<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
OLD GUARD GROUP, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
2929 Lititz Pike
P.O. Box 3010
Lancaster, Pennsylvania 17604-3010
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 2000
To the Shareholders of Old Guard Group, Inc.:
Notice is hereby given that the Annual Meeting (the "Meeting") of the
holders of Common Stock (the "Common Stock") of Old Guard Group, Inc. (the
"Company") will be held at the Quality Inn & Suites, located at 2363 Oregon
Pike, Lancaster, Pennsylvania on Thursday, May 11, 2000, at 10:00 a.m., local
time:
1. To elect three Class I directors to hold office for three years from the
date of election and until their successors shall have been elected and
qualified (Matter No. 1);
2. To ratify the appointment by the Company's Board of Directors of
PricewaterhouseCoopers L.L.P. as the Company's independent auditors for the
fiscal year ending December 31, 2000 (Matter No. 2);
3. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
Holders of record of issued and outstanding shares of Common Stock at the
close of business on March 15, 2000 are entitled to notice of, and to vote at,
the Meeting. Such shareholders may vote in person or by proxy.
The Board of Directors of the Company cordially invites you to attend the
Meeting. Whether or not you are personally present, it is important that your
shares be represented at the Meeting. Accordingly, please sign and return your
proxy in the enclosed envelope.
By Order of the Board of Directors,
[LOGO]
Steven D. Dyer,
Secretary
Dated: Lancaster, Pennsylvania
April 10, 2000
SHAREHOLDERS ARE URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY IN
THE ACCOMPANYING ENVELOPE. THE PROXY IS REVOCABLE AT ANY TIME BY A WRITTEN
INSTRUMENT, INCLUDING A LATER DATED PROXY, SIGNED IN THE SAME MANNER AS THE
PROXY AND RECEIVED BY THE SECRETARY OF THE COMPANY AT OR BEFORE THE MEETING. IF
YOU ATTEND THE MEETING, YOU MAY, IF YOU WISH, REVOKE YOUR PROXY BY VOTING IN
PERSON.
<PAGE>
[LOGO]
2929 LITITZ PIKE
P.O. BOX 3010
LANCASTER, PENNSYLVANIA 17604-3010
Proxy Statement
for Annual Meeting
May 11, 2000
GENERAL
INTRODUCTION
Old Guard Group, Inc. (the "Company") is a Pennsylvania business corporation
headquartered at 2929 Lititz Pike, Lancaster, Pennsylvania 17604. The Company
owns all of the capital stock of Old Guard Insurance Company ("Old Guard"), Old
Guard Fire Insurance Company ("Old Guard Fire"), and First Patriot Insurance
Company ("First Patriot" and collectively with Old Guard and Old Guard Fire the
"Insurance Companies"), 80% of the capital stock of First Delaware Insurance
Company ("First Delaware"), and 100% of the capital stock of Investors Southern
Corporation ("Investors Southern"). The Company also owns, directly and
indirectly, interests in other insurance related entities.
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company to be used at the Annual
Meeting of the holders of the Common Stock of the Company (the "Common Stock")
to be held at the Quality Inn & Suites, located at 2363 Oregon Pike, Lancaster,
Pennsylvania, at 10:00 a.m., local time, on Thursday, May 11, 2000, and at any
adjournment thereof. The approximate date upon which this Proxy Statement and
the accompanying proxy were first sent, given or otherwise made available to
shareholders was April 10, 2000. In addition to the use of the mails, proxies
may be solicited by personal interview and telephone by directors, officers and
employees of the Company and its subsidiaries. The Company will pay all costs of
soliciting proxies.
VOTING SECURITIES
Holders of record of the Common Stock at the close of business on March 15,
2000 (the "Record Date") are entitled to notice of, and to vote at, the Meeting.
At the Meeting, each shareholder is entitled to one vote for each share of
Common Stock registered in the shareholder's name at the close of business on
the Record Date. On the Record Date, there were 3,707,741 shares of Common Stock
outstanding. Holders of Common Stock are not entitled to cumulate votes in
elections of directors.
1
<PAGE>
If the enclosed form of proxy is appropriately marked, signed and returned
in time to be voted at the Meeting, the shares represented by the proxy will be
voted in accordance with the instructions marked thereon. Signed proxies not
marked to the contrary will be voted "FOR" the election of the nominees of the
Company's Board of Directors and "FOR" the ratification of
PricewaterhouseCoopers L.L.P. as the Company's independent auditors for 2000.
Signed proxies will be voted "FOR" or "AGAINST" any other matter that properly
comes before the Meeting or any adjournment thereof, at the discretion of the
persons named as proxyholders. As of March 30, 2000, no other matters have been
proposed for consideration at the Meeting, except as set forth above.
RIGHT OF REVOCATION
Any shareholder giving a proxy has the power to revoke it by a written
instrument, including a later dated proxy, signed in the same manner as the
proxy and received by the Secretary of the Company prior to its exercise. Any
shareholder attending the Meeting may also revoke his proxy by voting in person
at the Meeting.
QUORUM
Under the Company's Bylaws, the presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast will constitute a quorum for the transaction
of business at the Meeting.
2
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information, as of the Record Date, as to
beneficial owners, either directly or indirectly, of 5% or more of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP CLASS PERCENT
- ------------------- ----------------- -------------
<S> <C> <C>
Bank of Lancaster County, N.A., 399,975(1) 10.79%
Trustee of the Old Guard Group, Inc.
Employee Stock Ownership Plan Trust
Under Old Guard Group, Inc.
Employee Stock Ownership Plan Trust
Agreement dated January 1, 1997
c/o Trust Technical Services
1097 Commercial Avenue
P.O. Box 38
East Petersburg, PA 17520-0038
Gotham Capital V, LLC 392,442(2) 10.58%
Gotham Capital VI, LLC
Gotham Capital VII, LLC
Joel M. Greenblatt,
100 Jericho Quadrangle
Suite 212
Jericho, NY 11753
American Re-Insurance Company 300,700 8.11%
100 Campus Drive
P.O. Box 939
Florham Park, NJ 07932-0939
Pequod Investments, L.P. 200,000(3) 5.39%
Pequod International, Ltd.
Jonathan Gallen
450 Park Avenue, 28(th) Floor
New York, NY 10022
Jewelcor Management, Inc. 191,600(4) 5.17%
Seymour Holtzman
Evelyn Holtzman
S.H. Holdings, Inc.
Jewelcor, Inc.
100 North Wilkes-Barre Blvd.
Wilkes-Barre, PA 18702
</TABLE>
- ------------------------
(1) As of the Record Date, 399,975 shares of Common Stock were held of record
by a nominee for the Bank of Lancaster County, N.A., trustee for the Old Guard
Group, Inc. Employee Stock Ownership Plan (the "ESOP"). Shares held by the ESOP
that are allocated to an individual participant account for which no direction
is given and unallocated shares are voted for or against all matters in the same
proportion as allocated shares for which direction has been received. As of
December 31, 1999, 77,321 shares of Common Stock had been allocated to the
accounts of ESOP participants.
3
<PAGE>
(2) Joel M. Greenblatt is the manager of Gotham Capital V, Gotham Capital VI,
and Gotham Capital VII and in his capacity as manager possesses sole power to
vote and direct the disposition of the shares.
(3) Jonathan Gallen is the managing member of Pequod, L.L.C., which is the
general partner of Pequod Investments L.P., and Mr. Gallen is also President of
Ahab Capital Management, which is an investment advisor to Pequod
International, Ltd., and in those capacities possesses sole power to vote and
direct the disposition of the shares.
(4) Jewelcor Management, Inc. ("JMI") is a wholly-owned subsidiary of S. H.
Holdings, Inc. Seymour Holtzman and Evelyn Holtzman, his wife, own, as tenants
by the entirety, a controlling interest of S. H. Holdings, Inc. By virtue of
Mr. and Mrs. Holtzman's ownership interest in S. H. Holdings, Inc. and the
relationships among S. H. Holdings, Inc., Jewelcor, Inc. and JMI, each of the
reporting persons may be deemed to be the beneficial owners of the securities
held by JMI.
INFORMATION CONCERNING THE BOARD OF DIRECTORS,
THE COMPANY'S GOVERNANCE PROCEDURES
AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Articles of Incorporation provide that the number of Company
directors shall consist of not less than six nor more than twenty-five members,
as fixed by the Board of Directors from time to time. The Articles also divide
the Board into three classes, which under applicable law, must be, in terms of
the number of directors in each class, as nearly equal as possible. The Board
presently consists of eleven members, but will consist of nine members after the
election to be held at the 2000 Annual Meeting of Shareholders.
Consistent with its perception of good principles of corporate governance,
the Company historically has required that the preponderance of its Board
consist of outside, non-employee directors, and has delegated important policy
making and oversight functions to committees which also consist predominantly of
outside directors. A description of the committees which possess significant
corporate governance responsibilities is set forth below.
* The Company's Audit Committee consists of four directors, all of whom
are outside directors. The Company's Audit Committee serves as the
principal liaison among the Board of Directors, the Company's independent
certified public accountants and the Company's internal audit function.
It is responsible for, among other things, reporting to the Company's
Board on the results of the annual audit. The Committee reviews and
evaluates the scope of the audit, accounting policies and reporting
practices, internal auditing, internal controls, security procedures and
other matters considered appropriate. The Committee also reviews the
performance of the Company's independent certified public accountants in
connection with their audit of the Company's financial statements.
Importantly, from a corporate governance perspective, the Audit Committee
also evaluates the independent certified public accountants' independence
from the Company and the Company's management. Depending on the nature of
matters under review, the outside auditors, and such officers and other
employees, as necessary, attend all or part of the meetings of the
Committee. The Company's Audit Committee met four (4) times during 1999.
* The Company's Nominating Committee consists of three directors, all of
whom are outside directors. The Company's Bylaws provide for both
shareholder and Board nomination of director candidates. The Committee
has the important task of taking the first step toward assuring good
corporate governance by identifying, reviewing and recommending, to the
full Board, potential nominees for submission to the Company's
shareholders for election as directors of the Company or for election to
fill vacancies on the Board. The Committee strives to identify, review
and recommend only those nominees who appear to possess (i) the highest
4
<PAGE>
personal and professional ethics, integrity and values; (ii) sufficient
education and breadth of experience to understand, evaluate and suggest
solutions to the many problems facing insurance companies in an
increasingly competitive environment; (iii) a reasoned and balanced
commitment to the Company's social responsibilities; (iv) an interest in
and the availability of time to be involved in the Company's affairs over
a sustained period; (v) the reputation and stature required to represent
the Company in the communities the Company serves, as well as before the
Company's shareholders and other stakeholders; (vi) a willingness to
objectively appraise management performance in the interest of the
Company and its stakeholders; (vii) an open mind on all policy issues
affecting the overall interests of the Company and its stakeholders; and
(viii) involvement only in other activities or interests which do not
create a conflict, or the appearance of a conflict, with the director's
responsibilities to the Company and its stakeholders. The Committee's
review of candidates is performed without regard to gender, race or
religious affiliation. One of the objectives of this review is to have a
Board that consists of members with diverse backgrounds, skills,
experiences and personalities which will foster, not only good decision
making, but also the chemistry to create an environment encouraging
active, constructive, and informed participation among Board members. The
Committee met two (2) times during 1999.
* The Company's Compensation Committee consists of four directors, all of
whom are outside directors. This Committee is responsible for the
important task of studying and making recommendations to the Board on
compensating and providing incentives to executive management,
principally the Company's Chief Executive Officer. Among other
responsibilities, the Committee makes appraisals of the performance of
the Chief Executive Officer. In addition, the Committee reviews the
Company's executive compensation structure in an effort to insure that
executive compensation (i) is competitive and (ii) is closely linked to
the Company's financial performance. The Committee also attempts to
assure, through programs which are substantially weighted in favor of the
use of Company stock as a compensation medium, that the interests of
executive management are aligned, to the extent practicable, with the
interests of the Company's shareholders. This Committee met seven
(7) times during 1999.
Also consistent with its perception of good corporate governance, the
Company's Board, working with management, has established a series of practices
and procedures to assure a flow of information about the Company's business to
its directors in an effort to maximize continued active interest, involvement
and participation by Board members, as well as diligent and effective Board
decision making.
New Company directors receive information on the Company's vision, mission,
values and style, as well as copies of the Company's bylaws, policies,
procedures and guidelines. They are also provided with an opportunity to meet
with the Company's management and visit the Company's facilities.
Pre-meeting materials are routinely distributed to Board members in advance
of meetings. These materials include reports of the Company's major business
units, consisting not only of financial data, but also production, sales and
marketing data and information on market and industry trends, as well. These
materials also include background and write-ups on items coming before the
Board.
Senior and executive officers routinely attend at least a portion of every
Board meeting and they, and other members of management, frequently brief and
seek advice from the Board, not only on items coming before the Board, but also
on new products, marketing strategies and human resource initiatives. The Board
periodically invites professionals and representatives of securities firms to
make presentations to the Board in order to make the Board more aware, among
other things, of investor perceptions of the Company. Board members take these
and other opportunities to actively discuss Company-specific and
industry-specific information and trends with these officers and other visitors.
5
<PAGE>
The Company's Board of Directors has adopted a policy that requires the
Board to meet annually for the sole purpose of reviewing the Company's business
plans and corporate strategy and to evaluate the Company's strengths,
weaknesses, opportunities and threats in a changing marketplace. Specifically,
the Board meets with senior management and reviews the Company's progress
against Board established strategy and goals. In connection with this review,
the Company extensively studies its strategic alternatives, including continuing
its current strategy, engaging in a merger of equals, or sale. As part of the
review process, the Company expects that the Board will periodically seek the
advice of investment banking firms and industry consultants to assess the
Company's competitive position, the viability of its corporate strategy and the
execution of this strategy. As a result of its most recent review, the Company
has engaged Cochran, Caronia & Co, a full service investment banking firm
specializing in the insurance industry, to explore strategic alternatives. The
Board of Directors expects to explore and analyze a wide range of strategic
options and to consider all reasonable alternatives to deliver value to our
shareholders.
In addition, the Company's Board has identified the following areas of Board
and Board Committee involvement and responsibility as its principal areas of
focus in its effort to achieve good corporate governance and to represent the
Company's stakeholders effectively:
* Ongoing active and participatory review of the Company's strategic plan
and its long range goals and of the Company's performance against such
plan and goals, and the evaluation of the desirability, as appropriate,
of modifications to such plans and goals;
* Monitoring of the Company's activities that may pose significant risks
to the Company and of the Company's programs to respond to and contain
such risks;
* Periodic, independent and objective review of the performance and
development of the Chief Executive Officer and other members of executive
management and their compensation relative to such performance;
* Periodic study, using outside resources, of the Company's strategic
alternatives, including continuing its current strategy, engaging in a
merger of equals or sale;
* Review of the selection process for nominees for election to the
Company's Board and the overall quality, interest, diligence,
participation and contribution of its members; and
* The availability, dissemination and explanation of the information which
the Board and management believe is needed for the Board to perform its
duties diligently and effectively in the interest of the Company's
stakeholders.
The Board met fifteen (15) times during 1999. Except for Jay S. Sidhu, all
directors attended at least 75% of the total number of meetings of the Board and
its Committees on which the director served during 1999.
Directors of the Company are paid an annual retainer which consists of
$6,000 and 250 shares of Common Stock. Directors also receive up to $250 for
each committee meeting attended. The directors of Old Guard, Old Guard Fire,
First Patriot, First Delaware, and Investors Southern receive no compensation.
Directors of the Company, the Insurance Companies, First Delaware, or Investors
Southern who receive a salary from the Insurance Companies or their affiliates
are not entitled to receive an annual retainer or other additional compensation
for services rendered as directors or committee members.
6
<PAGE>
MATTER NO. 1
ELECTION OF DIRECTORS
GENERAL
The Articles of Incorporation of the Company provide that the Company's
business shall be managed by a Board of Directors of not less than six and not
more than twenty-five persons. The Company's Board, as provided in the Articles
of Incorporation, is divided into three classes: Class I, Class II and
Class III, each class being as nearly equal in number as possible. Under the
Company's Bylaws, a person elected to fill a vacancy on the Board of Directors
serves as a director for the remaining term of office of the Class to which he
or she was elected. The directors in each Class serve terms of three years each
and until their successors are elected and qualified.
The Board of Directors has fixed the number of directors in Class I at
three, effective with the election to be held at the 2000 Annual Meeting, and
the Board of Directors has nominated the three nominees listed below for
election as Class I directors. All three of the Board nominees for election as
Class I directors, Karen M. Balaban, Robert L. Goldstein, and Noah W. Kreider,
Jr., are presently directors of the Company.
Robert L. Goldstein was appointed to the Board of Directors of the Company
on January 11, 2000. In connection with the appointment of Mr. Goldstein to the
Board, Old Guard and Gotham Capital, of which Mr. Goldstein is a limited
partner, executed a five year agreement that outlines their relationship. Under
the Agreement, Old Guard agreed to appoint Mr. Goldstein to the Board, nominate
him for election to a full three year term at the 2000 Annual Meeting, and
appoint him to the executive committee. For its part, Gotham agreed generally
not to: (i) increase its ownership interest in the Company to 12.5% or more
without the prior written consent of the Company, (ii) solicit proxies or wage a
proxy contest with respect to any matter, or (iii) sell its stock in the Company
without the prior written consent of the Company except to: (A) an affiliate of
Gotham or a person approved by the Company who agrees to be bound by the terms
of the Agreement, or (B) any other person provided such person would own less
than 1% of the voting stock of the company after the transaction. In addition,
Gotham has agreed to vote all its shares in any election for directors in favor
of the nominees of the Board of Directors. As to any other matter brought before
the shareholders, Gotham will vote its shares either in favor of the position
recommended by the Board of Directors or it will allocate its votes for and
against any matter in the same proportion as all other shares are voted.
The Bylaws of the Company permit nominations for election to the Board of
Directors to be made by the Board of Directors or by any shareholder entitled to
vote for the election of directors. All nominations are referred to the
Nominating Committee of the Board of Directors for consideration. Nominations
for director to be made at the Meeting by shareholders entitled to vote for the
election of directors must be preceded by notice in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the
Company not less than 90 days prior to the Meeting, which notice must contain
certain information specified in the Bylaws. No notice of nomination for
election as a director has been received from a shareholder as of the date of
this Proxy Statement. If a nomination is attempted at the Meeting that does not
comply with the procedures required by the Bylaws or if any votes are cast at
the Meeting for any candidate not duly nominated, then such nomination and/or
such votes will be disregarded.
The three nominees who receive the highest number of votes cast at the
Meeting for Class I directors will be elected as Class I directors. Abstentions
and broker non-votes will not constitute or be counted as "votes" cast for
purposes of the Meeting. Shares represented by properly executed proxies will be
voted for the three Class I nominees listed below unless otherwise specified on
a shareholder's proxy card. Any shareholder who wishes to withhold authority
from the proxyholders to vote for the election of directors, or to withhold
authority to vote for any individual nominee, may do so by marking the proxy to
that effect. No proxy may be voted for a greater number of persons than the
number of nominees named.
7
<PAGE>
If any of the nominees listed below become unable to accept nomination or
election, the proxyholders may exercise their voting power in favor of such
other person or persons as the Board of Directors may recommend. The Company,
however, at present has no reason to believe that any nominee listed below will
be unable to serve as a director, if elected.
The name and principal occupation for the last five years of each nominee
for director and each continuing director, together with certain other relevant
information, is set forth below.
NOMINEES AS CLASS I DIRECTORS TO SERVE UNTIL 2003
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
DIRECTOR FOR THE LAST FIVE YEARS;
NAME AGE SINCE(1) OTHER DIRECTORSHIPS
- ---- -------- -------- ------------------------
<S> <C> <C> <C>
Karen M. Balaban 46 1998 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; Balaban & Lucas, LLP (law
firm) 1999 to present; Saul Ewing Remick and
Saul, LLP (law firm) 1997 to 1999; prior
thereto Schnader Harrison Segal and Lewis, LLP
(law firm)
Robert L. Goldstein 34 2000 Director, the Company; Limited Partner, Gotham
Capital (investment company) 1989 to present;
Managing Partner, Metropolis Partners
(investment company) 1989 to 1997
Noah W. Kreider, Jr. 67 1987 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; Owner/operator, Kreider
Farms
</TABLE>
CLASS II DIRECTORS SERVING UNTIL 2001
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
DIRECTOR FOR THE LAST FIVE YEARS;
NAME AGE SINCE(1) OTHER DIRECTORSHIPS
- ---- -------- -------- ------------------------
<S> <C> <C> <C>
James W. Appel 55 1980 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; Partner, Appel & Yost LLP
(law firm); Vice President, Aardvark
Abstracting, Inc. (title insurance agency)
M. Scott Clemens 52 1994 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; President/Owner, John T.
Fretz Insurance Agency, Inc.; prior thereto,
Insurance Agent, P/C Insurance Agency
G. Arthur Weaver 65 1966 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; Insurance and Real Estate
Agent, George A. Weaver, Inc.; Director,
Sovereign Bancorp, Inc. and Sovereign Bank
</TABLE>
8
<PAGE>
CLASS III DIRECTORS SERVING UNTIL 2002
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
DIRECTOR FOR THE LAST FIVE YEARS;
NAME AGE SINCE(1) OTHER DIRECTORSHIPS
- ---- -------- -------- ------------------------
<S> <C> <C> <C>
Jay S. Sidhu 48 1999 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; Director, President and
Chief Executive Officer of Sovereign Bancorp,
Inc.; President and Chief Executive Officer of
Sovereign Bank
David E. Hosler 49 1985 Chairman, President, Chief Executive Officer
and Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern
E. Matthew Brown 48 1999 Director, the Company and the Insurance
Companies; Director, First Delaware; Director,
Investors Southern; Investment Manager,
Wilmington Trust Company 1996-Present;
Investment Manager, PNC Bank 1993-1996.
</TABLE>
- ------------------------
(1) Indicates year first elected as a director of the Company or one or more of
the Insurance Companies.
9
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the number of shares
of Common Stock held as of the Record Date by each nominee for director, each
present director and each named executive officer set forth in the compensation
table herein (the "Named Executive Officers").
<TABLE>
----------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------------------------------------------------
SHARED
SOLE VOTING
TOTAL VOTING OR OR
BENEFICIAL DISPOSITIVE DISPOSITIVE PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP POWER POWER CLASS (1)
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
DIRECTORS
----------------------------------------------------------------------------------
James W. Appel (2) 14,493 13,093 0 *
----------------------------------------------------------------------------------
Karen M. Balaban (5) 500 500 0 *
----------------------------------------------------------------------------------
E. Matthew Brown 1,750 1,750 0 *
----------------------------------------------------------------------------------
Luther R. Campbell, Jr. (3) 16,093 16,093 0 *
----------------------------------------------------------------------------------
M. Scott Clemens (4) 22,193 20,693 1,500 *
----------------------------------------------------------------------------------
Robert L. Goldstein (5)(6) 2,484 2,484 0 *
----------------------------------------------------------------------------------
David E. Hosler (7) 142,320 107,120 35,200 3.84%
----------------------------------------------------------------------------------
Noah W. Kreider, Jr. (5)(8) 13,137 8,137 5,000 *
----------------------------------------------------------------------------------
Jay S. Sidhu 1,250 1,250 0 *
----------------------------------------------------------------------------------
G. Arthur Weaver (9) 15,593 13,593 2,000 *
----------------------------------------------------------------------------------
Robert L. Wechter (10) 12,593 12,593 0 *
----------------------------------------------------------------------------------
OTHER NAMED
EXECUTIVE OFFICERS
----------------------------------------------------------------------------------
Donald V. Cruickshanks 2,000 0 2,000 *
----------------------------------------------------------------------------------
Scott A. Orndorff (11) 52,533 42,533 10,000 1.42%
----------------------------------------------------------------------------------
Henry J. Straub (12) 14,676 14,676 0 *
----------------------------------------------------------------------------------
Steven D. Dyer (13) 48,333 47,308 1,025 1.30%
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
All directors and named
executive officers as a
group (15 persons) (14) 331,094 291,569 39,525 8.93%
----------------------------------------------------------------------------------
</TABLE>
- ------------------------
(1) Unless otherwise indicated, amount owned does not exceed 1% of the total
number of shares of Common Stock outstanding on the Record Date.
(2) Includes (i) 2,209 restricted shares awarded under the Company's Management
Recognition Plan (the "MRP") that vest ratably over a five-year period over
which Mr. Appel has voting control and (ii) 7,910 shares that may be
acquired upon the exercise of outstanding stock options.
(3) Includes (i) 2,209 restricted shares awarded under the MRP that vest ratably
over five years over which Mr. Campbell has voting control and (ii) 7,910
shares that may be acquired upon the exercise of outstanding stock options.
(4) Includes (i) 2,209 restricted shares awarded under the MRP that vest ratably
over five years over which Mr. Clemens has voting control and (ii) 7,910
shares that may be acquired upon the exercise of outstanding stock options.
(5) Indicates a nominee for election as a Class I director at the Meeting.
10
<PAGE>
(6) Mr. Goldstein, as the nominee of Gotham Capital, has indirect beneficial
ownership of an additional 392,442 shares in which Gotham Capital holds
voting control through various partnerships.
(7) Includes (i) 21,355 restricted shares awarded under the MRP that vest
ratably over five years over which Mr. Hosler has voting control and
(ii) 59,321 shares that may be acquired upon the exercise of outstanding
stock options, and (iii) 1,906 shares allocated to the account of
Mr. Hosler under the ESOP.
(8) Includes 2,209 restricted shares awarded under the MRP that vest ratably
over five years over which Mr. Kreider has voting control.
(9) Includes (i) 2,209 restricted shares awarded under the MRP that vest ratably
over five years over which Mr. Weaver has voting control and (ii) 7,910
shares that may be acquired upon the exercise of outstanding stock options.
(10) Includes (i) 2,209 restricted shares awarded under the MRP that vest
ratably over five years over which Mr. Wechter has voting control and
(ii) 7,210 shares that may be acquired upon the exercise of outstanding
stock options.
(11) Includes (i) 8,457 restricted shares awarded under the MRP that vest
ratably over five years over which Mr. Orndorff has voting control,
(ii) 26,695 shares that may be acquired upon the exercise of outstanding
stock options, and (iii) 1,743 shares allocated to the account of
Mr. Orndorff under the ESOP.
(12) Includes (i) 2,400 restricted shares awarded under the MRP that vest
ratably over five years over which Mr. Straub has voting control,
(ii) 10,425 restricted shares awarded under the MRP that vest on March 1,
2004 over which Mr. Straub has voting control, (iii) 4,000 shares that may
be acquired upon the exercise of outstanding stock options, and (iv) 780
shares allocated to the account of Mr. Straub under the ESOP.
(13) Includes (i) 8,457 restricted shares awarded under the MRP that vest
ratably over five years over which Mr. Dyer has voting control, (ii) 26,695
shares that may be acquired upon the exercise of outstanding stock options,
and (iii) 1,518 shares allocated to the account of Mr. Dyer under the ESOP.
(14) Includes (i) 64,348 restricted shares awarded under the MRP, (ii) 155,561
shares that may be acquired upon the exercise of outstanding stock options,
and (iii) 5,947 shares allocated to the account of participants under the
ESOP.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee is charged with the review and implementation of
the Compensation for the Company's executive officers, each of whom is an
employee of Old Guard Insurance Management Co. ("OGIMC"), a Pennsylvania
corporation that is a subsidiary of the Company and operates for the purpose of
employing and paying the senior management of the Insurance Companies. The
Compensation Committee also oversees the Company's management development and
succession programs (the Compensation Committee shall be referred to herein as
the "Committee").
The Committee bases its compensation recommendations on information derived
from multiple sources, including the Company's Human Resources Department,
industry surveys, and recommendations of management. The Committee believes that
consideration of these diverse sources of information helps to create a balanced
and appropriate compensation program.
11
<PAGE>
The Committee has considered factors such as the following in establishing
executive compensation:
- the personal performance of the executive officer;
- the achievement of annual corporate goals;
- the achievement of an acceptable return on equity; and
- the need of the Company to attract, retain and motivate superior
management.
The consideration of these different factors permits the encouragement of
corporate goals including but not limited to sustained and consistent
management; enhancement of shareholder value; and the completion of strategic
initiatives. Reflecting these different factors, the compensation program for
executive officers to date contains several components;
1. Base Salary--Base salary is based upon a general competitive review and a
review of industry-specific data based on a peer group. The peer group is
determined primarily by size of company and geographic locale. Base salary
is discretionary on the part of the Committee and reflects corporate
performance as well as an evaluation of the executive officer's performance
of his or her duties. The Company generally sets its competitive salary
midpoint for an executive officer position at the median level compared to
those companies which it surveys. A salary range based on this midpoint is
then developed. With respect to 2000, salaries were compared to a national
peer group that has resulted in increases in base compensation for 2000.
2. Senior Management Short-Term Incentive Bonus Plan--This plan is an
objective-based plan designed to direct the attention of the Company's
executive officers to the attainment of specific performance objectives.
Objectives consist of corporate business unit objectives as well as
individual performance objectives that are weighted appropriately based on
the executive's position within the Company. Objectives are established at
the beginning of the year and bonuses earned are paid based on the level of
performance the executive achieves for each of the objectives. Payouts under
the Company's short-term incentive plan are periodically compared to peer
companies, and pay-outs under the Company's short-term incentive plan are
targeted at the median level of the peer companies based on the executive's
achievement of stated objectives.
3. Stock-based Compensation--On August 19, 1997, shareholders of the Company
approved the Company's Stock Compensation Plan (the "Plan") and the
Management Recognition Plan (the "MRP"). The Committee believes that the
Plan and MRP constitute an important part of the Company's compensation
programs designed to encourage directors and employees of the Company, the
Insurance Companies and First Delaware to increase their stake in the
Company and to more significantly align their interests with those of the
Company's shareholders. The Committee believes adoption and implementation
of the Plan and the MRP has advanced the interests of the Company and its
shareholders by giving participants a proprietary and vested interest in the
Company and an increased incentive to contribute to the success of the
Company. The Committee also believes that the implementation of the Plan and
the MRP will continue to aid the Company in attracting, retaining, and
encouraging competent and dedicated management level employees.
COMPENSATION OF EXECUTIVE OFFICERS
The base salary of chief executive officer, David E. Hosler, and the base
salaries of the other executive officers were adjusted by the Committee in
January 1999. The total compensation of executive officers, composed of base
salary and Senior Management Incentive Bonus Plan award, was compared with
compensation packages of similar officers within the insurance industry.
12
<PAGE>
The limits on full deductibility of compensation for the Company permitted
by Internal Revenue Code Section 162(m) are not currently an issue for the
Company inasmuch as compensation levels for Mr. Hosler and the Named Executive
Officers do not exceed the $1,000,000 threshold figure. The Company will, of
course, continue to monitor this issue and will take appropriate action to
respond to developments and growth in compensation.
COMPENSATION COMMITTEE
James W. Appel, Chairperson
Karen M. Balaban
Luther R. Campbell, Jr.
Noah W. Kreider, Jr.
13
<PAGE>
COMPENSATION PAID TO EXECUTIVE OFFICERS
The following table sets forth information regarding the compensation of the
Chief Executive Officer, the President of Investors Southern, the Executive Vice
President, the Chief Financial Officer and Treasurer, and the Secretary and
General Counsel of the Company for each of the years ended December 31, 1997,
1998 and 1999. The amounts below represent the aggregate compensation paid to
such executive officers by OGIMC pursuant to OGIMC's management agreements with
the Insurance Companies.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
SALARY COMPENS- STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR (1) BONUS ATION (2) AWARDS SARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
David E. Hosler, 1999 $213,319 $ 2,930 $ -- $ -- --
Chairman, President, 1998 213,336 5,092 -- -- --
and Chief Executive Officer 1997 180,000 66,913 -- 658,471(5) 59,321
- --------------------------------------------------------------------------------------------------------------------------
Donald V. Cruickshanks, 1999 $145,000 $56,031 $ -- $ -- --
President, Investors Southern 1998 140,000 69,273 -- -- --
1997 135,000 61,638 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Scott A. Orndorff, Executive Vice President 1999 $141,638 $ -- $ -- $ -- --
1998 141,282 -- -- -- --
1997 123,808 20,000 -- 260,758(5) 26,695
- --------------------------------------------------------------------------------------------------------------------------
Henry J. Straub, 1999 $129,662 $ -- $ -- $157,416(8) 4,000
Chief Financial Officer 1998 108,355 -- -- 19,625(9) --
and Treasurer 1997 60,481 4,000 -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Steven D. Dyer, 1999 $123,179 $ 4,039 $ -- $ -- --
Secretary and 1998 119,267 6,917 -- -- --
General Counsel 1997 94,700 19,534 19,262(7) 260,758(5) 26,695
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALL OTHER
LTIP COMPENSATION
NAME AND PRINCIPAL POSITION PAYOUTS (3)(4)
- ------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
David E. Hosler, $ -- $11,065(6)
Chairman, President, -- 13,487(6)
and Chief Executive Officer -- 10,600(6)
- ------------------------------------------------------------------------------------------------------------------
Donald V. Cruickshanks, $ -- $ 2,175
President, Investors Southern -- 2,100
-- 1,614
- --------------------------------------------------------------------------------------------------------------------------
Scott A. Orndorff, Executive Vice President $ -- $ 4,800
-- 6,400
-- 5,520
- --------------------------------------------------------------------------------------------------------------------------
Henry J. Straub, $ -- $ 4,000
Chief Financial Officer -- 3,406
and Treasurer -- --
- --------------------------------------------------------------------------------------------------------------------------
Steven D. Dyer, $ -- $ 4,198
Secretary and -- 5,560
General Counsel -- 4,696
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes amounts which were deferred pursuant to Old Guard's 401(k) plan.
Under the 401(k) plan, employees who elect to participate may elect to have
earnings reduced and to cause the amount of such reduction to be contributed
to the 401(k) plan's related trust in an amount up to 10% of earnings. Any
employee who has completed 1 year of service and has worked 1,000 hours in a
plan year is eligible to participate in the 401(k) plan.
(2) OGIMC provided other benefits to the executive officers in connection with
their employment. Except with respect to Mr. Dyer, the value of such
personal benefits, which is not directly related to job performance, is not
included in the table above because the value of such benefits does not
exceed the lesser of $50,000 or 10% of the salary and bonus paid to any
executive officer.
(3) Includes amounts contributed by the Company under the 401(k) plan for the
benefit of the executive officer. The Company will make a matching
contribution equal to 100% of the employee's salary reduction up to a
maximum of 3% of the employee's salary.
(4) Includes amounts contributed under a Profit Sharing Plan for the benefit of
the executive officer.
(5) Equals the dollar value of restricted stock awards determined by multiplying
the closing market price of $18.50 on August 19, 1997, the date of the
awards, by the number of shares awarded.
(6) Includes the amount of insurance premiums paid by the Insurance Companies
with respect to a split dollar term life insurance policy.
(7) Includes income resulting from the forgiveness of a loan previously made by
the Company to Mr. Dyer to finance his legal education.
(8) Includes the dollar value of restricted stock awards determined by
multiplying the closing market price of $13.875 on January 4, 1999, the date
of the award, by the number of shares awarded on that date, plus the dollar
value of restricted stock awards determined by multiplying the closing
market price of $12.438 on March 1, 1999, the date of the award, by the
number of shares awarded on that date.
14
<PAGE>
(9) Equals the dollar value of restricted stock awards determined by multiplying
the closing market price of $19.62 on June 9, 1998, the date of the award,
by the number of shares awarded.
The following table sets forth information concerning grants of stock
options for the fiscal year ended December 31, 1999 to the Named Executive
Officers.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE POTENTIAL REALIZABLE VALUE AT
OPTION/SARS GRANTED IN OR BASE EXPIRATION ASSUMED ANNUAL RATES OF PRICE
GRANTED(1) FISCAL YEAR PRICE DATE APPRECIATION FOR OPTION TERM
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
0% 5%(2)
- ---------------------------------------------------------------------------------------------------------------------------
David E. Hosler 0/0 0 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Donald V. Cruickshanks 0/0 0 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Scott A. Orndorff 0/0 0 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Henry J. Straub 4,000/0 16.67% $13.375 04/13/2009 $0.00 (1) $33,260
- ---------------------------------------------------------------------------------------------------------------------------
Steven D. Dyer 0/0 0 0 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
OPTION/SAR
GRANTS IN
LAST FISCAL
YEAR
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
10%(2)
- ---------------------------------------------------------------------------------------------------------------------------
David E. Hosler
- ---------------------------------------------------------------------------------------------------------------------------
Donald V. Cruickshanks
- ---------------------------------------------------------------------------------------------------------------------------
Scott A. Orndorff
- ---------------------------------------------------------------------------------------------------------------------------
Henry J. Straub $85,265
- ---------------------------------------------------------------------------------------------------------------------------
Steven D. Dyer
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On the date of the option grant, the option exercise price was equal to the
fair market value of the Common Stock.
(2) The dollar amounts set forth under these columns are the result of
calculations assuming 5% and 10% price appreciation rates as required by the
Securities and Exchange Commission regulations and are not intended to
indicate future price appreciation, if any, of the Common Stock.
- ------------------------
The following table sets forth information concerning the exercise of
options to purchase shares of Common Stock by the Named Executive Officers
during the fiscal year ended December 31, 1999, as well as the number of
securities underlying unexercised options and potential value of unexercised
options (both options which are presently exercisable and options which are not
presently exercisable) as of December 31, 1999.
<TABLE>
- -------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE (1)
- -------------------------------------------------------------------------------------------------
VALUE OF
UNEXERCISED IN-
NUMBER OF THE-
SECURITIES MONEY OPTIONS/SARS
SHARES UNDERLYING AT
ACQUIRED ON OPTIONS/SARS AT FISCAL YEAR END
EXERCISE VALUE FISCAL YEAR END (#) ($)(2)
(#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
David E. Hosler 0 0 59,321/0 $59,321/$0
- -------------------------------------------------------------------------------------------------
Donald V.
Cruickshanks 0 0 0/0 0/0
- -------------------------------------------------------------------------------------------------
Scott A. Orndorff 0 0 26,695/0 $26,695/ 0
- -------------------------------------------------------------------------------------------------
Henry J. Straub 0 0 0/4,000 0/0
- -------------------------------------------------------------------------------------------------
Steven D. Dyer 0 0 26,695/0 $26,695/ 0
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) All amounts represent stock options. No SARs or SARs granted in tandem with
stock options were either exercised during 1999 or outstanding at fiscal
year end 1999.
(2) "In-the-money options" are stock options with respect to which the fair
market value of the underlying shares of Common Stock exceeds the exercise
price for such options. On December 31, 1999, the fair market value was
$11.00 per share.
15
<PAGE>
EMPLOYMENT AGREEMENTS.
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER. David E. Hosler and
Henry J. Straub entered into Employment Agreements with the Company and OGIMC on
June 1, 1996 and January 1, 1999 respectively. The Employment Agreements have an
initial three-year term and provide for automatic annual one-year extensions on
the anniversary dates thereafter unless the Company or the Executive Officer
gives prior written notice of nonrenewal. Under the Employment Agreements, the
Chief Executive Officer and Chief Financial Officer are entitled to receive an
annual base salary of not less than $180,000 and $118,175, respectively. In
addition, they are entitled to participate in any other incentive compensation
and employee benefit plans that the Company maintains.
In the event the Company terminates their employment for "Cause" as defined
in the Employment Agreement, they would be entitled to receive their accrued but
unpaid base salary and an amount for all accumulated but unused leave time. In
the event the Company terminates their employment without Cause, the Chief
Executive Officer and Chief Financial Officer would be entitled to receive an
annual amount equal to the greater of (i) his highest base salary received
during one of the two years immediately preceding the year in which he is
terminated, or (ii) his base salary in effect immediately prior to his
termination for the remainder of the term of the Employment Agreement. In
addition, during the remaining term of the Employment Agreement each would be
entitled to continuation annually of (i) an amount equal to the higher of the
aggregate bonuses paid to him in one of the two years immediately preceding the
year in which he is terminated and (ii) an amount equal to the sum of the
highest annual contribution made on his behalf (other than his own salary
reduction contributions) to each of the Company's tax qualified and nonqualified
defined contribution plans (as such term is defined in Section 3(35) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) in the
year in which he is terminated or in one of the two years immediately preceding
such year. The Chief Executive Officer and Chief Financial Officer would also be
entitled to certain retirement, health and welfare benefits.
In the event the Chief Executive Officer or the Chief Financial Officer
terminates his employment with the Company for "Good Reason," as defined in the
Employment Agreement, he would be entitled to receive the same amounts and
benefits he would receive if terminated without Cause. In the event either
Executive Officer terminates his employment with the Company without Good
Reason, he would be entitled to receive his accrued but unpaid base salary until
the date of termination and an amount for all accumulated but unused leave time.
In the event of the death or disability of the Chief Executive Officer or
Chief Financial Officer during the term of his Employment, the officer and his
eligible dependents or his spouse and her eligible dependents, as the case may
be, would be entitled to receive certain cash amounts and certain health and
welfare benefits.
In the event that the Chief Executive Officer or Chief Financial Officer is
required to pay any excise tax imposed under Section 4999 of the Code (or any
similar tax imposed under federal, state or local law) as a result of any
compensation and benefits received under the Employment Agreement in connection
with a change in control, the Company will pay to the officer an additional
amount such that the net amount retained by him, after the payment of such
excise taxes (and any additional income tax resulting from such payment by the
Company), equals the amount he would have received but for the imposition of
such taxes.
The Employment Agreement further provides that in the event either Executive
Officer's employment is terminated for Cause or without Good Reason prior to a
"Change in Control," as defined in the Employment Agreement, the Executive
Officer may not, for a period of twelve months after the date of termination,
without the prior written consent of the Company's Board of Directors, become an
officer, director, shareholder or equity owner of 4.9% or more of any entity
engaged in the property and casualty insurance business with its corporate
headquarters located within 50 miles of
16
<PAGE>
Lancaster, Pennsylvania. In addition, during either Executive Officer's
employment and for a period of 12 months following the termination of his
employment, except following a Change in Control, the Executive Officer may not
solicit, endeavor to entice away from the Company, its subsidiaries or
affiliates, or otherwise interfere with the relationship of the Company or its
subsidiaries or affiliates with any person who is, or was within the then most
recent 12-month period, an employee or associate of the Company or any of its
subsidiaries or affiliates.
OTHER NAMED EXECUTIVE OFFICERS. Mr. Donald V. Cruickshanks entered into an
Employment Agreement with Southern Title Insurance Corporation, a wholly-owned
subsidiary of Investors Southern, on January 1, 1999; Messrs. Scott A. Orndorff,
and Steven D. Dyer entered into Employment Agreements with the Company and OGIMC
on June 1, 1996. The Employment Agreements of Messrs. Cruickshanks, Orndorff,
and Dyer (collectively the "Executive Officers") have an initial three-year term
and provide for automatic annual one-year extensions on the anniversary date.
Under the Employment Agreements, Messrs. Cruickshanks, Orndorff, and Dyer are
entitled to receive annual base salaries of not less than $145,000, $94,000, and
$87,200 respectively.
In the event the Company terminates an Executive Officer's employment for
"Cause," as defined in the Employment Agreement, the executive would be entitled
to receive his accrued but unpaid base salary and an amount for all accumulated
but unused leave time.
In the event the Company terminates an Executive Officer's employment
without Cause, the Executive Officer would be entitled to receive an amount
equal to the greater of (i) his highest base salary received during one of the
two years immediately preceding the year in which he is terminated, or (ii) his
base salary in effect immediately prior to his termination for a two-year
period, beginning with the date of termination. In addition, the Executive
Officer would be entitled to continuation, for two years, of (i) an amount equal
to the higher of the aggregate bonuses paid to him in one of the two years
immediately preceding the year in which he is terminated and (ii) an amount
equal to the sum of the highest annual contribution made on his behalf (other
than his own salary reduction contributions) to each of the Company's tax
qualified and non-qualified defined contribution plans (as such term is defined
in Section 3(35) of ERISA), in the year in which he is terminated or in one of
the two years immediately preceding such year. The Executive Officer would also
be entitled to certain retirement, health and welfare benefits.
In the event the Executive Officer terminates his employment with the
Company for "Good Reason," as defined in the Employment Agreement, the Executive
Officer would be entitled to receive the same amounts and benefits he would
receive if terminated without Cause. In the event the Executive Officer
terminates his employment with the Company without Good Reason, the Executive
Officer would be entitled to receive his accrued but unpaid base salary and an
amount for all accumulated but unused leave time.
In the event of the Executive Officer's death or disability during the term
of the Employment Agreement, the Executive Officer and his eligible dependents
or his spouse and her eligible dependents, as the case may be, would be entitled
to receive certain cash amounts and certain health and welfare benefits.
In the event that the Executive Officer is required to pay any excise tax
imposed under Section 4999 of the Code (or any similar tax imposed under
federal, state or local law) as a result of any compensation and benefits
received under his Employment Agreement in connection with a change in control,
the Company will pay to the Executive Officer an additional amount such that the
net amount retained by him, after the payment of such excise taxes (and any
additional tax resulting from such payment by the Company), equals the amount he
would have received but for the imposition of such taxes.
17
<PAGE>
The Employment Agreement for each Executive Officer further provides that in
the event the Executive Officer's employment is terminated for Cause or he
voluntarily terminates his employment prior to a "Change in Control," as defined
in the Employment Agreement, the Executive Officer may not for a period of
twelve months after the date of termination, without the prior written consent
of the Company's Board of Directors, become an officer, director, shareholder or
equity owner of 4.9% or more of any entity engaged in the property and casualty
insurance business with its corporate headquarters located within 50 miles of
Lancaster, Pennsylvania. In addition, during the Executive Officer's employment
and for a period of 12 months following the termination of his employment,
except following a Change in Control, the Executive Officer may not solicit,
endeavor to entice away from the Company, its subsidiaries or affiliates, or
otherwise interfere with the relationship of the Company or its subsidiaries or
affiliates with any person who is, or was within the most recent 12-month
period, an employee or associate of the Company or any of its subsidiaries or
affiliates.
PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the cumulative
total shareholder return on the Common Stock against the cumulative total return
on the Nasdaq Composite Index and the Nasdaq Insurance Index since February 18,
1997, the date on which the Common Stock commenced trading on the
Nasdaq/National Market System. The graph assumes an initial investment of
$100.00 with dividends if any, reinvested over the periods indicated.
STOCK PRICE PERFORMANCE GRAPH
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1Q97 2Q97 3Q97 4Q97 1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Old Guard Insurance Group 100.00 107.23 135.81 139.46 139.84 134.36 114.57 104.45 93.84 98.48 83.14 81.29
NASDAQ Insurance Index Total Return 100.00 116.48 129.24 128.38 136.65 128.69 107.95 131.16 149.13 173.85 150.62 141.56
NASDAQ Composite Index Total Return 100.00 118.22 138.30 129.00 150.95 155.95 139.57 180.82 203.14 221.85 226.96 336.50
</TABLE>
<TABLE>
<CAPTION>
02/18/97 12/31/97 12/31/98 12/31/99
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OGGI 100.00 139.46 104.45 81.29
CCMP 100.00 129.00 180.82 336.50
CINS 100.00 128.38 131.16 141.56
</TABLE>
OGGI = Old Guard Group, Inc., CCMP = NASDAQ Composite Index, CINS = NASDAQ
Insurance Index.
18
<PAGE>
ADDITIONAL INFORMATION REGARDING DIRECTORS AND OFFICERS.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and any persons
owning ten percent or more of the Company's Common Stock, to file in their
personal capacities initial statements of beneficial ownership, statements of
changes in beneficial ownership and annual statements of beneficial ownership
with the Securities and Exchange Commission (the "SEC"). Persons filing such
beneficial ownership statements are required by SEC regulation to furnish the
Company with copies of all such statements filed with the SEC. The rules of the
SEC regarding the filing of such statements require that "late filings" of such
statements be disclosed in the Company's proxy statement. The Company is aware
of the following late filings based upon information provided by the officers
and directors of the Company. On February 26, 1999, David E. Hosler purchased
200 shares of Company stock. In accordance with the rules of the SEC this
transaction should have been reported by March 10, 1999; however, it was not
reported until March 29, 1999. On May 3, 1999, former director Richard B.
Neiley, Jr. exercised options to purchase 1,000 shares of Company stock. In
accordance with the rules of the SEC this transaction should have been reported
by June 10, 1999; however, it was not reported until September 3, 1999. On
May 13, 1999, E. Matthew Brown and Jay S. Sidhu were elected to the Board of
Directors. In accordance with the rules of the SEC, initial statements of
beneficial ownership should have been filed by June 10, 1999; however the
statements were not filed until August 10, 1999 for Mr. Brown and August 20,
1999 for Mr. Sidhu. On June 9, 1999, Henry J. Straub received 200 shares of
Company stock that vested under the Company's Management Recognition Plan. In
accordance with the rules of the SEC this transaction should have been reported
by July 10, 1999; however, it was not reported until September 3, 1999. Based
solely on the Company's review of any copies of the statements received by it,
or written representations from directors and officers, there are no annual
statements of beneficial ownership or additional transactions that were required
to be filed by such persons.
MATTER NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Company, in accordance with the recommendation
made by the Company's Audit Committee, has appointed the firm of
PricewaterhouseCoopers L.L.P., independent auditors, to provide certain
accounting services for the Company and its subsidiaries during fiscal year
2000. Such appointment is being submitted to shareholders for ratification.
PricewaterhouseCoopers L.L.P. has audited the books of account and financial
statements of the Insurance Companies or certain of their affiliates since 1990.
The Company has been advised that neither PricewaterhouseCoopers L.L.P. nor any
of its partners possesses any other material direct or indirect relationship
with the Company, its subsidiaries or its officers or directors, in their
capacities as such. Representatives of PricewaterhouseCoopers L.L.P. are
expected to attend the Meeting, will be afforded an opportunity to make a
statement if they desire to do so and will be available to respond to questions
from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
THE APPOINTMENT OF PRICEWATERHOUSECOOPERS L.L.P. AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE 2000 FISCAL YEAR. The affirmative vote of a majority of all
votes cast at the Meeting is required to ratify the appointment. Abstentions and
broker non-votes will not constitute or be counted as "votes" cast for purposes
of the Meeting. All proxies will be voted "FOR" ratification of the appointment
unless a shareholder specifies to the contrary on such shareholder's proxy card.
19
<PAGE>
SHAREHOLDER PROPOSALS FOR 2001
The Company's Annual Meeting of Shareholders for 2001 will be held on or
about May 10, 2001. Any shareholder desiring to submit a proposal to be
considered for inclusion in the Company's 2001 proxy materials must submit such
proposal or proposals in writing, addressed to Old Guard Group, Inc., 2929
Lititz Pike, P.O. Box 3010, Lancaster, Pennsylvania 17604-3010, Attention:
Corporate Secretary. Proposals must be received by the Company on or before
December 8, 2000. In addition, management proxyholders will have discretionary
authority to vote on any proposal submitted by a shareholder to the Company for
consideration at the Company's 2001 Annual Meeting if such proposal is received
after February 26, 2001.
OTHER MATTERS
The Board of Directors does not intend to bring any other matter before the
Meeting and is not presently informed of any other business which others may
bring before the Meeting. If any other matters should properly come before the
Meeting, or any adjournment thereof, however, it is the intention of the persons
named in the accompanying proxy to vote on such matters as they, in their
discretion, may determine.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 1999, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO,
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY BE
OBTAINED, WITHOUT CHARGE, FROM OLD GUARD GROUP, INC., 2929 LITITZ PIKE,
P.O. BOX 3010, LANCASTER, PENNSYLVANIA 17604-3010, ATTENTION: INVESTOR
RELATIONS.
BY ORDER OF THE BOARD OF DIRECTORS
[LOGO]
Steven D. Dyer,
Secretary
April 10, 2000
PLEASE SIGN, DATE AND MAIL YOUR PROXY NOW.
20
<PAGE>
REVOCABLE PROXY
OLD GUARD GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints James W. Appel and Scott A. Orndorff,
with full powers of substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of common stock of Old Guard Group, Inc., which
the undersigned is entitled to vote at the Annual Meeting of Shareholders, to be
held at the Quality Inn & Suites, located at 2363 Oregon Pike, Lancaster,
Pennsylvania on Thursday, May 11, 2000 at 10:00 a.m. and at any adjournments
thereof, as follows:
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSITIONS 1 AND 2. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, INCLUDING MATTERS RELATING TO THE CONDUCT
OF THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS OF
OLD GUARD GROUP, INC.
Thursday, May 11, 2000
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY INTERNET
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ONSCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
---------------------------------
YOUR CONTROL NUMBER IS
---------------------------------
Please Detach and Mail in the Envelope Provided
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSITIONS 1 AND 2.
FOR WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES
ALL NOMINEES LISTED LISTED AT RIGHT
/ / / /
1. To elect three Class I directors to hold office for three years from the
date of election, each to hold office until their successors shall have
been elected and qualified.
TO WITHHOLD AUTHORITY to vote for any individual nominee, strike a line
through that nominee's name in the list at right.
NOMINEES:
CLASS I
Karen M. Balaban
Robert L. Goldstein
Noah W. Kreider, Jr.
2. To ratify the appointment by the Company's Board of Directors of
PricewaterhouseCoopers L.L.P. as the Company's independent auditors for the
Company's fiscal year ended December 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof, then the power of said attorneys and prior proxies
shall be deemed terminated and of no further force and effect. The undersigned
may also revoke his or her proxy by filing a subsequent proxy or notifying the
Secretary of his or her decision to terminate his or her proxy.
The undersigned acknowledges receipt from Old Guard Group, Inc. prior to
the execution of this proxy of notice of the Meeting, and a Proxy Statement
dated April 10, 2000.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Signature of Shareholders
------------------------------------
Print Name of Shareholders
-----------------------------------
Date:
---------------------
NOTE: Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
<PAGE>
REVOCABLE PROXY
OLD GUARD GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints James W. Appel and Scott A. Orndorff,
with full powers of substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of common stock of Old Guard Group, Inc., which
the undersigned is entitled to vote at the Annual Meeting of Shareholders, to be
held at the Quality Inn & Suites, located at 2363 Oregon Pike, Lancaster,
Pennsylvania on Thursday, May 11, 2000 at 10:00 a.m. and at any adjournments
thereof, as follows:
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSITIONS 1 AND 2. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, INCLUDING MATTERS RELATING TO THE CONDUCT
OF THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
OLD GUARD GROUP, INC.
May 11, 2000
Please Detach and Mail in the Envelope Provided
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSITIONS 1 AND 2.
FOR WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES
ALL NOMINEES LISTED LISTED AT RIGHT
/ / / /
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED AT RIGHT
1. To elect three Class I directors to hold office for three years from the
date of election, each to hold office until their successors shall have
been elected and qualified.
TO WITHHOLD AUTHORITY to vote for any individual nominee, strike a line
through that nominee's name in the list at right.
NOMINEES:
CLASS I
Karen M. Balaban
Robert L. Goldstein
Noah W. Kreider, Jr.
2. To ratify the appointment by the Company's Board of Directors of
PricewaterhouseCoopers L.L.P. as the Company's independent auditors for the
Company's fiscal year ended December 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof, then the power of said attorneys and prior proxies
shall be deemed terminated and of no further force and effect. The undersigned
may also revoke his or her proxy by filing a subsequent proxy or notifying the
Secretary of his or her decision to terminate his or her proxy.
The undersigned acknowledges receipt from Old Guard Group, Inc. prior to
the execution of this proxy of notice of the Meeting, and a Proxy Statement
dated April 10, 2000.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Signature of Shareholders
------------------------------------------
Print Name of Shareholders
-------------------------------------------
Date:
-------------------
NOTE: Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
