a director of Travelers Group since 1986. He has been a
General Partner of First Manhattan Co. (an investment management firm)
since 1965. He is also a director of Vicorp Restaurants, Inc. and Fund
American and a trustee of Skidmore College, Carnegie Hall, New York
Foundation and UJA-Federation.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met 7 times during 1997. Each director attended at
least 75 percent of the meetings of the Board of Directors and Board Committees
of which he or she was a member during 1997 other than Mr. Byrne who attended
approximately 60% of such meetings.
COMMITTEES OF THE BOARD OF DIRECTORS
The following are the current members and functions of the standing
committees of the Board of Directors.
EXECUTIVE COMMITTEE. The members of the Committee are Messrs. Lipp
(Chairman), Bialkin, Byrne, Weill, and Zankel. The Committee meets in place of
the full Board of Directors when scheduling makes it difficult to convene all of
the directors or when issues arise requiring immediate attention. The Committee
did not meet during 1997.
AUDIT COMMITTEE. The members of the Committee are Messrs. Mecum (Chairman)
and Tasco. The primary functions of the Committee, composed entirely of
nonmanagement directors, are to pass upon the scope of the independent certified
public accountants' examination, to review with the independent certified public
accountants and the Company's principal financial and accounting officers the
audited financial statements and matters that arise in connection with the
examination, to review the Company's accounting policies and the adequacy of the
Company's internal accounting controls, and to review and approve the
independence of the independent certified public accountants. The Committee met
four times during 1997.
NOMINATIONS, COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE. The members
of the Committee are Messrs. Zankel (Chairman), Mendoza and Bialkin. From time
to time, the Committee acts as a nominating committee in recommending candidates
to the Board as nominees for election at the Annual Meeting of Stockholders or
to fill such Board vacancies as may occur during the year. The Committee will
consider candidates suggested by directors or stockholders. Nominations from
stockholders, properly submitted in writing to the Secretary of the Company,
will be referred to the Committee for consideration. The Committee represents
the full Board of Directors in matters relating to the compensation of Company
officers and, from time to time, recommends to the full Board of Directors
appropriate methods and rates of director compensation. It also administers the
Company's CAP Plan. A subcommittee (the "Subcommittee") of the Committee,
comprised of "outside directors" (as such term is used in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code")) who are also
"Non-Employee Directors" (as such term is defined in Rule 16b-3 of the Exchange
Act) has the responsibility for administration of the Travelers Property
Casualty Corp. 1996 Executive Option Plan (the "Executive Option Plan") and the
Travelers Property Casualty Corp. Executive Performance Compensation Plan (the
"Compensation Plan"). The Subcommittee has the exclusive authority to grant
options to purchase shares of the common stock, $.01 par value, of Travelers
Group ("TRV Common Stock") to Section 16(a) Persons and Covered Employees (as
hereinafter defined) under the Executive Option Plan and to administer certain
other elements of the Executive Option Plan covered by Section 162(m). All
actions of the Committee in connection with awards of options pursuant to the
Executive Option Plan must be authorized by the Nominations, Compensation and
Corporate Governance Committee of Travelers Group (the "TRV Committee") and are
subject to the limitations set forth in the Travelers Group 1996 Stock Incentive
Plan
8
<PAGE>
(the "TRV Incentive Plan"). The Subcommittee also is responsible for determining
whether the performance goals under the Compensation Plan have been met. The
Committee is also responsible for the periodic assessment of the performance of
the Board of Directors and the evaluation of corporate governance principles
applicable to the Board of Directors. The Committee met 7 times during 1997.
References herein to the Committee shall be deemed to be references to the
Subcommittee in all cases where Section 162(m) of the Code would require that
action be taken by the Subcommittee rather than the full Committee.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE EIGHT NOMINEES AS A DIRECTOR OF THE COMPANY. Assuming the presence
of a quorum, directors shall be elected by a plurality of the votes cast at the
Annual Meeting by holders of Common Stock for the election of directors. Under
applicable Delaware law, in tabulating the vote, broker nonvotes will not be
considered present at the Annual Meeting and will have no effect on the vote.
9
<PAGE>
EXECUTIVE COMPENSATION
RESPONSIBILITIES OF THE NOMINATIONS, COMPENSATION AND
CORPORATE GOVERNANCE COMMITTEE OF THE BOARD OF DIRECTORS
The Nominations, Compensation and Corporate Governance Committee (or a
subcommittee thereof) considers from time to time candidates for election to the
Company's Board of Directors, establishes the compensation of the Chief
Executive Officer, subject to the review and approval of such compensation by
the TRV Subcommittee (the "TRV Subcommittee"), a subcommittee of the TRV
Committee, to ensure compliance with the TRV Compensation Plan, reviews the
compensation of all other executives and evaluates the efforts of the Company
and of the Board of Directors to maintain effective corporate governance
practices.
No member of the Committee is a former or current officer or employee of the
Company or any of its affiliates.
REPORT OF THE NOMINATIONS, COMPENSATION AND CORPORATE GOVERNANCE
COMMITTEE ON EXECUTIVE COMPENSATION
STATEMENT OF PHILOSOPHY. The Company seeks to attract and retain highly
qualified employees at all levels, including particularly executives whose
performance is critical to the Company's success. In order to accomplish this,
the Company is willing to provide superior compensation for superior
performance. Such performance is generally measured on the performance of the
Company as a whole, or on the performance of a business unit, or using both
criteria, as the nature of an executive's responsibilities may dictate, and by
the extent to which such performance reflects the corporate values integral to
the Company's overall success. The Committee considers and gives weight to both
qualitative and quantitative factors, including such factors as earnings,
earnings per share, return on equity and return on assets and considers a full
range of performance criteria for all senior executives, including those senior
executives covered by the Compensation Plan, together with contributions to
financial results, productivity, initiative, risk containment, adherence to
corporate values and contributions to both operating unit or divisional strategy
and Company-wide strategy. In conducting such review, the Committee has
generally examined changes in the Company's financial results, both overall and
on a unit basis, as well as similar data for comparable companies, to the extent
publicly available.
STOCK OWNERSHIP COMMITMENT. It is the Company's policy to strongly
encourage stock ownership by the Company's directors and senior management. This
policy closely aligns the interests of management with those of the
shareholders. This policy takes a number of forms, including the following:
- all director fees are paid in Company stock
- a broad group of employees, including all members of senior management,
are required to take a significant portion of annual bonus in the form of
forfeitable, restricted stock.
EXECUTIVE PERFORMANCE COMPENSATION PLAN. The Compensation Plan, approved by
stockholders in 1997, establishes certain performance criteria for determining
the maximum amount of bonus compensation available for the five executives named
in the Summary Compensation Table in the Company's Proxy Statement (the "Covered
Employees"). The Compensation Plan is administered by the Committee which
determines whether the performance goals under the Compensation Plan have been
met.
The creation of any bonus pool for Covered Employees is contingent upon the
Company achieving at least a 10% Return on Equity, as defined in the
Compensation Plan. The amount of the bonus pool is calculated based upon the
extent to which the Return on Equity exceeds the 10% minimum threshold.
The Compensation Plan establishes that up to 31% of any bonus pool
established will be available for bonus awards to the chief executive officer
and up to 17.25% will be available to each of the other four eligible
participants. The Committee nevertheless retains discretion to reduce or
eliminate payments under
10
<PAGE>
the Compensation Plan to take into account subjective factors, including an
individual's performance or other relevant criteria.
COMPONENTS OF COMPENSATION. Compensation of executive officers consists of
base salary, discretionary bonus awards, a significant portion of which is
forfeitable restricted stock, and, in certain cases, stock option awards
exercisable for shares of TRV Common Stock. Examination of competitors' pay
practices in this area is conducted to ensure that the Company's compensation
policies will enable it to attract new talent and retain current valuable
employees.
Bonuses are discretionary subject to certain maximum amounts specified by
the Compensation Plan and are generally a substantial part of total compensation
of Company executives. Because a percentage of executive compensation is awarded
in the form of forfeitable restricted stock, bonus awards are not only a
short-term cash reward but also a long-term incentive related directly to the
enhancement of stockholder value. The restricted period applicable to awards to
executives is three years in furtherance of the long-term nature of such
compensation. As Mr. Lipp is a Covered Employee under the Compensation Plan and
is one of the executive officers of Travelers Group who is named in the Summary
Compensation Table in Travelers Group's Proxy Statement (the "TRV Covered
Employees"), the determination of whether he is entitled to bonus compensation
is made under the Compensation Plan and the Travelers Group Executive
Compensation Plan (the "TRV Compensation Plan") which is more fully described in
Annex A to this Proxy Statement, for services rendered to each of the Company
and Travelers Group and its subsidiaries (other than the Company and its
subsidiaries). Provided that the criteria are met for the creation of a bonus
pool under both Plans, Mr. Lipp may receive discretionary bonus compensation in
an amount that does not exceed the lesser of the maximum amount available to him
under either Plan. Mr. Lipp does not receive separate bonuses under both Plans.
The Company also takes all reasonable steps to obtain the fullest possible
corporate tax deduction for compensation paid to its executives by qualifying
under Section 162(m) of the Code.
No stock options have been granted which are exercisable for shares of
Common Stock. However, certain executives have received grants of stock options
exercisable for TRV Common Stock under the Executive Option Plan approved by
stockholders in 1997 which permits the Committee, in its discretion and with the
authorization of the TRV Committee, to grant options exercisable for TRV Common
Stock to certain executives of the Company and its subsidiaries. All of such
options are issued under and pursuant to the terms of the TRV Incentive Plan.
1997 COMPENSATION. The Committee believes that 1997 was a year of
accomplishment for the Company. The Company achieved record operating earnings
of $1.126 billion, representing a 40.5% increase in operating earnings, achieved
record earnings per share of $2.85, representing a 31% increase in earnings per
share, and made significant progress in developing alternative distribution
channels for its products.
Under the Compensation Plan, the maximum bonus pool for 1997 for the Chief
Executive Officer and the four other most highly compensated executives of the
Company was approximately $24.3 million. The amounts awarded to such persons are
set forth in the Summary Compensation Table below and total approximately $8.3
million.
THE NOMINATIONS, COMPENSATION
AND CORPORATE GOVERNANCE COMMITTEE:
ARTHUR ZANKEL (CHAIRMAN)
KENNETH J. BIALKIN
ROBERTO G. MENDOZA
11
<PAGE>
NOMINATIONS, COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The persons named above under the caption "Election of Directors--Committees
of the Board of Directors--Nominations, Compensation and Corporate Governance
Committee" were the only members of such committee during 1997. Mr. Bialkin, a
member of the Committee, is a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP, which performs legal services for the Company and Travelers
Group and its subsidiaries from time to time. Mr. Bialkin does not serve as a
member of the Subcommittee of the Committee that grants awards to Section 16(a)
Persons under the CAP Plan, grants options to Section 16(a) Persons under the
Executive Option Plan and administers the Compensation Plan.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation paid by the
Company and its subsidiaries to the chief executive officer and the four other
most highly compensated executive officers for services rendered to the Company
and Travelers Group and its subsidiaries in all capacities during each of the
fiscal years ended December 31, 1997, 1996 and 1995. The format of this table
has been established by the SEC. Certain of the Covered Employees received (i)
awards of restricted TRV Common Stock and/or stock options exercisable for TRV
Common Stock under employee benefit plans of Travelers Group in respect of
performance for the fiscal years ended December 31, 1995, 1996 and 1997 and/or
(ii) awards of stock options exercisable for TRV Common Stock in respect of
performance for the fiscal year ended December 31, 1997 under the Executive
Option Plan. These awards are listed under the headings "Restricted Stock Awards
(TRV)" and "Securities Underlying Travelers Group Options (number of shares)."
All share numbers in the column entitled "Securities Underlying Travelers Group
Stock Options (number of shares)" have been restated to the extent necessary to
give effect to the two TRV Common Stock dividends declared and paid during 1996
and the TRV Common Stock dividend declared and paid during 1997.
12
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
--------------------------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------------------------- TRAVELERS
OTHER RESTRICTED RESTRICTED GROUP ALL
ANNUAL STOCK STOCK STOCK OTHER
NAME AND COMPEN- AWARDS AWARDS OPTIONS COMPEN-
PRINCIPAL POSITION SATION (TAP) (TRV) (NUMBER OF SATION
AT 12/31/97 YEAR SALARY ($) BONUS($) ($)(B) ($)(C) ($)(D) SHARES) ($)(E)
- -------------------- ---- ---------- ---------- -------- ---------- ---------- ---------- -------
Robert I. Lipp...... 1997 $ 600,000 $2,985,003 $145,347 $1,486,662 -- 1,052,042 $ 900
Chairman of the 1996 600,000 2,685,022 5,333 1,353,301 -- 1,067,181 1,900
Board, Chief 1995 600,000 2,160,000 5,333 -- $1,119,997 735,429 1,962
Executive Officer
and President (A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jay S. Fishman...... 1997 391,667 1,012,095 129,092 517,206 -- 261,061 348
Vice Chairman and 1996 300,000 810,015 139,000 386,647 -- 262,420 1,204
Chief Executive 1995 300,000 660,000 106,283 -- 319,955 291,369 1,211
Officer-Commercial
Lines(A)
Jon C. Madonna 1997 550,000 672,506 -- -- 436,659 286,396 528
(A)...............
Vice Chairman
Stanton F. Long..... 1997 473,875 391,557 24,719 277,924 -- 120,000 900
Vice Chairman
Charles J. Clarke... 1997 500,000 310,014 -- 253,314 -- 223,114 18,255
Vice Chairman 1996 393,125 336,746 4,444 217,672 -- 108,663 19,727
1995 297,250 381,250 -- -- 224,970 106,623 31,657
</TABLE>
- ------------------------
(A) For Mr. Lipp and Mr. Fishman, it is estimated that approximately 80% of such
amounts reflect compensation for services provided to the Company and
approximately 20% of such amounts reflect compensation for services rendered
to Travelers Group and its affiliates (other than the Company and its
subsidiaries). For Mr. Madonna, it is estimated that approximately 75% of
such amounts reflect compensation for services provided to the Company and
approximately 25% of such amounts reflect compensation for services rendered
to Travelers Group and its affiliates (other than the Company and its
subsidiaries). The bonus compensation Mr. Lipp received pursuant to the
Compensation Plan and the TRV Compensation Plan is inclusive of bonus
compensation paid to him for services rendered to each of the Company and
Travelers Group and its subsidiaries; and the portion of his bonus payable
in restricted stock was awarded in shares of Common Stock under the CAP
Plan. The bonus compensation each of Mr. Fishman and Mr. Madonna received
pursuant to the Compensation Plan is inclusive of bonus compensation paid to
each of them for services rendered to each of the Company and Travelers
Group and its subsidiaries. The portion of Mr. Fishman's bonus payable in
restricted stock was awarded in shares of Common Stock under the CAP Plan
and the portion of Mr. Madonna's bonus payable in restricted stock was
awarded in shares of TRV Common Stock under the Travelers Group Capital
Accumulation Plan (the "TRV CAP Plan").
(B) The aggregate amounts set forth for Mr. Lipp and Mr. Fishman include $39,153
and $27,388, respectively, for housing expenses while away from home and
$30,852 and $32,891, respectively, for use of Company transportation.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
13
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(C) Restricted stock awards are made under the CAP Plan, other than the award
made to Mr. Madonna for 1997, which was made under the TRV CAP Plan. The CAP
Plan provides for payment, mandatory as to senior executives and certain
others within the Company and certain of its subsidiaries, of a portion of
compensation in the form of awards of restricted shares of Common Stock
discounted (currently 25%) from market value in order to reflect the impact
of the restrictions on the value of the restricted stock as well as the
possibility of forfeiture of restricted stock. Under the current award
formula in effect under the CAP Plan for corporate executives, the following
percentages of annual compensation are payable in the form of restricted
shares of Common Stock:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION % IN RESTRICTED STOCK
- ------------------------------------------------------------------------ -------------------------
<S> <C>
Up to $200,000.......................................................... 10%
$200,001 to $400,000.................................................... 15%
$400,001 to $600,000.................................................... 20%
Amounts over $600,000................................................... 25%
</TABLE>
Annual compensation generally consists of salary and incentive awards. The
recipient of restricted stock is not permitted to sell or otherwise dispose
of such stock (except by will or the laws of descent and distribution) for a
period of three years from the date of award (or (i) for such other period
as may be determined to be applicable to various classes of participants in
the sole discretion of the Nominations, Compensation and Corporate
Governance Committee or (ii) for additional one year periods if the
participant elected to defer vesting and thereby extend the restricted
period). Upon expiration of the applicable restricted period, and assuming
the recipient's continued employment with the Company, the restricted shares
of Common Stock become fully vested and freely transferable. From the date
of award, the recipient may vote the restricted shares of Common Stock and
receives dividends or dividend equivalents on the restricted shares of
Common Stock at the same rate as dividends are paid on all outstanding
shares of Common Stock. As of December 31, 1997, including the awards made
in January 1998 in respect of 1997, but excluding awards vesting in January
1998, the total holdings of restricted shares of Common Stock under the CAP
Plan and the market value at such date of such shares for each of the
persons in the Summary Compensation Table were as follows: Mr. Lipp: 70,026
shares ($3,081,144); Mr. Fishman: 22,122 shares ($973,368); Mr. Long: 6,358
shares ($279,752) and Mr. Clarke: 11,588 shares ($509,872). The year-end
market price of the Common Stock was $44.00 per share.
(D) The bonus compensation Mr. Madonna received under the Compensation Plan is
inclusive of bonus compensation paid to him for services rendered to each of
the Company and Travelers Group; however, the portion of his bonus payable
in restricted stock was awarded in shares of TRV Common Stock under the TRV
CAP Plan rather than in shares of Common Stock under the CAP Plan. In
addition, certain Covered Persons have, in the past, received awards of
restricted TRV Common Stock under the TRV CAP Plan. The TRV CAP Plan is
substantially identical to the CAP Plan. As of December 31, 1997, including
the awards made in January 1998 in respect of 1997, but excluding awards
vesting in January 1998, the total holdings of restricted TRV Common Stock
under the TRV CAP Plan and the market value at such date of such shares for
each of the persons in the Summary Compensation Table were as follows: Mr.
Lipp: 54,723 shares ($2,948,201.63); Mr. Fishman: 15,633 shares
($842,227.88); Mr. Madonna: 8,994 ($484,551.75) and Mr. Clarke: 10,992
shares ($592,194). The year-end market price of TRV Common Stock was $53.875
per share.
(E) Includes (i) the matching grant for 1997 pursuant to the Savings Plan in the
form of $4.53 ESOP Convertible Preferred Stock, Series C, of Travelers Group
("Series C Preferred Stock"), which was converted into TRV Common Stock in
January 1998, having a market value at December 31, 1997 of $4,000 for Mr.
Clarke, and (ii) the variable matching grant for 1997 pursuant to the
Savings Plan in the form of Series C Preferred Stock, which was also
converted into TRV Common Stock in January 1998, having a market value of
$800 for Mr. Clarke. Also includes supplemental life insurance paid by the
Company.
14
<PAGE>
STOCK OPTIONS GRANTED
The following table sets forth information with respect to stock options
exercisable for TRV Common Stock granted to the Covered Employees for services
rendered to the Company during 1997. All of such options permit the Covered
Employees to purchase TRV Common Stock, were awarded under the Executive Option
Plan and are subject to the terms of the TRV Incentive Plan.
The aggregate number of shares of TRV Common Stock that may be granted to
any one Covered Employee pursuant to awards made under the Executive Option Plan
between the effective date of the Executive Option Plan and April 23, 2006 may
not exceed eight million (8,000,000) shares, subject to adjustment as provided
in Section 15 of the TRV Incentive Plan in the event of any stock split, stock
dividend, merger, consolidation, reorganization, combination or exchange of
shares or other similar event.
The "Grant Date Present Value" numbers set forth in the table below were
derived by application of a variation of the Black-Scholes option pricing model.
The following assumptions were used in employing such model:
- stock price volatility was calculated by using the weekly closing price of
TRV Common Stock on the NYSE Composite Transactions Tape for the one-year
period prior to the grant date of each option;
- the risk-free interest rate for each option grant was the interpolated
market yield on the date of grant on a Treasury bill with a term identical
to the subject option life, as reported by the Federal Reserve;
- the dividend yield on the date of the option grant (based upon the actual
annual dividend rate of TRV Common Stock during 1997) was assumed to be
constant over the life of the option;
- exercise of the option was deemed to occur approximately ten months after
the date of grant with respect to options that vest six months after the
date of grant and approximately three years after the date of grant with
respect to options that vest at a rate of 20% per year, as appropriate,
based upon each individual's historical experience of the average period
between the grant date and exercise date for those options that have
vested;
- in the case of Mr. Long, the value arrived at through the use of the
Black-Sholes model was discounted by 10% to reflect the nontransferability
of shares of TRV Common Stock issued upon exercise during the one-year or
two-year period, as the case may be, following such exercise; and
- in the case of Messrs. Lipp, Fishman, Madonna and Clarke, the value
arrived at through the use of the Black-Scholes model was discounted by
25% to reflect the reduction in value (as measured by the estimated cost
of protection) of the options due to their commitment, as members of
Travelers Group's planning group (the "TRV Planning Group"), not to
dispose of their shares of TRV Common Stock except for donations to
charity, for certain limited estate planning purposes or for use in
connection with participation in the stock option and restricted stock
plans of Travelers Group (the "TRV Stock Ownership Commitment"). For
purposes of calculating the discount, a five year holding period was
assumed even though each of Messrs. Lipp, Fishman, Madonna and Clarke may
be a member of the TRV Planning Group for more than five years.
The potential value of options granted depends entirely upon a long-term
increase in the market price of TRV Common Stock: if the stock price does not
increase, the options would be worthless and if the stock price does increase,
this increase would benefit both option holders and all Travelers Group
stockholders.
15
<PAGE>
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF % OF EXERCISE
SECURITIES TOTAL TRV OPTIONS OR
UNDERLYING GRANTED TO ALL BASE
TRV OPTIONS GRANTED TRAVELERS GROUP PRICE GRANT DATE
(NUMBER OF EMPLOYEES ($ PER EXPIRATION PRESENT
NAME SHARES) IN 1997 SHARE) DATE VALUE ($)
- --------------------------------------- ------------------------ ------------------- ---------- ------------ -----------
<CAPTION>
RELOAD NON-RELOAD RELOAD NON-RELOAD
------------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert I. Lipp 24,850.50 None .06 0 $ 34.5833 2/22/03 71,771
69,147.00 .16 31.5000 11/2/02 181,786
33,894.00 .08 31.5000 5/2/03 89,106
59,376.00 .13 36.6667 11/2/02 182,795
21,475.50 .05 36.6667 2/22/03 66,114
29,350.50 .07 36.6667 5/2/03 90,358
17,757.00 .04 36.6667 11/26/04 54,667
21,148.50 .05 37.4167 12/14/05 68,023
112,945.50 .26 43.0833 11/2/02 427,671
37,626.00 .09 43.0833 2/22/03 142,472
53,038.50 .12 43.0833 5/2/03 200,832
15,606.00 .04 43.0833 11/26/04 59,093
22,009.50 .05 44.0833 2/22/03 87,110
125,892.00 .28 46.6250 11/2/02 515,188
28,060.50 .06 46.6250 5/2/03 114,832
52,626.00 .12 46.6667 11/2/02 215,768
19,033.50 .04 46.6667 2/22/03 78,038
26,013.00 .06 46.6667 5/2/03 106,654
33,601.50 .08 46.6667 11/26/04 137,767
15,556.50 .04 46.6667 11/1/06 63,782
39,228.00 .09 46.4167 12/14/05 160,836
99,855.00 .23 55.1250 11/2/02 483,753
33,264.00 .08 55.1250 2/22/03 161,149
46,891.00 .11 55.1250 5/2/03 227,166
13,797.00 .03 55.1250 11/26/04 66,840
------------ ---------- ------ ---------- -----------
Total.................................. 1,052,042.50 0 2.42 0 4,053,571
Jay S. Fishman 8,104.50 None .02 0 34.0833 2/26/04 20,950
4,096.50 .01 35.5000 4/25/02 11,430
30,472.50 .07 32.8333 6/1/99 78,160
14,944.50 .03 32.8333 4/27/01 38,332
6,852.00 .02 32.8333 4/25/02 17,575
2,077.50 .00 32.8333 5/22/02 5,329
15,226.50 .03 32.8333 2/26/04 39,055
2,628.00 .01 32.2500 5/22/02 6,573
16,753.50 .04 37.4167 12/14/05 49,817
8,019.00 .02 42.7500 6/1/99 29,605
9,012.00 .02 42.7500 4/27/01 33,271
6,861.00 .02 42.7500 4/25/02 25,329
4,071.00 .01 42.7500 5/22/02 15,029
2,605.50 .01 42.7500 5/22/02 9,619
6,865.50 .02 46.4583 2/26/04 26,300
3,547.50 .01 46.2917 4/25/02 13,463
24,534.00 .06 49.7083 6/1/99 100,638
12,031.50 .03 49.7083 4/27/01 49,353
5,514.00 .01 49.7083 4/25/02 22,618
1,672.50 .00 49.7083 5/22/02 6,861
12,258.00 .03 49.7083 2/26/04 50,282
2,167.50 .00 46.4167 5/22/02 8,234
30,453.00 .07 46.4167 12/14/05 115,690
8,019.00 .02 51.5000 6/1/99 33,499
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
9,012.00 .02 51.5000 4/27/01 37,648
6,860.00 .02 51.5000 4/25/02 28,658
6,403.00 .01 51.5000 5/22/02 26,749
------------ ---------- ------ ---------- -----------
Total.................................. 261,061.50 0 .61 0 900,067
Jon C. Madonna 286,396.50 .65 34.9167 2/3/07 1,984,771
Stanton F. Long 120,000.00 .27 34.1667 1/22/07 819,684
Charles J. Clarke 7,810.50 None .02 0 34.0000 2/4/98 23,597
8,056.50 .02 34.0000 2/2/99 24,340
11,617.50 .03 34.0000 2/8/00 35,098
5,734.50 .01 34.0000 1/10/01 17,325
25,312.50 .06 34.0000 2/13/02 76,473
23,485.50 .05 34.0000 1/7/03 70,953
23,073.00 .05 34.0000 2/26/04 69,707
4,546.50 .01 32.6667 2/4/98 13,421
5,584.50 .01 32.6667 1/10/01 16,485
8,974.50 .02 32.6667 2/13/02 26,491
4,909.50 .01 32.6667 1/7/03 14,492
6,855.00 .02 46.5833 2/2/99 31,111
9,889.50 .02 46.5833 2/8/00 44,883
4,879.50 .01 46.5833 1/10/01 22,145
21,546.00 .05 46.5833 2/13/02 97,786
19,990.50 .05 46.5833 1/17/03 90,726
19,639.50 .04 46.5833 2/26/04 89,133
7,245.00 .02 50.2083 2/13/02 34,744
3,964.50 .01 50.2083 1/7/03 19,012
------------ ---------- ------ ---------- -----------
Total.................................. 223,114.50 0 .51 0 817,922
</TABLE>
- ------------------------
(A) The option price of each option granted under the TRV Incentive Plan is not
less than the fair market value of the TRV Common Stock subject to the
option, determined in good faith by the TRV Committee. Under current rules
established by the TRV Committee, fair market value is the closing sale
price of TRV Common Stock on the NYSE Composite Transactions Tape on the
last trading day prior to the date of grant of the option. Options generally
vest in cumulative installments of 20% on each anniversary of the date of
grant such that the options are fully exercisable on and after five years
from the date of grant until ten years following such grant (in the case of
non-qualified stock options, which represent all options currently
outstanding). The TRV Committee has discretion to establish a slower or
faster vesting schedule for options granted under the TRV Incentive Plan.
Participants are entitled to have shares of TRV Common Stock otherwise
issuable upon an option exercise withheld to cover in whole or in part the
tax liability associated with such exercise, or participants may cover such
liability by surrendering shares of TRV Common Stock (other than restricted
TRV Common Stock).
Under the reload feature of the TRV Incentive Plan, participants who tender
shares to pay all or a portion of the exercise price of vested stock options
or tender previously owned shares or have shares withheld to cover the
associated tax liability may be eligible to receive a reload option covering
the same number of shares as are tendered or withheld for such purposes.
Under the TRV Incentive Plan, if a participant elects to receive a reload
option, the shares of TRV Common Stock such participant receives upon
exercise of the underlying option will be subject to restrictions on
transferability for two
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
17
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
years. Further, in order for a participant to receive a reload option in
connection with his or her exercise of a vested option, the market price of
TRV Common Stock on the date of exercise must equal or exceed the minimum
market price level established by the TRV Committee from time to time (the
"Market Price Requirement"). The TRV Committee has established that the
initial Market Price Requirement will be a market price on the date of
exercise equal to or greater than 120% of the price of the option being
exercised.
The TRV Committee determines the exercise price for the reload option at the
time such reload option is granted, provided that the exercise price may not
be less than the fair market value of a share of TRV Common Stock on the
date of exercise of the underlying option, and such reload option will have
a term equal to the remaining term of the original option, except that the
reload option will not be exercisable until six months after its date of
grant, unless the TRV Committee determines otherwise.
Reload options are intended to encourage employees to exercise options at an
earlier date and to retain the shares so acquired, in furtherance of
Travelers Group's long-standing policy of encouraging increased employee
stock ownership. With standard stock options, sale of at least a portion of
the stock to be acquired by exercise is often necessitated to cover the
exercise price or the associated withholding tax liability. The employee
thereby receives fewer shares upon exercise, and also forgoes any future
appreciation in the stock sold. By use of previously owned shares to
exercise an option, an employee is permitted to gain from the past price
appreciation in such shares, and receives a new option at the current market
price. The reload option so granted enables the employee to participate in
future stock price appreciation.
STOCK OPTIONS EXERCISED
The following table sets forth, in the aggregate, the number of shares of
TRV Common Stock underlying options exercised during 1997 and states the value
at year-end of exercisable and unexercisable options remaining outstanding. The
"Value Realized" column reflects the difference between the market price on the
date of exercise and the market price on the date of grant (which establishes
the exercise price for the option) for all options exercised, even though the
executive may have actually received fewer shares of TRV Common Stock as a
result of the surrender of shares to pay the exercise price or the tax
liability, or the withholding of shares to cover the tax liability associated
with option exercise. Accordingly, the "Value Realized" numbers do not
necessarily reflect what the individual might receive, should he or she choose
to sell the shares of TRV Common Stock acquired by the option exercise, since
the market price of the shares so acquired may at any time be higher or lower
than the price on the exercise date of the option.
18
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997
AND
1997 YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
TRV OPTIONS AT IN THE MONEY
1997 YEAR-END TRV OPTIONS
SHARES VALUE (NUMBER OF SHARES) AT 1997 YEAR-END($)(C)
ACQUIRED ON REALIZED -------------------------------- ------------------------------
NAME EXERCISE (A) ($)(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ------------ ------------- ----------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert I. Lipp....................... 1,308,641 $ 21,083,742 0 878,656 $ 0 $ 14,687,319
Jay S. Fishman....................... 313,024 4,102,588 0 225,338 0 4,078,063
Jon C. Madonna....................... 0 0 0 286,396 0 5,429,591
Stanton F. Long...................... 0 0 0 120,000 0 2,364,996
Charles J. Clarke.................... 299,360 4,087,359 0 118,009 0 1,620,855
</TABLE>
- ------------------------
(A) This column reflects the number of shares of TRV Common Stock underlying
options exercised in 1997 by the named executive officers. The actual number
of shares of TRV Common Stock received by each of these individuals from
options exercised in 1997 (net of shares surrendered to cover the exercise
price and/or surrendered or withheld to cover the exercise price and tax
liabilities) was: Mr. Lipp, 256,599 shares; Mr. Fishman, 51,963 shares and
Mr. Clarke, 58,378 shares.
(B) "Value Realized" is in each case calculated as the difference between the
market price on the date of exercise and the market price on the date of
grant, which establishes the exercise price for option exercise, multiplied
by the number of options exercised. Messrs. Lipp, Fishman, Madonna and
Clarke have agreed to the TRV Stock Ownership Commitment. Other than shares
of TRV Common Stock used in connection with employee compensation plans,
charitable contributions or certain limited estate planning transactions, at
December 31, 1997, none of Mr. Lipp, Mr. Fishman, Mr. Madonna or Mr. Clarke
had ever disposed of any TRV Common Stock.
(C) "Value of Unexercised In the Money Options" is the aggregate, calculated on
a grant by grant basis, of the product of the number of unexercised options
on the last day of the year multiplied by the difference between the closing
undiscounted market price on the last day of the year and the exercise price
for each grant, excluding grants for which such difference is equal to or
less than zero.
PERFORMANCE GRAPH
The following line graph compares annual changes in "Cumulative Total
Return" (as defined below) of the Company with (i) Cumulative Total Return of a
performance indicator of equity stocks in the overall stock market, the S&P 500
Index, and (ii) Cumulative Total Return of a "Peer Index," each for the period
beginning on the date of the initial public offering of the Class A Common Stock
and ending on December 31, 1997. The Peer Index is CNA Financial Corp., American
International Group, Inc. and the companies that comprise the S&P Property and
Casualty Insurance Index: The Allstate Corporation, The Chubb Corporation,
General Re Corporation, SAFECO Corporation, and The St. Paul Companies, Inc. The
Peer Index has been weighted based on market capitalization. "Cumulative Total
Return" is calculated (in accordance with SEC instructions) by dividing (i) the
sum of (A) the cumulative amount of dividends during the relevant period,
assuming dividend reinvestment at the end of the month in which such dividends
were paid, and (B) the difference between the market capitalization at the end
and the beginning of such period, by (ii) the market capitalization at the
beginning of such period.
The comparisons in this table are set forth in response to SEC disclosure
requirements, and therefore are not intended to forecast or be indicative of
future performance of the Common Stock.
19
<PAGE>
TRAVELERS PROPERTY CASUALTY CORP.
COMPARISON OF CUMULATIVE TOTAL RETURN FOR THE PERIOD
COMMENCING APRIL 22, 1996 THROUGH DECEMBER 31, 1997
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRAVELERS PROPERTY CASUALTY
CORP. S&P 500 PEER INDEX
<S> <C> <C> <C>
22-Apr-96 100.00 100.00 100.00
31-Dec-96 142.24 115.45 120.13
31-Dec-97 178.30 153.95 175.87
</TABLE>
<TABLE>
<CAPTION>
APRIL 22,
1996 DECEMBER 31, 1996 DECEMBER 31, 1997
------------- ----------------- -----------------
<S> <C> <C> <C>
Travelers Property Casualty Corp............................ 100.00 142.24 178.30
S&P......................................................... 100.00 115.45 153.95
Peer Index.................................................. 100.00 120.13 175.87
</TABLE>
- ------------------------
ASSUMES $100 INVESTED AT THE CLOSING PRICE ON APRIL 22, 1996, IN THE COMPANY'S
COMMON STOCK, THE S&P 500 INDEX, AND THE PEER INDEX, INCLUDING CNA FINANCIAL
CORP. AND AMERICAN INTERNATIONAL GROUP, INC. AND THE S&P INSURANCE (PROPERTY AND
CASUALTY) INDEX. THE PEER INDEX HAS BEEN WEIGHTED BASED ON MARKET
CAPITALIZATION.
COMPENSATION OF DIRECTORS
Pursuant to the Company's By-Laws, the members of the Board of Directors are
compensated in a manner and at a rate determined from time to time by the Board
of Directors. The Company pays outside directors in shares of Common Stock in
order to assure that the directors have an ownership interest in the Company in
common with other stockholders. Compensation of outside directors of the Company
currently consists of an annual retainer of $50,000, payable in shares of Class
A Common Stock, receipt of which may be deferred at the election of a director.
Directors who have not made such election receive fees partly in shares of Class
A Common Stock and partly in cash equal to the current tax liability incurred by
receipt of such Class A Common Stock.
Directors receive no additional compensation for participation on committees
of the Board. Additional compensation, if any, for special assignments
undertaken by directors will be determined on a case by case basis, but no such
additional compensation was paid to any director in 1997. Directors who are
employees of the Company or its affiliates do not receive any compensation for
their services as directors.
20
<PAGE>
RETIREMENT PLANS
All employees of the Company are eligible to participate in the Travelers
Group Pension Plan (the "TRV Retirement Plan") on the later of attaining age 21
or completion of one year of service. Benefits under the TRV Retirement Plan
vest after five years of service with Travelers Group or its subsidiaries,
including the Company. The normal form of retirement benefit is, in the case of
a married participant, a joint and survivor annuity payable over the life of the
participant and his or her spouse, or in the case of an unmarried participant,
an annuity payable over the participant's life. Instead of such normal form of
payment, participants may elect to receive other types of annuities or a single
sum payable at retirement or, with respect to certain participants, other
termination of service.
Messrs. Lipp, Fishman, Madonna and Long accrue benefits in accordance with
the formula described below. When expressed as a single sum payment option,
benefits accrue for the first five years of covered service at an annual rate
varying between .75% and 4.0% of the participant's qualifying compensation,
depending upon the participant's age at the time of accrual. "Qualifying
compensation" generally includes base salary (before pre-tax contributions to
the Savings Plan or other benefit plans), overtime pay, commissions and bonuses.
Under rules promulgated by the Internal Revenue Service (the "Service"), a
ceiling of $160,000 for 1997 (subject to adjustment by the Service) is imposed
on the amount of compensation that may be considered "qualifying compensation"
under the TRV Retirement Plan.
During the period of the sixth through the fifteenth year of covered
service, benefits accrue at an annual rate of between 1.25% and 5.0% of the
participant's qualifying compensation, depending upon the participant's age at
the time of accrual. After a participant has completed 15 years of covered
service, benefits accrue at an annual rate varying between 1.25% and 7.0% of the
participant's qualifying compensation, depending upon the participant's age at
the time of accrual. There are also minimum benefits provided for under the TRV
Retirement Plan.
Subject to the statutory maximum benefits payable by a qualified plan (as
described below), a participant also accrues annually an additional amount
calculated as 1.0% to 2.5% of qualifying compensation (again depending upon his
or her age) for that part of qualifying compensation in excess of the amount of
the Social Security wage base. There is an interest accrual added to the
participant's single sum entitlement. This interest amount is determined by
multiplying the prior year's single sum by a percentage calculated annually
pursuant to a formula set forth in the TRV Retirement Plan.
The statutory maximum retirement benefit that may be paid to any one
individual by a tax qualified defined benefit pension plan in 1997 is $125,000
annually. Years of service credited under the TRV Retirement Plan to date for
Messrs. Lipp, Fishman, Madonna and Long are as follows: Mr. Lipp, 11 years; Mr.
Fishman, 8 years, Mr. Madonna, 0 year(s) and Mr. Long, 1 year.
The Company and certain Company subsidiaries provide certain pension
benefits, in addition to the statutory maximum benefit payable under tax
qualified pension plans, under non-funded, non-qualified retirement benefit
equalization plans ("RBEPs"). The benefits payable under RBEPs are unfunded, and
will come from the general assets of each plan's sponsor. The compensation
covered by such plans is limited to a fixed amount of $300,000 (equal to twice
the 1994 statutory maximum qualifying compensation without giving effect to any
future adjustments) less amounts covered by the TRV Retirement Plan, thereby
limiting benefits payable under the RBEPs to all participants. As the RBEPs were
amended as of January 1994 to exclude certain executives of Travelers Group and
its subsidiaries, no benefits were accrued in 1997 under any of the RBEPs for
the account of the Covered Employees, other than for Mr. Long.
Benefits payable under the Travelers Group Supplemental Retirement Plan
("SERP") covering supplemental retirement benefits to designated senior
executives of Travelers Group and its subsidiaries are frozen. Messrs. Lipp and
Fishman are SERP participants. The maximum benefit payable under SERP is also
reduced by any benefits payable under the TRV Retirement Plan (or its
predecessor plans, if
21
<PAGE>
applicable), under any applicable RBEP, under any other Travelers Group or
subsidiary sponsored qualified or non-qualified defined benefit or defined
contribution pension plan (other than the Savings Plan or other 401(k) plans),
and under the Social Security benefit program.
Estimated annual benefits under the benefit plans of Travelers Group for the
Covered Employees using the applicable formulas under the TRV Retirement Plan
and the RBEP and SERP Plans and assuming their retirement at age 65, would be as
follows: Mr. Lipp, $295,174; Mr. Fishman, $78,271; Mr. Madonna and Mr. Long,
$23,999. These estimates were calculated assuming that the interest accrual was
8% for 1989 through 1991, 6% for 1992 through 1993, 5.5% for 1994, 7% for 1995
and 5.5% thereafter until the participant retires at the age of 65, and that the
current salary of the participant, the 1997 dollar ceiling on qualifying
compensation is $160,000, the 1997 Social Security wage base and the current
regulatory formula to convert lump-sum payments to annual annuity figures each
remains unchanged.
Mr. Clarke accrues benefits in accordance with the formula described below.
Under the retirement plan in effect through 1989 (the "old Travelers Retirement
Plan"), retirement benefits were computed on an actuarial basis providing fixed
benefits after a specified number of years of service. Generally, the plan
provided vested benefits after five years of service equal to 2% of final
average salary over a five-year period for each year of service up to 25 years
plus two-thirds of 1% for each year of service over 25 years (up to a maximum of
15 additional years), less a portion of the primary Social Security amount, plus
adjustments for cost-of-living increases of up to 3% each year. The following
table sets forth estimated annual benefits payable under the plan in effect
through 1989 to participating employees in the specified remuneration and
years-of-service classifications, on a straight life annuity basis and before
deduction for Social Security benefits.
<TABLE>
<CAPTION>
YEARS OF CONTINUOUS SERVICE TO NORMAL
RETIREMENT DATE(2)(3)
----------------------------------------------
FINAL AVERAGE SALARY(1) 10 20 30 40
- -------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 700,000............................................... $ 140,000 $ 280,000 $ 373,310 $ 420,000
800,000............................................... 160,000 320,000 426,640 480,000
900,000............................................... 180,000 360,000 479,970 540,000
1,000,000.............................................. 200,000 400,000 533,300 600,000
1,100,000.............................................. 220,000 440,000 586,000 660,000
</TABLE>
- ------------------------
(1) "Final Average Salary" is the average of an employee's salary paid in any
consecutive five-year period during the employee's last ten years of active
employment which produces the highest average salary.
(2) Assumes retirement at age 65, normal retirement date, although there is no
reduction for an employee who retires at age 62 or thereafter. On January 1,
1998, Mr. Clarke had 40 years of credited service.
(3) As a result of limitations under the Internal Revenue Code of 1986, as
amended, a portion of these amounts may be paid under a supplemental benefit
plan outside the qualified benefit plan.
Employees who were vested participants in the old Travelers Retirement Plan
on December 31, 1989 are entitled to a minimum benefit as calculated under that
plan, without adjustment for cost-of-living increases. It is anticipated that
Mr. Clarke will receive a minimum benefit computed under the prior plan and,
accordingly, the above table reflects the minimum benefit he is expected to
receive. In addition, such employees, the sum of whose age and years of service
on such date exceeded 55 will have such minimum benefit increased by an amount
equal to the excess of their age and years of service on such date over 55, up
to a maximum of 25, times 0.3% of their three-year final average salary,
determined as described below. The excess of the age and years of service over
55 utilized in calculating such increased benefit for Mr. Clarke is 25 years.
The estimated annual benefits payable upon retirement at normal retirement
age for Mr. Clarke is $483,894. His actual pension benefit will be based on the
highest benefit amount available to him.
22
<PAGE>
In addition to retirement benefits under the old Travelers Retirement Plan,
the Company pays a retirement allowance of up to 13 weeks of base salary, based
upon age at retirement, to employees who attained age 50 on or before December
31, 1989. This additional benefit is available to Mr. Clarke.
EMPLOYMENT PROTECTION AGREEMENTS
Mr. Madonna is party to a letter agreement dated January 13, 1997 providing
for his employment as Vice Chairman of the Company and Vice Chairman of
Travelers Group. The agreement provides that Mr. Madonna will receive a base
salary of $600,000 per year, and, with respect to 1997, bonus compensation of at
least $600,000. The agreement also provides that in each year after 1997, Mr.
Madonna will be eligible for consideration for a bonus. The agreement provides
for Mr. Madonna's participation in the TRV CAP Plan; a one-time grant of a stock
option for TRV Common Stock; an annual subsidy for financial planning and
participation in employee welfare benefit and pension plans of the Company
and/or its affiliates. Mr. Madonna's employment is at will and may be terminated
at any time.
Mr. Long is party to a letter agreement dated November 17, 1996, providing
for his employment as Vice Chairman of the Company. The agreement provides that
Mr. Long will receive a base salary of at least $450,000 with respect to 1997,
and, with respect to 1998 and 1999, a base salary at least equal to his salary
from the prior year. Mr. Long is also entitled, with respect to 1997 and 1998,
to bonus compensation of at least $450,000, and with respect to 1999, bonus
compensation of at least $650,000. The agreement provides for Mr. Long's
participation in the CAP Plan, a one-time grant of a stock option for TRV Common
Stock, reimbursement for certain moving and housing expenses, reimbursement up
to a maximum amount of compensation foregone and certain expenses in connection
with employment by the Company and participation in employee welfare benefit and
pension plans of the Company and/or its affiliates (including five years of
vesting credit under the Company's retirement plan). Mr. Long is entitled to
severance payments ranging in amount from $900,000 to $1.8 million to be paid if
his employment is terminated prior to December 31, 2001 for reasons which vary
depending on the year of termination but which include termination without
cause, death, disability or failure of the Company to provide Mr. Long with a
mutually acceptable position. Mr. Long's receipt of severance payments is
subject to his agreement not to compete with the Company. Mr. Long's employment
is terminable by either party upon three months' written notice to the other
party. Following any termination, Mr. Long is subject to certain confidentiality
provisions and an agreement not to cause Company employees to terminate
employment.
CERTAIN TRANSACTIONS
The Travelers Indemnity Company, a subsidiary of the Company and The
Travelers Insurance Company, an affiliate of the Company, purchased during 1997
limited partnership interests in Capricorn Investors II, L.P. (the "Fund"). The
Fund is a limited partnership whose business is to acquire equity and
equity-like securities in public or private companies. Dudley Mecum, a director
of the Company, is a Managing Director of Capricorn Holdings, LLC, the general
partner of the Fund. The investment in the Fund, $10 million, represents less
than 10% of the capital of that entity.
On April 2, 1996, the Company purchased all of the outstanding shares of
common stock of each of The Aetna Casualty and Surety Company (now known as
Travelers Casualty and Surety Company ("Travelers C & S")) and The Standard Fire
Insurance Company from Aetna as more fully described below. The Company entered
into certain arrangements with various parties, including Travelers Group and
its subsidiaries and certain private investors, in connection with the
acquisition and the financing thereof, a number of which are continuing. The
relevant provisions of the applicable agreements have been summarized below. The
summaries do not purport to be complete and are qualified in their entirety by
reference to such agreements which have previously been filed with the
Commission. All terms used herein that are defined in such agreements shall have
the meanings assigned them in such agreements.
23
<PAGE>
RELATIONSHIPS WITH AETNA
Pursuant to the Stock Purchase Agreement dated as of November 28, 1995
between TIGI and Aetna (the "Aetna Stock Purchase Agreement"), which was
assigned to the Company, the Company purchased Travelers C&S and Standard Fire
on April 2, 1996 for an aggregate purchase price of approximately $4.2 billion.
Aetna agreed not to compete with any of the Aetna P&C businesses as
conducted in certain countries, with certain limited exceptions for a period of
five years. Aetna entered into a license agreement with Aetna Casualty and
Standard Fire that permits those companies and their subsidiaries to use the
"Aetna" name in connection with their operations through December 31, 1998.
Aetna also agreed not to license the Aetna name to anyone else for use in a
property and casualty insurance business until after December 31, 2001.
Aetna and its subsidiaries continue to provide certain telecommunications
services to the Company and arrangements for the lease of real and personal
property, among other things. During 1997, the Company paid to Aetna
approximately $4 million in respect of services provided. From time to time the
Company engages in transactions with Aetna and its subsidiaries in the ordinary
course of business.
RELATIONSHIPS WITH PRIVATE INVESTORS
Pursuant to the Shareholders Agreement, the Private Investors have certain
rights with respect to the ownership of Class A Common Stock and the management
of the Company.
Pursuant to the Shareholders Agreement, the Private Investors are
collectively entitled to a total of four demand registrations with respect to
their shares of Class A Common Stock (one of which was exercised in November
1997) and an unlimited number of "piggyback" registrations. The Company has
agreed to indemnify the Private Investors for certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Private
Investors may be required to make in respect thereof, in connection with sales
by the Private Investors of shares of Class A Common Stock in a registration
statement prepared by the Company. Pursuant to the Shareholders Agreement, the
Company has agreed to pay all expenses in connection with each such
registration, except underwriting discounts and commissions applicable to the
shares of Class A Common Stock sold by the Private Investors.
RELATIONSHIPS WITH TIGI AND TRAVELERS GROUP
The Company has engaged in certain transactions and is a party to certain
arrangements with TIGI and Travelers Group and certain of their affiliates.
INTERCOMPANY AGREEMENT
The Company and Travelers Group entered into an Intercompany Agreement dated
as of April 2, 1996 (the "Intercompany Agreement"), certain provisions of which
are summarized below. As used herein, "Travelers Affiliated Group" means
Travelers Group collectively with its subsidiaries other than the Company and
its subsidiaries.
LICENSE TO USE THE TRAVELERS NAME AND CERTAIN TRADEMARKS. Pursuant to the
Intercompany Agreement, certain members of the Travelers Affiliated Group have
granted to the Company and certain of its subsidiaries, a non-exclusive,
revocable license to use the "Travelers" name and certain trademarks
(collectively, the "Trademarks") solely in connection with the Company's
property and casualty insurance business and activities related to such property
and casualty insurance business.
INDEMNIFICATION. The Intercompany Agreement provides that the Company will
indemnify each member of the Travelers Affiliated Group and each of their
respective officers, directors, employees and agents (collectively, the
"Indemnitees") against losses based on, arising out of or resulting from certain
24
<PAGE>
actions by the Company and its Subsidiaries. Travelers Group has also agreed to
indemnify the Company and its subsidiaries and each of their respective
officers, directors, employees and agents against losses based on, arising out
of or resulting from certain actions by Travelers Group and its Subsidiaries.
TRAVELERS GROUP CONSENT TO CERTAIN EVENTS. The Intercompany Agreement
provides that until members of the Travelers Affiliated Group cease to control
at least 20% of the combined voting power of the outstanding Common Stock or no
longer own at least 20% of the outstanding shares of Common Stock, the prior
written consent of Travelers Group will be required for certain fundamental
corporate actions.
REGISTRATION RIGHTS. The Company has granted to the Travelers Affiliated
Group the right to request up to two demand registrations in each calendar year.
The Travelers Affiliated Group also has unlimited "piggyback" registration
rights. The Company has agreed to pay all costs and expenses in connection with
each such registration, except underwriting discounts and commissions applicable
to the shares of Common Stock sold by the Travelers Affiliated Group.
CERTAIN BUSINESS RELATIONSHIPS. The Company has agreed that all
distribution arrangements in effect as of April 2, 1996 pursuant to which
members of the Travelers Affiliated Group distribute property and casualty
insurance products of the Company or its subsidiaries will continue until such
time as the members of the Travelers Affiliated Group cease to control at least
50% of the combined voting power of the outstanding Common Stock. The Company
has agreed to make its products available for distribution through other members
of the Travelers Affiliated Group, such as PFS, and to refrain from using like
distribution channels, and Travelers Group has agreed that the members of the
Travelers Affiliated Group will refrain from selling property and casualty
insurance products of any nonaffiliate, in each case, until such time as the
members of the Travelers Affiliated Group, in the aggregate, cease to control at
least 50% of the combined voting power of the outstanding Common Stock and for a
period of two years from and after such date unless the parties agree to
terminate earlier such period or to extend such period. This arrangement may be
modified by the parties.
REAL PROPERTY. The Intercompany Agreement provides that the Travelers
Affiliated Group will continue to lease to the Company certain premises
currently occupied by it and to sublease certain other properties currently
occupied by it for varying periods on terms consistent with prior cost
allocation practices on a fair market value basis.
OTHER PROVISIONS. The Intercompany Agreement also provides for: (i) the
provision of insurance and allocation and/or reimbursement of costs and premiums
thereof; (ii) the provision of data processing services and allocation and/or
reimbursement of costs thereof; (iii) cross-licensing of computer software; (iv)
the provision of benefits and participation in benefit and retirement plans and
reimbursement for the costs thereof; and (v) provisions governing certain other
relationships among members of the Travelers Affiliated Group, on the one hand,
and the Company and its subsidiaries, on the other hand.
TAX SHARING AGREEMENT
The Company's items of income, loss, deductions and credits are included in
the consolidated and combined tax returns of Travelers Group for federal income
and certain state tax purposes. Travelers Group, TIGI and the Company have
entered into an agreement, effective January 1, 1996 (the "Tax Sharing
Agreement"), providing for the filing of consolidated and combined federal and
certain state income tax and franchise tax returns and for the allocation of
income tax liabilities related to such returns. As required by the terms of the
Tax Sharing Agreement, in general, the Company will pay TIGI an amount equal to
the federal income or state income or franchise taxes that would have been
payable by the Company if it filed separate consolidated or combined returns
with its own subsidiaries.
25
<PAGE>
OTHER INTERCOMPANY AGREEMENTS
The Company participates with Travelers Group and TIGI in certain limited
group purchasing arrangements, including telecommunications services. Travelers
Group provides certain corporate staff services, including legal, internal audit
and other services, to the Company at cost pursuant to a Service Reimbursement
Agreement.
TIGI and various of its subsidiaries, including subsidiaries of the Company,
are parties to an Expense Allocation Agreement that provides for the allocation
among the parties of costs for services provided to or by the parties. Such
services include, but are not limited to, financial management, operational
management, legal, investment management, government relations, record-keeping
and data processing services and the acquisition of equipment, software and
office space. Charges are allocated at cost, and no party is expected to realize
a profit or incur a loss as a result of providing or obtaining services under
the agreement. The agreement may be terminated as to any party upon 90 days
prior notice to the other parties.
From time to time the Company engages in transactions with Travelers Group
and its subsidiaries, including, among other things, reinsurance of
long-standing business and the promotion of affiliates' products. To the extent
such transactions are material to the Company, they are more fully described in
the Company's periodic reports filed with the SEC under the Exchange Act.
During 1997, the Company paid to Travelers Group and its subsidiaries
approximately $27 million, and Travelers Group and its subsidiaries paid to the
Company approximately $32 million, in respect of services provided pursuant to
the various intercompany agreements and arrangements herein described.
The Company and Travelers Group have made available to each other a line of
credit in the amount of $200 million. There is no obligation on the part of
either party to make a loan under this line of credit and no amounts are
outstanding thereunder.
CERTAIN BUSINESS RELATIONSHIPS
Smith Barney, an affiliate of the Company of which Mr. Dimon is a Co-Chief
Executive Officer and Co-Chairman of the Board, acted as a manager in a
secondary offering of Class A Common Stock in November 1997.
ITEM 2:
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as the
independent auditors of the Company for 1998. KPMG has served as the independent
auditors of the Company and its predecessors since December 1993. Arrangements
have been made for a representative of KPMG to attend the Annual Meeting. The
representative will have an opportunity to make a statement if he or she desires
to do so, and will be available to respond to appropriate stockholder questions.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
THE SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
1998. Assuming the presence of a quorum, the affirmative vote of a majority of
the votes cast by the holders of shares of Common Stock present and entitled to
vote on this item at the Annual Meeting, voting as a single class, is required
to ratify the selection of the Company's auditors. Under applicable Delaware
law, in determining whether this item has received the requisite number of
affirmative votes, abstentions and broker nonvotes will be counted and will have
the same effect as a vote against this item.
26
<PAGE>
COST OF SOLICITING PROXIES
The cost of soliciting proxies and the cost of the Annual Meeting will be
borne by the Company. In addition to the solicitation of proxies by mail,
proxies may be solicited by personal interview, telephone and similar means by
directors, officers or employees of the Company, none of whom will be specially
compensated for such activities. The Company also intends to request that
brokers, banks and other nominees solicit proxies from their principals and will
pay such brokers, banks and other nominees certain expenses incurred by them for
such activities. The Company has retained Morrow & Co., Inc. a proxy soliciting
firm, to assist in the solicitation of proxies, whose fee will consist of the
reimbursement of certain out-of-pocket expenses.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the next Annual Meeting
of Stockholders and who wishes such proposal to be included in the Proxy
Statement for that meeting must submit such proposal in writing to the Secretary
of the Company, at the address set forth on the first page of this Proxy
Statement, and such proposal must be received on or before November 23, 1998.
OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Annual Meeting. If other matters should arise
at the Annual Meeting, shares represented by proxies will be voted at the
discretion of the proxy holder.
27
<PAGE>
ANNEX A
TRAVELERS GROUP EXECUTIVE PERFORMANCE COMPENSATION PLAN
The following description of the Travelers Group Executive Performance
Compensation Plan does not purport to be complete and is qualified in its
entirety by reference to the Plan. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Proxy Statement to which this
description is annexed.
The TRV Compensation Plan establishes certain performance criteria for
determining the maximum amount of bonus compensation available, including that
portion of bonuses payable with respect to Mr. Lipp, in the form of Common Stock
under the CAP Plan, and with respect to all of the TRV Covered Employees other
than Mr. Lipp, in the form of restricted TRV Common Stock under the TRV CAP
Plan. The TRV Subcommittee comprised of "outside directors" (as such term is
used in Section 162(m) of the Code) who are also "Non-Employee Directors" (as
such term is defined in Rule 16b-3 of the Exchange Act) is responsible for
determining whether such goals have been met. References herein to the "TRV
Committee" shall be deemed to be references to the TRV Subcommittee in all cases
where Section 162(m) of the Code would require that action be taken by the TRV
Subcommittee rather than the full TRV Committee. The bonus compensation Mr. Lipp
received pursuant to the TRV Compensation Plan is inclusive of bonus
compensation paid to him for services rendered to each of Company and Travelers
Group.
The creation of a bonus pool in which the TRV Covered Employees participate
is contingent upon Travelers Group achieving at least a 10% Return on Equity, as
defined in the TRV Compensation Plan. The amount of the bonus pool is calculated
based upon the extent to which the Return on Equity exceeds the 10% minimum
threshold.
Based on the composition of the participants in the bonus pool for 1997, the
TRV Compensation Plan establishes that up to 25.2% of any bonus pool established
will be available for bonus awards to the chief executive officer and up to
18.7% will be available to each of the other four eligible participants. The TRV
Committee nevertheless retains discretion to reduce or eliminate payments under
the TRV Compensation Plan for any of the participating executive officers to
take into account subjective factors, including an individual's performance or
other relevant criteria.
<PAGE>
[LOGO]
<PAGE>
Detach Proxy Here
- --------------------------------------------------------------------------------
TRAVELERS PROPERTY CASUALTY CORP.
Proxy Solicited on Behalf of the Board of Directors
of Travelers Property Casualty Corp. for the Annual Meeting, April 22, 1998
The undersigned hereby constitutes and appoints Robert I. Lipp, Jay S.
Fishman and James M. Michener, and each of them his or her true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Stockholders of Travelers Property
Casualty Corp. (the "Company") to be held in the auditorium of the
headquarters of Travelers Group Inc., 388 Greenwich Street, New York, New
York, on Wednesday, April 22, 1998 at 2:30 p.m. local time, and at any
adjournments or postponements thereof, on all matters properly coming before
said Annual Meeting, including but not limited to the matters set forth on
the reverse side.
If shares of Travelers Property Casualty Corp. Class A Common Stock are
issued to or held for the account of the undersigned under employee plans and
voting rights attach to such shares (any of such plans, a "Voting Plan"),
then the undersigned hereby directs the respective fiduciary of each
applicable Voting Plan to vote all shares of Travelers Property Casualty
Corp. Class A Common Stock in the undersigned's name and/or account under
such Plan in accordance with the instructions given herein at the Annual
Meeting and at any adjournments or postponements thereof, on all matters
properly coming before the Annual Meeting including but not limited to the
matters set forth on the reverse side.
You are encouraged to specify your choices by marking the appropriate
boxes. SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote
in accordance with the Board of Directors' recommendations. Your proxy cannot
be voted unless you sign, date and return this card or follow the
instructions for telephonic voting set forth on the reverse side.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR all of the
Proposals and will be voted in the discretion of the proxies (or, in the case
of a Voting Plan, will be voted in the discretion of the plan trustee or
administrator) upon such other matters as may properly come before the Annual
Meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
TRAVELERS PROPERTY
CASUALTY CORP.
P.O. BOX 11490
NEW YORK, NY 10203-0490
- --------------------------------------------------------------------------------
<PAGE>
-----------------------------------------------------------
VOTE BY TELEPHONE
[GRAPHIC] [GRAPHIC]
QUICK * * * EASY * * * IMMEDIATE
-----------------------------------------------------------
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed and returned your proxy card.
YOU WILL BE ASKED TO ENTER THE NUMBER LOCATED IN THE BOX MARKED "CONTROL
NUMBER." YOU WILL THEN HEAR THESE INSTRUCTIONS:
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL proposals:
Press 1
OPTION #2: If you choose to vote on each proposal separately, press 0. You
will hear these instructions:
- --------------------------------------------------------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to
the instructions
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1 -
THANK YOU FOR VOTING
-----------------------------
IF YOU VOTE BY
TELEPHONE
DO NOT MAIL BACK
YOUR PROXY
-----------------------------
Call * * Toll Free * * On a Touch-Tone Telephone
1-888-776-5658 - ANYTIME -----------------------------
There is NO CHARGE to you for this call. CONTROL NUMBER
-----------------------------
Detach Proxy Card Here
- --------------------------------------------------------------------------------
----
----
<TABLE>
<CAPTION>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS:
1. Proposal to elect eight directors to a one-year term.
NOMINEES:
01 - Kenneth J. Bialkin 02 - James Dimon 03 - Robert I. Lipp
04 - Dudley C. Mecum 05 - Roberto G. Mendoza 06 - Frank J. Tasco
07 - Sanford I. Weill 08 - Arthur Zankel
FOR WITHHOLD MARK HERE
ALL / / FOR ALL / / EXCEPTIONS / / FOR ADDRESS
CHANGE AND / /
NOTE AT
BOTTOM LEFT
Exceptions___________________________________________________________
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), The signer(s) hereby acknowledge(s) receipt of
mark the exception box and write the name(s) in the space provided above. the Notice of Annual Meeting of Stockholders
and accompanying Proxy Statement.
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection of KPMG The signer(s) hereby revoke(s) all proxies
Peat Marwick LLP as the Company's / / / / / / heretofore given by the signer(s) to vote at
independent auditors for 1998. said Annual Meeting and any adjournments
or postponements thereof.
IF NO BOXES ARE MARKED, THIS PROXY WILL BE
VOTED IN THE MANNER DESCRIBED ON THE REVERSE
SIDE.
NOTE: Please sign exactly as name appears
herein. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title
as such.
---------------------------------------------
Signature
---------------------------------------------
Signature
Dated:_________________________________, 1998
Votes MUST be indicated [x] in Black or
Blue ink.
</TABLE>
