<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 / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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 22, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Travelers Property Casualty Corp. on Tuesday, April 20, 1999. The meeting will
be held in the Citigroup Inc. auditorium at 399 Park Avenue, 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, the appointment of auditors, the adoption of a new stock incentive
plan and an amendment to the executive option plan. Please take the time to read
carefully each of the proposals for stockholder action described in the proxy
materials.
Thank you for your continued support of our Company.
Sincerely,
/s/ Robert I. Lipp /s/ Jay S. Fishman
Robert I. Lipp Jay S. Fishman
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 of Citigroup Inc., 399 Park Avenue,
New York, New York, on Tuesday, April 20, 1999 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
1999;
ITEM 3. To approve and adopt the Travelers Property Casualty Corp. 1999
Stock Incentive Plan;
ITEM 4. To approve and adopt an Amendment to the Travelers Property Casualty
Corp. 1996 Executive Option Plan;
and to transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has set the close of business on March 3, 1999 as the
record date for determining stockholders entitled to notice of and to vote at
the Annual Meeting. A list of stockholders entitled to vote at the Annual
Meeting will be maintained at the headquarters of Citigroup Inc., 153 East
53(rd) Street, New York, New York prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ James M. Michener
James M. Michener
SECRETARY
March 22, 1999
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE OR THAT YOU REGISTER YOUR VOTE BY TELEPHONE OR
BY THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD, SO THAT YOUR
SHARES WILL BE REPRESENTED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
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" or "TAP") 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 of Citigroup Inc. (formerly Travelers Group Inc.)
("Citigroup"), 399 Park Avenue, New York, New York, on Tuesday, April 20, 1999,
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 22, 1999, to stockholders of the Company on March 3,
1999, the record date for the Annual Meeting (the "Record Date"). Employees of
the Company who are participants in one or more of the Company's benefit plans
may receive this Proxy Statement and their proxy cards separately. The Company's
Annual Report to Stockholders for the fiscal year ended December 31, 1998 will
be delivered to stockholders prior to or concurrently with the mailing of the
proxy material.
Stockholders of the Company are cordially invited to attend the Annual
Meeting. Whether or not you expect to attend, it is important that you complete
the enclosed proxy card, and sign, date and return it as promptly as possible in
the envelope enclosed for that purpose or vote your shares by telephone or by
the Internet by following the instructions on your proxy card (except under the
very limited circumstances in which telephonic or Internet voting is not
available). You have the right to revoke your proxy at any time prior to its use
by filing a written notice of revocation with the Secretary of the Company prior
to the convening of the Annual Meeting, or by presenting another proxy card with
a later date. If you attend the Annual Meeting and desire to vote in person, you
may request that your previously submitted proxy card not be used.
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 63,388,266
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 Citigroup. On October 8, 1998,
Citicorp merged with a wholly-owned subsidiary of Travelers Group Inc.
("Travelers Group") and Travelers Group changed its name to Citigroup Inc. 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>
PERCENTAGE
OF VOTING
NUMBER OF SHARES PERCENTAGE OF CLASS (2) PERCENTAGE OF POWER OF
BENEFICIALLY OWNED OUTSTANDING OUTSTANDING
NAME AND ADDRESS ----------------------- ------------------------ COMMON COMMON
OF BENEFICIAL OWNER (1) CLASS A CLASS B CLASS A CLASS B STOCK STOCK
- ----------------------------------------------- --------- ------------ ----------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Citigroup Inc. (3)............................. 328,020,170 100% 83.8% 98%
153 East 53(rd) Street
New York, New York 10043
FMR Corp....................................... 6,030,330 9.51% 1.54% *
82 Devonshire Street
Boston, MA 02109
Goldman, Sachs & Co. and....................... 3,500,301 5.52% * *
The Goldman Sachs Group, L.P.
85 Broad Street
New York, New York 10004
Morgan Stanley Dean Witter & Co................ 3,391,626 5.35% * *
1585 Broadway
New York, New York 10036
John Hancock Mutual Life
Insurance Company.............................. 3,796,410 5.99% * *
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
</TABLE>
- ------------------------------
* Less than 1%
(1) Based on Schedules 13G filed with the SEC by such beneficial owners in
February 1999 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. Citigroup 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.
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 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.
2
<PAGE>
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, ratification of the selection
of KPMG LLP (formerly KPMG Peat Marwick LLP) as the Company's independent
auditors for 1999, approval and adoption of the Travelers Property Casualty
Corp. 1999 Stock Incentive Plan (the "1999 Incentive Plan") and approval and
adoption of an amendment to the Travelers Property Casualty Corp. Executive
Option Plan (the "Executive Option Plan"). 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 or by the Internet, 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 or by the Internet, your shares of Common Stock will be
voted in accordance with such instructions.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 28, 1999, the Common Stock
ownership of each director and certain executive officers of the Company. As of
February 28, 1999, the directors and the executive officers of the Company as a
group (18 persons) beneficially owned 302,097 shares of Class A Common Stock (or
approximately .009% of the total voting power of the Common Stock outstanding
and entitled to vote at the Annual Meeting).
As of February 28, 1999, 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 February 28, 1999, 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...................................................... 8,394
Director
Charles J. Clarke....................................................... 19,336
Executive Officer
Leslie B. Disharoon..................................................... 816
Director
Jay S. Fishman.......................................................... 38,323
Director and Chief Executive Officer
William Hannon.......................................................... 14,393
Executive Officer
Robert I. Lipp.......................................................... 148,126
Director and Chairman of the Board
Stanton F. Long......................................................... 6,358
Executive Officer
Dudley C. Mecum......................................................... 5,769
Director
Roberto G. Mendoza (2).................................................. 2,379
Director
Frank J. Tasco.......................................................... 6,644
Director
Sanford I. Weill........................................................ 4,100
Director
Arthur Zankel........................................................... 6,379
Director
All Directors and Executive Officers
as a group (18 persons)(3)............................................ 302,097
</TABLE>
- ------------------------
(1) This information includes, as of February 28, 1999, 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 Travelers Property Casualty Corp. Amended
and Restated Plan for Non-Employee Directors, but receipt of which is
deferred: Mr. Bialkin, 4,019, Mr. Disharoon, 816, Mr. Mecum, 4,019 and Mr.
Tasco, 4,019; (ii) the following number of shares of Class A Common Stock
held 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,
4,315 and Mr. Fishman, 3,490; 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, 15,038; Mr. Fishman, 31,847; Mr.
Hannon, 9,493; 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
13,173 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 161,740 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, 1998, each of its officers, directors and
greater than ten percent stockholders complied with all such applicable filing
requirements, except that due to an administrative oversight of the Company, the
initial filing for Anil M. Khanna, an executive officer, was late.
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
Roberto Mendoza who will not stand for election.
Each nominee elected will hold office until the Annual Meeting of
Stockholders to be held in 2000 and until a successor has been duly elected and
qualified, unless prior to such meeting a director shall resign, or his
directorship shall become vacant due to his 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 2000:
<TABLE>
<S> <C> <C>
KENNETH J. BIALKIN PARTNER
69 SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
- Joined Skadden, Arps, Slate, Meagher & Flom LLP in 1988
- TAP director since 1996
- Travelers Group director since 1986
- Other Directorships: Citigroup, The Municipal Assistance
Corporation for the City of New York, Oshap Technologies,
Ltd., Tecnomatix Technologies Ltd. and Sapiens International
Corporation N.V.
- Other Activities: Carnegie Hall, New School University (Visiting
Committee, Graduate Faculty), American Jewish Historical
Society (President), America-Israel Friendship League
(Chairman) and Council on Foreign Relations
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
LESLIE B. DISHAROON FORMER CHAIRMAN OF THE BOARD, PRESIDENT
66 AND CHIEF EXECUTIVE OFFICER
MONUMENTAL CORPORATION
- Chairman of the Board, President and Chief Executive Officer of
Monumental Corporation--1978 to 1988
- TAP director since 1998
- Travelers Group director--1986 to 1998
- Other Directorships: Aegon USA, Inc., GRC International Inc.,
M.S.D. & T. Funds, Inc. and Caves Valley Club Inc. (Chairman)
[PHOTO]
JAY S. FISHMAN CHIEF EXECUTIVE OFFICER
46 PRESIDENT
TRAVELERS PROPERTY CASUALTY CORP.
- Joined Travelers Group--1989
- Chief Financial Officer, Travelers Group's Consumer Financial
Services Group--1989 to 1991
- Treasurer, Travelers Group--1991 to 1993
- Chief Financial Officer, TIGI--1993
- Vice Chairman, TIGI--1995
- Chief Administrative Officer, TIGI--1996
- Vice Chairman and Chief Administrative Officer, TAP--1996 to
1998
- Chief Operating Officer, Commercial Lines--1996 to 1998
- Chief Executive Officer and President, Commercial Lines--1998
- Chief Executive Officer and President, TAP--1998
- TAP director--1998
- Other Activities: Connecticut Public Broadcasting, Inc.
(Trustee)
[PHOTO]
ROBERT I. LIPP CHAIRMAN OF THE BOARD
60 TRAVELERS PROPERTY CASUALTY CORP.
- Joined Travelers Group--1986
- Executive Vice President, Travelers Group and its corporate
predecessor--1986 to 1991
- Chairman and Chief Executive Officer, Travelers Group's Consumer
Financial Services Group--1991 to 1993
- Vice Chairman and director, Travelers Group--1991 to 1998
- Chairman of the Board and Chief Executive Officer, TIGI--1993
- Chief Executive Officer and President, TAP--1996 to 1998
- Chairman of the Board, TAP--1996
- Director, TAP--1996
- Co-Chief Executive Officer, Global Consumer Businesses,
Citigroup-- 1998
- Other Directorships: The New York City Ballet (President), the
Wadsworth Atheneum, the Massachusetts Museum of Contemporary
Art and Dance-On Inc. (Chairman)
- Other Activities: Williams College (Finance Committee)
[PHOTO]
DUDLEY C. MECUM MANAGING DIRECTOR
64 CAPRICORN HOLDINGS, LLC
- Managing Partner, KPMG LLP (New York office)--1979 to 1985
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
- Partner, G.L. Ohrstrom & Co.--1989 to 1996
- Managing Director, Capricorn Holdings, LLC--1997
- TAP director since 1996
- Travelers Group director since 1986
- Other Directorships: Citigroup, Dyncorp, Vicorp Restaurants,
Inc., Lyondell Companies, Inc., Suburban Propane Partners, MLP
and CCC Information Services, Inc.
[PHOTO]
FRANK J. TASCO RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
71 DIRECTOR
MARSH & MCLENNAN COMPANIES, INC.
- Travelers Group director--1992 to 1998
- TAP director since 1996
- Other Directorships: Angram Inc. (Chairman of the Board)
- Other Activities: Phoenix House Foundation, Catholic Health
Council of the Archdiocese of Rockville Centre (Chairman),
Council on Foreign Relations, the Lincoln Center Consolidated
Corporate Fund Leadership Committee, the Foreign Policy
Association, New York University (Trustee), the Inner-City
Scholarship Fund (Trustee), President Bush's Drug Advisory
Council and New York Drugs Don't Work (Founder)
[PHOTO]
SANFORD I. WEILL CHAIRMAN
65 CO-CHIEF EXECUTIVE OFFICER
CITIGROUP INC.
- Founding Partner, Shearson Lehman Brothers Inc.'s predecessor
partnership--1960 to 1965
- Chairman of the Board and Chief Executive Officer, or a
principal executive officer, Shearson Lehman Brothers
Inc.--1965 to 1984
- Chairman of the Board, Shearson Lehman Brothers Holdings Inc.--
1984 to 1985
- Chairman of the Board and Chief Executive Officer, American
Express Insurance Services, Inc.--1984 to 1985
- President, American Express Company--1983 to 1985
- Chairman of the Board and Chief Executive Officer, Travelers
Group (and its predecessor)--1986
- President--1986 to 1991
- Chairman and Co-Chief Executive Officer, Citigroup--1998
- Travelers Group director since 1986
- TAP director since 1996
- Other Directorships: Citigroup, AT&T Corp. and E.I. du Pont de
Nemours & Company
- Other Activities: The Business Roundtable, The Business Council,
Board of Trustees, Carnegie Hall (Chairman), Baltimore
Symphony Orchestra (director), Board of Governors of New York
Hospital, Board of Overseers of the Joan and Sanford I. Weill
Medical College & Graduate School of Medical Sciences of
Cornell University (Chairman), The New York and Presbyterian
Hospitals (Trustee), Cornell University's Johnson Graduate
School of Management Advisory Board, Cornell University
(Trustee Emeritus), National
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Academy Foundation (Chairman), United States Treasury
Department's Working Group on Child Care
[PHOTO]
ARTHUR ZANKEL GENERAL PARTNER
67 FIRST MANHATTAN CO.
- Joined First Manhattan Co.--1965
- Travelers Group director since 1986
- TAP director since 1996
- Other Directorships: Citigroup, Vicorp Restaurants, Inc. and
Fund American Enterprises Holdings, Inc.
- Other Activities: Skidmore College (Trustee), Carnegie Hall
(Trustee), New York Foundation (Trustee) and UJA-Federation
(Trustee)
[PHOTO]
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met five times during 1998. Each director attended at
least 75 percent of the meetings of the Board of Directors and Board Committees
of which he was a member during 1998 during the period that he served as a
director.
8
<PAGE>
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, Fishman, 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
met twice during 1998.
AUDIT COMMITTEE. The members of the Committee are Messrs. Mecum (Chairman),
Disharoon and Tasco. The Committee, composed entirely of non-management
directors, reviews the audit plans and findings of the independent auditors and
the Company's internal audit and risk review staff, the results of regulatory
examinations, and tracks management's corrective action plans where necessary.
It reviews the Company's accounting policies and controls; compliance programs
as well as significant tax and legal matters; and recommends to the Board the
annual appointment of independent auditors. It also reviews the Company's risk
management processes. The Committee met four times during 1998.
NOMINATIONS, COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE. The members
of the Committee are Messrs. Zankel (Chairman), Mendoza and Bialkin. The
Committee, composed entirely of non-management directors, is responsible, among
other things, for evaluating the efforts of the Company and of the Board of
Directors to maintain effective corporate governance practices and identifying
candidates for election to the Company's Board of Directors. The Committee will
consider candidates suggested by directors or stockholders. Nominations from
stockholders, properly submitted in writing to the Secretary of the Company,
will be referred to the Committee for consideration. The Committee reviews the
compensation actions for senior management. Further, the Committee approves
broad-based and special compensation plans across the Company. The Committee met
seven times during 1998.
INCENTIVE COMPENSATION SUBCOMMITTEE. The members of the Subcommittee are
Messrs. Zankel (Chairman) and Mendoza. The Subcommittee, comprised of "outside
directors" (as such term is used in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code")) who are also "Non-Employee Directors" (as such
term is defined in Rule 16b-3 of the Securities Exchange Act of 1934, as
amended) establishes compensation for the Chief Executive Officer and certain
other senior executives and has the exclusive authority to approve all
compensation for Section 16(a) Persons and the executives required to be named
in the Summary Compensation Table in the Company's annual proxy statement (the
"Covered Employees"). The Subcommittee has the responsibility for administration
of 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 Citigroup ("Citigroup Common Stock") to Section 16(a) Persons
and Covered Employees 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 Subcommittee in connection with awards of options pursuant to the
Executive Option Plan must be authorized by the Incentive Compensation
Subcommittee (the "Citigroup Subcommittee") of the Personnel, Compensation and
Directors Committee of Citigroup (the "Citigroup Committee") and are subject to
the provisions of the Travelers Group 1996 Stock Incentive Plan (the "TRV
Incentive Plan") and/or any other plan that may be adopted by Citigroup. Pending
approval of the 1999 Incentive Plan that is the subject of Item 3 being voted
upon by stockholders, the Subcommittee will have the exclusive authority to
grant options to purchase shares of Common Stock and, in accordance with the
terms of the Compensation Plan, other stock-based or stock-denominated awards to
Section 16(a) Persons and Covered Employees and to administer certain other
elements of the Stock Incentive Plan covered by Section 162(m). The Subcommittee
met seven times during 1998. References herein to the Nominations, Compensation
and Corporate Governance Committee (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.
9
<PAGE>
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, if any, will
be disregarded and will have no effect on the vote.
EXECUTIVE COMPENSATION
REPORT OF THE NOMINATIONS, COMPENSATION AND CORPORATE GOVERNANCE
COMMITTEE ON EXECUTIVE COMPENSATION
COMMITTEE RESPONSIBILITIES. The Committee is responsible for evaluating the
efforts of the Company and of the Board of Directors to maintain effective
corporate governance practices and identifying candidates for election to the
Company's Board of Directors. The Committee will consider candidates suggested
by directors or stockholders. Nominations from stockholders, properly submitted
in writing to the Secretary of the Company, will be referred to the Committee
for consideration. The Committee reviews the compensation actions for senior
management, which includes members of the business planning groups and the most
senior members of corporate staff. Further, the Committee approves broad-based
and special compensation plans across the Company.
The Incentive Compensation Subcommittee (the "Subcommittee") of the
Committee establishes compensation for the Chief Executive Officer and certain
other senior executives and has the exclusive authority to approve all
compensation for Section 16(a) Persons and Covered Employees subject, in the
case of the Chairman's compensation for 1998, to the review and approval of such
compensation by the Citigroup Subcommittee.
No member of the Committee or the Subcommittee is a former or current
officer or employee of the Company or any of its affiliates. One member, Mr.
Bialkin, is a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom
LLP, which performs legal services for the Company and Citigroup and its
subsidiaries from time to time. Therefore, decisions regarding compensation
actions for any of the Section 16(a) Persons are made by the Subcommittee of
which Mr. Bialkin is not a member.
STATEMENT OF PHILOSOPHY. The Company seeks to attract and retain highly
qualified employees at all levels, 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
stockholders. This policy takes a number of forms, including the following:
- at least 50% of director fees are paid in Company stock
10
<PAGE>
- a broad group of employees, including most members of senior management,
are paid a portion of their annual bonus in the form of forfeitable,
restricted Company 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 Covered Employees
named in the Summary Compensation Table that follows this Report. The
Compensation Plan is administered by the Subcommittee 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 the Compensation Plan to take into account subjective
factors, including an individual's performance or other relevant criteria.
Because Mr. Lipp served as Chief Executive Officer through October 7, 1998 and
Mr. Fishman served as Chief Executive Officer for the remainder of 1998, the
maximum bonus award for each was based on the number of days each served as
Chief Executive Officer and as an other eligible paticipant. The maximum amount
of the bonus pool available for Mr. Lipp was 27.80% and for Mr. Fishman was
20.45%. Under the Compensation Plan, the maximum bonus pool for 1998 for the
Chief Executive Officer and the four other most highly compensated executives of
the Company was approximately $25.3 million.
COMPONENTS OF COMPENSATION. Compensation of executive officers consists of
base salary, discretionary bonus awards, a significant portion of which is
payable in forfeitable restricted stock, and, in certain cases, stock option
awards exercisable for shares of Citigroup 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 include 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 Citigroup who is named in the Summary
Compensation Table in Citigroup's Proxy Statement (the "Citigroup Covered
Employees"), the determination of whether he was entitled to bonus compensation
for the 1998 performance year was made under the Compensation Plan and the
Travelers Group Amended and Restated Executive Performance 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 Citigroup 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 Citigroup Common Stock under the Executive Option Plan approved
by stockholders in 1997 which permits the Subcommittee, in its discretion
11
<PAGE>
and with the authorization of the Citigroup Subcommittee, to grant options to
purchase Citigroup Common Stock to certain executives of the Company and its
subsidiaries. All of such options have been issued under and pursuant to the
terms of the TRV Incentive Plan.
1998 COMPENSATION. The Committee believes that 1998 was a year of
accomplishment for the Company. The Company achieved an 11% increase in
operating earnings to a record $1.25 billion and made significant progress in
developing alternative distribution channels for its products. The amounts
awarded to each of the Covered Employees under the Compensation Plan is set
forth in the Summary Compensation Table below and total approximately $7.5
million.
THE NOMINATIONS, COMPENSATION
AND CORPORATE GOVERNANCE COMMITTEE:
ARTHUR ZANKEL (CHAIRMAN)
KENNETH J. BIALKIN
ROBERTO G. MENDOZA
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 1998. 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 Citigroup
and its subsidiaries from time to time. Mr. Bialkin does not serve as a member
of the Subcommittee.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation paid by the
Company and its subsidiaries to each individual who served as chief executive
officer during 1998 and the three other most highly compensated executive
officers for services rendered to the Company and Citigroup and its subsidiaries
in all capacities during each of the fiscal years ended December 31, 1998, 1997
and 1996. The format of this table has been established by the SEC. Certain of
the Covered Employees received (i) awards of restricted Common Stock under the
CAP Plan for the fiscal years ended December 31, 1996, 1997 and/or 1998, (ii)
awards of restricted Citigroup Common Stock and/or stock options exercisable for
Citigroup Common Stock under employee benefit plans of Citigroup in respect of
performance for the fiscal years ended December 31, 1996, 1997 and/or 1998
and/or (iii) awards of stock options exercisable for Citigroup Common Stock in
respect of performance for the fiscal years ended December 31, 1997 or 1998
under the Executive Option Plan. These awards are listed under the headings
"Restricted Stock Awards (TAP)", "Restricted Stock Awards (Citigroup)" and
"Securities Underlying Citigroup Options (number of shares)", respectively. All
share numbers in the column entitled "Securities Underlying Citigroup Stock
Options (number of shares)" have been restated to the extent necessary to give
effect to the two Citigroup Common Stock dividends declared and paid during 1996
and the Citigroup Common Stock dividend declared and paid during 1997.
12
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- --------------------------------------------
SECURITIES
UNDERLYING
OTHER RESTRICTED RESTRICTED CITIGROUP ALL
ANNUAL STOCK STOCK STOCK OTHER
NAME AND COMPEN- AWARDS AWARDS OPTIONS COMPEN-
PRINCIPAL POSITION SATION (TAP) (CITIGROUP) (NUMBER OF SATION
AT 12/31/98 YEAR SALARY ($) BONUS($) ($)(B) ($)(C) ($)(D) SHARES) ($)(E)
- -------------------- ---- ---------- ---------- -------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert I. Lipp...... 1998 $ 600,000 $2,985,034 $113,402 -- $1,486,621 1,215,349 $1,404
Chairman of the 1997 600,000 2,985,003 145,347 $1,486,662 -- 1,052,042 900
Board (A) 1996 600,000 2,685,022 5,333 1,353,301 -- 1,067,181 1,900
Jay S. Fishman...... 1998 400,000 1,235,021 137,986 309,985 309,988 521,219 348
Chief Executive 1997 391,667 1,012,095 129,092 517,206 -- 261,061 348
Officer and 1996 300,000 810,015 139,000 386,647 -- 262,420 1,204
President (A)
Charles J. Clarke... 1998 500,000 235,054 5,654 109,969 109,960 120,767 17,338
Vice Chairman 1997 500,000 310,014 -- 253,314 -- 223,114 18,255
1996 393,125 336,746 4,444 217,672 -- 108,663 19,727
William Hannon...... 1998 416,667 143,371 28,269 71,082 71,091 71,472 576
Chief Financial 1997 400,000 166,254 30,787 144,968 -- -- 348
Officer 1996 384,849 182,130 37,586 148,271 -- 120,000 1,348
Stanton F. Long..... 1998 473,875 450,000 22,782 -- -- -- 2,543
Vice Chairman 1997 473,875 391,557 24,719 277,924 -- 120,000 900
</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 Citigroup 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 both the Company and
Citigroup and its subsidiaries. The portion of Mr. Lipp's bonus payable in
restricted stock was awarded in shares of Citigroup Common Stock under the
Travelers Group Capital Accumulation Plan (the "TRV CAP Plan"). The bonus
compensation Mr. Fishman received pursuant to the Compensation Plan is
inclusive of bonus compensation paid to him for services rendered to both
the Company and Citigroup and its subsidiaries. The portion of Mr. Fishman's
bonus payable in restricted stock was awarded 50% in shares of Common Stock
under the CAP Plan and 50% in shares of Citigroup Common Stock under the TRV
CAP Plan.
(B) The aggregate amounts set forth for Mr. Lipp and Mr. Fishman include $33,573
and $28,907, respectively, for housing expenses while away from home and
$19,389 and $37,171, respectively, for use of Company transportation.
(C) For 1998, restricted stock awards are made 50% in shares of Common Stock
under the CAP Plan and 50% in shares of Citigroup Common Stock under the TRV
CAP Plan, other than the award made to Mr. Lipp for 1998, which was made
entirely in shares of Citigroup Common Stock under the TRV CAP Plan. The TRV
CAP Plan is substantially identical to the 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
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
13
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
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. 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, 1998, including the awards made in January 1999 in respect of
1998, but excluding awards that vested in January 1999, 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. Clarke: 15,038 shares ($466,178);
Mr. Fishman: 31,847 shares ($987,257); Mr. Hannon: 9,493 shares ($294,283);
Mr. Lipp: 70,026 shares ($2,170,806); and Mr. Long: 6,358 shares ($197,098).
The year-end market price of the Common Stock was $31.00 per share.
(D) The bonus compensation Mr. Lipp received under the Compensation Plan is
inclusive of bonus compensation paid to him for services rendered to each of
the Company and Citigroup; however, the portion of his bonus payable in
restricted stock was awarded in shares of Citigroup Common Stock under the
TRV CAP Plan rather than in shares of Common Stock under the CAP Plan. For
1998 all CAP participants other than Mr. Lipp received 50% of their awards
of restricted stock in shares of Citigroup Common Stock under the TRV CAP
Plan. Mr. Long did not participate in the CAP Plan for 1998. In addition,
certain Covered Employees have received awards of restricted Citigroup
Common Stock under the TRV CAP Plan. The TRV CAP Plan is substantially
identical to the CAP Plan. As of December 31, 1998, including the awards
made in January 1999 in respect of 1998, but excluding awards that vested in
January 1999, the total holdings of restricted Citigroup 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.
Clarke: 2,051 shares ($101,909.06); Mr. Fishman: 5,782 shares ($287,293.13);
Mr. Hannon: 1,326 shares ($65,885.63); and Mr. Lipp: 27,729 shares
($1,377,784.69).The year-end market price of Citigroup Common Stock was
$49.6875 per share.
(E) Also includes supplemental life insurance paid by the Company.
STOCK OPTIONS GRANTED
The following table sets forth information with respect to stock options
exercisable for Citigroup Common Stock granted to the Covered Employees. All of
such options permit the Covered Employees to purchase Citigroup 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 Citigroup 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
14
<PAGE>
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
Citigroup 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 Citigroup Common Stock during 1998) was assumed to
be constant over the life of the option;
- exercise of the option was deemed to occur approximately six months after
the date of grant with respect to options that vest six months after the
date of grant and approximately three and one-half years after the date of
grant with respect to options that vest at a rate of 20% per year, based
upon an estimate of the average period between the grant date and the
exercise date for those options that have vested;
- in the case of Messrs. Clarke, Hannon and Long, the value arrived at
through the use of the Black-Scholes model was discounted by 10% to
reflect the nontransferability of shares of Citigroup 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. Fishman and Lipp, 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 the commitment of senior management of Citigroup to
hold at least 75% of any Citigroup stock previously granted, currently
owned or awarded to them in the future as long as they remain members of
senior management (the "Stock Ownership Commitment"). For these purposes,
"senior management" includes all of the members of Citigroup's Management
Committee, comprised of the most senior executives of Citigroup and its
subsidiaries, all of the members of the Planning Groups for the Global
Consumer and Corporate and Investment Banking businesses of Citigroup, and
the most senior members of the Citigroup corporate staff, in total
comprising approximately seventy individuals. Charitable gifts, limited
estate planning transactions and transactions with Citigroup itself in
connection with participation in stock option and restricted stock plans
are exempted from this commitment. For purposes of calculating the
discount, a five year holding period was assumed even though Messrs. Lipp
and Fishman may be members of senior management of Citigroup for more than
five years.
The potential value of options granted depends entirely upon a long-term
increase in the market price of Citigroup 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 Citigroup
stockholders.
15
<PAGE>
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NUMBER OF % OF
SECURITIES TOTAL CITIGROUP
UNDERLYING OPTIONS EXERCISE
CITIGROUP OPTIONS GRANTED TO ALL OR
GRANTED CITIGROUP BASE PRICE GRANT DATE
(NUMBER OF EMPLOYEES ($ PER EXPIRATION PRESENT
SHARES) IN 1998 SHARE) DATE VALUE ($)
------------------ ------------------- ---------- ------------ -----------
NAME RELOAD REGULAR RELOAD REGULAR
- --------------------------------------- -------- -------- ------ ----------
Robert I. Lipp......................... 23,171 .02 $ 50.0000 2/22/03 $ 80,855
100,000 .09 49.3750 1/28/08 913,930
19,842 .02 54.1250 2/22/03 75,497
109,944 .10 61.2500 11/02/02 429,495
53,687 .05 61.2500 5/02/03 209,728
45,849 .04 61.6250 11/02/02 179,054
16,582 .01 61.6250 2/22/03 64,757
22,663 .02 61.6250 5/02/03 88,505
29,274 .03 61.6250 11/26/04 114,323
34,092 .03 61.6250 12/14/05 133,139
13,553 .01 61.6250 11/01/06 52,928
89,050 .08 69.2500 11/02/02 396,060
29,665 .03 69.2500 2/22/03 131,939
41,817 .04 69.2500 5/02/03 185,986
12,304 .01 69.2500 11/26/04 54,724
19,786 .02 69.0000 2/22/03 88,100
17,868 .02 46.6250 11/26/04 66,385
15,513 .01 47.0000 11/01/06 56,984
500,000 .44 47.0000 11/02/08 4,837,194
20,689 .02 43.3750 12/14/05 71,604
Sub-Total.............................. 615,349 600,000 .56 .53
Total.................................. 1,215,349 1.09 8,231,187
Jay S. Fishman......................... 7,413 .01 48.0000 2/26/04 24,281
50,000 .04 49.3750 1/28/08 456,965
6,255 .01 55.7500 2/26/04 23,794
3,068 .00 62.0000 4/25/02 12,363
21,123 .02 67.2500 6/1/99 94,280
10,357 .01 67.2500 4/27/01 46,227
4,745 .00 67.2500 4/25/02 21,179
1,439 .00 67.2500 5/22/02 6,423
10,551 .01 67.2500 2/26/04 47,093
1,882 .00 61.6250 5/22/02 7,258
26,449 .02 61.6250 12/14/05 101,997
7,292 .01 62.0625 6/1/99 28,207
8,195 .01 62.0625 4/27/01 31,700
6,238 .01 62.0625 4/25/02 24,130
5,822 .01 62.0625 5/22/02 22,521
6,314 .01 66.5000 2/26/04 26,546
300,000 .26 47.0000 11/2/08 2,902,316
16,516 .01 43.3750 12/14/05 56,721
Sub-Total.............................. 143,659 350,000 .14 .30
Total.................................. 493,659 0.44 3,934,001
Charles J. Clarke...................... 8,361 .01 64.7500 2/8/00 42,792
4,125 .00 64.7500 1/10/01 21,112
5,796 .01 64.7500 2/02/02 29,665
24,563 .02 64.7500 2/13/02 125,716
20,373 .02 64.7500 1/7/03 104,271
23,345 .02 64.7500 2/26/04 119,482
40,000 .03 47.0000 11/2/08 464,370
Sub-Total.............................. 86,563 40,000 .08 .03
Total.................................. 126,563 0.11 907,408
William Hannon......................... 12,258 .01 48.0000 2/24/06 48,180
14,214 .01 66.5000 2/24/06 71,686
45,000 .04 47.0000 11/2/08 522,417
Sub-Total.............................. 26,472 45,000 .02 .04
Total.................................. 71,472 0.06 642,283
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
16
<PAGE>
- ------------------------------
(A) The option price of each option granted under the TRV Incentive Plan is not
less than the fair market value of the Citigroup Common Stock subject to the
option, determined in good faith by the Citigroup Committee. Under current
rules established by the Citigroup Committee, fair market value is the
closing sale price of Citigroup 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 Citigroup Committee has discretion to
establish a different vesting schedule for options granted under the TRV
Incentive Plan. Participants are entitled to tender previously owned shares
of Citigroup Common Stock to pay the exercise price of an option and may
direct the Company to withhold or sell shares of Citigroup Common Stock
otherwise issuable upon an option exercise to cover in whole or in part the
tax liability associated with such exercise.
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
and/or elect to have shares withheld or sold to cover the associated tax
liability may be eligible to receive a reload option covering the same
number of shares as are tendered and/or used for such purposes. Under the
TRV Incentive Plan, if a participant elects to receive a reload option, the
shares of Citigroup Common Stock such participant receives upon exercise of
the underlying option will be subject to restrictions on transferability for
two 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
Citigroup Common Stock on the date of exercise must equal or exceed the
minimum market price level established by the Citigroup Committee from time
to time (the "Market Price Requirement"). The Citigroup 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 Citigroup 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 Citigroup 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,
but will not be exercisable until six months after the date of grant, unless
the Citigroup 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
Citigroup'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
Citigroup Common Stock underlying options exercised during 1998 and states the
value at year-end of exercisable and unexercisable options remaining
outstanding. The "Value Realized" column reflects the difference between the
market price at the time of exercise and the market price at the time 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 Citigroup
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. In addition, the "Value Realized" numbers do
not necessarily reflect what the individual might receive, should he or she
choose to sell the shares of Citigroup 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 market price on the exercise date of the option.
17
<PAGE>
AGGREGATED OPTION EXERCISES IN 1998
AND
1998 YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
CITIGROUP OPTIONS AT IN THE MONEY CITIGROUP
SHARES 1998 YEAR-END OPTIONS
ACQUIRED ON VALUE (NUMBER OF SHARES) AT 1998 YEAR-END($)(C)
EXERCISE REALIZED($) --------------------------- ---------------------------
NAME (A) ($)(B) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert I. Lipp.......................... 751,826 $14,956,620 345,487 996,692 $0 $6,015,137
Jay S. Fishman.......................... 172,750 3,081,750 113,416 432,830 0 2,884,882
Charles J. Clarke....................... 106,010 2,285,705 86,563 52,000 0 545,250
William Hannon.......................... 36,258 999,196 0 131,214 0 2,216,437
Stanton F. Long......................... 24,000 842,000 0 96,000 0 1,490,000
</TABLE>
- ------------------------
(A) This column reflects the number of shares of Citigroup Common Stock
underlying options exercised in 1998 by the named executive officers. The
actual number of shares of Citigroup Common Stock received by each of these
individuals from options exercised in 1998 (net of shares surrendered to
cover the exercise price and/or surrendered or withheld to cover the
exercise price and tax liabilities) was: Mr. Clarke, 19,440 shares; Mr.
Fishman, 29,086 shares; Mr. Hannon, 9,786 shares; Mr. Lipp, 136,474 shares;
and Mr. Long, 7,295 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 at the time of
grant, which establishes the exercise price for option exercise. Messrs.
Fishman and Lipp have made the Stock Ownership Commitment (as described
above) pursuant to which such executives commit to hold at least 75% of
their Citigroup stock while they continue to be members of senior management
or the Planning Groups of certain business units of Citigroup.
(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, 1998. The Peer Index is American International Group,
Inc. and the companies that comprise the S&P Property and Casualty Insurance
Index: The Allstate Corporation, The Chubb Corporation, Cincinnati Financial
Corporation, Loews Corporation, The Progressive Corporation, SAFECO Corporation,
and The St. Paul Companies, Inc. In prior years the Company included CNA
Financial Corp. in its Peer Index; however, because Loews Corporation (the
holder of 80% of CNA Financial Corp.) is now included in the S&P Property and
Casualty Index, the addition of CNA Financial Corp. to the Index would be
duplicative. 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.
18
<PAGE>
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.
TRAVELERS PROPERTY CASUALTY CORP.
COMPARISON OF CUMULATIVE TOTAL RETURN FOR THE PERIOD
COMMENCING APRIL 22, 1996 THROUGH DECEMBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRAVELERS PROPERTY CASUALTY
CORP. S&P 500 PEERS INDEX
<S> <C> <C> <C>
04/22/1996 100 100 100
12/31/1996 142.24 115.45 123.04
12/31/1997 178.31 153.93 185.17
12/31/1998 126.94 197.92 205.16
</TABLE>
<TABLE>
<CAPTION>
APRIL 22,
1996 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Travelers Property Casualty Corp......... 100.00 142.24 178.31 126.94
S&P...................................... 100.00 115.45 153.93 197.92
Peer Index............................... 100.00 123.04 185.17 205.16
</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 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 $75,000, payable either 100% in
shares of Class A Common Stock or up to 50% of such retainer in cash and the
remainder in shares of Class A Common Stock. Receipt of the Common Stock may be
deferred at the election of a director. Directors receive no additional
compensation for participation on committees of the Board. Additional
compensation, if any, for special assignments undertaken by directors will be
determined on a case by case basis, but no such additional compensation was paid
to any director in 1998. Directors who are employees of the Company or its
affiliates do not receive any compensation for their services as directors.
19
<PAGE>
RETIREMENT PLANS
All employees of the Company are eligible to participate in The Citigroup
Inc. Pension Plan (the "Citigroup Retirement Plan") on the later of attaining
age 21 or completion of one year of service. Benefits under the Citigroup
Retirement Plan vest after five years of service with Citigroup 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.
When accrued as a single sum payment option, benefits accrue for the first
five years of covered service at an annual rate varying between .75% and 7.0% of
the participant's qualifying compensation, dependent upon the participant's age
and years of service. Qualifying compensation generally includes (with limited
exceptions), a participant's total pay. The Code imposed a ceiling of $160,000
for 1998 (subject to adjustment by the Internal Revenue Service) on the amount
of compensation that may be considered "qualifying compensation" under the
Citigroup 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 Citigroup Retirement Plan.
The statutory maximum retirement benefit that may be paid to any one
individual by a tax qualified defined benefit pension plan in 1998 is $130,000
annually. Years of service credited under the Citigroup Retirement Plan to date
for Messrs. Fishman, Hannon, Lipp and Long are as follows: Mr. Fishman, 9 years;
Mr. Hannon, 2 years; Mr. Lipp, 12 years; and Mr. Long, 2 years.
The Company and certain Company subsidiaries provide certain pension
benefits, in addition to the statutory maximum benefit payable under tax
qualified pension plans, under non-funded, non-qualified retirement benefit
equalization plans ("RBEPs"). The benefits payable under RBEPs are unfunded, and
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 Citigroup Retirement Plan,
thereby limiting benefits payable under the RBEPs to all participants. No
benefits were accrued in 1998 under any of the RBEPs other than for Messrs.
Hannon and Long.
Effective at the end of 1993, the Committee froze benefits payable under the
Travelers Group Supplemental Retirement Plan ("SERP") covering supplemental
retirement benefits to designated senior executives of Citigroup and its
subsidiaries. Messrs. Fishman and Lipp are SERP participants. The maximum
benefit payable under SERP is also reduced by any benefits payable under the
Citigroup Retirement Plan (or its predecessor plans, if applicable), under any
applicable RBEP, under any other Citigroup 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 Citigroup for the
Covered Employees using the applicable formulas under the Citigroup Retirement
Plan, the RBEP and the frozen SERP Plan and assuming their retirement at age 65,
would be as follows: Mr. Fishman, $104,082; Mr. Hannon, $42,551; Mr. Lipp,
$289,863; and Mr. Long, $22,118. These estimates were calculated assuming that
the interest accrual was 8% for 1989 through 1991, 6% for 1992 through 1993,
5.5% for 1994, 7% for 1995 and 5.5% thereafter until the participant retires at
the age of 65. In calculating these estimates it was also assumed
20
<PAGE>
that the following remain unchanged: current salary of the participant, the 1998
dollar ceiling on qualifying compensation of $160,000, the 1998 Social Security
wage base and the current regulatory formula to convert lump-sum payments to
annual annuity figures.
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.
<TABLE>
<CAPTION>
YEARS OF CONTINUOUS SERVICE TO NORMAL
RETIREMENT DATE(2)(3)(4)
----------------------------------------------
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,
1999, Mr. Clarke had 41 years of credited service.
(3) As a result of limitations under the Code, a portion of these amounts may be
paid under a supplemental benefit plan outside the qualified benefit plan.
(4) Amounts include estimated Social Security benefits, which will be deducted
in calculating benefits.
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 $483,756. His actual pension benefit will be based on the
highest benefit amount available to him.
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.
21
<PAGE>
EMPLOYMENT PROTECTION AGREEMENTS
Mr. Long is party to a letter agreement dated November 17, 1996, providing
for his employment as Chairman of the Company's Claim Operations. The agreement
provides that Mr. Long will receive a base salary of at least $450,000 with
respect to 1998, and, with respect to 1999 and 2000, a base salary of $500,000.
The agreement provides for Mr. Long's participation in the CAP Plan for 1997, a
one-time grant of a stock option for Citigroup Common Stock and certain other
benefits. The agreement addresses the percentage of Mr. Long's professional time
that must be dedicated to Company matters. Mr. Long is entitled to severance
payments of $1.5 million to be paid if his employment is terminated on or prior
to December 31, 2000 for reasons which vary depending on the year of
termination. 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.
RELATIONSHIPS WITH TIGI AND CITIGROUP
The Company has engaged in certain transactions and is a party to certain
arrangements with TIGI and Citigroup and certain of their affiliates.
INTERCOMPANY AGREEMENT
The Company and Citigroup 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 Citigroup
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
actions by the Company and its Subsidiaries. Citigroup 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 Citigroup and its Subsidiaries.
CITIGROUP 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 Citigroup 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
22
<PAGE>
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 Primerica Financial Services, Inc., and to
refrain from using like distribution channels, and Citigroup 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 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 Citigroup for federal income and
certain state tax purposes. Citigroup, 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.
OTHER INTERCOMPANY AGREEMENTS
The Company participates with Citigroup and TIGI in certain limited group
purchasing arrangements, including telecommunications services. Citigroup
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 Citigroup 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.
23
<PAGE>
During 1998, the Company paid to Citigroup and its subsidiaries
approximately $31 million, and Citigroup and its subsidiaries paid to the
Company approximately $33 million, in respect of services provided pursuant to
the various intercompany agreements and arrangements herein described.
The Company and Citigroup 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
Salomon Smith Barney Inc., an affiliate of the Company, acted as a manager
in a secondary offering of Class A Common Stock in May 1998.
ITEM 2:
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG LLP (formerly KPMG Peat Marwick
LLP) ("KPMG") as the independent auditors of the Company for 1999. KPMG has
served as the independent auditors of the Company and its predecessors since
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 LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1999.
Assuming the presence of a quorum, the affirmative vote of a majority of the
votes cast by the holders of shares of Common Stock present and entitled to vote
on this item at the Annual Meeting, voting as a single class, is required to
ratify the selection of the Company's auditors. Under applicable Delaware law,
in determining whether this item has received the requisite number of
affirmative votes, abstentions will have the same effect as a vote against this
item and broker nonvotes, if any, will be disregarded and have no effect on the
outcome of such vote.
ITEM 3:
APPROVAL AND ADOPTION OF TRAVELERS PROPERTY CASUALTY CORP.
1999 STOCK INCENTIVE PLAN
On January 19, 1999, the Board of Directors of the Company unanimously
approved the 1999 Incentive Plan providing for the issuance of a maximum of four
(4) million shares of Common Stock in connection with the grant of options
and/or other stock-based or stock-denominated awards and recommended that the
1999 Incentive Plan be submitted to stockholders for approval at the Annual
Meeting. The 1999 Incentive Plan, if approved, will become effective on April
30, 1999. The following summary is qualified in its entirety by reference to the
complete text of the 1999 Incentive Plan, which is attached hereto as Annex B.
Capitalized terms used but not defined herein shall have the meanings set forth
in the 1999 Incentive Plan.
The Company has had a long-standing policy of encouraging employees at all
levels to become stockholders of the Company in order to share with other
stockholders both the perspective of, and the rewards experienced by,
non-employee owners of the Company. This policy has been effected in part
through the CAP Plan and the Travelers Property Casualty Corp. Stock Purchase
Plan. Employees of the Company are eligible and have received grants of options
to purchase Citigroup Common Stock under the TRV Incentive Plan and the
Executive Option Plan. The Company believes that adoption of the 1999 Incentive
Plan will enable the Company to continue to provide an effective source of
incentives to reward
24
<PAGE>
the efforts of highly motivated employees and attract new personnel by granting
options to purchase stock of the Company as well as other incentive awards which
are payable in or denominated in Company stock.
The four (4) million shares available for grant under the 1999 Incentive
Plan will be in addition to the remaining allocation of shares under all
existing plans of the Company, including, but not limited to the CAP Plan.
The 1999 Incentive Plan includes the following features:
- The 1999 Incentive Plan provides for the grant of non-qualified stock
options, reload options, incentive stock options, stock appreciation
rights, restricted stock and other stock-based or stock-denominated awards
to employees of the Company and its subsidiaries.
- The 1999 Incentive Plan will become effective on April 30, 1999 and have a
ten-year term.
- The Committee will have the authority to determine the type of awards to
be granted and the participation level of each award recipient.
- The Committee will determine the vesting and exercisability provisions and
all other features of awards and will have the discretion to accelerate,
waive or extend vesting.
- Options will be granted with an exercise price which shall not be less
than the fair market value of the Common Stock.
- The 1999 Incentive Plan sets the maximum number of options that may be
granted to any one employee during the term of the Plan.
- Unless the Committee determines otherwise, restricted stock awards will
have a minimum one-year vesting requirement.
- If a Participant is no longer employed by the Company and engages in
conduct detrimental to the Company, he or she will forfeit his or her
awards.
- The 1999 Incentive Plan contains a prohibition against repricing of
options.
Awards may be granted by the Committee in its discretion, and therefore
future benefits to be allocated to any individual or group of individuals under
the 1999 Incentive Plan are not presently determinable.
DESCRIPTION OF THE TRAVELERS PROPERTY CASUALTY CORP. 1999 STOCK INCENTIVE PLAN
AWARDS. The 1999 Incentive Plan provides for the issuance of stock-based
and stock-denominated awards to officers and other employees and agents of the
Company and its participating subsidiaries, including nonqualified stock
options, reload options, incentive stock options ("ISOs"), stock appreciation
rights ("SARs"), restricted stock, deferred stock, stock units and other
stock-based or stock-denominated awards. Participants will not be required to
make any payments to the Company or a Subsidiary as consideration for the
granting of an award.
PLAN ADMINISTRATION. Awards will be granted by the Committee. The number of
employees selected to receive awards will likely vary from year to year. No
awards will be granted from the 1999 Incentive Plan until it has been approved
by stockholders and has become effective.
COMMITTEE AUTHORITY. The Committee will have the authority, in its
discretion, to determine when awards will be granted, to select the employees to
whom awards will be made under the 1999 Incentive Plan and to determine the type
and size of each award, the exercise price for each award, the fair market value
of the Common Stock and whether and under what circumstances such fair market
value should be discounted and all other provisions relating to payment of the
exercise price and exercisability of options, ISOs and SARs, the terms and
conditions for vesting, cancellation and forfeiture of awards and the other
25
<PAGE>
features applicable to each award or type of award granted under the 1999 Stock
Incentive Plan. Subject to certain limitations set forth below, the Committee
will also have the authority to modify, waive, extend or accelerate the terms
and conditions for vesting, exercisability, cancellation and forfeiture of
awards, to modify or cancel awards and to determine whether the Common Stock
issued pursuant to awards should be restricted in any manner, and the nature,
terms and conditions of any such restrictions.
SHARES AVAILABLE FOR ISSUANCE. The maximum number of shares of Common Stock
that may be issued to Participants under the 1999 Incentive Plan is four (4)
million. The market price of the Common Stock on March 18, 1999 was $35.875.
Common Stock issued pursuant to the 1999 Incentive Plan may consist of shares
that are authorized but unissued, or previously issued shares reacquired by the
Company, or both. If an award is forfeited, canceled, terminated or expires
prior to the issuance of shares to the Participant, the shares of Common Stock
underlying such award will be available for future grants under the 1999
Incentive Plan. Previously owned shares that are tendered by a Participant to
pay the exercise price of an award and shares used to pay withholding taxes will
not be counted towards the maximum number of shares available for issuance under
the Plan.
PRIOR PLANS. The share allocation set forth above for the 1999 Incentive
Plan is in addition to the number of shares, if any, which remain available for
issuance under the existing stock plans of the Company including, without
limitation, the CAP Plan.
MAXIMUM NUMBER OF SHARES THAT MAY BE GRANTED TO ANY ONE EMPLOYEE. Effective
as of April 30, 1999 and during the term of the 1999 Incentive Plan, the
aggregate number of shares of Common Stock that may be granted to any one
employee pursuant to nonqualified stock options, ISOs and/or SARs granted under
the 1999 Incentive Plan (including reload options) will not exceed four (4)
million shares (the "Maximum Allocation").
ADJUSTMENTS. The maximum number of shares available for issuance under the
1999 Incentive Plan, the Maximum Allocation, the maximum number of shares which
may be granted as ISOs, the number of shares of Common Stock covered by
outstanding awards and the exercise price applicable to outstanding options,
ISOs and SARs may be adjusted by the Committee, if the Committee determines that
any stock split, stock dividend, distribution, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar event equitably requires such an adjustment. However, the Committee may
not amend an outstanding Award for the sole purpose of reducing the exercise
price thereunder.
EXERCISE PRICE. The Committee will determine the exercise price applicable
to each option, ISO and SAR, which will not be less than the fair market value
of the Common Stock at the time of the grant.
PAYMENT OF EXERCISE PRICE. Upon the exercise of an option or ISO, payment
of the exercise price may be made in cash or, if permitted by the Committee, by
tendering Common Stock owned by the Participant (or the Participant and his or
her spouse jointly) and acquired at least six (6) months prior to such tender,
having a fair market value equal to the exercise price, by a combination of cash
and Common Stock or by authorizing the Company to sell, on behalf of the
Participant, the number of shares otherwise issuable upon exercise, with the
sale proceeds applied towards the exercise price. If shares of Common Stock are
so used, the Participant may be eligible for the grant of a reload option, as
described below.
RELOAD OPTIONS. A reload option gives the Participant the right to purchase
a number of shares of Common Stock equal to the number of shares of Common Stock
surrendered to pay the exercise price and used to pay the withholding taxes
applicable to an option exercise. Reload options do not increase the net equity
position of a Participant. Their purpose is to facilitate continued stock
ownership in the Company by Participants. Upon the exercise of an option granted
under the 1999 Incentive Plan or under any other stock plan of the Company which
may be designated by the Committee from time to time (including but not limited
to the CAP Plan and any other prior or successor plans assumed or adopted by the
Company)
26
<PAGE>
the Participant, at the discretion of the Committee, may receive a reload option
on the terms, conditions and limitations determined by the Committee, from time
to time.
EXERCISE PRICE AND FEATURES OF RELOAD OPTIONS. The Committee will determine
the exercise price of reload options, provided that the exercise price will not
be less than the fair market value of the Common Stock at the time of grant.
Reload options will be subject to such other terms, conditions and limitations
as the Committee may determine from time to time regarding vesting,
exercisability, cancellation and forfeiture.
CHANGE OF CONTROL. Upon a "Change of Control," as defined in the 1999
Incentive Plan and as determined by the Committee, the Committee, may, in its
discretion, accelerate, purchase, adjust or modify awards or cause the awards to
be assumed by the surviving corporation in a corporate transaction.
ADDITIONAL FORFEITURE PROVISIONS. Awards granted under the 1999 Incentive
Plan are subject to forfeiture if, after a termination of employment, the
Participant engages in certain activities which are materially injurious to or
in competition with the Company.
TRANSFERABILITY. The Committee may permit Participants to transfer certain
awards and, during any period of restriction on transferability, shares issued
as a result of an option exercise, one time to an immediate family member or a
trust for the benefit of immediate family members; otherwise, awards granted
under the 1999 Incentive Plan and sale restricted shares will not be
transferable other than by will or the laws of descent and distribution.
DEFERRALS. The Committee may postpone the exercise of options, ISOs and
SARs, or the issuance or delivery of Common Stock or cash pursuant to any award
for such periods and upon such terms and conditions as the Committee determines.
In addition, the Committee may determine that all or a portion of a payment to a
Participant, whether in cash, shares of Common Stock or a combination thereof,
will be deferred in order to prevent the Company or any Subsidiary from being
denied a Federal income tax deduction with respect to an award granted under the
1999 Incentive Plan.
AMENDMENT AND TERMINATION. The 1999 Incentive Plan may be amended or
terminated by the Committee at any time, without the approval of stockholders or
Participants, provided that no such action may, without a Participant's written
consent, adversely affect any previously granted award, and no amendment that
would require stockholder approval under applicable law or under the Code,
including but not limited to Section 162(m), may become effective without
stockholder approval. No grants may be made under the 1999 Incentive Plan after
a date which is ten (10) years following the effective date of such plan, unless
the Plan has been terminated prior to such date.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal United States Federal
income tax consequences of transactions under the 1999 Incentive Plan, based on
current United States Federal income tax laws. This summary is not intended to
be exhaustive, does not constitute tax advice and, among other things, does not
describe state, local or foreign tax consequences.
NON-QUALIFIED OPTIONS. No taxable income is realized by a Participant upon
the grant of an option (including a reload option). Upon the exercise of an
option, the Participant will recognize ordinary compensation income in an amount
equal to the excess, if any, of the fair market value of the shares of Common
Stock exercised over the aggregate option exercise price (the "Spread"), even
though such Common Stock may be subject to a restriction on transferability or
may be subsequently forfeited, in limited circumstances, as more particularly
described in the 1999 Incentive Plan. Income and payroll taxes are required to
be withheld by the Participant's employer on the amount of ordinary income
resulting to the Participant from the exercise of an option. The Spread is
generally deductible by the Participant's
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employer for Federal income tax purposes, subject to the possible limitations on
deductibility of compensation paid to certain executives pursuant to Section
162(m) of the Code (See "Certain Limitations on Deductibility of Executive
Compensation"). The Participant's tax basis in shares of Common Stock acquired
by exercise of an option will be equal to the exercise price plus the amount
taxable as ordinary income to the Participant.
Upon a sale of the shares of Common Stock received by the Participant upon
exercise of the option, any gain or loss will generally be treated for Federal
income tax purposes as long-term or short-term capital gain or loss, depending
upon the holding period of such stock. The Participant's holding period for
shares acquired pursuant to the exercise of an option begins on the date of
exercise of such option. With respect to individuals, the adjusted net capital
gain is subject to a statutory maximum tax rate of twenty percent (20%) or ten
percent (10%) for taxpayers in the fifteen percent (15%) tax bracket. After the
year 2000, lower capital gains rates may apply.
If the Participant pays the exercise price in full or in part with shares of
previously acquired Common Stock, such exercise will not affect the tax
treatment described above. With respect to such exercise, no gain or loss
generally will be recognized to the Participant upon the surrender of the
previously acquired shares to the Company. The shares received upon exercise
which are equal in number to the previously acquired shares tendered will have
the same tax basis as the previously acquired shares surrendered to the Company,
and will have a holding period for determining capital gain or loss that
includes the holding period of the shares surrendered. The value of the
remaining shares received by the Participant will be taxable to the Participant
as compensation, even though such shares may be subject to limited restrictions.
The remaining shares will have a tax basis equal to the fair market value
recognized by the Participant as compensation income and the holding period will
commence on the exercise date. Shares tendered to pay applicable income and
payroll taxes arising from such exercise will generate taxable income or loss
equal to the difference between the tax basis of such shares and the amount of
income and payroll taxes satisfied with such shares. Such income or loss will be
treated as long-term or short-term capital gain or loss depending on the holding
period of the shares surrendered. Where the shares tendered to pay applicable
income and payroll taxes arising from such exercise generate a loss equal to the
difference between the tax basis of such shares and the amount of income and
payroll taxes satisfied with such shares, such loss may not be currently
recognizable if, within a period beginning thirty (30) days before the exercise
date and ending thirty (30) days after that date, the Participant acquires or
enters into a contract or option, including a reload option, to acquire
additional Common Stock.
STOCK APPRECIATION RIGHTS ("SAR"). Upon the exercise of a SAR, the
Participant will recognize compensation income, in an amount equal to the cash
received plus the fair market value of the Common Stock received from the
exercise. The Participant's tax basis in the shares of Common Stock received in
the exercise of the SAR will be equal to the compensation income recognized with
respect to the Common Stock. The Participant's holding period for shares
acquired pursuant to the exercise of a SAR begins on the exercise date. Income
and payroll taxes are required to be withheld on the amount of compensation
attributable to the exercise of the SAR, whether the income is paid in cash or
shares. Upon the exercise of a SAR, the Participant's employer will generally be
entitled to a deduction in the amount of the compensation income recognized by
the Participant.
INCENTIVE STOCK OPTIONS ("ISO"). No taxable income is realized by a
Participant upon the grant or exercise of an ISO. If shares of Common Stock are
issued to a Participant pursuant to the exercise of an ISO granted under the
1999 Incentive Plan and if no disqualifying disposition of such shares is made
by such Participant within two (2) years after the date of grant or within one
(1) year after the receipt of such shares by such Participant, then (a) upon the
sale of such shares, any amount realized in excess of the option exercise price
will be taxed to such Participant as a long-term capital gain and (b) no
deduction will be allowed to the Company. Additionally, the exercise of an ISO
will give rise to an item of tax preference that may result in alternative
minimum tax liability for the Participant.
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If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of either holding period described above, such
disposition would be a "disqualifying disposition," and generally (a) the
Participant will realize ordinary income in the year of disposition in an amount
equal to the excess, if any, of the fair market value of the shares on the date
of exercise (or, if less, the amount realized on the disposition of the shares)
over the option exercise price thereof, and (b) the Company will be entitled to
deduct such amount. Any other gain realized by the Participant on such
disposition will be taxed as short-term or long-term capital gain, and will not
result in any deduction to the Company. If a Participant pays the exercise price
in full or in part with previously acquired shares of Common Stock, the exchange
will not affect the tax treatment of the exercise. Upon such exchange, no gain
or loss generally will be recognized upon the delivery of the previously
acquired shares to the Company, and the shares issued in replacement of the
shares tendered to pay the exercise price will have the same basis and holding
period for capital gain purposes as the previously acquired shares. A
Participant, however, would not be able to utilize the holding period for the
previously acquired shares for purposes of satisfying the ISO statutory holding
period requirements. Additional shares of Common Stock will have a basis of zero
and a holding period that commences on the date the Common Stock is issued to
the Participant upon exercise of the ISO. If such an exercise is effected using
shares of Common Stock previously acquired through the exercise of an ISO, the
exchange of the previously acquired shares may be a disqualifying disposition of
such Common Stock if the holding periods discussed above have not been met.
If an ISO is exercised at a time when it no longer qualifies as an ISO, the
option will be treated as a nonqualified option. Subject to certain exceptions
for disability or death, an ISO generally will not be eligible for the Federal
income tax treatment described above if it is exercised more than three (3)
months following a termination of employment.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION. With
certain exceptions, Section 162(m) of the Code limits the deduction to either
the Company or the Participant's employer, as applicable, for compensation paid
to the Covered Employees in excess of $1 million dollars per executive per
taxable year. However, compensation paid to Covered Employees will not be
subject to such deduction limit if it is considered "qualified performance-based
compensation" (within the meaning of Section 162(m) of the Code). Compensation
to be paid to the Covered Employees under this Plan is intended to be qualified
performance-based compensation.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE TRAVELERS PROPERTY CASUALTY CORP. 1999 STOCK INCENTIVE PLAN.
Assuming the presence of a quorum, the affirmative vote of a majority of the
votes cast by the holders of shares of Common Stock present and entitled to vote
on this item at the Annual Meeting, voting as a single class, is required for
the approval and adoption of the Travelers Property Casualty Corp. 1999 Stock
Incentive Plan. Under applicable Delaware law, in determining whether this item
has received the requisite number of affirmative votes, abstentions will have
the same effect as a vote against this item and broker nonvotes, if any, will be
disregarded and have no effect on the outcome of such vote.
ITEM 4:
APPROVAL AND ADOPTION OF AMENDMENT TO
THE TRAVELERS PROPERTY CASUALTY CORP. 1996 EXECUTIVE OPTION PLAN
On April 23, 1997, the stockholders of the Company approved the adoption of
the Executive Option Plan. On March 16, 1999 the Board of Directors unanimously
approved the adoption of an Amendment to the Executive Option Plan and
subsequently recommended that such Amendment be submitted to stockholders for
approval at the Annual Meeting. The following summary is qualified in its
entirety by reference to the Executive Option Plan, as amended by the Amendment.
The complete text of the
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Amendment is attached hereto as Annex C. Capitalized terms used, but not defined
herein, shall have the meanings set forth in the Executive Option Plan and/or
the Amendment.
The Executive Option Plan permits the Company to reward the efforts of the
Company's executive officers and to attract new personnel by providing
incentives in the form of options to purchase shares of Citigroup Common Stock
to executive officers of the Company. Pursuant to the terms of the Executive
Option Plan, options to purchase shares of Citigroup Common Stock have been
granted to officers of the Company under the TRV Incentive Plan.
The Board of Directors of Citigroup has approved the adoption of the
Citigroup 1999 Stock Incentive Plan (the "Citigroup 1999 Incentive Plan"), which
will be presented to the stockholders of Citigroup for approval and adoption at
the Citigroup annual meeting on April 20, 1999. The Amendment to the Executive
Option Plan will permit the Company to grant options to purchase Citigroup
Common Stock under the Citigroup 1999 Incentive Plan, if such plan is approved
and adopted by the stockholders of Citigroup, and any successor or replacement
plan. The Amendment also incorporates certain conforming amendments, consistent
with the corresponding provisions of the Citigroup 1999 Incentive Plan.
The Executive Option Plan is intended to address certain limitations on the
deductibility of executive compensation under Section 162(m) of the Code (the
"Section 162(m) Limitations") which limits the deductibility of certain
compensation in excess of $1 million per year paid by a publicly traded
corporation to Covered Employees (including any deduction with respect to the
exercise of a nonqualified option or reload stock option). However, compensation
paid to Covered Employees will not be subject to the Section 162(m) Limitations
if it is considered "qualified performance-based compensation." Under the
regulations to Section 162(m), four (4) tests (the "Qualifying Tests") must be
met for compensation to qualify as performance-based compensation. Compensation
will not be subject to the deduction limit if (i) it is payable on account of
the attainment of one or more pre-established, objective performance goals; (ii)
the performance goals are established by a compensation committee of the board
of directors that is comprised solely of two or more outside directors; (iii)
the material terms of the compensation and the performance goals are disclosed
to and approved by stockholders before payment; and (iv) the compensation
committee certifies that the performance goals have been satisfied before
payment. Nonqualified options and reload options are, by virtue of their terms,
and in accordance with certain written requirements of Section 162(m) of the
Code which are contained within the Executive Option Plan, intended to be
qualified performance-based compensation.
Options will be granted by the Committee in its discretion, and therefore
future benefits to be allocated to any individual or group of individuals under
the Executive Option Plan are not determinable. All actions of the Committee in
connection with awards of options pursuant to the Executive Option Plan must be
authorized by the Citigroup Committee or the Citigroup Subcommittee, as the case
may be, and are subject to the limitations set forth in the plan under which
such options will be granted.
DESCRIPTION OF THE TRAVELERS PROPERTY CASUALTY CORP. EXECUTIVE OPTION PLAN.
The following is a description of certain of the provisions of the Executive
Option Plan, as amended by the Amendment.
ELIGIBILITY. Executive officers of the Company who hold the office of
vice-president or higher, and/or who are Section 16(a) Persons and who
contribute significantly to the long-term performance and growth of the Company
and Executive officers of subsidiaries of the Company who hold the office of
Senior Vice President or higher and who contribute significantly to the
long-term performance and growth of the Company or its subsidiaries are eligible
to receive Awards under the Executive Option Plan. The number of employees
selected to receive options will likely vary from year to year.
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AWARDS. The Executive Option Plan provides for the issuance of options to
purchase shares of Citigroup Common Stock to Executive officers by the Committee
as authorized by the Citigroup Subcommittee. Awards granted under the Executive
Option Plan are governed by the terms of the TRV Incentive Plan or, assuming its
adoption and approval, the Citigroup 1999 Incentive Plan and/or any replacement
or successor plan adopted by Citigroup (the "Citigroup Option Plans").
GRANTING OF OPTIONS; ADMINISTRATION. The Committee has the power to
determine, among other things, the type, Exercise Price, number and
transferability of Options subject to any Award, to determine the terms of
vesting, exercisability, timing and payment of any Award, to establish
objectives and conditions for earning Awards and to determine whether such
objectives or conditions have been met. At the discretion of the Committee, an
Executive Officer may also be eligible to receive a Reload Option in connection
with an Option exercise.
COMMITTEE AUTHORITY. The Committee may not delegate its authority over the
administration of the Executive Option Plan.
MAXIMUM NUMBER OF SHARES THAT MAY BE GRANTED TO ANY ONE EXECUTIVE
OFFICER. The aggregate number of shares of Citigroup Common Stock that may be
granted to any one Executive Officer 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 the applicable Citigroup Option Plan in the event of any stock
split, stock dividend, merger, consolidation, reorganization, combination or
exchange of shares or other similar event.
INCOME AND WITHHOLDING TAXES. The Company and its Subsidiaries shall have
the right to require payment of, or may deduct from any payment made under the
Executive Option Plan, or may permit shares to be tendered or sold, including
shares of Common Stock delivered or vested in connection with an Award, in an
amount sufficient to cover withholding of any federal, state, local, foreign or
other governmental taxes or charges required by law or such greater amount of
withholding as the Committee shall determine from time to time and to take such
other action as may be necessary to satisfy any such withholding obligations.
The value of any shares allowed to be withheld or tendered for tax withholding
may not exceed the amount allowed consistent with fixed plan accounting in
accordance with generally accepted accounting principles. It shall be a
condition to the obligation of Citigroup to issue Common Stock upon the exercise
of an Option that the Executive Officer pay to the Company, on demand, such
amount as may be requested by the Company for the purpose of satisfying any tax
withholding liability. If the amount is not paid, Citigroup may refuse to issue
shares.
TERMINATION; AMENDMENT. The Executive Option Plan will terminate on the
earlier to occur of (a) a resolution of the Board terminating the Executive
Option Plan or (b) April 23, 2006. The Executive Option Plan may be amended or
suspended from time to time by the Board, provided that no amendment may be made
without the approval of the Board of Directors of Citigroup, and no amendment
may be made without stockholder approval, if approval by the Company's
stockholders is required under applicable law or under the Code, including, but
not limited to, Section 162(m). No termination, amendment or suspension of the
Executive Option Plan may adversely affect any right of any Executive Officer
with respect to any Award theretofore granted, as determined by the Committee,
without such Executive Officer's written consent.
DEFERRALS. If authorized by the Citigroup Committee, the Committee may
postpone the exercising of Awards, the issuance or delivery of Citigroup Common
Stock under any Award or any action permitted under the Executive Option Plan to
prevent the Company or any Subsidiary from being denied a Federal income tax
deduction with respect to any Award other than an Incentive Stock Option. In
addition, the Committee, as authorized by the Citigroup Committee, may determine
that all or a portion of a payment to an Executive Officer, whether to be made
in cash, shares of Citigroup Common Stock or a combination
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thereof, will be deferred for such periods and upon such terms and conditions as
the Committee may determine, as authorized by the Citigroup Committee.
EFFECTIVE DATE OF AMENDMENT. The Amendment to the Executive Option Plan
will take effect as of April 30, 1999, assuming receipt of stockholder approval
at the Annual Meeting.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE AMENDMENT TO THE TRAVELERS PROPERTY CASUALTY CORP. 1996
EXECUTIVE OPTION PLAN. Assuming the presence of a quorum, the affirmative vote
of a majority of the votes cast by the holders of shares of Common Stock present
and entitled to vote on this item at the Annual Meeting, voting as a single
class, is required for the approval and adoption of the Amendment to the
Travelers Property Casualty Corp. 1996 Executive Option Plan. Under applicable
Delaware law, in determining whether this item has received the requisite number
of affirmative votes, abstentions will have the same effect as a vote against
this item and broker nonvotes, if any, will be disregarded and have no effect on
the outcome of such vote.
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, 1999.
OTHER MATTERS
The Board of Directors and management of the Company know of no other
matters to be brought before the Annual Meeting. If other matters should arise
at the Annual Meeting, shares represented by proxies will be voted at the
discretion of the proxy holder.
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ANNEX A
TRAVELERS GROUP AMENDED AND RESTATED EXECUTIVE
PERFORMANCE COMPENSATION PLAN
The following description of the Travelers Group Amended and Restated
Executive Performance Compensation Plan (the "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 Plan establishes certain performance criteria for determining the
maximum amount of bonus compensation available, including that portion of
bonuses payable in the form of restricted Citigroup Common Stock under the TRV
CAP Plan. The Citigroup Subcommittee is responsible for determining whether such
goals have been met. The bonus compensation Mr. Lipp received pursuant to the
Plan is inclusive of bonus compensation paid to him for services rendered to
each of the Company and Citigroup.
The creation of a bonus pool in which the Citigroup Covered Employees
participate is contingent upon Citigroup achieving at least a 10% Return on
Equity, as defined in the Plan. The amount of the bonus pool is calculated based
upon the extent to which the Return on Equity exceeds the 10% minimum threshold.
The 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 Citigroup
Subcommittee nevertheless retains discretion to reduce or eliminate payments
under the Plan for any of the participating executive officers to take into
account subjective factors, including an individual's performance or other
relevant criteria.
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ANNEX B
TRAVELERS PROPERTY CASUALTY CORP.
1999 STOCK INCENTIVE PLAN
(EFFECTIVE APRIL 30, 1999)
1. PURPOSE
The purposes of the Travelers Property Casualty Corp. 1999 Stock Incentive
Plan (the "Plan") are to (i) attract and retain employees by providing
compensation opportunities that are competitive with other companies; (ii)
provide incentives to those employees who contribute significantly to the
long-term performance and growth of the Company and its Subsidiaries and (iii)
align employees' long-term financial interests with those of the Company's
shareholders.
2. EFFECTIVE DATE
The Plan will become effective April 30, 1999, subject to approval by the
stockholders of the Company.
3. DEFINITIONS
"AWARD" shall mean an Option, SAR or other form of Stock Award granted under
the Plan.
"AWARD AGREEMENT" shall mean the document evidencing an Award granted under
the Plan.
"BOARD" shall mean the Board of Directors of the Company.
"CHANGE OF CONTROL" shall have the meaning set forth in Section 13.
"COMMON STOCK" shall mean the Class A common stock of the Company, par value
$.01 per share.
"COVERED EMPLOYEE" shall mean "covered employee" as such term is defined in
Section 162(m) of the Code.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, including
any rules and regulations promulgated thereunder.
"COMPANY" shall mean Travelers Property Casualty Corp., a Delaware
corporation.
"COMMITTEE" shall mean, with respect to Section 16(a) Officers and Covered
Employees, the Incentive Compensation Subcommittee, and with respect to all
other Participants, the Nominations, Compensation and Corporate Governance
Committee of the Board or the Incentive Compensation Subcommittee, as the
case may be.
"DEFERRED STOCK" shall mean an Award payable in shares of Common Stock at
the end of a specified deferral period that is subject to the terms,
conditions and limitations described or referred to in Section 7(c)(iv).
"EMPLOYEE" shall have the meaning set forth in General Instruction A to the
Registration Statement on Form S-8 promulgated under the Securities Act of
1933, as amended, or any successor form or statute, as determined by the
Committee.
"FAIR MARKET VALUE" shall mean the fair market value of the Common Stock, as
determined by the Committee.
"INCENTIVE COMPENSATION SUBCOMMITTEE" shall mean the subcommittee of the
Nominations, Compensation and Corporate Governance Committee, appointed by
the Nominations, Compensation and
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Corporate Governance Committee, the members of which subcommittee shall
satisfy the requirements of Rule 16b-3 under the 1934 Act and who also
qualify, and shall remain qualified as "outside directors" as defined in
Section 162(m) of the Code.
"ISO" shall mean an incentive stock option as defined in Section 422 of the
Code.
"OPTION" shall mean the right to purchase a specified number of shares of
Common Stock at a stated exercise price for a specified period of time. The
term "Option" as used in this Plan, shall include the terms "Reload Option"
and "ISO".
"PARTICIPANT" shall mean an Employee who has been granted an Award under the
Plan.
"PLAN YEAR" shall mean a twelve-month period beginning with January 1 of
each year, or any other twelve-month period (or, with respect to the year in
which the Plan is adopted or terminates, such shorter period) as determined
by the Committee to be a Plan Year.
"RELOAD OPTION" shall have the meaning set forth in Section 7(a)(ii).
"RESTRICTED STOCK" shall mean an Award of Common Stock that is subject to
the terms, conditions, restrictions and limitations described or referred to
in Section 7(c)(iii).
"SAR" shall mean a stock appreciation right that is subject to the terms,
conditions, restrictions and limitations described or referred to in Section
7(b).
"SECTION 16(A) OFFICER" shall mean an Employee who is subject to the
reporting requirements of Section 16(a) of the 1934 Act.
"STOCK AWARD" shall have the meaning set forth in Section 7(c)(i).
"STOCK UNIT" shall have the meaning set forth in Section 7(c)(v).
"SUBSIDIARY" shall mean any entity that is directly or indirectly controlled
by the Company or any entity, including an acquired entity, in which the
Company has a significant equity interest, as determined by the Committee,
in its discretion.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended,
including the rules and regulations promulgated thereunder and any successor
thereto.
4. THE COMMITTEE
(A) COMMITTEE AUTHORITY. The Committee shall have full and exclusive power
to administer and interpret the Plan, to grant Awards and to adopt such
administrative rules, regulations, procedures and guidelines governing the Plan
and the Awards as it may deem necessary in its discretion, from time to time.
The Committee's authority shall include, but not be limited to the authority to
(i) determine the type of Awards to be granted under the Plan; (ii) select Award
recipients and determine the extent of their participation; (iii) determine the
method or formula for establishing the fair market value of the Common Stock for
various purposes under the Plan; (iv) determine whether and under what
circumstances such fair market value may be discounted; and (v) establish all
other terms, conditions, restrictions and limitations applicable to Awards and
the shares of Common Stock issued pursuant to Awards, including, but not limited
to those relating to a Participant's retirement, death, disability, leave of
absence or termination of employment. The Committee may accelerate or defer the
vesting or payment of Awards, cancel or modify outstanding Awards, waive any
conditions or restrictions imposed with respect to Awards or the Common Stock
issued pursuant to Awards and make any and all other determinations which it
deems necessary with respect to the administration of the Plan, subject to the
limitations contained in Section 4(d) with respect to all Participants and
subject to the provisions of Section 162(m) of the Code with respect to Covered
Employees. The Committee's right to make any decision or determination under the
Plan shall be in its sole and absolute discretion.
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(B) ADMINISTRATION OF THE PLAN. The administration of the Plan shall be
managed by the Committee. The Committee shall have the power to prescribe and
modify, as necessary, the form of Award Agreement, to correct any defect, supply
any omission or clarify any inconsistency in the Plan and/or in any Award
Agreement and to take such actions and make such administrative determinations
that the Committee deems appropriate in its discretion. Any decision of the
Committee in the administration of the Plan, as described herein, shall be
final, binding and conclusive on all parties concerned, including the Company,
its stockholders and Subsidiaries and all Participants. The administration of
the Plan with respect to Section 16(a) Officers and Covered Employees, to the
extent required or appropriate under the 1934 Act and/or Section 162(m) of the
Code, shall be managed by the Incentive Compensation Subcommittee.
(C) DELEGATION OF AUTHORITY. The Committee may at any time delegate to one
or more officers or directors of the Company some or all of its authority over
the administration of the Plan, with respect to persons who are not Section
16(a) Officers or Covered Employees.
(D) PROHIBITION AGAINST REPRICING. In no event shall the Committee have the
right to amend an outstanding Award for the sole purpose of reducing the
exercise price thereunder.
(E) INDEMNIFICATION. No member of the Committee shall be personally liable
for any action or determination made with respect to the Plan, except for his or
her own willful misconduct or as expressly provided by statute. The members of
the Committee shall be entitled to indemnification and reimbursement. In the
performance of its functions under the Plan, the Committee shall be entitled to
rely upon information and advice furnished by the Company's officers,
accountants, counsel and any other party the Committee deems necessary, and no
member of the Committee shall be liable for any action taken or not taken in
reliance upon any such advice.
5. PARTICIPATION
(A) ELIGIBLE EMPLOYEES. The Committee shall determine which Employees shall
be eligible to receive Awards under the Plan.
(B) PARTICIPATION BY SUBSIDIARIES. Employees of Subsidiaries may participate
in the Plan upon approval of the Awards by the Committee. A Subsidiary's
participation in the Plan may be terminated at any time by the Committee. If a
Subsidiary's participation in the Plan shall terminate, such termination shall
not relieve it of any obligations theretofore incurred by it under the Plan,
except with the approval of the Committee.
(C) PARTICIPATION OUTSIDE OF THE UNITED STATES. The Committee or its
designee shall have the authority to amend the Plan and/or the terms and
conditions relating to an Award to the extent necessary to permit participation
in the Plan by Employees who are located outside of the United States on terms
and conditions comparable to those afforded to Employees located within the
United States, provided that any such action taken with respect to a Covered
Employee shall be taken in compliance with Section 162(m) of the Code.
(D) CANCELLATION AND MODIFICATION OF AWARDS. In the event of a change in a
Participant's duties and responsibilities, or a transfer of the Participant to a
different position, the Committee may cancel or modify any Award granted to such
Participant or adjust the number of shares of Common Stock subject thereto
commensurate with the transfer or change in responsibility, as determined by the
Committee, in its discretion, provided that no such action shall violate the
provisions of Section 4(d), and further provided that any such action taken with
respect to a Covered Employee shall be taken in compliance with Section 162(m)
of the Code.
6. AVAILABLE SHARES OF COMMON STOCK
(A) SHARES SUBJECT TO THE PLAN. Common Stock issued pursuant to Awards
granted under the Plan may be shares which have been authorized but unissued, or
have been previously issued and reacquired by the Company, or both. Reacquired
shares may consist of shares purchased in open market transactions.
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Subject to the following provisions of this Section 6, the aggregate number of
shares of Common Stock that may be issued to Participants pursuant to Awards
granted under the Plan shall not exceed four million (4,000,000) shares.
(B) PRIOR PLANS. Shares available for grant under the Travelers Property
Casualty Corp. Capital Accumulation Plan shall not count towards the maximum
number of shares that may be issued under the Plan as set forth in Section 6(a).
(C) FORFEITED AWARDS. Awards or portions of Awards made under the Plan which
are forfeited, expire or are canceled or settled without issuance of shares
shall not count towards the maximum number of shares that may be issued under
the Plan as set forth in Section 6(a).
(D) SHARES USED TO PAY EXERCISE PRICE AND TAXES. If a Participant pays the
exercise price of an Option by surrendering previously owned shares, as may be
permitted by the Committee and/or arranges to have the appropriate number of
shares otherwise issuable upon exercise withheld or sold to cover the
withholding tax liability associated with the Option exercise, the surrendered
shares and shares used to pay taxes shall not count towards the maximum number
of shares that may be issued under the Plan as set forth in Section 6(a).
(E) OTHER ITEMS NOT INCLUDED IN ALLOCATION. The maximum number of shares
that may be issued under the Plan as set forth in Section 6(a) shall not be
affected by (i) the payment in cash of dividends or dividend equivalents in
connection with outstanding Awards; (ii) the granting or payment of
stock-denominated Awards which by their terms may be settled only in cash; or
(iii) Awards that are granted through the assumption of, or in substitution for,
outstanding awards previously granted to individuals who have become Employees
as a result of a merger, consolidation, or acquisition or other corporate
transaction involving the Company or a Subsidiary.
(F) OTHER LIMITATIONS ON SHARES WHICH MAY BE GRANTED UNDER THE PLAN.
(i) The aggregate number of shares of Common Stock that may be granted
to any single individual during the term of the Plan in the form of Options
(including Reload Options and ISOs) and/or SARs shall not exceed four
million (4,000,000).
(ii) The aggregate number of shares of Common Stock that may be granted
in the form of ISOs shall not exceed four million (4,000,000).
(G) ADJUSTMENTS. In the event of any stock dividend, stock split,
combination or exchange of equity securities, merger, consolidation,
recapitalization, reorganization, divestiture or other distribution (other than
ordinary cash dividends) of assets to stockholders, or any other similar event
affecting the Common Stock, the Committee may make such adjustments as it may
deem appropriate, in its discretion, to (i) the maximum number of shares of
Common Stock that may be issued under the Plan as set forth in Section 6(a);
(ii) to the extent permitted under Section 162(m) of the Code, the maximum
number of shares that may be granted pursuant to Section 6(f)(i); (iii) to the
extent permitted under Section 422 of the Code, the maximum number of shares
that may be granted pursuant to Section 6(f)(ii); (iv) the number or kind of
shares subject to an Award; (v) subject to the limitation contained in Section
4(d), the Exercise Price applicable to an Award; and/or (vi) any measure of
performance that relates to an Award in order to reflect such change in the
Common Stock.
7. AWARDS UNDER THE PLAN
Awards under the Plan may be granted as Options, SARs, or Stock Awards, as
described below. Awards may be granted singly, in combination or in tandem as
determined by the Committee, in its discretion.
(A) OPTIONS. Options granted under the Plan, including Reload Options, may
be non-qualified stock options, ISOs or any other type of stock option permitted
under the Code.
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(I) ISOS. The terms and conditions of any ISOs granted hereunder shall
be subject to the provisions of Section 422 of the Code and the terms,
conditions, limitations and administrative procedures established by the
Committee, from time to time. At the discretion of the Committee, ISOs may
be granted to any Employee of the Company and its subsidiaries, as such term
is defined in Section 424(f) of the Code.
(II) RELOAD OPTIONS. If a Participant tenders shares of Common Stock to
pay the exercise price of an Option, and/or arranges to have a portion of
the shares otherwise issuable upon exercise withheld or sold to pay the
applicable withholding taxes, the Participant may receive, at the discretion
of the Committee, a new "Reload Option" equal to the sum of the number of
shares tendered to pay the exercise price and the number of shares used to
pay the withholding taxes. Reload Options may be any type of option
permitted under the Code and will be granted subject to such terms,
conditions, restrictions and limitations as may be determined by the
Committee, from time to time. Reload Options may also be granted in
connection with the exercise of options granted under any other plan of the
Company which may be designated by the Committee, from time to time.
(III) EXERCISE PRICE. The Committee shall determine the exercise price
per share for each Option, which shall not be less than 100% of the Fair
Market Value at the time of grant.
(IV) EXERCISE OF OPTIONS. Upon satisfaction of the applicable conditions
relating to vesting and exercisability, as determined by the Committee, and
upon payment in full of the Exercise Price and applicable taxes due, the
Participant shall be entitled to exercise the Option and receive the number
of shares of Common Stock issuable in connection with the Option exercise.
The shares issued in connection with the Option exercise may be subject to
such conditions and restrictions as the Committee may determine, from time
to time. The exercise price of an Option and applicable withholding taxes
relating to an Option exercise may be paid by methods permitted by the
Committee from time to time including (1) a cash payment in US dollars (2)
tendering (either actually or by attestation) shares of Common Stock owned
by the Participant for at least six (6) months, valued at the Fair Market
Value at the time of exercise; (3) arranging to have the appropriate number
of shares of Common Stock issuable upon the exercise of an Option withheld
or sold or (4) any combination of the above.
(B) STOCK APPRECIATION RIGHTS. A stock appreciation right ("SAR") represents
the right to receive a payment in cash, Common Stock, or a combination thereof,
in an amount equal to the excess of the Fair Market Value of a specified number
of shares of Common Stock at the time the SAR is exercised over an amount which
shall be no less than the Fair Market Value of the same number of shares at the
time the SAR was granted, except that if a SAR is granted retroactively in
substitution for an Option, the Fair Market Value established by the Committee
may be the Fair Market Value at the time such Option was granted. Any such
substitution of a SAR for an Option granted to a Covered Employee may only be
made in compliance with the provisions of Section 162(m) of the Code.
(C) STOCK AWARDS.
(I) FORM OF AWARDS. The Committee may grant Awards ("Stock Awards")
which are payable in shares of Common Stock or denominated in units
equivalent in value to shares of Common Stock or are otherwise based on or
related to shares of Common Stock, including, but not limited to Awards of
Restricted Stock, Deferred Stock and Stock Units, subject to such terms,
conditions, restrictions and limitations as the Committee may determine to
be applicable to such Awards, in its discretion, from time to time. In order
to reflect the impact of the conditions, restrictions or limitations
applicable to a Stock Award, as well as the possibility of forfeiture or
cancellation, the Fair Market Value may be discounted at a rate determined
by the Committee, from time to time, for purposes of determining the number
of shares of Common Stock allocable to a Stock Award.
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<PAGE>
(II) STOCK PAYMENT. Shares of Common Stock may be used as payment for
compensation which otherwise would have been delivered in cash (including
without limitation any compensation that is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Code),
and unless otherwise determined by the Committee, no minimum vesting period
will apply to such shares. Any Shares used for such payment will be valued
at Fair Market Value at the time of payment and shall be subject to such
terms, conditions, restrictions and limitations as shall be determined by
the Committee at the time of payment.
(III) RESTRICTED STOCK. Awards of Restricted Stock shall be subject to
the conditions, limitations, restrictions, vesting and forfeiture provisions
determined by the Committee, in its discretion, from time to time. The
number of shares of Restricted Stock allocable to an Award under the Plan
shall be determined by the Committee, pursuant to a formula approved by the
Committee from time to time. In order to reflect the impact of the
restrictions on the value of the Restricted Stock, as well as the
possibility of forfeiture of the Restricted Stock, the Fair Market Value may
be discounted at a rate to be determined by the Committee, for purposes of
determining the number of shares allocable to an Award of Restricted Stock.
Unless the Committee determines otherwise, Awards of Restricted Stock will
carry a minimum vesting period of one (1) year.
(IV) DEFERRED STOCK. Awards of Deferred Stock shall be subject to the
conditions, limitations, and cancellation provisions determined by the
Committee, in its discretion, from time to time. A Participant who receives
an Award of Deferred Stock shall be entitled to receive the number of shares
of Common Stock allocable to his or her Award, as determined by the
Committee, pursuant to a formula approved by the Committee from time to
time, at the end of a specified deferral period determined by the Committee.
In order to reflect the impact of the deferral conditions on the value of an
Award of Deferred Stock, as well as the possibility of cancellation of the
Deferred Stock Award, the Fair Market Value may be discounted at a rate to
be determined by the Committee, for purposes of determining the number of
shares allocable to an Award of Deferred Stock. Awards of Deferred Stock
represent only an unfunded, unsecured promise to deliver shares in the
future and do not give Participants any greater rights than those of an
unsecured general creditor of the Company.
(V) STOCK UNITS. A Stock Unit is an Award denominated in shares of
Common Stock, pursuant to a formula determined by the Committee, which may
be settled either in shares of Common Stock or in cash, in the discretion of
the Committee, subject to such other terms, conditions, restrictions and
limitations determined by the Committee from time to time.
8. FORFEITURE PROVISIONS FOLLOWING A TERMINATION OF EMPLOYMENT
In any instance where the rights of a Participant with respect to an Award
extend past the date of termination of a Participant's employment, all of such
rights shall terminate and be forfeited, if, in the determination of the
Committee, the Participant, at any time subsequent to his or her termination of
employment engages, directly or indirectly, either personally or as an employee,
agent, partner, stockholder, officer or director of, or consultant to, any
entity or person engaged in any business in which the Company or its affiliates
is engaged, in conduct that breaches his or her duty of loyalty to the Company
or a Subsidiary or that is in material competition with the Company or a
Subsidiary or is materially injurious to the Company or a Subsidiary, monetarily
or otherwise, which conduct shall include, but not be limited to (i) disclosing
or misusing any confidential information pertaining to the Company or a
Subsidiary; (ii) any attempt, directly or indirectly to induce any Employee,
agent, insurance agent, insurance broker or broker-dealer of the Company or any
Subsidiary to be employed or perform services elsewhere or (iii) any attempt by
a Participant directly or indirectly to solicit the trade of any customer or
supplier or prospective customer or supplier of the Company or any Subsidiary or
(iv) disparaging the Company, any Subsidiary or any of their respective officers
or directors. The determination of whether any conduct, action or failure to act
falls within the scope of activities contemplated by this Section shall be made
by the Committee, in its discretion. For purposes of this paragraph, a
Participant shall not be deemed to be a stockholder of a
B-6
<PAGE>
competing entity if the Participant's record and beneficial ownership amount to
not more than one percent (1%) of the outstanding capital stock of any company
subject to the periodic and other reporting requirements of the Securities
Exchange Act of 1934, as amended.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that Stock Awards shall earn dividends or dividend
equivalents. Such dividends or dividend equivalents may be paid currently or may
be credited to an account maintained on the books of the Company. Any payment or
crediting of dividends or dividend equivalents will be subject to such terms,
conditions, restrictions and limitations as the Committee may establish, from
time to time, including reinvestment in additional shares of Common Stock or
common share equivalents. Unless the Committee determines otherwise, Section
16(a) Officers may not participate in dividend reinvestment programs established
under the Plan. The Committee shall determine the Participants' rights under the
Plan with respect to extraordinary dividends or distributions on the Common
Stock.
10. VOTING
The Committee shall determine whether a Participant shall have the right to
direct the vote of shares of Common Stock allocated to a Stock Award. If the
Committee determines that an Award shall carry voting rights, the shares
allocated to such Award shall be voted by the Company's Senior Human Resources
Officer, or such other person as the Committee may designate in accordance with
instructions received from Participants (unless to do so would constitute a
violation of fiduciary duties). Shares as to which no instructions are received
shall be voted by the Plan Administrator proportionately in accordance with
instructions received from Participants in the Plan (unless to do so would
constitute a violation of fiduciary duties).
11. PAYMENTS AND DEFERRALS
Payment of Awards may be in the form of cash, Common Stock, other Awards, or
combinations thereof as the Committee shall determine, subject to such terms,
conditions, restrictions and limitations as it may impose. The Committee may
postpone the exercise of Options or SARs, and may require or permit Participants
to elect to defer the receipt or issuance of shares of Common Stock pursuant to
Awards or the settlement of Awards in cash under such rules and procedures as it
may establish, in its discretion, from time to time. It also may provide for
deferred settlements of Awards including the payment or crediting of earnings on
deferred amounts, or the payment or crediting of dividend equivalents where the
deferred amounts are denominated in common share equivalents. In addition, the
Committee may stipulate in an Award Agreement, either at the time of grant or by
subsequent amendment, that a payment or portion of a payment of an Award be
delayed in the event that Section 162(m) of the Code (or any successor or
similar provision of the Code) would disallow a tax deduction by the Company for
all or a portion of such payment. The period of any such delay in payment shall
be until the payment, or portion thereof, is tax deductible, or such earlier
date as the Committee shall determine in its discretion.
12. TRANSFERABILITY
Unless otherwise determined by the Committee, Awards granted under the Plan
and, during any period of restriction on transferability, shares of Common Stock
issued in connection with the exercise of an Option, may not be sold, pledged,
hypothecated, assigned, margined or otherwise transferred, other than by will or
the laws of descent and distribution. The Committee may permit (on such terms,
conditions and limitations as it shall establish) non-qualified Options
(including non-qualified Reload Options) and/or shares issued in connection with
an Option exercise which are subject to restrictions on transferability, to be
transferred one time to a member of a Participant's immediate family or to a
trust or similar vehicle for the benefit of a Participant's immediate family
members. Except to the extent required by law, no Award or interest of any
Participant in the Plan shall be subject to any lien, levy, attachment, pledge,
obligation,
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<PAGE>
liability or bankruptcy of a Participant. During the lifetime of a Participant,
all rights with respect to Awards shall be exercisable only by such Participant
or, if applicable, a permitted transferee.
13. CHANGE OF CONTROL
(a) The Committee may, in its discretion, at the time an Award is made
hereunder or at any time prior to, coincident with or after the time of a Change
of Control:
(i) provide for the acceleration of any time periods relating to the
exercise or realization of such Awards so that such Awards may be exercised
or realized in full on or before a date fixed by the Committee;
(ii) provide for the purchase of such Awards, upon the Participant's
request, for an amount of cash equal to the amount which could have been
obtained upon the exercise or realization of such rights had such Awards
been currently exercisable or payable;
(iii) make such adjustment to the Awards then outstanding as the
Committee deems appropriate to reflect such transaction or change; or
(iv) cause the Awards then outstanding to be assumed, or new rights
substituted therefore, by the surviving corporation in such change.
The Committee may, in its discretion, include such further provisions and
limitations in any Award Agreement as it may deem equitable and in the best
interests of the Company.
(b) A "Change of Control" shall be deemed to occur if and when:
(i) any person, including a "person" as such term is used in Section
14(d)(2) of the 1934 Act (a "Person"), becomes a beneficial owner (as such
term is defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities;
(ii) any plan or proposal for the liquidation of the Company is adopted
by the stockholders of the Company;
(iii) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board;
(iv) all or substantially all of the assets of the Company are sold,
liquidated or distributed; or
(v) there occurs a reorganization, merger, consolidation or other
significant corporate transaction involving the Company (a "Transaction")
which is deemed to be a "Change of Control" by the Committee.
Any good faith determination by the Committee as to whether a Change of
Control within the meaning of this Section has occurred shall be conclusive and
binding on the Participants.
14. AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by a document (an "Award
Agreement") in writing setting forth the terms, conditions, restrictions and
limitations applicable to the Award, including, but not
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<PAGE>
limited to the provisions governing vesting, exercisability, payment, amendment,
cancellation, forfeiture, and termination of employment and the Company's
authority to amend or terminate the Plan and to amend, cancel, or rescind an
Award, at any time. The Committee need not require the execution of such
document by the Participant, in which case acceptance of the Award by the
Participant shall constitute agreement by the Participant to the terms,
conditions, restrictions and limitations set forth in the Plan and the Award
Agreement as well as the administrative guidelines and practices of the Company
in effect from time to time.
15. TAX WITHHOLDING
The Company and its Subsidiaries shall have the right to require payment of,
or may deduct from any payment made under the Plan, or may permit shares to be
tendered or sold, including shares of Common Stock delivered or vested in
connection with an Award, in an amount sufficient to cover withholding of any
federal, state, local, foreign or other governmental taxes or charges required
by law or such greater amount of withholding as the Committee shall determine
from time to time and to take such other action as may be necessary to satisfy
any such withholding obligations. The value of any shares allowed to be withheld
or tendered for tax withholding may not exceed the amount allowed consistent
with fixed plan accounting in accordance with generally accepted accounting
principles. It shall be a condition to the obligation of the Company to issue
Common Stock upon the exercise of an Option or a SAR that the Participant pay to
the Company, on demand, such amount as may be requested by the Company for the
purpose of satisfying any tax withholding liability. If the amount is not paid,
the Company may refuse to issue shares.
16. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise determined by the Committee, Awards received by
Participants under the Plan shall not be deemed a part of a Participant's
regular, recurring compensation for purposes of calculating payments or benefits
from any Company benefit plan or severance program. No Employee shall have any
claim or right to be granted an Award under the Plan. There shall be no
obligation of uniformity of treatment of Employees under the Plan. Further, the
Company and its Subsidiaries may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary. The adoption of the Plan
shall not confer upon any Employee any right to continued employment in any
particular position or at any particular rate of compensation, nor shall it
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of its Employees at any time, free from any claim or liability
under the Plan.
17. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded and
shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any Participant or other person. To the extent any Participant holds
any rights by virtue of an Award granted under the Plan, such rights shall
constitute general unsecured liabilities of the Company and shall not confer
upon any Participant any right, title, or interest in any assets of the Company.
18. EXPENSES OF THE PLAN
The expenses of the administration of the Plan shall be borne by the Company
and its Subsidiaries. The Company may require Subsidiaries to pay for the Common
Stock issued under the Plan.
19. RIGHTS AS A STOCKHOLDER
Unless the Committee determines otherwise, a Participant shall not have any
rights as a stockholder with respect to shares of Common Stock covered by an
Award until the date the Participant becomes the
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<PAGE>
holder of record with respect to such shares. No adjustment will be made for
dividends or other rights for which the record date is prior to such date,
except as provided in Section 9.
20. FUTURE RIGHTS
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company or a Subsidiary or to participate in any
other compensation or benefit plan, program or arrangement of the Company or a
Subsidiary.
21. AMENDMENT AND TERMINATION
The Plan may be amended, suspended or terminated at any time by the
Committee, provided that no amendment shall be made without stockholder
approval, if stockholder approval is required under then applicable law,
including tax and/or accounting rules. No termination, suspension or amendment
of the Plan shall adversely affect the right of any Participant with respect to
any Award theretofore granted, as determined by the Committee, without such
Participant's written consent. Unless terminated earlier by the Board, the Plan
will terminate on April 30, 2009.
22. SUCCESSORS AND ASSIGNS
The Plan and any applicable Award Agreement entered into under the Plan
shall be binding on all successors and assigns of a Participant, including,
without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.
23. GOVERNING LAW
The Plan and all agreements entered into under the Plan shall be construed
in accordance with and governed by the laws of the State of Delaware.
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ANNEX C
AMENDMENT TO THE
TRAVELERS PROPERTY CASUALTY CORP.
1996 EXECUTIVE OPTION PLAN
Effective April 30, 1999
The Travelers Property Casualty Corp. 1996 Executive Option Plan is hereby
amended as follows:
SECTION 1. "PURPOSE" IS HEREBY REPLACED IN ITS ENTIRETY WITH THE FOLLOWING:
1. PURPOSE. The purpose of the Travelers Property Casualty Corp. 1996 Executive
Option Plan (the "Plan") is to advance the interests of the Company, its
Subsidiaries and stockholders by providing incentives in the form of options
to purchase shares of common stock of Citigroup Inc. ("Citigroup") to
Executive Officers of Travelers Property Casualty Corp. (the "Company") and
its Subsidiaries. Option grants will be made under the Citigroup 1999 Stock
Incentive Plan, as same may be amended or replaced from time to time
("SIP").
SECTION 2. "DEFINITIONS" IS HEREBY AMENDED BY REPLACING THE EXISTING DEFINITIONS
OF "COMMON STOCK", "SIP" AND "SIP COMMITTEE" WITH THE FOLLOWING NEW DEFINITIONS:
"Common Stock" shall mean the common stock of Citigroup, par value $.01 per
share.
"SIP" shall mean the Citigroup 1999 Stock Incentive Plan, as the same may be
amended or replaced from time to time.
"SIP Committee" shall mean the Incentive Compensation Subcommittee of the
Personnel, Compensation and Directors Committee of Citigroup, or such other
committee that may, from time to time, have the power and authority to grant
awards under SIP to Section 16(a) Persons.
THE DEFINITION OF "TRAVELERS" IS HEREBY DELETED, THE NEW DEFINITION "CITIGROUP"
IS INSERTED ALPHABETICALLY AND DEFINED AS FOLLOWS, AND ALL OTHER REFERENCES IN
THE PLAN TO "TRAVELERS" SHALL BE REPLACED WITH THE WORD "CITIGROUP":
"Citigroup" shall mean Citigroup Inc., a Delaware corporation and currently,
the majority stockholder of the Company.
SECTION 5. "MAXIMUM NUMBER OF SHARES ISSUABLE TO ANY ONE EXECUTIVE OFFICER" IS
HEREBY REPLACED IN ITS ENTIRETY WITH THE FOLLOWING:
5. MAXIMUM NUMBER OF SHARES THAT MAY BE GRANTED TO ANY ONE EXECUTIVE OFFICER.
The aggregate number of shares of Common Stock that may be granted to any
one Executive Officer pursuant to Awards made under this Plan between the
effective date of this Plan and April 23, 2006 shall not exceed eight
million (8,000,000) shares, subject to adjustment as provided in Section 6
of SIP (or the applicable adjustment provision of any successor or
replacement plan).
SECTION 7. "INCENTIVE STOCK OPTIONS" IS HEREBY REPLACED IN ITS ENTIRETY WITH THE
FOLLOWING:
7. INCENTIVE STOCK OPTIONS. The terms and conditions of any Incentive Stock
Options granted hereunder shall be subject to the provisions of SIP, the
provisions of Section 422 of the Code and the terms, conditions, limitations
and administrative procedures established by the Committee, from time to
time.
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<PAGE>
SECTION 8. "INCOME AND WITHHOLDING TAXES" IS HEREBY REPLACED IN ITS ENTIRETY
WITH THE FOLLOWING:
8. TAX WITHHOLDING. The Company and its Subsidiaries shall have the right to
require payment of, or may deduct from any payment made under the Plan, or
may permit shares to be tendered or sold, including shares of Common Stock
delivered or vested in connection with an award, in an amount sufficient to
cover withholding of any federal, state, local, foreign or other
governmental taxes or charges required by law or such greater amount of
withholding as the Committee shall determine from time to time and to take
such other action as may be necessary to satisfy any such withholding
obligations. The value of any shares allowed to be withheld or tendered for
tax withholding may not exceed the amount allowed consistent with fixed plan
accounting in accordance with generally accepted accounting principles. It
shall be a condition to the obligation of Citigroup to issue Common Stock
upon the exercise of an Option that the Executive Officer pay to the
Company, on demand, such amount as may be requested by the Company for the
purpose of satisfying any tax withholding liability. If the amount is not
paid, Citigroup may refuse to issue shares.
THE FIRST SENTENCE OF SECTION 13. "TERMINATION; AMENDMENT" IS HEREBY REPLACED IN
ITS ENTIRETY WITH THE FOLLOWING:
The Plan shall terminate on the earlier to occur of (a) a resolution of the
Board terminating the Plan or (b) April 23, 2006.
THE SECOND SENTENCE OF SECTION 13. IS HEREBY AMENDED BY ADDING THE WORDS
"INCLUDING TAX AND OR ACCOUNTING RULES" TO THE END OF SUCH SENTENCE.
EXCEPT AS SPECIFICALLY MODIFIED BY THIS AMENDMENT, ALL OTHER TERMS AND
PROVISIONS OF THE PLAN SHALL REMAIN IN FULL FORCE AND EFFECT.
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<PAGE>
WAIT! THERE'S AN EASIER WAY TO SUBMIT YOUR PROXY.
24 HOURS A DAY--7 DAYS A WEEK
<TABLE>
<S> <C>
SUBMIT YOUR PROXY BY TELEPHONE SUBMIT YOUR PROXY BY INTERNET
It's fast, convenient, and your It's fast, convenient, and your
submission is immediately submission is immediately
confirmed and posted. confirmed and posted.
Call Toll-Free On A Touch Tone Phone Go to website:
1-800-690-6903 WWW.PROXYVOTE.COM
JUST FOLLOW THESE FOUR EASY STEPS: JUST FOLLOW THESE FOUR EASY STEPS:
- ------------------------------------------------------ ------------------------------------------------------
1. Read the accompanying Proxy Statement and this 1. Read the accompanying Proxy Statement and this
proxy card. proxy card.
2. Call the toll-free number 1-800-690-6903. 2. Go to website WWW.PROXYVOTE.COM
3. Enter your 12-digit Control Number located on the 3. Enter your 12-digit Control Number located on the
reverse side. reverse side.
4. Follow the simple recorded instructions. 4. Follow the simple instructions.
- ------------------------------------------------------ ------------------------------------------------------
IF YOU SUBMIT YOUR PROXY BY TELEPHONE OR INTERNET, DO NOT RETURN YOUR PROXY CARD.
THANK YOU FOR YOUR PROXY SUBMISSION.
</TABLE>
<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 20, 1999
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 at Citigroup
Inc., 399 Park Avenue, New York, New York, on Tuesday, April 20, 1999 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 or internet voting set forth above and 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
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<PAGE>
TRAVELERS PROPERTY CASUALTY
CORP. [LOGO]
C/O PROXY SERVICES
P.O. BOX 9079
EDGEWOOD, NY 11717
THREE WAYS TO VOTE
VOTE BY PHONE: 1-800-690-6903
1. Read the accompanying Proxy Statement and this proxy card.
2. Call toll free 1-800-690-6903.
3. Enter your 12 digit Control Number, shown below.
4. Follow the simple recorded instructions.
VOTE BY INTERNET: WWW.PROXYVOTE.COM
1. Read the accompanying Proxy Statement and this proxy card.
2. Go to website WWW.PROXYVOTE.COM
3. Enter your 12 digit Control Number, shown below.
4. Follow the simple recorded instructions.
VOTE BY MAIL
1. Mark, sign and date your proxy card.
2. Return it in the enclosed postage paid envelope.
YOUR VOTE IS IMPORTANT
Do not return this proxy card if you vote by telephone or Internet.
Detach Proxy Card Here
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS.
Vote on Directors
1. Proposal to elect eight directors to a one-year term.
NOMINEES:
01 - Kenneth J. Bialkin 02 - Leslie B. Disharoon 03 - Jay S. Fishman
04 - Robert I. Lipp 05 - Dudley C. Mecum 06 - Frank J. Tasco
07 - Sanford I. Weill 08 - Arthur Zankel
FOR WITHHOLD
ALL / / ALL / / FOR ALL EXCEPT / / To withhold authority to vote, mark
"For All Except" and write the
nominee's number on the line below.
----------------------------------
Vote on Proposals FOR AGAINST ABSTAIN
2. Proposal to ratify the selection
of KPMG LLP as the Company's / / / / / /
independent auditors for 1999.
FOR AGAINST ABSTAIN
3. Proposal to approve and adopt | | | | | |
the Travelers 1999 Stock | | | | | |
Incentive Plan. | | | | | |
---- ---- ----
FOR AGAINST ABSTAIN
4. Proposal to approve and adopt | | | | | |
an Amendment to the Travelers | | | | | |
Property Casualty Corp. 1996 | | | | | |
Executive Option Plan. ---- ---- ----
<PAGE>
The signer(s) hereby acknowledge(s) receipt of the Notice of Annual Meeting of Stockholders and accompanying Proxy Statement.
The signer(s) hereby revoke(s) all proxies heretofore given by the signer(s) to vote at said Annual Meeting and any adjournments
or postponements thereof.
IF NO BOXES ARE MARKED, THIS PROXY WILL BE VOTED IN THE MANNER DESCRIBED ON THE REVERSE SIDE.
NOTE: Please sign exactly as name appears herein. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
- ----------------------------------------------- -----------------------------------------------
Signature (Please sign within box) Date Signature (Joint Owners) Date
</TABLE>
