<PAGE>
THE ST. PAUL COMPANIES, INC.
385 Washington Street, St. Paul, Minnesota 55102
Telephone (612) 221-7911
(LOGO)
March 15, 1995
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders of
your Company. The meeting will be held on Tuesday, May 2, 1995, at 2:00 P.M.
(Central Daylight Time) at the office of the Company, 385 Washington Street, St.
Paul, Minnesota.
We suggest that you carefully read the Notice of Annual Meeting and the Proxy
Statement which you will find on the following pages.
It is important that your shares be represented at the meeting, regardless of
the size of your holding. Therefore, we urge you to PLEASE VOTE, SIGN, DATE AND
RETURN AS SOON AS POSSIBLE the enclosed proxy form in the postage-paid envelope
provided. This should be done whether or not you now plan to attend the meeting.
The proxy may be withdrawn if you decide later to attend the meeting and vote in
person.
Sincerely,
Douglas W. Leatherdale
Chairman, President and
Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders of The St. Paul Companies, Inc. will be
held on Tuesday, May 2, 1995, at 2:00 P.M. (Central Daylight Time) at the office
of the Company, 385 Washington Street, St. Paul, Minnesota 55102, for the
following purposes:
1. To elect a Board of thirteen Directors;
2. To act on the proposal to ratify the selection of KPMG Peat Marwick LLP
as the independent auditors of the Company; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
All shareholders are invited to attend, although only those shareholders of
record at the close of business on March 6, 1995, will be entitled to vote at
the meeting. Your attention is directed to the Proxy Statement accompanying this
Notice for a more complete statement regarding the matters proposed to be acted
upon at the meeting. PLEASE VOTE, SIGN AND DATE THE ACCOMPANYING PROXY FORM AND
RETURN IT IN THE STAMPED, SELF-ADDRESSED ENVELOPE ENCLOSED. YOU MAY REVOKE YOUR
PROXY AT ANY TIME BEFORE IT IS VOTED.
Bruce A. Backberg
Vice President and
Corporate Secretary
March 15, 1995
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PROXY STATEMENT
THE ST. PAUL COMPANIES, INC.
385 WASHINGTON STREET, ST. PAUL, MINNESOTA 55102
This Proxy Statement is being mailed first to the shareholders of The St. Paul
Companies, Inc. (the "Company") on or about March 15, 1995. The accompanying
proxy is solicited on behalf of the Board of Directors of the Company for use at
the Annual Shareholders' Meeting to be held May 2, 1995, at the time and place
and for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Any proxy may be revoked at any time before it has been voted by
giving written notice to the Corporate Secretary of the Company, by a duly
executed and presented proxy bearing a later date, or by voting in person at the
meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, officers and employees of the Company may solicit proxies
personally or by telephone, telegraph or other means without additional
compensation. Arrangements also will be made with banks, brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation material to
the beneficial owners of stock held of record by such persons, and the Company
will, upon request, reimburse them for their reasonable expenses in so doing. D.
F. King & Co., Inc., New York, N.Y., has been engaged by the Company to assist
in the solicitation of proxies for an anticipated fee of approximately $7,500,
plus out-of-pocket costs and expenses.
The record date for the determination of shareholders entitled to notice of and
to vote at the Annual Shareholders' Meeting has been established as the close of
business on March 6, 1995. At that time there were 84,309,476 shares of common
stock and 1,010,499 shares of Series B convertible preferred stock outstanding
which are entitled to vote at the meeting. The holders of common stock and
Series B convertible preferred stock vote as one class. Each share of common
stock is entitled to one vote, and each share of Series B convertible preferred
stock is entitled to four votes.
The affirmative vote of a majority of the total shares represented in person or
by proxy and entitled to vote at the meeting is required for (a) the election of
directors, (b) ratification of the selection of KPMG Peat Marwick LLP as
independent auditors, and (c) the approval of such other matters as may properly
come before the meeting.
Under Minnesota law and the Company's bylaws, the presence in person or by proxy
of a majority of the voting power of the shares of common stock and Series B
convertible preferred stock entitled to vote constitutes the quorum necessary
for shareholders to take action at the Annual Shareholders' Meeting. Shares
represented in person or by proxy at the Annual Shareholders' Meeting will be
counted for quorum purposes regardless of whether the shareholder or proxy fails
to vote on a particular proposal (an "abstention") or whether a broker with
discretionary authority fails to exercise such authority with respect to a
particular proposal (a "broker non-vote"). For purposes of determining whether a
proposal has been approved, an abstention or non-vote (including a broker non-
vote) with regard to a particular proposal will not be counted as a vote in
favor of such proposal and, as a result, will have the effect of a vote against
such proposal.
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ELECTION OF DIRECTORS
Pursuant to the provisions of the Company's bylaws, the Board of Directors has
set the number of directors at thirteen, effective May 2, 1995. The thirteen
directors to be elected at the Annual Shareholders' Meeting will hold office
until the Annual Shareholders' Meeting in 1996 or until their successors are
duly elected and qualified. Unless otherwise instructed by the shareholders, it
is the intention of the persons named in the accompanying proxy (the "proxy
holders") to vote the proxies held by them for the election of the thirteen
nominees named in the "Nominees for Directors" table. The proxies cannot be
voted for more than thirteen candidates for director. However, if any of the
thirteen nominees shall not be a candidate for election at the time of the
meeting (a contingency which the Board of Directors does not expect to occur),
such proxies may be voted in accordance with the best judgment of the proxy
holders.
Twelve of the nominees are presently directors of the Company. With the
exception of Gordon M. Sprenger, all nominees were elected at the 1994 Annual
Shareholders' Meeting. Mr. Sprenger is being nominated for election for the
first time at the May 2 meeting.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTORS
PRESENT PRINCIPAL DIRECTOR OTHER PUBLIC
NAME AGE OCCUPATION(A) SINCE CORPORATION DIRECTORSHIPS
- ------------------------ --- ---------------------------------- --------- ----------------------------------
<S> <C> <C> <C> <C>
Michael R. Bonsignore 53 Chairman and Chief Executive 8-6-91 Honeywell Inc.;
Officer, Honeywell Inc. Donaldson Company;
(manufacturer of automation and Cargill, Incorporated (private
control systems) corporation)
John H. Dasburg 52 President and Chief Executive 2-2-94 Northwest Airlines, Inc.; Ecolab;
Officer, Northwest Airlines, Inc. Riverwood International
Corporation
W. John Driscoll 66 Retired President and Chairman, 9-21-70 Comshare, Incorporated;
Rock Island Company (private Northern States Power Company;
investment company) Weyerhaeuser Company;
The John Nuveen Company; M.I.P.
Properties; Taylor Investment
Corporation
Pierson M. Grieve 67 Chairman and Chief Executive 11-5-85 Ecolab Inc.;
Officer, Ecolab Inc. (developer/ Meredith Corporation;
marketer of cleaning and Norwest Corporation;
sanitizing products, systems and U S WEST Inc; Waldorf Corporation;
services) Minnegasco
Ronald James(b) 44 Vice President--Minnesota, U S 5-4-93 Ceridian Corporation; Automotive
WEST Communications, Inc. Industries Holding, Inc.
William H. Kling(c) 52 President, Minnesota Public Radio; 11-7-89 Irwin Financial Corporation
and President, Greenspring Company
(diversified media and catalog
marketing company)
</TABLE>
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<TABLE>
<CAPTION>
NOMINEES FOR DIRECTORS
PRESENT PRINCIPAL DIRECTOR OTHER PUBLIC
NAME AGE OCCUPATION(A) SINCE CORPORATION DIRECTORSHIPS
- ------------------------ --- ---------------------------------- --------- ----------------------------------
<S> <C> <C> <C> <C>
Douglas W. Leatherdale 58 Chairman, President and Chief 5-5-81 United HealthCare Corporation;
Executive Officer, The St. Paul Northern States Power Company;
Companies, Inc. The John Nuveen Company
Bruce K. MacLaury(d) 63 President, The Brookings 8-4-87 Scott Paper Company;
Institution (public policy American Express Bank, Ltd.
research and education)
Ian A. Martin 60 Chairman and Chief Executive 8-7-90 Granada Group PLC;
Officer, Glenisla Group Ltd. House of Fraser PLC;
(private investment company) Unigate PLC
Glen D. Nelson, M.D. 57 Vice Chairman, Medtronic, Inc. 5-5-92 Medtronic, Inc.;
(manufacturer of biomedical ReliaStar Financial Corp.;
devices) Carlson Holdings, Inc. (private
corporation)
Anita M. Pampusch, Ph.D. 56 President, The College of St. 5-7-85 None
Catherine
Gordon M. Sprenger 57 Executive Officer, Allina Health ------ Medtronic, Inc.
Systems (hospital and managed care
non profit company)
Patrick A. Thiele 44 Executive Vice President and Chief 5-4-93 The John Nuveen Company
Financial Officer, The St. Paul
Companies, Inc.
<FN>
- ------------------------
(a) Principal employment of nominees in the past five years. Mr. Bonsignore
served in a number of executive offices at Honeywell Inc. for more than
five years prior to assuming his current responsibilities in April of
1993. In addition to their present responsibilities, Messrs. Leatherdale
and Thiele have served in a number of executive offices of the Company and
as officer and director of various subsidiaries of the Company for many
years. Mr. Martin served in a number of executive offices of Grand
Metropolitan PLC and its subsidiaries prior to assuming his current
position in February 1994. Prior to assuming his current position in 1990,
Mr. Dasburg served in a number of executive offices with Northwest
Airlines, Inc. and Marriott Corporation. Prior to his present position,
Mr. Sprenger served as Executive Officer of Health Span, Inc. from
1993-1994 and as CEO of Life Span from 1986-1993. All other nominees have
been employed during the past five years as they presently are employed.
(b) Mr. James is a director of the five mutual funds within the Great Hall
Investment Funds group.
(c) Mr. Kling is a director or trustee of each of the following mutual funds
which are provided investment advisory services by The Capital Research
and Management Company: EuroPacific Growth Fund, New Economy Fund, New
Perspective Fund and SMALLCAP World Fund.
</TABLE>
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<TABLE>
<S> <C>
(d) Mr. MacLaury is a director or trustee of each of the mutual funds which
are provided investment advisory services by The Vanguard Group, Inc.,
with the exception of Vanguard's tax-exempt mutual funds.
</TABLE>
BOARD OF DIRECTORS COMPENSATION
Directors who are not also officers of the Company or any of its subsidiaries
are each paid $20,500 annually, plus $1,000 for each Board or committee meeting
attended. Outside directors serving as chair of any committee of the Board of
Directors are paid an additional $4,000 annually for each committee that they
chair. The non-officer directors participate in the Director Life Insurance Plan
pursuant to which the Company pays the premium for $100,000 of group term life
insurance. The Company also pays the premium to provide the non-officer
directors with $200,000 of coverage under a travel-accident insurance policy and
all directors with directors' and officers' liability insurance and fiduciary
liability insurance. In addition, non-officer directors are eligible to defer
directors' fees under the Directors' Deferred Compensation Plan.
Under the Company's 1994 Stock Incentive Plan, annual nonqualified stock option
grants covering 1,000 common shares are made at the first Board meeting of each
November to each non-officer director (all nominees for director except Messrs.
Leatherdale and Thiele). Such options will be granted at the market price of the
Company's stock on the date of grant. The option price is to be paid, upon
exercise, in cash.
Under that plan, options terminate at the earliest of ten years after the date
of grant, three years after retirement, immediately if directorship is
terminated for cause, one month after any voluntary termination of service as a
director other than by retirement (but the option in this case may be exercised
only to the extent it was exercisable on the date of such termination), or any
earlier time set by the committee at the time of option grant. Special
provisions apply in the case of death of an optionee or in the case of a Change
of Control, as defined below. If an option were not fully exercisable at the
time of occurrence of a Change of Control, all portions of the option
immediately would become exercisable in full.
"Change of Control" is defined in the 1994 Stock Incentive Plan to mean a change
of control of the Company of a nature that would be required to be reported to
the Securities and Exchange Commission on Form 8-K pursuant to the Securities
Exchange Act of 1934 ("34 Act"), with such Change of Control to be deemed to
have occurred when (a) any person, as defined in the '34 Act, other than the
Company or a Company subsidiary or one of their employee benefit plans is or
becomes the beneficial owner of 50% or more of the Company's common stock or (b)
members of the Board of Directors on May 3, 1994 (the "Incumbent Board") cease
to constitute a majority thereof (provided that persons subsequently becoming
directors with the approval of directors comprising at least three-quarters of
the Incumbent Board shall be considered as members of the Incumbent Board).
Under the Company's Non-Employee Director Stock Retainer Plan, eligible
directors (all nominees except Messrs. Leatherdale and Thiele) may elect to
receive all or a portion of their annual retainer (currently $20,500) in the
form of common shares of the Company that are subject to certain service-related
restrictions as described below. Such an election will entitle a director to be
issued a number of shares of restricted stock equal in value to 110% of the
portion of the annual retainer that was elected for participation in the plan.
For valuation purposes, the amount used to determine the number
6
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of restricted shares allocated to a participating director is the average of the
stock's closing price on the last business day of each quarter of the calendar
year. Immediately upon issuance of the restricted shares, the recipient is
entitled to receive all dividends paid on the shares and to vote the shares.
If within five years from the date restricted stock is issued to an eligible
director under the plan a director's service on the Board is terminated for any
reason other than death, disability or retirement, such restricted stock will be
forfeited. When a director's service on the Board is terminated because of
death, disability or retirement, any restrictions on stock received under the
plan lapse.
A Board policy provides that each director with fifteen or more years of service
shall tender his or her resignation to the chair of the board governance
committee by November 20 of each year indicating his or her intent not to stand
for re-election at the subsequent Annual Meeting of the Shareholders. If,
however, upon review, the board governance committee shall determine that there
is a continuing need on the Board for the type of qualifications the resigning
director provides, then such director may be asked to become a candidate for
re-election. Additionally, upon a substantial change in principal employment, a
director should tender his or her resignation. As part of this policy, the
Company provides an Outside Directors' Retirement Plan under which the Company
will pay a retirement benefit to non-officer directors who have served for two
or more years when their directorships terminate. The annual amount of that
benefit will be equal to the director's annual retainer (currently $20,500) when
he or she ceases to be a director, plus a value assigned to the November option
grant (currently about $11,000). Directors may elect to have the benefit paid
quarterly for a period of years following termination of active service which
equals the length of time he or she served as an outside director up to a
maximum of fifteen years. Alternatively, directors may elect to receive the
discounted present value of those future payments in one lump sum payment. If a
retired director dies while receiving periodic payments, the discounted present
value of any remaining payments to which he or she may be entitled will be paid
to his or her estate, or upon his or her election, to a surviving spouse.
The Company has transferred funds to a grantor trust created for the purpose of
implementing benefits under various nonqualified plans of deferred compensation,
including the Directors' Deferred Compensation Plan and the Outside Directors'
Retirement Plan (the "Implemented Plans").
Following a Change of Control (generally defined the same as in the 1994 Stock
Incentive Plan), no portion of the trust assets may be returned to the Company
or any subsidiary unless the trustee determines that that portion of the assets
and future earnings on it never will be required to pay benefits and if a
majority of the then participants of the Implemented Plan consent to the return
of the assets.
Unlike assets held in the trusts created to implement benefits under the
Company's tax-qualified plans, assets held in the grantor trust remain subject
to the claims of the Company's creditors. If the Company becomes insolvent, the
trustee will be required to cease payment of benefits under all Implemented
Plans and dispose of trust assets pursuant to the direction of a court of
competent jurisdiction.
In February of 1995, as part of the Company's policy of providing support for
charitable institutions and in order to retain and attract qualified directors,
the Board of Directors established the Directors' Charitable Award Program,
which will be initially funded by life insurance on the lives of the members of
the Board of Directors. The
7
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Company intends to make charitable contributions of $1 million per director,
paid out over a period of ten years following the death of the director. Each
director is able to recommend up to four charities to receive contributions from
the Company. Directors become vested in this program in $200,000 annual
increments starting with their third anniversary of election as a Director.
Directors are fully vested upon the earliest of the seventh anniversary of their
election as a director, death, disability, or retirement at age seventy. Current
Directors have been given vesting credit for all of the years they have served
as Directors. Beneficiary organizations designated under this program must be
tax-exempt, and donations ultimately paid by the Company will be deductible
against federal and other income taxes payable by the Company in accordance with
the tax laws applicable at the time. Directors derive no financial benefit from
the program since all insurance proceeds and charitable deductions accrue solely
to the Company. Because of such deductions and use of insurance, the long-term
cost to the Company is expected to be minimal.
BOARD COMMITTEES
There are six standing committees of the Board of Directors: the executive
committee, the audit committee, the finance committee, the board governance
committee, the personnel committee and the executive compensation committee.
Current members of the individual committees are named below, with the chairman
of each committee named first:
<TABLE>
<CAPTION>
EXECUTIVE AUDIT FINANCE
- -------------------------- -------------------------- ---------------------------
<S> <C> <C>
D. W. Leatherdale W. H. Kling W. J. Driscoll
W. J. Driscoll J. H. Dasburg M. R. Bonsignore
P. M. Grieve W. J. Driscoll J. H. Dasburg
W. H. Kling R. James R. James
A. M. Pampusch G. D. Nelson W. H. Kling
P. A. Thiele A. M. Pampusch D. W. Leatherdale
I. A. Martin
P. A. Thiele
<CAPTION>
BOARD GOVERNANCE PERSONNEL EXECUTIVE COMPENSATION
- -------------------------- -------------------------- ---------------------------
<S> <C> <C>
P. M. Grieve M. R. Bonsignore M. R. Bonsignore
D. W. Leatherdale P. M. Grieve P. M. Grieve
B. K. MacLaury D. W. Leatherdale B. K. MacLaury
G. D. Nelson B. K. MacLaury I. A. Martin
A. M. Pampusch I. A. Martin G. D. Nelson
G. D. Nelson
</TABLE>
The audit committee is charged with the responsibility for:
1. Reviewing the annual financial report to shareholders and the annual
report (Form 10-K) filed with the Securities and Exchange Commission;
2. Reviewing the quarterly reporting process;
3. Overseeing the monitoring of the Company's system of internal controls;
8
<PAGE>
4. Recommending annually to the Board of Directors, subject to
shareholders' approval, the selection of the Company's independent
auditors;
5. Determining the independent auditors' qualifications, including the
firm's membership in the SEC practice section of the AICPA and
compliance with that organization's requirements for peer review and
independence;
6. Confirming the independence of the internal auditors;
7. Reviewing annually the combined audit plans of the independent auditors
and internal auditors;
8. Meeting with the independent auditors at the completion of their annual
audit to review their evaluation of the financial reporting and internal
controls of the Company, and any changes required in the originally
planned audit program;
9. Meeting with the internal auditors on an ongoing basis to review:
(a) audit results,
(b) reports on exposures/controls, irregularities and control failures,
(c) the disposition of recommendations for improvements in internal
controls made by internal and independent auditors, and
(d) any changes required in the originally planned audit program;
10. Reviewing the reports on examinations by regulatory authorities;
11. Monitoring the Company's policies and procedures for the review of
expenses and perquisites of selected members of executive management;
12. Overseeing the monitoring of the Company's code of conduct;
13. Performing any special reviews, investigations or oversight
responsibilities required by the Board of Directors or its chairman; and
14. Reporting to the Board of Directors on the results of the activities of
the committee.
The executive committee is charged with the broad responsibility of having and
exercising the authority of the Board of Directors in the management of the
business of the Company in the interval between meetings of the Board.
The finance committee is responsible for:
1. Advising the Board of Directors on corporate financial policy;
2. Advising the Board of Directors on debt limits and related corporate
financial matters;
3. Recommending dividend policy to the Board of Directors;
4. Reviewing capital plans; and
5. Recommending to the Board of Directors the investment policy for those
investment portfolios specified in resolutions adopted from time to time
by the Board, and monitoring the investment performance thereof.
It is the responsibility of the personnel committee to:
1. Review and recommend to the Board of Directors major changes in
personnel policies and employee benefits;
2. Review plans to provide management continuity; and
9
<PAGE>
3. Recommend to the Board of Directors employee and executive compensation
policies.
The primary responsibilities of the executive compensation committee are to
administer the Company's stock option plan, restricted stock award plan and
long-term incentive plan and to approve compensation changes for executive
management. Among other things, the committee determines who will participate in
each plan as well as the extent and terms of participation.
The primary functions of the board governance committee are to:
1. Identify and present qualified persons for election and re-election as
directors; and
2. Study, advise and make recommendations to the Board of Directors
concerning:
(a) criteria for Board membership,
(b) the number of directors to comprise the full Board,
(c) the Board's composition,
(d) an annual review of Board performance,
(e) directors' compensation,
(f) directors' retirement policy, and
(g) other related areas assigned by the Board or its chairman.
In determining which persons may be qualified as candidates for election to the
Board of Directors, the Board Governance Committee weighs the experience of each
possible candidate, the present need on the Board of Directors for that type of
experience, and the willingness and availability of such person(s) to serve. It
is the policy of the board governance committee to consider any qualified person
as a possible candidate for Board of Directors membership, regardless of whether
such person was recommended by a committee member or by some other source,
provided that such person was nominated in accordance with the procedures set
forth in the Company's bylaws. The Company's bylaws provide that nominations,
other than those made by or at the direction of the Board, shall be made by
timely notice in writing to the Corporate Secretary. To be timely, a
shareholder's notice shall be delivered or mailed to and received at the
principal executive office of the Company not less than 60 days prior to the
date of the meeting; provided, however, that in the event that less than 70
days' notice or prior disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholders to be timely must be received not later
than the close of business of the 10th day following the date on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such shareholder's notice shall set forth (i) as to each person whom such
shareholder proposes to nominate for election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the '34 Act, (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected), and (ii) as to the shareholder giving the notice (a) the
name and address, as they appear on the Company's share register, of such
shareholder and (b) the class and number of shares of the Company's capital
stock that are beneficially owned by such shareholder. At the request of the
Board, any person nominated by the Board for election as a director shall
furnish to the Corporate Secretary that information required to be set forth in
a shareholder's notice of nomination which pertains to the nominee. Notices to
the Corporate Secretary should be sent to
10
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Bruce A. Backberg, Corporate Secretary, The St. Paul Companies, Inc., 385
Washington Street, St. Paul, Minnesota 55102.
In its action appointing members of the foregoing committees, the Board of
Directors has designated each director who is not a member of a particular
committee as an alternate who may at any time, at the request of the chairman,
serve as a member of the committee.
BOARD AND COMMITTEE MEETINGS
During 1994, the Board of Directors met on six occasions. The board governance
committee met three times, the audit and executive compensation committees each
met five times, the personnel and finance committees each met four times, and
the executive committee met once.
ATTENDANCE AT MEETINGS
Attendance at 1994 Board and committee meetings combined averaged 96%. Each
director attended more than 75% of the combined total meetings of the Board and
committees of the Board on which the director served at any time during the
year.
SELECTION OF AUDITORS
The independent certified public accounting firm of KPMG Peat Marwick LLP, has
been selected by the Board of Directors upon recommendation of its audit
committee to act as the independent auditor for the Company and its subsidiaries
for the current fiscal year. At the Annual Meeting the shareholders will be
asked to ratify the Board of Directors' selection. The shares represented by the
accompanying proxy will be voted for the ratification of the selection of KPMG
Peat Marwick LLP unless otherwise specified by the shareholder. KPMG Peat
Marwick LLP, which has served as independent auditor of the Company and its
subsidiaries since 1968, is expected to have a representative present at the
Annual Shareholders' Meeting. The representative will have an opportunity to
make a statement at the meeting and will also be available to respond to
appropriate questions of the shareholders.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PROGRAM PHILOSOPHY
The guiding philosophies of The St. Paul Companies' executive compensation
program are to:
- Provide an industry-competitive
compensation program, with an emphasis on incentive pay which links
pay to performance, both long- and short-term, and which provides the
opportunity to earn compensation above the competitive market when the
Company's performance exceeds that of its peers.
- Ensure that executive compensation,
over time, closely reflects long-term shareholder return.
The compensation of the Company's top executives is reviewed and approved by the
executive compensation committee, which is comprised ENTIRELY OF NON-EMPLOYEE
DIRECTORS. The committee has access to compensation consultants and survey
information on executive compensation levels in the property-liability insurance
industry.
PROGRAM ELEMENTS
There are three elements of the Company's executive compensation program:
- Base salary compensation.
- Annual incentive compensation.
- Long-term incentive compensation.
11
<PAGE>
Base salary compensation for senior executives, including those listed in the
Summary Compensation Table, is targeted to be at the 50th percentile of
companies in our industry, such as Aetna, Chubb, CIGNA, Continental, USF&G,
Allstate, Crum & Forster, Travelers, Farmers Insurance, GEICO, CNA, Kemper,
Liberty Mutual, and Nationwide ("Base Target Salary"). The first five companies
listed are included in the group of companies used in the combined index of
companies included in the total return graph on page 18. Actual base salary
levels generally vary between 80%-120% of this level based upon the potential
impact the executive has on the Company, the skills and experiences the
executive brings to the job, and the performance and potential of the executive
in the job.
At the 1994 Annual Shareholders' Meeting, the 1994 Annual and Long-Term
Incentive Compensation Plans were approved for executive officers. These
compensation opportunities are set so that actual payouts are leveraged to the
Company's performance (e.g., below 50th percentile performance versus our
industry peers will generate below 50th percentile incentive compensation, while
75th percentile or above performance will yield 75th percentile or above
incentive compensation).
Annual incentive compensation for executives is based on established performance
goals, primarily corporate earnings per share and business unit operating
performance, and also includes an overall assessment by the executive
compensation committee of each executive's performance. Maximum annual incentive
opportunities for executives range from 50%-105% of annual base salary.
Long-term incentive compensation consists of a three-year cash incentive plan, a
stock option plan and restricted stock. Long-term incentive compensation is
offered only to those key executives who can make a material impact on the
Company's long-term performance.
- Long-term cash incentive awards are
currently earned based on the Company's three-year financial
performance as measured by return on equity and total shareholder
return as compared to a peer group of 12 companies(1) in our industry
(the "Peer Group"). Eighteen officers participate in this plan.
- The number of stock options
awarded to an executive is based on the executive's target option
level and the following factors, which are listed in order of relative
importance: the Company's return on equity and total shareholder
return, individual performance, individual responsibilities and
individual potential. Target option levels are established in
accordance with industry norms, as determined by an independent
compensation consultant. Grants generally range between 50%-150% of
the target levels, based on the factors listed above. Currently,
neither the number of options previously granted to nor the options
currently held by a potential recipient is considered when grants are
awarded. Stock options to individuals are limited. Stock options are
granted at the fair market value on the date of
- ------------------------
(1)Aetna, AIG, Chubb, CIGNA, CNA, Continental, General Re, Lincoln National,
Ohio Casualty, Safeco, Travelers and USF&G. Allstate replaced Travelers
effective January 1, 1994.
12
<PAGE>
grant, carry a ten-year term, and, beginning with options granted in
1994, vest one year after grant date. Approximately 90 officers
participate in this plan.
- Restricted stock is used selectively to
attract and retain key executives. Over the last two years
approximately 14 officers have received restricted stock grants. The
total number of shares granted over the last two years was 59,884
shares.
$1 MILLION COMPENSATION LIMIT ON DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code prohibits the Company from deducting
executive compensation in excess of $1 million, unless certain standards are
met, to its Chief Executive Officer or to any of the other four executive
officers named in the Summary Compensation Table. The Committee has determined
that it will make every reasonable effort, consistent with sound executive
compensation principles and the needs of the Company, to ensure that all amounts
paid to the Company's Chief Executive Officer or to any of the other named
executive officers are deductible by the Company.
CEO COMPENSATION
The methods for determining Mr. Leatherdale's Base Target Salary and
opportunities under the Company's annual and long-term incentive compensation
plans are described in the "Program Elements" section of this report.
Mr. Leatherdale's annualized base salary was $685,000 at the beginning of 1995.
In March of 1995, he received a salary increase of $65,000 per year. This salary
increase, which sets Mr. Leatherdale's salary at 107% of his Base Target Salary,
was based primarily on the Company's profitability in 1994.
Mr. Leatherdale has an annual incentive award maximum of 105% of base salary.
For 1994, Mr. Leatherdale received an annual incentive award of $623,350. The
award was based upon the Company's 1994 operating earnings of $4.60 per share
and the Board's overall assessment of his and the Company's performance.
Mr. Leatherdale received a $227,238 payout from the long-term cash incentive
plan in March of 1995. This payout was based on the Company's 1992-1994 return
on equity and total shareholder return, which ranked third and sixth,
respectively, as compared to the Peer Group.
On February 7, 1995, Mr. Leatherdale was granted 51,000 stock options with an
exercise price of $47.875 per share. The number represents 150% of his target
option level, based on the previously described factors. Mr. Leatherdale's 1994
grant of 44,200 options represents 130% of his target level. Factors considered
in determining the size of the grant include the following, in order of relative
importance: the Company's return on equity and total shareholder return,
individual performance, individual responsibilities and individual potential.
OTHER NAMED OFFICER COMPENSATION
The other four named executive officers received salary increases ranging from
$15,000 to $50,000 effective in March of 1995. Those executive officers received
annual incentive awards for 1994 ranging from $113,950 to $312,000. They
received long-term incentive payouts ranging from $40,002 to $98,002, and stock
option grants, ranging from 12,000 to 30,000 shares. The criteria for payouts
and grants under these plans are the same as for the CEO. In addition, Mr.
Douglass was awarded 4,000 restricted shares.
The preceding report was issued by the Executive Compensation Committee
comprised of M. Bonsignore (Chairman), P. Grieve, B. MacLaury, I. Martin and G.
Nelson.
13
<PAGE>
The following table sets forth the cash and non-cash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the four other most highly compensated executive officers of
the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------------- ------------
(E) (F) (G) (H)
OTHER RESTRICTED SECURITIES LONG-TERM (I)
(A) (C) (D) ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND PRINCIPAL (B) SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ SARS PLAN PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($)(2) ($) ($)(3) (#) ($)(4) ($)(5)
- ------------------ ---- -------- ------------ -------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. W. Leatherdale 1994 $670,856 $ 623,350 $ 59,246 44,200 $ 227,238 $ 129,452
Chairman, 1993 $611,450 $ 556,420 $ 0 18,000 $ 150,814 $ 81,318
President and 1992 $628,310 $ 0 $ 0 31,200 $ 134,917 $ 89,311
Chief Executive
Officer
P. A. Thiele 1994 $381,923 $ 312,000 $ 468,000 20,800 $ 98,002 $ 64,586
Executive Vice 1993 $313,654 $ 257,400 $ 0 15,000 $ 59,913 $ 38,344
President and 1992 $290,769 $ 0 $ 0 13,000 $ 49,324 $ 59,285
Chief Financial
Officer
N. M. Brown 1994 $341,346 $ 189,000 $ 338 $ 0 8,000 $ 64,359 $ 79,425
Executive Vice 1993 $113,750 $ 162,500 $14,261 $ 541,500 0 $ 18,240 $ 212,537
President and 1992 $ 0 $ 0 $ 0 0 $ 0 $ 0
Chief Operating
Officer--St. Paul
Fire and Marine
Ins. Co.
J. F. Duffy 1994 $285,769 $ 144,000 $21,806 $ 0 16,000 $ 80,499 $ 416,396
President--St. 1993 $250,000 $ 133,333 $ 0 8,000 $ 54,337 $ 32,913
Paul Reinsurance 1992 $259,616 $ 0 $ 0 5,000 $ 50,160 $ 34,975
A. I. Douglass 1994 $259,815 $ 113,950 $32,174 $ 0 5,000 $ 40,002 $ 330,485
Senior Vice 1993 $91,353 $ 75,000 $11,506 $ 179,250 0 $ 13,264 $ 153,503
President and 1992 $ 0 $ 0 $ 0 0 $ 0 $ 0
General Counsel
<FN>
- ------------------------------
(1) Salaries in 1994 and 1993 reflect 26 pay periods and salaries in 1992
reflect 27 pay periods.
(2) Amounts shown were earned in the year indicated and paid under the annual
incentive program in the immediately following year.
(3) As of December 31, 1994, Messrs. Leatherdale, Thiele, Brown, and Douglass
held 1,524, 16,000, 8,000 and 3,000 shares respectively, having market
values of $68,199, $716,000, $358,000 and $134,250 respectively. Mr.
Leatherdale's restricted shares were received in 1994 by acquisition of
shares through the Executive Stock Ownership Program. Under the terms of
that award, the shares vest in three years, upon the condition that he
continues to be employed by the Company. Mr. Thiele was granted shares in
1991 and 1994. Under the terms of his 1991 award, 2,000 shares will vest
in each of 1995 and 1996 if he is then employed by the Company; for his
1994 award, 4,000 shares will vest in
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
each of 1997, 1998 and 1999 if he is then employed by the Company. Mr.
Brown's restricted shares were received in 1993 as part of a total award
of 12,000 shares. Under the terms of that award, 4,000 shares vest each
year, upon the condition he is then employed with the Company. Mr.
Douglass' restricted shares were received in 1993 as part of a total award
of 4,000 shares. Under the terms of that award, 1,000 shares vest each
year, upon the condition he is then employed with the Company. In the
event of a Change of Control (defined the same as in the 1994 Stock
Incentive Plan as described on page 6) of the Company, restrictions on all
such restricted shares will lapse and such shares will be fully vested.
Recipients of restricted stock awards are entitled to receive any
dividends paid on the shares.
(4) Amounts shown were earned based on Company performance over a rolling
three-year period ending in the year indicated. Payouts occurred in the
following year.
(5) Amounts shown in this column for the fiscal year ending December 31, 1994
consist of the following:
Savings Plus Preferred Stock Fund contributions (in the form of Series B
convertible preferred stock and cash, under the Preferred Stock Fund and
Benefit Equalization Plan, respectively) were made in the following
amounts for each executive officer: Mr. Leatherdale $22,012; Mr. Thiele
$11,880; Mr. Brown $11,700; Mr. Duffy $9,000 and Mr. Douglass $9,000.
Common stock, with a fair market value of $11,671 on December 31, 1994,
was allocated by the Company under the Employee Stock Ownership Plan
(ESOP) to the ESOP accounts of Messrs. Leatherdale, Thiele, Brown, Duffy
and Douglass.
Cash payments were made by the Company to each of the named executive
officers in the amount of $79,785 for Mr. Leatherdale, $37,253 for Mr.
Thiele, $25,723 for Mr. Brown, $20,490 for Mr. Duffy, and $13,154 for Mr.
Douglass in order to compensate for a portion of their ESOP award which
could not be granted in stock under the ESOP plan due to U. S. tax law.
Under the Company's Executive Post-Retirement Life Insurance Plan,
insurance premiums were paid on behalf of each named executive officer in
the amount of $15,983 for Mr. Leatherdale, $3,781 for Mr. Thiele, $5,713
for Mr. Duffy and $47,463 for Mr. Douglass. The plan does not involve a
split-dollar arrangement.
During 1994 Mr. Brown ($30,330), Mr. Duffy ($359,385), and Mr. Douglass
($249,196) received reimbursement payments related to their relocations.
In addition, Mr. Duffy received an interest free relocation loan valued at
$10,135 for 1994 (based on the amount of interest that would have accrued
had the loan been made at the Prime Lending Rate in effect on the date of
the loan).
In 1993 Mr. Brown and Mr. Douglass received initial employment payments
and were reimbursed for expenses related to their relocations.
</TABLE>
15
<PAGE>
The following tables summarize option grants and stock appreciation rights
(SARs) and exercises during fiscal 1994 to or by the executive officers named in
the Summary Compensation Table and the value of the options held by such persons
at the end of fiscal 1994.
OPTION & SAR GRANTS IN 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
(C) AT ASSUMED ANNUAL RATES OF
(B) % OF TOTAL STOCK PRICE APPRECIATION
SECURITIES OPTIONS FOR
UNDERLYING AND SARS (D) OPTION TERM (2)
OPTIONS/ SARS GRANTED TO EXERCISE OR (E) --------------------------
(A) GRANTED (1) EMPLOYEES BASE PRICE EXPIRATION (F) (G)
NAME (NUMBER) IN 1994 ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- ------------------ ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D. W. Leatherdale 44,200 options 7.8% $ 43.1875 01/31/04 $ 1,200,073 $ 3,040,982
P. A. Thiele 20,800 options 3.7% $ 43.1875 01/31/04 $ 564,740 $ 1,431,050
N. M. Brown 8,000 options 1.4% $ 43.1875 01/31/04 $ 217,208 $ 550,404
J. F. Duffy 16,000 options 2.8% $ 43.1875 01/31/04 $ 434,416 $ 1,100,808
A. I. Douglass 5,000 options 0.9% $ 43.1875 01/31/04 $ 135,755 $ 344,002
<FN>
- ------------------------
(1) Options were granted February 1, 1994 and have a one-year vesting period.
However, all options will become immediately vested and exercisable in
full upon a Change of Control (defined the same as in the 1994 Stock
Incentive Plan as described on page 6) of the Company. No SARs were
granted in 1994.
(2) Assumes options are held until the last date exercisable (1/31/04) and
that the stock price has appreciated at compound annual rates of 5%
[column (F)] and 10% [column (G)]. Any such percentage increase would
benefit all shareholders in the same manner.
</TABLE>
AGGREGATED OPTION AND SAR EXERCISES IN 1994 AND 12-31-94 YEAR END
OPTION/SAR VALUES (1)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/ OPTIONS AND SARS AT
SARS AT 12/31/94 (#) 12/31/94 ($)
SHARES ACQUIRED ON VALUE EXERCISABLE(EX)/ EXERCISABLE(EX)/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE(UNEX) UNEXERCISABLE(UNEX)
- ---------------------------------------- ------------------ ------------ ---------------------- -------------------
<S> <C> <C> <C> <C>
D. W. Leatherdale 8,162 1$33,673 107,728(ex) 1$,235,110(ex)
44,200(unex) $ 69,062(unex)
P. A. Thiele 0 $ 0 41,710(ex) $400,306(ex)
20,800(unex) $ 32,500(unex)
N. M. Brown 0 $ 0 0(ex) $ 0(ex)
8,000(unex) $ 12,500(unex)
J. F. Duffy 0 $ 0 40,980(ex) $559,877(ex)
16,000(unex) $ 25,000(unex)
A. I. Douglass 0 $ 0 0(ex) $ 0(ex)
5,000(unex) $ 7,812(unex)
<FN>
- ------------------------
(1) No SARs were outstanding during 1994.
</TABLE>
16
<PAGE>
The following table shows each potential Long-Term Incentive Plan award made to
the executive officers named in the Summary Compensation Table for the 1994
fiscal year.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
(B) (C) ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE NON-STOCK PRICE-BASED PLANS
SHARES, OR OTHER -----------------------------------
UNITS, OR PERIOD UNTIL (D) (E) (F)
(A) OTHER RIGHTS MATURATION OR THRESHOLD TARGET MAXIMUM
NAME (#) PAYOUT ($) ($) ($)
- --------------------- ------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
D. W. Leatherdale -- 12/31/96 $ 41,325 $ 213,513 $ 344,375
P. A. Thiele -- 12/31/96 $ 17,825 $ 92,097 $ 148,544
N. M. Brown -- 12/31/96 $ 17,797 $ 91,950 $ 148,307
J. F. Duffy -- 12/31/96 $ 14,153 $ 73,122 $ 117,939
A. I. Douglass -- 12/31/96 $ 10,915 $ 56,393 $ 90,957
</TABLE>
These potential threshold, target and maximum awards under the Company's
Long-Term Incentive Plan are based on the executives' current and estimated
target salary levels. The goals for the applicable performance cycle are based
on a performance standard which is weighted 40% on the Company's return on
common equity and 60% on total shareholder return compared to that of the Peer
Group over a three-year time period ending December 31, 1996. Awards earned are
paid in cash during the quarter following the end of the applicable performance
cycle.
The following table shows estimated annual benefits payable upon retirement at
age 65 under all defined benefit plans of the Company.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 125,000 $33,750 $45,000 $56,250 $67,500 $67,500
$ 150,000 40,500 54,000 67,500 81,000 81,000
$ 175,000 47,250 63,000 78,750 94,500 94,500
$ 200,000 54,000 72,000 90,000 108,000 108,000
$ 225,000 60,750 81,000 101,250 121,500 121,500
$ 250,000 67,500 90,000 112,500 135,000 135,000
$ 300,000 81,000 108,000 135,000 162,000 162,000
$ 350,000 94,500 126,000 157,500 189,000 189,000
$ 400,000 108,000 144,000 180,000 216,000 216,000
$ 450,000 121,500 162,000 202,500 243,000 243,000
$ 500,000 135,000 180,000 225,000 270,000 270,000
$ 1,000,000 270,000 360,000 450,000 540,000 540,000
$ 1,500,000 405,000 540,000 675,000 810,000 810,000
</TABLE>
All of the executive officers named in the Summary Compensation Table
participate in the Company's defined benefit pension plans. The amount of their
remuneration which is covered by the plans is the amount set forth in columns
(C) and (D) of the Summary Compensation Table. Plan benefits are calculated on
the basis of a life annuity and are subject to integration with Social Security.
Certain highly compensated Company employees may be entitled to slightly
increased benefits under the plans, based on a formula of 55% of final average
compensation prorated over 30 years, without any integration with Social
Security (including Messrs. Leatherdale and Duffy). Based on those calculations,
Messrs. Leatherdale and Duffy may be entitled to increased benefit amounts of
approximately
17
<PAGE>
1% more than benefits represented in the Pension Plan Table. These differing
payments are the result of their pension benefits being grandfathered under a
pension plan formula which was in place prior to 1989. The formula was changed
in 1989 to comply with Internal Revenue Code requirements. The current number of
credited years of service for those officers is as follows: Mr. Leatherdale-23;
Mr. Thiele-15; Mr. Brown-1; Mr. Duffy-13; and Mr. Douglass-1. Retirement
benefits for Messrs. Leatherdale, Thiele and Duffy are fully vested. Messrs.
Brown and Douglass have also been given pension credit for their service with
their previous employers.
SPECIAL SEVERANCE POLICY
Under the Company's Special Severance Policy ("Policy") severance benefits would
be provided to eligible employees of the Company, including all of the executive
officers named in the Summary Compensation Table (the "Named Executives"), in
the event their employment terminates under certain conditions within two years
following a Change of Control. Change of Control is generally defined the same
as in the 1994 Stock Incentive Plan, as described on page 6. If the employment
of any Named Executive is terminated within two years after a Change of Control
by the employer other than for Cause or employment is terminated by the employee
for Good Reason, the Named Executive would become entitled to certain benefits.
Under the Policy the term "Cause" is defined as conviction of willfully engaging
in illegal conduct constituting a felony or gross misdemeanor which is
materially injurious to the employer, willful and continued failure to perform
duties after a written demand, and permanent disability. "Good Reason" is
defined to include such situations as an adverse change in status or position as
a result of a material diminution in duties or responsibilities, the refusal to
allow the Named Executive to engage in outside activities that were not
prohibited before the Change of Control, a reduction in the employee's rate of
compensation, job relocations of a certain type and failure to maintain benefits
that are substantially the same as are in effect when the Change of Control
occurs.
The following is a summary of the severance benefits provided to Named
Executives under the Policy:
1. A Named Executive Officer will receive a lump sum severance payment
equal to 299% of his or her "annualized includible compensation for the
base period" (as defined in Section 280G of the Internal Revenue Code).
2. Participation will be continued for three years in those medical,
dental, disability and life insurance programs in which the Named
Executive participated on the date employment terminated.
3. Outplacement assistance will be provided.
4. All payments to Named Executives are subject to reduction so that no
amount will be subject to the federal excise tax on "excess parachute
payments" imposed by Section 4999 of the Internal Revenue Code.
The Policy is subject to amendment or termination without the consent of the
Named Executives at any time prior to a Change of Control. After a Change of
Control, there are restrictions applicable to the amendment or termination of
the Policy.
18
<PAGE>
If, prior to August 2, 1996, Mr. N. M. Brown's employment with the Company is
terminated for any reason other than malfeasance, the Company will pay to him
three times his annual cash compensation.
The following graph shows a five-year comparison of cumulative total returns for
the Company, the S&P 500 composite index and an index of peer companies selected
by the Company.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
THE ST. PAUL COMPANIES, INC.
S&P 500 INDEX AND COMBINED S&P PROPERTY-CASUALTY AND
MULTILINE INSURANCE INDEXES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
12/31/89 1990 1991 1992 1993 12/31/94
<S> <C> <C> <C> <C> <C> <C>
St. Paul 100 110.67 133.65 146.35 176.55 182.34
S&P 500 100 96.9 126.42 136.05 149.76 151.74
Combined S&P Property Casualty and Multiline Insurance
Indexes 100 88.5 114.8 131.27 139.25 145.11
</TABLE>
Assumes $100 invested on December 31, 1989.
Companies in the combined S&P Property-Casualty and Multiline Insurance Indexes
are as follows: The St. Paul Companies, Inc., SAFECO Corporation, General Re
Corporation, Continental Corporation, USF&G Corporation, The Chubb Corporation,
Aetna Life and Casualty Company, American International Group, Inc., and CIGNA
Corporation. Returns of each of the companies included in the combined index
have been weighted according to their respective market capitalizations. This
group of companies closely approximates the Peer Group against which the Company
compares its performance under its Long-Term Incentive Plan.
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
capital stock of the Company by each person known to own 5% or more of the
outstanding shares of each class of the Company's capital stock, each director
nominee of the Company, each of the executive officers of the Company included
in the Summary Compensation Table, and all director nominees and executive
officers of the Company as a group. Except as otherwise indicated, the
shareholders indicated in the table have sole voting and investment powers with
respect to the capital stock owned by them.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF CLASS OF
AMOUNT AND NATURE CLASS SERIES B
OF BENEFICIAL OF COMMON CONVERTIBLE
BENEFICIAL OWNER OWNERSHIP STOCK PREFERRED STOCK (7)
- ------------------------------------------------------------ ------------------- ---------- --------------------
<S> <C> <C> <C>
First Bank System, Inc. 6,744,995(1) 8.02 0
and Subsidiaries
601 2nd Avenue South
Minneapolis, MN 55402
The Capital Group, Inc. 6,276,100(2) 7.46 0
333 South Hope Street
Los Angeles, CA 90071
Delaware Management 4,707,312(3) 5.59 0
Company, Inc.
10 Penn Center Plaza
Philadelphia, PA 19103
State Street Bank 4,966,251(4) 5.90(4) 100(4)
and Trust Company
P.O. Box 1992
Boston, MA 02105
Mellon Bank Corporation 4,815,000(5) 5.72 0
Mellon Bank Center
Pittsburgh, PA 15258
D. W. Leatherdale 236,927(6) * 0
P. A. Thiele 85,033(6) * 0
N. M. Brown 22,344(6) * 0
J. F. Duffy 80,911(6) * 0
A. I. Douglass 15,244(6) * 0
M. R. Bonsignore 4,673(6) * 0
J. H. Dasburg 1,000(6) * 0
W. J. Driscoll 13,673(6) * 0
P. M. Grieve 10,073(6) * 0
R. James 1,781(6) * 0
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF CLASS OF
AMOUNT AND NATURE CLASS SERIES B
OF BENEFICIAL OF COMMON CONVERTIBLE
BENEFICIAL OWNER OWNERSHIP STOCK PREFERRED STOCK (7)
- ------------------------------------------------------------ ------------------- ---------- --------------------
<S> <C> <C> <C>
W. H. Kling 6,673(6) * 0
B. K. MacLaury 5,033(6) * 0
I. A. Martin 1,800(6) * 0
G. D. Nelson, M.D. 7,079(6) * 0
A. M. Pampusch, Ph.D. 5,535(6) * 0
G. M. Sprenger 0 * 0
All Director Nominees and Executive Officers as a Group (27 800,732(6) * 0
Persons)
<FN>
- ------------------------
* Indicates ownership of less than 1% of the Company's outstanding common
stock.
(1) This figure, as of December 31, 1994, was reported in a Schedule 13G filed
with the Securities and Exchange Commission. With respect to those shares,
First Bank System, Inc. and its subsidiaries (together the "First Bank
System") had sole power to direct the vote of 1,907,601 shares, shared
power to direct the vote of 4,697,024 shares, sole power to direct the
disposition of 1,565,778 shares and shared power to direct the disposition
of 5,099,153 shares. Of the total beneficially owned by First Bank System,
First Trust National Association ("First Trust"), a subsidiary of First
Bank System, beneficially owned 2,108,950 shares in its capacity as
trustee of the Company's Employee Stock Ownership Plan Trust. First Trust
has advised the Company that no beneficiary of any account for which it
acts as fiduciary owns beneficially through such account as much as 5% of
the outstanding common stock of the Company.
(2) This figure, as of December 31, 1994, was reported in a Schedule 13G filed
with the Securities and Exchange Commission. With respect to those shares,
the Capital Group, Inc. and related investment funds had sole power to
direct the vote of 102,100 shares and sole power to direct the disposition
of 6,276,100 shares.
(3) This figure, as of December 31, 1994, was reported in a Schedule 13G filed
with the Securities and Exchange Commission. With respect to those shares,
Delaware Management Company, Inc. and related investment funds had sole
power to direct the vote of 3,253,800 shares, sole power to direct the
disposition of 4,531,712 shares and shared power to direct the disposition
of 175,600 shares.
(4) These figures, calculated as of February 22, 1995, are based on
information provided by State Street Bank and Trust ("State Street").
Included in these figures are 4,045,353 shares of the Company's common
stock issuable upon conversion of 1,011,348 shares of Series B convertible
preferred stock which State Street may be deemed to beneficially own in
its capacity as trustee of the Company's Savings Plus Preferred Stock
Ownership Trust.
(5) This figure, as of December 31, 1994, was reported in a Schedule 13G filed
with the Securities and Exchange Commission. With respect to those shares,
Mellon Bank Corporation had sole power to
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
direct the vote of 3,438,000 shares and sole power to direct the
disposition of 3,763,000 shares. Mellon Bank Corporation had shared power
to direct the vote of 34,000 shares and shared power to direct the
disposition of 1,052,000 shares.
(6) Under the Company's Stock Option Plan, the named executive officers and
director nominees have the right to acquire beneficial ownership of the
following number of shares within 60 calendar days: Mr.
Leatherdale--151,928; Mr. Thiele--59,280; Mr. Brown--8,000; Mr. Duf-
fy--56,980; Mr. Douglass--5,000; Mr. Bonsignore--3,000; Messrs. Driscoll,
Grieve, Kling and MacLaury--4,000 each; Dr. Nelson--2,000; Dr.
Pampusch--3,800; Messrs. James and Martin--1,000 each; and all director
nominees and executive officers as a group--523,168. These shares are
included in the totals shown for each individual and the group of all
director nominees and executive officers.
The following number of restricted shares are held, as of March 1, 1995,
by the Company under its Restricted Stock Award Plan, Stock Incentive
Plan, and Non-Employee Director Stock Retainer Plan, for the named
executive officers and director nominees: Mr. Leatherdale--1,524; Mr.
Thiele--16,000; Mr. Brown--8,000; Mr. Douglass--7,000; Dr.
Pampusch--1,135; Dr. Nelson--1,079; Mr. MacLaury--833; Mr. James--549; and
Messrs. Bonsignore, Driscoll, Grieve, and Kling--1,673 each. Those
director nominees and executive officers have sole voting power and no
investment power with respect to those shares.
Under the Company's Directors' Deferred Compensation Plan, participating
non-officer directors are eligible to defer directors' fees to prime rate
and/or common stock equivalent accounts. Directors electing common stock
equivalents have their deferred accounts credited with the number of
common shares of the Company which could have been purchased with the fees
on the date they were deferred. This is a "phantom" arrangement and no
common shares are actually purchased or held for any director's account.
However, dividends on phantom shares are credited to participating
directors' accounts, and the value of a participating director's common
stock account fluctuates with changes in the market value of the Company's
common stock. As of December 31, 1994, the following directors had phantom
shares credited to their common stock accounts in this plan: Mr.
Bonsignore--1,746 shares; Mr. Grieve--10,737 shares; Mr. MacLaury--999
shares; and Dr. Pampusch--710 shares. Under the Company's Employee Stock
Ownership Plan (ESOP), the following number of shares of common stock have
been allocated to the ESOP accounts of the following executive
officers--Mr. Leatherdale--3,263; Mr. Thiele--2,450; Mr. Brown--260; Mr.
Duffy--2,707; Mr. Douglass--260; and all executive officers as a
group--29,991. These shares are included in the totals shown for each
executive officer and for all executive officers as a group. Employees
(including executive officers) have sole voting power and no investment
power over shares allocated to their ESOP accounts, except that
participants age 55 and over may elect to diversify a portion of their
ESOP account into investments offered through the Savings Plus Plan or
otherwise.
(7) Under the Company's Savings Plus Preferred Stock Ownership Plan (PSOP) the
following number of Series B convertible preferred shares have been
allocated to the PSOP accounts of the following executive officers: Mr.
Leatherdale--91 shares; Mr. Thiele--162 shares; Mr. Brown--20 shares; Mr.
Duffy--100 shares; Mr. Douglass--20 shares; and all executive officers as
a group--1,633 shares. Each share of Series B preferred stock is
convertible into and votes as if it
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
were four shares of the Company's common stock. These shares, as if
converted to common stock, are included in the totals shown for each
executive officer and for all executive officers as a group. Employees
(including executive officers) have sole voting power and no investment
power over shares allocated to their PSOP accounts. In addition, under the
Company's Benefit Equalization Plan, the following number of "phantom"
Series B convertible preferred shares have been allocated to the accounts
of the following executive officers: Mr. Leatherdale--459 shares; Mr.
Thiele--96 shares; Mr. Brown--46 shares; Mr. Duffy--143 shares; Mr.
Douglass--30 shares; and all executive officers as a group--1,197 shares.
</TABLE>
SHAREHOLDER PROPOSALS--1996 ANNUAL MEETING
If any shareholder wishes to propose a matter for consideration at the Company's
Annual Meeting of Shareholders scheduled to be held on May 7, 1996, the proposal
should be mailed by Certified Mail-Return Receipt Requested to the Company's
Corporate Secretary, 385 Washington Street, St. Paul, Minnesota 55102. A
proposal must be received by the Company by November 15, 1995 in order to be
considered for inclusion in the Company's 1996 Annual Meeting Proxy Statement
and form of proxy to be mailed in March of 1996.
OTHER BUSINESS
The Board of Directors does not know of any other matters to be brought before
the meeting. If other matters are presented, the proxy holders have
discretionary authority to vote all proxies in accordance with their best
judgment.
[SIGNATURE]
Bruce A. Backberg St. Paul, Minnesota
Vice President and March 15, 1995
Corporate Secretary
By Authority of the
Board of Directors
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1994, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO,
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE WITHOUT
CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST ADDRESSED TO:
BRUCE A. BACKBERG
VICE PRESIDENT AND CORPORATE SECRETARY
THE ST. PAUL COMPANIES, INC.
385 WASHINGTON STREET
ST. PAUL, MINNESOTA 55102
23
