========================
SCHEDULE 14A INFORMATION
========================
(Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or
sec.240.14a-12
- - -----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Selective Insurance Group, Inc.
======================================================================
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(i)(2) or Item 22(a)(2) of Schedule A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
__________________________________________________________________
<PAGE>
SELECTIVE INSURANCE GROUP, INC.
[ L O G O ] 40 Wantage Avenue
Branchville, New Jersey 07890
201-948-3000
James W. Entringer
Chairman, President and
Chief Executive Officer
March 29, 1996
Dear Stockholder of Selective Insurance Group, Inc.:
It is a pleasure to invite you to your Company's 1996 Annual Meeting of
Stockholders to be held on Friday, May 3, 1996, at 11:00 a.m. in the
auditorium at the headquarters of the Company at 40 Wantage Avenue,
Branchville, New Jersey. The Annual Report, as well as formal Notice of the
Annual Meeting, together with the Proxy Statement and proxy, are enclosed
with this letter.
Whether you own a few or many shares of stock and whether you plan to attend
the meeting in person, it is important that your shares be represented and
voted. Please complete, date, sign, and return the enclosed proxy as soon as
possible.
Your continued support is appreciated. We look forward to seeing you at the
meeting.
Warmest regards,
James W. Entringer
- - ------------------
James W. Entringer
<PAGE>
SELECTIVE INSURANCE GROUP, INC.
[ L O G O ] 40 Wantage Avenue
Branchville, New Jersey 07890
201-948-3000
===================================
NOTICE OF ANNUAL MEETING TO BE HELD
===================================
May 3, 1996
===========
TO OUR STOCKHOLDERS:
- - --------------------
Notice is hereby given that the Annual Meeting of Stockholders of Selective
Insurance Group, Inc. ("Company") will be held on Friday, May 3, 1996, at
11:00 a.m. in the auditorium at the headquarters of the Company at 40 Wantage
Avenue, Branchville, New Jersey, for the following purposes:
1. To elect four directors for a term of three years each and to elect two
directors for a term of one year each.
2. To consider a proposal to approve the Selective Insurance Group, Inc.
Stock Compensation Plan for Nonemployee Directors.
3. To transact such other and further business, if any, as properly may be
brought before the meeting.
Only stockholders of record on the books of the Company at the close of
business on March 15, 1996, shall be entitled to vote at the meeting.
If you do not expect to be present at the meeting, please complete, date, and
sign the enclosed proxy and return it in the accompanying postage-paid
envelope.
The giving of the proxy will not affect your right to vote in person, should
you attend the meeting.
By order of the Board of Directors,
Susan R. Perretta
- - -----------------
Susan R. Perretta
Secretary
Dated: March 29, 1996
<PAGE> PAGE 1
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
March 29, 1996
===============
PROXY STATEMENT
===============
===============
General Matters
===============
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Selective Insurance Group, Inc.
("Company") for use at the Annual Meeting of Stockholders to be held on
Friday, May 3, 1996, at 11:00 a.m. in the auditorium at the headquarters of
the Company at 40 Wantage Avenue, Branchville, New Jersey, and at any
adjournment thereof.
The Company has retained Corporate Investor Communications, Inc. for a fee of
$4,500 to aid in solicitation of proxies by mail, telephone, and personal
contact. The costs of the solicitation will be borne by the Company.
In addition to solicitation by mail and by certain employees of the Company
(without additional compensation), arrangements have been made with brokerage
houses and other custodians, nominees, and fiduciaries to send proxy material
to their principals.
On March 15, 1996, which is the record date for stockholders entitled to
notice of and to vote at the Annual Meeting, there were outstanding and
entitled to vote 14,561,347 shares of common stock, $2.00 par value ("Common
Stock"). This is the Company's only issued and outstanding class of stock.
This Proxy Statement and the accompanying proxy are being mailed beginning on
or about April 1, 1996, to all stockholders of record on the record date.
Under New Jersey law and the Company's Bylaws, each share of Common Stock
outstanding on the record date is entitled to one vote at the Annual Meeting
of Stockholders, and the presence in person or by proxy of the holders of
shares of Common Stock entitled to cast a majority of the votes constitutes a
quorum. Under New Jersey law, proxies submitted with votes withheld for the
election of directors and broker nonvotes are included in determining whether
a quorum is present. Under New Jersey law, directors are elected by a
plurality of votes cast. Votes withheld for the election of any or all of the
nominees have no impact on the election of directors except to reduce the
number of votes for the nominee(s) for which votes are withheld. Approval of
the Stock Compensation Plan for NonEmployee Directors requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented at the Annual Meeting. The affirmative votes of a
majority of votes cast by stockholders entitled to vote at the Annual Meeting
is required to decide any other item of business which may properly be
brought before the Annual Meeting. Abstentions have the effect of votes
against the approval of the Stock Compensation Plan for NonEmployee
Directors, and broker nonvotes are not counted in tabulating the number of
votes with respect to said proposal. Abstentions and broker nonvotes are not
counted in tabulating the number of votes cast on other items of business
that may properly be brought before the meeting.
There is no person(s) or group(s) known by the Company as of March 15, 1996,
to be the beneficial owners of more than 5% of the Company's outstanding
Common Stock.
PAGE 2
As of the date hereof, the Board of Directors knows of no other business that
will be presented for consideration at the meeting, except those matters set
forth in the Notice of Annual Meeting. If any such other business shall
properly come before the meeting, it is intended that votes will be cast,
pursuant to proxies solicited, in respect of any such other business in the
discretion of the persons acting under said proxies. Proxies that contain no
instructions to the contrary will be voted for the election as directors of
the six nominees named herein.
The Annual Report to Stockholders for the fiscal year ending December 31,
1995, has been provided to all stockholders of record as of the close of
business on March 15, 1996.
=====================
REVOCABILITY OF PROXY
=====================
Any stockholder giving a proxy may revoke it by notifying the Secretary of
the Company, in writing, of such revocation at any time prior to its exercise
or by filing another proxy with the Secretary of the Company.
========================
I. ELECTION OF DIRECTORS
========================
(Item 1 on Proxy)
The Company's Restated Certificate of Incorporation, as amended
("Certificate") and the Bylaws provide that the number of directors of the
Company shall not be less than seven nor more than twenty, such number within
the minimum and maximum limitations to be fixed from time to time by a
resolution approved by a majority of the whole Board of Directors. The
Certificate and Bylaws also provide for the Board of Directors to be divided
into three classes, equal or nearly as equal as possible, so that all
directors serve staggered three-year terms.
The Board has nominated William A. Dolan, II, William C. Gray, D.V.M.,
Frederick H. Jarvis, and Joan M. Lamm-Tennant, Ph.D. for reelection as
directors for three-year terms expiring at the Annual Meeting of Stockholders
in 1999. All such persons are currently directors and were previously elected
by stockholders.
At its February 10, 1996 meeting, the Board of Directors elected J. Brian
Thebault to fill a vacant seat on the Board created by the death of David M.
Gessner on July 28, 1994, and A. David Brown to fill a newly created
directorship. Both Mr. Thebault and Mr. Brown were added to the class of
directors whose terms expire in 1997 and stand for election for a one-year
term expiring at the Annual Meeting of Stockholders in 1997. J. Brian
Thebault is the son of Louis P. Thebault who is retiring as a director
effective as of the Annual Meeting. Upon Mr. Thebault's retirement, the Board
intends to reduce the size of the Board to thirteen directors, thereby
eliminating the vacancy created by such retirement.
In the event any nominee shall be unable to serve as a director at the time
of the Annual Meeting of Stockholders, the proxies in favor of such
unavailable nominee will be voted for a consenting nominee selected by the
Board of Directors. Except as noted above, none of the nominees for director
is related to any executive officer or director of the Company or another
nominee by blood, marriage or adoption.
Directors shall be elected by a plurality of the votes cast.
PAGE 3
==========
CANDIDATES
==========
The following information is set forth with respect to the four nominees for
election as directors at the Annual Meeting of Stockholders to serve
three-year terms expiring at the Annual Meeting of Stockholders in 1999:
Shares of
Common Stock
Beneficially
Names Positions and Offices Owned as of
of in Company and February 22,
Directors Business Experience 1996(1)
=============================================================================
William A. Dolan, II Of Counsel, Kelly, Gaus & 15,419(2)(3)
Age: 64 Holub,law firm; Partner, Kelly,
Director since: 1988 Gaus, Holub & Dolan, law firm,
Term to expire: 1999 1994; President and Partner,
Dolan and Dolan, P.A., law firm,
1988 to 1993; Director and Chairman
of the Board, High Point Financial
Corporation; Committees of the
Company: Chairman, Conflict of
Interest; member, Audit.
- - -----------------------------------------------------------------------------
William C. Gray, D.V.M. Veterinarian and President, Newton 19,890(4)
Age: 66 Veterinary Hospital; Director, Newton
Director since: 1992 Financial Corp. and Newton Trust Company;
Term to expire: 1999 Committees of the Company: member, Audit
and Conflict of Interest.
- - -----------------------------------------------------------------------------
Frederick H. Jarvis Retired; Chairman and Chief Executive 15,470(5)
Age: 68 Officer of the Company, 1987 to 1993;
Director since: 1984 President of the Company, 1987 to 1992;
Term to expire: 1999 Committees of the Company: Chairman,
Finance; member, Executive and Committee
on Directors.
- - -----------------------------------------------------------------------------
Joan M. Lamm-Tennant, Professor of Finance, Villanova 5,100(5)
Ph.D. University; Associate Professor of
Age: 43 Finance, 1992 to 1994; Assistant
Director since: 1993 Professor, 1989 to 1991; Chief
Term to expire: 1999 Executive Officer, Cornerstone Associates
Technology Services, Inc., software,
since 1994; Director, Financial Analyst
of Philadelphia, a professional association
of portfolio managers and securities
analysts; Director, Focus Trust Fund,
a mutual fund; Committees of the Company:
member, Finance, Salary and Employee
Benefits, and Audit.
- - -----------------------------------------------------------------------------
The following information is set forth with respect to the two nominees for
director to be elected at the Annual Meeting of Stockholders to serve
one-year terms expiring at the Annual Meeting of Stockholders in 1997. Mr.
Brown and Mr. Thebault were elected by the Board of Directors on February 10,
1996 and added to the class of directors whose terms will expire in 1997.
=============================================================================
A. David Brown Managing Vice President, Korn/ 0
Age: 53 Ferry International, executive
Director since: 1996 recruiting;served in various
Term to expire: 1997 executive positions with
Macy & Co., Inc., 1969 to 1994 and
was Senior Vice President, Human
Resources, 1983 to 1994 and Director,
1987-1992.
- - -----------------------------------------------------------------------------
J. Brian Thebault President and Chief Executive 1,575
Age: 44 Officer, L.P. Thebault Company,
Director since: 1996 graphic communications, since
Term to expire: 1997 1984.
- - ---------------------------------------------------------------------------
PAGE 4
====================
CONTINUING DIRECTORS
====================
The following information is set forth with respect to the directors whose
terms of office will continue after the Annual Meeting.
Shares of
Common Stock
Beneficially
Names Positions and Offices Owned as of
of in Company and February 22,
Directors Business Experience 1996(1)
=============================================================================
James W. Entringer Chairman, President and Chief 170,206(6)
Age: 55 Executive Officer of the Company
Director since: 1992 since 1993; President and Chief
Term to expire: 1998 Operating Officer of the Company,
1992 to 1993; Senior Resident Vice
President, Merrill Lynch, Pierce,
Fenner & Smith, Inc. ("Merrill
Lynch"), 1991 to 1992; President,
Chief Executive Officer and Director,
Family Life Insurance Company, a
subsidiary of Merrill Lynch, 1988 to
1991; Committees of the Company:
member, Executive and Finance.
- - -----------------------------------------------------------------------------
C. Edward Herder President, Chester H. Herder & Son, 39,872(2)
Age: 60 Inc., and Chairman, Herder Tarricone
Director since: 1978 Associates, general insurance agencies;
Term to expire: 1998 Committees of the Company: member,
Executive, Finance, and Committee on
Directors.
- - -----------------------------------------------------------------------------
William M. Kearns, Jr. President, W.M. Kearns & Co., Inc., 35,012(2)
Age: 60 investment banking; Director, Kuhlman
Director since: 1975 Corporation, Mountasia Entertainment
Term to expire: 1997 International, Inc. and Consolidated
Delivery & Logistics, Inc.; Managing
Director, Lehman Brothers, Inc. and
predecessor firms, 1969 to 1992;
Advisory Director, Lehman Brothers Inc.,
1992 to 1994; Committees of the Company:
member, Finance and Salary and Employee
Benefits.
- - -----------------------------------------------------------------------------
S.Griffin McClellan III Consultant; Director, Summit Bank; 12,000(7)(8)
Age: 58 Chairman and Chief Executive
Director since: 1980 Officer, Crestmont Savings and Loan
Term to expire: 1997 Association, 1991 to 1994; President,
Chief Executive Officer and Director,
Crestmont Federal Savings and Loan
Association, 1989 to 1991; Committees
of the Company: Chairman, Audit;
member, Executive and Salary and
Employee Benefits.
- - -----------------------------------------------------------------------------
Russell R. Moffett Retired; Formerly President of the 17,552(9)
Age: 69 Company; Director, Newton Financial
Director since: 1981 Corp., and Newton Trust Company;
Term to expire: 1997 Committees of the Company: member,
Audit and Conflict of Interest.
- - -----------------------------------------------------------------------------
William M. Rue President, Chas. E. Rue & Son, Inc. 122,025(2)
Age: 48 T/A Rue Insurance; Director, First
Director since: 1977 Constitution Bank; Committees of the
Term to expire: 1998 Company: member, Executive, Finance and
Committee on Directors.
- - -----------------------------------------------------------------------------
Thomas D. Sayles, Jr. Retired; Director, Summit 11,500(2)
Age: 64 Bank Corp.; Chairman, The
Director since: 1988 Summit Bancorporation, 1995-1996;
Term to expire: 1998 Chairman and Chief Executive Officer,
The Summit Bancorporation, 1974 to 1994;
Committees of the Company: Chairman,
Salary and Employee Benefits; member,
Executive and Committee on Directors.
- - -----------------------------------------------------------------------------
PAGE 5
=====================================================
NOTES TO TABLE OF CANDIDATES AND CONTINUING DIRECTORS
=====================================================
(1) The amount of shares beneficially owned by each of the above-named
directors does not exceed 1% of the Common Stock outstanding.
(2) Includes 9,000 shares that may be acquired upon the exercise of options
granted and presently exercisable under the Company's Stock Option Plan
for Directors.
(3) Includes 1,050 shares held by Mr. Dolan's wife, of which Mr. Dolan
disclaims beneficial ownership.
(4) Includes 6,000 shares that may be acquired upon the exercise of options
granted and presently exercisable under the Company's Stock Option Plan
for Directors.
(5) Includes 3,000 shares that may be acquired upon the exercise of options
granted and presently exercisable under the Company's Stock Option Plan
for Directors.
(6) Includes 91,615 shares that may be acquired upon the exercise of options
granted and presently exercisable under the Company's Stock Option
Plans.
(7) Includes 4,500 shares that may be acquired upon the exercise of options
granted and presently exercisable under the Company's Stock Option Plan
for Directors.
(8) Includes 1,000 shares held by Mr. McClellan's wife, of which Mr.
McClellan disclaims beneficial ownership.
(9) Includes 7,500 shares that may be acquired upon the exercise of options
granted and presently exercisable under the Company's Stock Option Plan
for Directors.
The number of shares of Common Stock beneficially owned by the Chairman,
President and Chief Executive Officer, Mr. Entringer, as of February 22,
1996, is set forth on page 4. The number of shares of Common Stock
beneficially owned as of February 22, 1996, by the other executive officers
named in the Summary Compensation Table set forth on page 8 are as follows:
Mr. Addesso, 92,752 (including 61,500 shares that may be acquired upon the
exercise of stock options granted and presently exercisable under the
Company's stock option plans); Mr. Land, 81,706 (including 44,500 shares that
may be acquired upon the exercise of stock options granted and presently
exercisable under the Company's stock option plans); Mr. Murphy, 39,723
(including 24,384 shares that may be acquired upon the exercise of stock
options granted and presently exercisable under the Company's stock option
plans); and Mr. Ochiltree, 31,250 (including 16,500 shares that may be
acquired upon the exercise of stock options granted and presently exercisable
under the Company's stock option plans). The number of shares beneficially
owned by each of the above-named executive officers does not exceed 1% of the
Common Stock outstanding. The number of shares of Common Stock beneficially
owned by all current directors and executive officers of the Company as a
group as of February 22, 1996, was 711,052, representing 4.9% of the
outstanding shares of Common Stock on that date. Such number includes shares
that may be acquired within 60 days of such date upon the exercise of
outstanding stock options granted under the Company's stock option plans and
Stock Option Plan for Directors.
=========================
COMPENSATION OF DIRECTORS
=========================
The directors of the Company who are not employees received an annual
retainer of $20,000 in 1995. In addition, directors of the Company who are
not employees received in 1995 a fee of $1,000 for each Board meeting and
$1,000 for each Committee meeting attended. Committee Chairmen received
$1,200 for each Committee meeting attended. Each nonemployee director is
eligible to participate in the directors' Deferred Compensation Plan which
allows the deferral of the annual retainer and fees payable from time to time
as a result of services performed on behalf of the Company. Mr. Sayles, Mr.
McClellan and Mr. Dolan have elected to defer their compensation for 1996.
Deferred compensation of directors participating in this Plan accrues
interest at an annual rate equal to the average one-year United States
Treasury Bill rate from the beginning of the year to the date of payment. A
participant may elect to defer payment of compensation under the Plan until a
specified year in the future, the attainment of age 70 or termination of
services as a director of the Company. A participant may elect to receive
payment of the compensation deferred under the Plan in either a lump sum or
up to five equal annual installments. The Board intends to amend the Deferred
Compensation Plan to permit participants to make a one-time election to
convert the deferred cash amounts held in their deferred compensation
accounts to shares of Common Stock based on the fair market value (as defined
in the Deferred Compensation Plan) of a share of Common Stock as of the date
of such election.
The compensation payable to nonemployee directors is proposed to be changed
effective January 1, 1997, subject to stockholder approval, so that such
directors are compensated in Common Stock. See "Proposal to Approve the Stock
Compensation Plan for NonEmployee Directors" below.
PAGE 6
The Company's Directors' Plan provides retirement benefits for those
directors who have never been employees of the Company or its subsidiaries
and who have been members of the Board for at least five calendar years. An
eligible participant receives annual retirement or disability benefits equal
to 100% of the annual director's retainer fee. This benefit is payable in
monthly installments for a period equal to the participant's years of service
as a Board member, calculated in completed years and months, up to a maximum
of 15 years. If a participant dies prior to the commencement of benefits, no
benefit is payable from the Plan except to a surviving spouse. The surviving
spouse is entitled to receive the same monthly benefit that the participant
would have received had such participant retired on the day prior to the date
of death. Such benefits cease if the surviving spouse dies before accrued
benefits have been paid. If, after benefits commence, a participant dies
leaving a surviving spouse, the participant's monthly benefit payments shall
continue to be paid to such surviving spouse with the same frequency until
all benefits have been paid or until the spouse's death. In the event of the
total and permanent disability of a participant, benefits equal to those upon
retirement are payable immediately. If stockholders approve the adoption of
the Stock Compensation Plan for NonEmployee Directors, the Board intends to
amend the Directors' Plan to permit the Board, in its discretion to limit the
amount of annual retirement benefits and to fix the maximum annual amount
therof. See "Proposal to Approve the Stock Compensation Plan for NonEmployee
Directors" below.
The Directors' Plan provides for accelerated payment of accrued and unpaid
benefits under certain circumstances. Such benefits are payable if the
directors nominated by management of the Company and constituting a majority
of the Board cease to be directors after any of the following events
constituting a Change of Control: (a) acquisition of a controlling interest
in the Company's voting securities; (b) an election contest; (c) a successful
tender or exchange offer by a person other than the Company or an affiliate
of the Company; (d) a merger; and (e) a consolidation or other business
combination. The benefit under the Directors' Plan becomes payable in monthly
installments, commencing on the first day of the month coincident with or
next following a "Change of Control" and the termination of the participant's
service as a Board member.
The Company maintains a Stock Option Plan for Directors for those directors
who are not full-time employees of the Company or its subsidiaries unless any
of such eligible directors elects not to participate. Under such plan, each
eligible director participating in the plan automatically receives an option
to purchase 1,500 shares of Common Stock on March 1 of each year. Subject to
certain adjustments, the maximum number of shares of Common Stock that may be
issued under options granted is 200,000, which may be authorized but unissued
shares or treasury shares. The exercise price for each share of Common Stock
subject to an option granted is the Fair Market Value (as defined in the
plan) of a share of Common Stock on the date such option is granted and is
payable in cash. Any option granted under the plan becomes exercisable on the
first anniversary of the date it was granted. No option is exercisable after
the tenth anniversary of the grant. Options granted under the plan are
nontransferable, except by will or by laws of descent and distribution. In
the event of an optionee's death or disability, an option may be exercised,
in whole or in part, by the optionee's executor, administrator, guardian, or
legal representative in accordance with the terms of such option. On March 1,
1995, options to purchase 1,500 shares of Common Stock were granted to each
eligible director at an exercise price of $27.925 per share.
====================================
COMMITTEES OF THE BOARD OF DIRECTORS
====================================
The Company's Audit Committee, the membership of which is the same as the
Audit Committee of the Company's subsidiaries, Selective Insurance Company of
America, Selective Way Insurance Company, Selective Insurance Company of the
Southeast and Selective Insurance Company of South Carolina, is comprised of
S. Griffin McClellan III, Chairman, William A. Dolan, II, William C. Gray,
Joan M. Lamm-Tennant and Russell R. Moffett. In 1995, the Committee met four
times. The functions of the Committee are to receive and examine the
Auditors' Report, meet with the auditors, access the books and vouchers of
the Company, as necessary, consider the adequacy of internal controls, confer
with the officers of the Company, and report to the Board on its findings.
The Company's Salary and Employee Benefits Committee, the membership of which
is the same as the Salary and Employee Benefits Committee of Selective
Insurance Company of America, Selective Way Insurance Company, Selective
Insurance Company of the Southeast and Selective Insurance Company of South
Carolina, is comprised of Thomas D. Sayles, Jr., Chairman, William M. Kearns,
Jr., Joan M. Lamm-Tennant and S. Griffin McClellan III. In 1995, the
Committee met four times. The functions of the Committee are to evaluate the
performance of certain officers of the Company and its subsidiaries and to
make recommendations to the Board as to salary adjustments. This Committee
also continuously evaluates employee benefits and makes recommendations to
the Board in connection therewith. This Committee also functions as the
Compensation Committee, which administers the Company's stock option plans,
and as the Trustees of the Retirement Savings Plan and the Retirement Income
Plan.
PAGE 7
The Company's Committee on Directors, the membership of which is the same as
the Committee on Directors of Selective Insurance Company of America and
Selective Way Insurance Company, is comprised of C. Edward Herder, Frederick
H. Jarvis, William M. Rue and Thomas D. Sayles, Jr. In 1995, the Committee
met two times. Louis P. Thebault, who is retiring from the Board as of the
Annual Meeting of Stockholders, has been the Chairman of the Committee. The
primary function of the Committee is to seek and review qualified candidates
for directorships and to make recommendations to the Board as to nominees for
election as directors. This Committee will consider nominees recommended by
stockholders for election as directors at an Annual Meeting of Stockholders
but does not solicit such recommendations. In order to receive consideration,
all such recommendations must be in writing addressed to the Chairman of the
Committee on Directors, c/o the Secretary of the Company, 40 Wantage Avenue,
Branchville, New Jersey 07890. Such recommendations must include a reasonable
amount of biographical information about the person recommended, contain a
statement as to why the stockholder believes such person to be well qualified
to serve as a director, contain the written consent of the proposed nominee
to the submission of such information and such recommendation, and be
received by the Secretary no later than January 1 preceding the Annual
Meeting of Stockholders for which such person's election is recommended.
=======================================
ATTENDANCE OF BOARD MEMBERS AT MEETINGS
=======================================
During the past year, there were four meetings of the Board. No Board member
attended fewer than 75% of the aggregate number of meetings of the Board and
of the meetings of Committees on which he or she served.
============================================
EXECUTIVE COMPENSATION AND OTHER INFORMATION
============================================
EXECUTIVE OFFICERS OF THE COMPANY
=================================
As of March 15, 1996, the executive officers of the Company were:
=============================================================================
James W. Entringer age 55 Chairman of the Board, President and Chief
Executive Officer since April 1, 1993;
President and Chief Operating Officer from
March 1992 to April 1993; Director since May
1992. *
- - -----------------------------------------------------------------------------
Dominic J. Addesso age 42 Executive Vice President, Strategic Business
Units, since May 1993; Executive Vice President
and Chief Financial Officer from 1989 to May
1993.
- - -----------------------------------------------------------------------------
Thornton R. Land age 55 Executive Vice President, Administration, and
General Counsel, responsible for corporate
legal, staff claims counsel, government
affairs, administrative services and human
resources, since May 1993; Senior Vice
President and General Counsel from 1988 to
1993.
- - -----------------------------------------------------------------------------
Gregory E. Murphy age 40 Senior Vice President and Chief Financial
Officer, since January 1994; Vice President,
Finance, from 1993 to January 1994; Chief
Accounting Officer since 1992; Vice President
from 1987 to January 1994.
- - -----------------------------------------------------------------------------
Jamie Ochiltree, age 43 Senior Vice President, Branch Operations, since
III September 1994; Vice President, Market
Development from April 1994 to September 1994;
Vice President, Sales and Marketing, Cincinnati
Financial Corp., May 1988 to December 1993.
- - -----------------------------------------------------------------------------
Robert P. Rank age 54 Senior Vice President, Investments since
December 1993; Senior Vice President,
Investments, American Express Company, 1987 to
1993.
- - -----------------------------------------------------------------------------
Donald E. Williams age 51 Senior Vice President, Information Systems
since 1992; Vice President 1989-1992.
- - -----------------------------------------------------------------------------
All terms of office are for a one-year period.
*See additional information about Mr. Entringer on page 4.
PAGE 8
==========================
SUMMARY COMPENSATION TABLE
==========================
The following table shows, for the fiscal years ending December 31, 1995,
1994, and 1993, the compensation, paid or accrued for those years, to the
Chairman, President and Chief Executive Officer, and each of the four most
highly compensated executive officers of the Company who served as executive
officers during fiscal year 1995. (See footnote 1.)
Long-Term Compensation
|------Awards------|-Payouts-|
Annual Compensation Securities
Under- All
Name Restricted lying Other
and Stock Options/ LTIP Compen-
Principal Salary Bonus Awards SARs Payouts sation
Position Year ($)(1) ($)(2) ($)(3) (#) ($)(4) ($)(5)
=============================================================================
James W. 1995 410,000 300,000 657,145 40,000 - 9,000
Entringer(6,7) 1994 388,269 200,000 - 70,000 - 9,000
Chairman, 1993 361,923 100,000(4) - 24,839 100,000 7,480
President and
Chief Executive
Officer
- - -----------------------------------------------------------------------------
Dominic J. 1995 191,714 100,000 78,188 7,500 - 20,096
Addesso(6,7) 1994 185,191 66,708 - 39,500 - 9,525
Executive Vice 1993 178,204 40,000(4) - 8,000 131,396 5,346
President
- - -----------------------------------------------------------------------------
Thornton R. 1995 187,824 90,000 78,188 - - 9,000
Land(6,7) 1994 176,366 62,242 - 54,500 - 9,000
Executive Vice 1993 166,231 50,000(4) - 8,000 109,276 4,987
President and
General Counsel
- - -----------------------------------------------------------------------------
Gregory E. 1995 130,000 85,000 52,125 7,500 - 12,518
Murphy(6,7) 1994 124,023 43,280 - 14,780 - 7,667
Senior Vice 1993 115,619 40,000(4) - - 89,408 3,469
President and
Chief Financial
Officer
- - -----------------------------------------------------------------------------
Jamie 1995 150,000 90,000 52,125 7,500 - 14,762
Ochiltree,III 1994 80,098 - - 17,000 - 420
(6,7,8) 1993 - - - - - -
Senior Vice
President
- - -----------------------------------------------------------------------------
=======================================
FOOTNOTES TO SUMMARY COMPENSATION TABLE
=======================================
1. The executive officers received cash compensation only from the
Company's subsidiary, Selective Insurance Company of America ("SICA"),
which company also provides the employee benefit plans in which such
executive officers participate.
2. The Company maintained an Annual Plan pursuant to which cash bonuses
were awarded to officers and key employees who had contributed
significantly to the Company's success during 1993. The Company also
maintained a Long-Term Performance Plan ("LTIP") through 1993. Because
the criteria by which awards were determined under the Annual Plan for
1993 were the same as the criteria by which awards were determined under
the LTIP for the award cycle ended December 31, 1993, the Company
combined these two awards and paid one sum to those participants
eligible therefor. The "Bonus" amounts for the fiscal year ended
December 31, 1993, include awards paid to the named executive officers
under both the Annual Plan and the LTIP in respect of such fiscal year.
See footnote 4 below.
Effective for the fiscal year 1994, the Company adopted a Rewards
Program by which employees may receive a stated percentage of salary as
Annual Cash Incentive Payments if they achieve specified personal goals
and the Company achieves stated corporate performance goals. The "Bonus"
amounts for 1994 and 1995 indicate the amounts awarded to the named
executive officers as Annual Cash Incentive Payments. See the Report of
the Company's Salary and Employee Benefits Committee set forth in this
Proxy Statement.
3. The value of restricted stock awards at the end of 1995 was $678,337 for
Mr. Entringer, $106,500 for each of Messrs. Addesso and Land and $71,000
for each of Messrs. Murphy and Ochiltree. As of the end of 1995, the
number of restricted shares held by Mr. Entringer was 18,864; by each of
Messrs. Addesso and Land, 3,000; and by each of Messrs. Murphy and
Ochiltree, 2,000. The award of 5,000 such shares to Mr. Entringer, and
the awards to Messrs. Addesso, Land, Murphy and Ochiltree were made
under the Company's Stock Option Plan II under which such shares and
accrued dividends vest after four years from the date of grant depending
upon the achievement of predetermined performance goals. On November 1,
1995, Mr. Entringer received an additional award of 13,864 shares of
Common Stock outside of such plan, of which 3,466 shares vested on the
date of the award and 3,466 shares shall vest annually in 1996, 1997 and
1998, provided that Mr. Entringer remains in the employ of the Company.
The value of restricted stock awards shown above is based on the closing
market price of Common Stock on December 29, 1995, except that the value
of Mr. Entringer's shares vested on November 1, 1995 is based on the
closing market price of Common Stock on such date.
PAGE 9
4. The LTIP was an incentive compensation plan terminated on December 31,
1993, under which awards were made at the discretion of the Salary and
Employee Benefits Committee of the Board of Directors to any salaried
employee of the Company or any of its subsidiaries. The amounts set
forth under "LTIP Payouts" comprise the awards, including interest, paid
to the named executive officers in December 1993 and earned in respect
of the award cycle ended December 31, 1992. The amounts paid to the
named executive officers for awards earned under the LTIP with respect
to the one-year award cycle ended December 31, 1993 are included in the
amounts set forth in the "Bonus" column. See footnote 2 above.
5. The amounts in "All Other Compensation" include Company contributions
under the Company's Retirement Savings Plan (formerly Thrift Plan) for
the fiscal years ended December 31, 1995, December 31, 1994, and
December 31, 1993. This Plan is a defined contribution plan available to
substantially all employees. Company contributions are 30% vested after
two years of service and become 100% vested after six years of service.
In addition, for Messrs. Addesso, Murphy and Ochiltree, the amounts for
1995 in the "All Other Compensation" column also include $11,096, $4,749
and $8,877, respectively, representing the difference between the market
rate of interest and the actual rate of interest on indebtedness of such
executive officer to the Company. For additional information relating to
such indebtedness, see "Interest of Management and Others in Certain
Transactions."
6. Under employment agreements with SICA effective September 1993 to
September 1996, Messrs. Entringer, Addesso, and Land receive annual base
salaries of not less than the following amounts: Mr. Entringer,
$375,000; Mr. Addesso, $177,250; and Mr. Land, $172,000. Mr. Entringer
will also serve as a director of the Company so long as he continues to
serve as Chairman, President and Chief Executive Officer of SICA. Under
an employment agreement with SICA effective August 1, 1995, Mr. Murphy
receives an annual base salary of not less than $130,000 through August
1, 1998. Under an employment agreement with SICA effective October 31,
1995, Mr. Ochiltree receives an annual base salary of not less than
$150,000 through October 31, 1998. If any of these executive officers is
not reelected to his current position, or if he is terminated without
cause, he will be entitled to receive severance pay equal to his salary
and certain benefits in effect at the time of his termination of
employment for a period of two years after the date of such termination,
payable in monthly installments. If he is terminated for cause, he is
entitled to receive that portion of his salary earned to the date of his
termination and the benefits accrued to him under certain employee
benefit plans to the date of such termination, to the extent that such
benefits may be payable to him under the provisions of such plans in
effect on the date of the termination of his employment. The Company has
guaranteed SICA's performance of all its obligations under the
employment agreements.
7. Messrs. Entringer, Addesso, Land, Murphy and Ochiltree have termination
agreements with SICA pursuant to which payments will be made under
certain circumstances following a Change in Control of the Company, as
defined in the agreements. The agreements for Messrs. Entringer, Addesso
and Land are effective from September 1993 to September 1996 and are
automatically renewable for successive one-year terms each September 1
unless prior written notice of nonrenewal is given. Mr. Murphy's
agreement is effective from August 1, 1995 through August 1, 1998 and is
automatically renewable for successive one-year terms each August 1
unless prior written notice of nonrenewal is given. Mr. Ochiltree's
agreement is effective from October 31, 1995 through October 31, 1998
and is automatically renewable for successive one-year terms each
October 31 unless prior written notice of nonrenewal is given. Each
agreement provides that, in the event of a Change in Control of the
Company, SICA shall continue to employ the executive officer in the
capacities in which he was serving immediately prior to the Change in
Control for a period of three years, commencing on the date on which the
Change in Control shall have occurred, which term will be automatically
renewed for successive one-year periods unless prior written notice is
given. Each agreement provides that if the executive officer's
employment is terminated (as defined in the agreement) after a Change in
Control occurs, other than (i) due to the executive officer's death or
retirement, (ii) by SICA for Cause or Disability, or (iii) by the
executive officer other than for Good Reason (as such foregoing
capitalized terms are defined in the agreement), the executive officer
will be entitled to receive earned but unpaid base salary through the
date of termination, as well as any incentive compensation benefits or
awards that have been accrued, earned, or become payable but which have
not been paid, and as severance pay in lieu of any further salary for
periods subsequent to the date of termination, an amount in cash equal
to his "annualized includible compensation for the base period" (as
defined in Section 280G(d)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), multiplied by a factor of 2.99, provided that if
any of the payments or benefits provided for in the agreement, together
with any other payments or benefits that the executive officer has the
right to receive, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), the payments and benefits due to the
executive officer will be reduced in the order of priority and amount as
the executive officer shall elect, to the largest amount as will result
in no portion of such payments being subject to the excise tax imposed
by Section 4999 of the Code. The Company has guaranteed SICA's
performance of all its obligations under the termination agreements.
8. Mr. Ochiltree joined the Company in April 1994.
PAGE 10
===========================================
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
===========================================
The following table contains information concerning the grant of stock
options and tandem stock appreciation rights ("SARs") under the Company's
Stock Option Plan II ("Plan") to the Chairman, President and Chief Executive
Officer, and each of the other executive officers named in the Summary
Compensation Table.
=====================================
OPTION/SAR GRANTS IN LAST FISCAL YEAR
=====================================
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
|----------Individual Grants------------| for Option Term
% of
Number of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base Expira-
Granted(1)(3) in Fiscal Price tion
Name (#) Year ($/Sh) Date 5%($)(2) 10%($)(2)
=============================================================================
James W. 18,000 11.89% $37.50 11/06/05 $424,504 $1,075,776
Entringer 22,000 14.54% 37.688 12/18/05 521,439 1,321,429
Dominic J. 7,500 4.96% 36.625 10/31/05 172,749 437,781
Addesso
Thornton R. - - - - - -
Land
Gregory E. 7,500 4.96% 36.625 10/31/05 172,749 437,781
Murphy
Jamie 7,500 4.96% 36.625 10/31/05 172,749 437,781
Ochiltree,III
- - -----------------------------------------------------------------------------
1. The Plan permits the granting of options to all employees and permits
the granting of SARs in tandem with any or all stock options. If an SAR
is exercised, the employee must surrender the related stock option or
portion thereof. Upon exercise of an SAR, payment will be made by the
Company in stock, cash, or some combination thereof, as a committee
appointed by the Board of Directors shall determine at the time of
exercise. None of the options granted to the named executive officers in
1995 has SARs attached. Under the terms of the Plan, options or any
related SARs, may be granted at no less than fair market value as of the
date of grant. They must be exercised within ten years from the date of
grant. In the event of any change in the number of outstanding shares of
the Common Stock of the Company as a result of a stock dividend, stock
split, or other readjustments, the committee appointed by the Board of
Directors shall make an appropriate adjustment in the aggregate number
of shares which may be subject to stock options granted under the Plan
and in the number of shares subject to and the option price of each then
outstanding option.
2. The dollar amounts under these columns are based on the assumed
appreciation rates of 5% and 10% prescribed by the Securities and
Exchange Commission. These amounts are not intended to forecast possible
future appreciation, if any, of the Company's stock price.
3. Options granted in 1995 were exercisable immediately.
PAGE 11
=====================================
OPTION AND SAR EXERCISES AND HOLDINGS
=====================================
The following table sets forth information with respect to the Chairman,
President and Chief Executive Officer, and each of the other executive
officers named in the Summary Compensation Table concerning the exercise of
options and/or SARs during the last fiscal year and unexercised options and
SARs held as of the end of the last fiscal year:
===================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
===================================================
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs
Options/SARs at at Fiscal
Shares Fiscal Year-End(#)(1); Year-End($)(2);
Acquired ******************** **************
on Value Exercisable/ Exercisable/
Name Exercise(#) realized($) Unexercisable Unexercisable
=============================================================================
James W. 11,000 $49,500 91,615/ $425,214/
Entringer - - 17,600 191,400
Dominic J. - - 61,500/ 592,937/
Addesso 0 0
Thornton R. - - 44,500/ 358,688/
Land 20,000 217,500
Gregory E. - - 24,384/ 219,497/
Murphy 0 0
Jamie - - 16,500/ 91,688/
Ochiltree,III 0 0
- - -----------------------------------------------------------------------------
1. The number of securities underlying unexercised options at the end of
1995 included options with tandem SARs granted under the Company's
former stock option plan for employees which expired November 5, 1992.
This plan had 600,000 shares reserved for issuance and was, for the most
part, identical to the Company's Stock Option Plan II.
2. The value of unexercised in-the-money options is based on the closing
market price per share of Common Stock on December 29, 1995 of $35.50,
less the option exercise price per share.
PAGE 12
=============
PENSION PLANS
=============
The following table illustrates annual pension benefits, including
supplemental benefits, at normal retirement (age 65) for various years of
credited service in the form of a single life annuity and prior to any offset
for Social Security benefits. As of December 31, 1995 the Chairman, President
and Chief Executive Officer and the other executive officers named in the
Summary Compensation Table had the following credited years of service under
the pension plans: Mr. Entringer, 1 year; Mr. Addesso, 16 years; Mr. Land, 9
years; Mr. Murphy, 14 years and Mr. Ochiltree, no credited service.
====================
PENSION PLAN TABLE(1)
====================
=============================================================================
Years of Service
----------------------------------------------------------
Remuneration 5 15 20 25 30 35
=============================================================================
125,000 12,500 37,500 50,000 62,500 75,000 87,500
150,000 15,000 45,000 60,000 75,000 90,000 105,000
175,000 17,500 52,500 70,000 87,500 105,000 122,500
200,000 20,000 60,000 80,000 100,000 120,000 140,000
225,000 22,500 67,500 90,000 112,500 135,000 157,500
250,000 25,000 75,000 100,000 125,000 150,000 175,000
300,000 30,000 90,000 120,000 150,000 180,000 210,000
400,000 40,000 120,000 160,000 200,000 240,000 280,000
450,000 45,000 135,000 180,000 225,000 270,000 315,000
500,000 50,000 150,000 200,000 250,000 300,000 350,000
- - -------------------------------------------------------------------------
1. The Company maintains a noncontributory Retirement Income Plan
integrated with Social Security benefits. The plan covers substantially
all employees, including officers. Compensation covered under the plan
consists only of basic wages and salaries, not including overtime and
bonuses, i.e., only the "Salary" column of the Summary Compensation
Table. Monthly plan benefits are computed at the rate of 2% of average
monthly compensation for the 60 months out of the most recent 120 months
of employment for which the employee's compensation is the highest
multiplied by the number of years of credited service, less an offset
for Social Security benefits, calculated as 1 3/7% of the participant's
Social Security income in effect on January 1 of the year of retirement
multiplied by the number of years of credited service. If the employee
is married, the normal form of benefit is a joint and survivor annuity
for the employee and spouse. If the employee elects against such annuity
with the spouse's consent, a single life annuity may be paid. The
Company has a nonqualified supplemental pension plan to provide benefits
that would have been paid by the qualified plan, but for the limitations
imposed by the Internal Revenue Code on the maximum benefits payable and
the compensation upon which qualified plan benefits may be calculated.
PAGE 13
============================================
REPORT OF THE SELECTIVE INSURANCE GROUP, INC.
SALARY AND EMPLOYEE BENEFITS COMMITTEE
============================================
The Salary and Employee Benefits Committee (the "Committee") of the Board of
Directors is responsible for setting the executive compensation policies of
the Company and evaluating the level of compensation of the executive
officers of the Company and its subsidiaries relative to the positions and
performances of the executive officers. The Committee's decisions on
executive compensation are subject to the approval of the Board of Directors,
except for grants under certain of the Company's employee benefit plans,
which are made solely by the Committee in order for such plans to satisfy the
disinterested administration requirements of Rule 16b-3 under the Securities
Exchange Act of 1934. The Committee consists of Messrs. Sayles (Chairman),
Kearns, and McClellan and Ms. Lamm-Tennant, all of whom are nonemployee
directors. For purposes of this report, the term "Company" means Selective
Insurance Group, Inc. and its subsidiaries unless the context otherwise
requires.
The Committee's executive compensation policies are intended to enable the
Company to attract and retain qualified executives by combining a base salary
component with annual bonus and long-term incentive components. The levels
of annual total compensation for executive officers (including the executive
officers named in the foregoing tables) are generally intended to be
comparable to the levels of annual total compensation paid to executives with
comparable responsibilities in a group of other companies in the financial
services industry, identified by the Company using external surveys as being
similar in size and scope to the Company, while providing for annual and
long-term incentives which are subject to the achievement of
performance-related goals. This comparison group of companies in the
financial services industry is smaller and more diverse than the group
comprising the Company's peer group for purposes of the performance graph set
forth on page 15 in this Proxy Statement.
After determining the level of compensation for each executive officer as
compared with his counterparts in the identified industry group, the
Committee weighs the executive officer's performance and level of
responsibility and considers such executive officer's contribution to the
financial and other goals of the Company. The goals and objectives are
established in advance and may relate to the executive officer's performance,
the Company's performance, or both. Among the criteria used in determining
base salaries are: (i) the Company's financial performance compared to its
performance in the prior year, including the Company's combined ratio (both
overall and by lines of insurance), return on equity, results of operations
and overall financial condition; (ii) the managerial ability of such
executive officer as evaluated by the Committee taking into account the
evaluation of such person by the Chairman; and (iii) such officer's ability
to develop personnel within the areas of his responsibility for the future
operation of the Company. These criteria are the more significant factors
used by the Committee in reaching its decisions on executive compensation. As
a result of the individual evaluations, for any particular year the
compensation level of each executive officer may be higher or lower than that
of comparable executives in the comparison group and may vary each year
depending upon the achievement of the individual.
The Committee meets approximately four times a year. Changes in the base
salary component of executive compensation do not necessarily occur annually,
but may occur after a longer period of time.
In addition to the base salary component of executive officers' compensation,
Annual Cash Incentive Payments under the Company's Rewards Program may be
earned. Specific performance-related goals are established for each executive
officer at the beginning of the fiscal year after discussions between such
executive officer and the Chairman (and with respect to the Chairman between
the Chairman and the Committee) to determine the nature and extent of such
goals. These individual goals relate to specific business, departmental or
management objectives that support specific corporate goals established for
the fiscal year. In 1995, corporate goals included improving the loss ratio
and increasing diversification of geographic premium distribution. If
individual and corporate goals are achieved for the year, the executive
officer may earn the percentage of salary specified in the Annual Cash
Incentive Plan for such officer's position as an annual incentive.
In January 1996 the Committee reviewed each executive officer's performance
evaluation, the recommendations of the Chairman as to the achievement of the
individual performance-related goals and the Company's performance for 1995
using the criteria described above. Based upon such criteria and the Annual
Cash Incentive percentage guidelines, the Committee determined the Annual
Cash Incentive Payments to be awarded to the Company's executive officers for
the year ended December 31, 1995. As a result of extraordinary
accomplishments and the Company's unprecedented earnings for 1995, the
Committee approved Annual Cash Incentive Payments for all executive officers.
Annual Cash Incentive Payments for some executive officers were approved in
excess of the percentages specified in Annual Cash Incentive Plan Guidelines.
Approval of a particular percentage reflected the Committee's assessment of
the individual's contributions to the Company's overall success and the
degree to which he achieved personal performance objectives.
The two forms of executive officers' long-term incentive compensation are
stock options (with or without tandem stock appreciation rights) and stock
grants under the Company's Stock Option Plan II (the "Plan"). The Committee
believes that
PAGE 14
stock ownership by management encourages management to enhance stockholder
value. Stock options (with or without tandem stock appreciation rights)
granted to executive officers and other employees give optionees the right to
purchase shares of the Company's Common Stock over a ten-year period at the
fair market value per share on the date of grant. Generally, the Committee
grants options to executive officers based on individual merit, taking into
account, among other things, the performance evaluations of such executive
officers by the Chairman. The number of options granted at any given time is
also determined, in part, by the executive officer's level of responsibility,
i.e., more options are given to employees and executives in positions of
greater responsibility, and the date of the last option grant to such person.
In recent years, the Company has generally granted options on an annual
basis, but options will not necessarily be granted annually to each executive
officer. Stock options (and any tandem stock appreciation rights) that have
been granted to executive officers have generally been exercisable
immediately upon grant. However, the Committee has the discretion to
establish a vesting schedule for option grants and has at times granted
options that vest over a period of time. Grants of stock, whether restricted
or unrestricted, also provide incentive to the executive officers to enhance
stockholder value. Under the Plan, the Committee, in its discretion, may make
restricted or unrestricted grants of Common Stock, or grant rights to receive
Common Stock, to executive officers and other employees in addition to or in
substitution for options or stock appreciation rights. Each such grant is
subject to the attainment of one or more performance-related objectives and
other terms and conditions as may be determined by the Committee in its
discretion. Grants of stock under the Plan were made to all of the executive
officers in 1995. All restricted stock grants to date are subject to vesting
four years after the date of grant and the attainment of predetermined
corporate financial objectives during the vesting period.
The Company intends, to the extent practicable, to preserve deductibility
under the Internal Revenue Code for compensation paid to its executive
officers while maintaining compensation programs to attract and retain highly
qualified executives in a competitive environment.
The Committee's bases for determining the compensation of Mr. Entringer have
been substantially the same as those referred to above with respect to the
Company's executive officers. The Committee seeks to maintain the base salary
of the Chief Executive Officer at a level competitive with the mid-range of
the base salaries of the chief executive officers of other insurance
companies in the Company's identified comparison group, but Mr. Entringer's
base salary and incentive compensation for 1995 were significantly affected
by his performance and the Company's performance as compared to the peer
group, as described below.
Mr. Entringer is eligible to participate in the same employee benefit plans
available to the other executive officers of the Company. In November and
December 1995, the Committee granted Mr. Entringer an option to purchase
18,000 and 22,000 shares, respectively, of the Company's Common Stock, at an
exercise price equal to the fair market value on the date of grant, as
defined in the Plan. In determining the number of options granted to Mr.
Entringer, the Committee evaluated Mr. Entringer's overall compensation
package relative to those of other chief executive officers in the comparison
group, as well as Mr. Entringer's performance and level of responsibility.
In addition, the Committee wished to further align Mr. Entringer's interests
with those of stockholders generally through encouraging his greater stock
ownership.
In determining Mr. Entringer's award under the Annual Cash Incentive Plan for
1995, the Committee considered the extent to which Mr. Entringer had met or
exceeded certain financial and operational goals, and how well he had
implemented initiatives scheduled for 1995 including objectives related to
increased productivity, field underwriting, and integration of automated
systems. The Committee reviewed the Company's combined ratio, expense
reduction, and capital strategies and Mr. Entringer's achievements in
productivity, employee compensation and development, corporate restructuring
and technological development, in addition to those factors used in
determining the awards of the other executive officers.
In November 1995 the Committee awarded additional long-term compensation to
Mr. Entringer in the form of a restricted stock grant outside the Plan. To
reward Mr. Entringer for his achievement in increasing the value of the
Company during the previous year, the Committee awarded Mr. Entringer 13,864
shares of stock of which 3,466 shares vested immediately. In addition, 3,466
shares will vest annually in 1996, 1997 and 1998, provided Mr. Entringer
remains with the Company.
Submitted by the Salary and Employee Benefits Committee of the Company's
Board of Directors: Thomas D. Sayles, Jr. (Chairman), William M. Kearns, Jr.,
Joan M. Lamm-Tennant and S. Griffin McClellan III.
No Compensation Committee interlocks or insider participation in compensation
decisions occurred during the fiscal year ended December 31, 1995.
PAGE 15
================================================
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
================================================
The following graph demonstrates a five-year comparison of cumulative total
returns for the Company, the Nasdaq Stock Market (U.S. companies), and the
Fire, Marine and Casualty insurers (Nasdaq Market).
=============================
(CORPORATE PERFORMANCE GRAPH)
=============================
=============================================================================
|-------------------As of---------------------|
INDEX 12/31 12/31 12/31 12/31 12/30 12/29
DESCRIPTION 1990 1991 1992 1993 1994 1995
- - -----------------------------------------------------------------------------
Selective Insurance Group, 100.0 134.8 187.0 270.7 233.7 340.4
Inc.
Nasdaq Stock Market (US 100.0 160.6 186.9 214.5 209.7 296.3
Companies)
NASDAQ Stocks (SIC 6330- 100.0 142.0 190.9 197.4 190.2 266.4
6339 US + Foreign Fire,
Marine, and Casualty
Insurance Peer Group(1))
- - -----------------------------------------------------------------------------
1. The members of the Peer Group include Fire, Marine and Casualty insurers
that are traded on the Nasdaq Stock Market and have the same Standard
Industry Classification (SIC) number as the Company. The Peer Group
members are as follows: 20th Century Industries CA; Allied Group, Inc.;
Allmerica Property & Casualty Companies, Inc; American Bankers Insurance
Group, Inc.; American Indemnity Financial Corporation; American
Integrity Corporation; Argonaut Group, Inc.; Baldwin & Lyons, Inc.;
Bancinsurance Corporation; W. R. Berkley Corporation; Chandler Insurance
Company, Ltd.; Cincinnati Financial Corporation; Citizens Security
Group, Inc.; Condor Services, Inc.; Donegal Group, Inc.; Employers
Casualty Company; Equitable of Iowa Companies; Exstar Financial
Corporation; Financial Institutions Insurance Group, Ltd.; Florida
Employers Insurance Company; Foremost Corporation America; Fremont
General Corporation; Goran Capital, Inc.; Gryphon Holdings, Inc.; HCC
Insurance Holdings, Inc.; Hanover Insurance Company; Harleysville Group
Inc.; Home State Holdings, Inc.; Intercargo Corporation; Kaye Group,
Inc.; MAIC Holdings, Inc.; Markel Corp.; Mercury General Corporation;
Meridian Insurance Group, Inc.; Mid Ocean, Ltd.; Midland Financial
Group, Inc.; Milwaukee Insurance Group Inc.; Mobile America Corporation;
Motor Club of America; Mutual Assurance, Inc.; NAC Re Corporation;
NYMAGIC Inc.; Navigators Group, Inc.; Niagara Exchange Corp.; Nobel
Insurance, Ltd.; North East Insurance Company; Occupational Urgent Care
Health; Ohio Casualty Corporation; Old Lyme Holding Corp.; Omni
Insurance Group, Inc.; PXRE Corp.; PAC RIM Holding Corporation; PAN
Atlantic Inc.; Phoenix Re Corporation; Piedmont Management, Inc.; RTW,
Inc.; Rathbone King & Seeley Inc.; SAFECO Corporation; Selective
Insurance Group, Inc.; St. Paul Companies, Inc.; State Auto Financial
Corporation; Titan Holdings, Inc.; Tokio Marine & Fire Insurance, Ltd.;
Trenwick Group, Inc.; U.S. Capital Group, Inc.; Unico American
Corporation; United Coasts Corporation; United Fire & Casualty Company;
United States Facilities Corporation; Walshire Assurance Company.
PAGE 16
==================================================
II. APPROVAL OF THE SELECTIVE INSURANCE GROUP, INC.
STOCK COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS
==================================================
(Item 2 on Proxy Card)
Introduction
============
On February 10, 1996, subject to approval by the Company's stockholders, the
Board of Directors of the Company adopted the Selective Insurance Group, Inc.
Stock Compensation Plan for Nonemployee Directors (the "Plan"). The purpose
of the Plan is to provide for the payment, effective January 1, 1997, of
compensation payable to nonemployee directors for their services as directors
in shares of Common Stock, in lieu of cash, thereby increasing their
ownership of Common Stock and promoting the alignment of their interest in
the long-term success of the Company with that of stockholders generally. The
Plan provides for a maximum of 200,000 shares of Common Stock to be issued to
nonemployee directors under the Plan.
The principal features of the Plan are summarized below. The summary is
qualified in its entirety to the full text of the Plan, which is annexed as
Exhibit A.
=============================================================================
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE PLAN.
=============================================================================
Description of the Plan
=======================
Eligibility. Each member of the Company's Board of Directors (the "Board")
============ who is not an employee of the Company or a subsidiary of the
Company will participate in the Plan (each, a "Participant").
Administration. The Plan will be administered by the Secretary of the
=============== Company. Such administrator's duties will be limited to
matters of interpretation and administrative oversight of the Plan.
Compensation in Common Stock. The Plan provides that each Participant will
============================= receive his or her annual compensation for
services as a director ("Compensation") in shares of Common Stock.
Participants will be entitled to receive quarterly in each year, commencing
1997, a number of shares of Common Stock determined by dividing one-fourth of
the amount of a Participant's Compensation by the "fair market value" of a
share of Common Stock, which is the average of the high and low sale prices
of a share of Common Stock as quoted in the Nasdaq National Market, on each
designated payment date. Shares will be prorated for any person who becomes
a Participant after a designated payment date and before the next designated
payment date. The right to receive shares of Common Stock under the Plan
will be nontransferable except by will or the laws of descent and
distribution.
Deferral of Receipt of Shares. A Participant may elect prior to the
============================== commencement of any year to defer the
issuance and receipt of shares of Common Stock issuable as Compensation to
the Participant for such year. In such event, shares issuable in respect of
Compensation for such year, and any dividends payable in respect of such
shares and interest thereon, will be credited to a deferred compensation
account for the Participant.
Shares Available under the Plan. The maximum number of shares of Common
================================ Stock that will be available for issuance
under the Plan will be 200,000 shares. In the event of any reorganization,
recapitalization, stock dividend or other change in the capital structure of
the Company, an appropriate adjustment will be made to prevent a dilution or
enlargement of the Participants' rights under the Plan.
Participants' Compensation. The amount of Participants' Compensation will be
=========================== determined by the Board no more frequently than
once per year during the term of the Plan.
Term of the Plan. If approved by stockholders, the Plan will become
================= effective January 1, 1997 and remain in effect for ten
years thereafter.
Nonexclusivity of Plan. The Plan will not affect, modify or rescind any
======================= other existing compensation Plan for directors,
which include the Stock Option Plan for Directors and the Directors' Plan
(retirement plan).
Termination or Amendment of the Plan. The Board may terminate or suspend the
===================================== Plan at any time. The Board may amend
the Plan as provided therein to conform to legal requirements or in other
respects, except, that no amendment to the Plan will be effective without
stockholder approval to increase the number of shares of Common Stock
available for issuance under the Plan or if such approval is required under
the Securities Exchange Act of 1934, as amended. No amendment of the Plan
shall be made to modify the eligibility requirements for Participants or the
requirement that Participants receive their Compensation in shares of Common
Stock.
PAGE 17
Effect of Plan
==============
If the Plan is approved by stockholders, nonemployee directors of the Company
will receive their Compensation in shares of Common Stock commencing January
1, 1997. All of the Company's current directors, other than Mr. Entringer,
and all nominees for election as directors, if elected by stockholders, will
be Participants. The Board has set the amount of Compensation for all
nonemployee directors at $31,000 per annum, effective January 1, 1997.
If the Plan had been in effect during the year ended December 31, 1995 and
the amount of nonemployee directors' Compensation had been $31,000 for such
year, each nonemployee director would have received 1,033 shares of Common
Stock as Compensation, and nonemployee directors would have received an
aggregate of 12,396 shares of Common Stock as Compensation assuming that all
current nonemployee directors were directors of the Company for the entire
year.
The number of shares of Common Stock actually to be received by the Company's
nonemployee directors under the Plan will depend on the amount of
Compensation determined by the Board from year to year and the fair market
value of a share of Common Stock on each designated payment date. The Plan
will not affect the Company's Stock Option Plan for Directors or the
Directors' Plan, except that, subject to stockholder approval of the Plan,
the Board intends to amend the Directors' Plan, described above on page 6 of
this Proxy Statement, to permit the Board, in its discretion, to limit the
amount of annual retirement benefits to nonemployee directors and to fix the
annual amount thereof.
At the present time the nonemployee members of the Board of Directors of the
Company receive an annual retainer of $20,000 and a fee of $1,000 for each
Committee and Board meeting attended. However, Committee Chairmen receive
$1,200 for each Committee meeting attended. This program resulted in a range
of 1995 cash or deferred compensation of $28,000 to $36,000 per director.
The following table shows the components of director compensation and
compares current director compensation to compensation giving effect to the
Plan:
=============================================================================
COMPENSATION CURRENT PROPOSED UNDER THE PLAN
============ ======= =======================
- - -----------------------------------------------------------------------------
Annual Retainer $20,000 $31,000 fair market value
of Common Stock as
determined under the
Plan
- - -----------------------------------------------------------------------------
Annual Option
Grant(1) 1,500 shares 1,500 shares
- - -----------------------------------------------------------------------------
Attendance Fee
(per meeting) $ 1,000 None
- - -----------------------------------------------------------------------------
Committee Meeting
Attendance Fee
(per meeting) $ 1,000 None
- - -----------------------------------------------------------------------------
Committee Meeting
Attendance Fee
(per meeting) for
Committee Chair $ 1,200 None
- - -----------------------------------------------------------------------------
BENEFITS
========
- - -----------------------------------------------------------------------------
Retirement The amount of the annual Up to an annual amount
retainer for a maximum equal to (i) the Compen-
of 15 years (depending on sation or (ii) a lesser
years of service)(2) amount determined by the
Board under the Directors'
Plan, for a maximum of 15
Years (depending on years
of service)(2)
- - -----------------------------------------------------------------------------
Vote Required for Approval
==========================
Approval of the Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented at the Annual
Meeting.
===================================================================
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE PLAN.
===================================================================
FOOTNOTES
=========
(1) Options are granted to nonemployee directors under the Company's Stock
Option Plan for Directors at the fair market value on the date of grant,
which is March 1 of each year.
(2) See description of the Company's Directors' Plan under the heading
"Compensation of Directors" above.
PAGE 18
=========================================================
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
=========================================================
C. Edward Herder, a director of the Company, is Chairman and owner of more
than a 5% equity interest in Herder Tarricone Associates, a general insurance
agency, which received $640,523 in commissions during 1995 for insurance
policies placed with the Company's subsidiaries. During 1995, the Company's
insurance subsidiaries purchased insurance coverages with premiums of
$316,506 through the agency. William M. Rue, a director of the Company, is
President and owner of more than a 5% equity interest in Rue Insurance, a
general insurance agency, which received $1,077,665 in commissions during
1995 for insurance policies placed with the Company's subsidiaries. During
1995, the Company's insurance subsidiaries purchased insurance coverages with
premiums of $1,043,605 through the agency. J. Brian Thebault, a director of
the Company, is President and Chief Executive Officer of L.P. Thebault
Company, Inc., graphic communications, which received $63,949 during 1995 for
services performed for the Company and its subsidiaries. Louis P. Thebault,
retiring from the Board of Directors of the Company as of the Annual Meeting
of Stockholders, is the Chairman of L.P. Thebault Company, Inc. The foregoing
relationships have existed during the past fiscal year, and the Company
intends to continue these relationships in the current year.
On December 16, 1994, Messrs. Addesso, Murphy and Ochiltree, each of whom is
an executive officer of the Company, incurred certain indebtedness to the
Company in connection with their respective exercises of nonqualified stock
options granted on such date under the Company's Stock Option Plan II. Such
loans were made by the Company to such officers and certain other employees
in order to encourage such employees to exercise their options and thus to
align further their interests with those of the stockholders through greater
stock ownership. The principal amounts of such loans to Messrs. Addesso,
Murphy and Ochiltree were $246,250, $105,395 and $197,000, respectively.
These loans bear no interest and are due in 2005. Principal amounts
outstanding as of March 1, 1996 were $229,012, $90,639; and $169,420 for
Messrs. Addesso, Murphy, and Ochiltree, respectively.
===================
DATE FOR SUBMISSION
OF STOCKHOLDER PROPOSALS
========================
Any stockholder desiring to submit a proposal for inclusion in the Proxy
Statement relating to the 1997 Annual Meeting of Stockholders (to be held on
or about May 2, 1997) must submit the same in time to be received at the
Company's headquarters at Branchville, New Jersey, on or before November 30,
1996, for determination of eligibility in accordance with law.
====================
FINANCIAL STATEMENTS
AND OTHER INFORMATION
=====================
Consolidated financial statements for the Company and its subsidiaries and
the report thereon of KPMG Peat Marwick LLP are included in the 1995 Annual
Report to Stockholders. A copy of the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, as filed with the Securities and
Exchange Commission, excluding exhibits, will be provided without charge to
stockholders upon written request to the Senior Vice President, and Chief
Financial Officer, Selective Insurance Group, Inc., 40 Wantage Avenue,
Branchville, New Jersey 07890. The Form 10-K provided to stockholders will
include only a list of exhibits to the Form 10-K. Exhibits will be furnished
to stockholders upon request and upon payment of reproduction and mailing
expenses.
===========
ACCOUNTANTS
===========
For many years, the Company has engaged the services of KPMG Peat Marwick LLP
as its principal accountants. The Company anticipates making no change in its
selection and a representative of that firm is expected to be available at
the Annual Meeting of Stockholders to respond to appropriate questions and to
make a statement if such representative so desires.
PAGE A-1
=========
EXHIBIT A
=========
==============================
SELECTIVE INSURANCE GROUP, INC.
STOCK COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS
=================================================
I. PURPOSE OF THE PLAN
===================
The purpose of this Selective Insurance Group, Inc. Stock
Compensation Plan for Nonemployee Directors (the "Plan") is to provide for
the payment of compensation payable to members of the Board of Directors (the
"Board") of Selective Insurance Group, Inc. (the "Company") who are not
employees of the Company or a subsidiary of the Company for their services as
directors in shares of the common stock, $2.00 par value, of the Company
("Common Stock"), thereby increasing their ownership of Common Stock and
promoting the alignment of their interest in the long-term success of the
Company with that of stockholders generally.
II. ELIGIBILITY
===========
Each person who is a member of the Board (a "Director") and is not
an employee of the Company or any of its subsidiaries shall be a participant
in the Plan (a "Participant").
III. ADMINISTRATION
==============
The Plan will be administered by the Secretary of the Company (the
"Administrator"). The Administrator's duties under the Plan will be limited
to matters of interpretation and administrative oversight of the Plan. Each
determination, interpretation or other action that the Administrator makes or
takes pursuant to the provisions of the Plan will be conclusive and binding
for all purposes on the Company and all Participants, and the Administrator
will not be liable for any action or determination made in good faith with
respect to the Plan.
IV. ISSUANCE OF COMMON STOCK
========================
(a) Subject to approval of the Plan by stockholders of the
Company, commencing January 1, 1997 each Participant shall receive his or her
annual compensation for services as a Director (the "Compensation") in shares
of Common Stock. The number of shares of Common Stock to be issued to each
Participant pursuant to this Section IV(a) shall be determined on January 1,
April 1, July 1 and October 1 of each year commencing January 1, 1997 (each,
a "Payment Date"), or the next succeeding business day if a Payment Date is
not a business day. On each Payment Date, each Participant shall become
entitled to receive the number of shares of Common Stock determined by
dividing one-fourth of the amount of the Participant's Compensation by the
Fair Market Value (as hereinafter defined) of a share of Common Stock on the
Payment Date. Any factional shares resulting from such calculation shall be
rounded up to the nearest whole number of shares.
(b) Any person who becomes a Participant in the Plan after a
Payment Date and before the next succeeding Payment Date in any year, whether
by appointment or election as a Director or by ceasing to be an employee of
the Company or a subsidiary of the Company, shall receive a pro rata number
of shares of Common Stock issuable under Section IV(a) hereof as his or her
Compensation until the next Payment Date. Such pro rata number of shares of
Common Stock shall be the number of shares of Common Stock determined by (a)
multiplying the amount of such Participant's Compensation by a fraction, the
numerator of which shall be the number of days remaining from the date of
election or appointment until the next succeeding Payment Date, and the
denominator of which shall be 365, and (b) dividing the product of said
multiplication by the Fair Market Value (as hereinafter defined) of a share
of Common Stock on the last preceding Payment Date. Any fractional shares
resulting from such calculation shall be rounded up to the nearest whole
number of shares.
V. CERTIFICATES FOR SHARES
=======================
No certificate for shares of Common Stock will be issued to a
Participant unless the Participant requests such issuance in writing to the
Company. Shares of Common Stock issuable to a Participant will be credited
to such Participant's account until receipt of such written request for all
or part of such shares. The number of shares of Common Stock issuable on
each Payment Date and the cumulative number of shares credited to an account
under the Plan will be shown on a statement of account furnished to each
Participant after each Payment Date. Upon a Participant's written request to
the Company, a certificate for all or any portion of the whole shares of
Common Stock credited to such Participant's account will be issued to such
Participant.
PAGE A-2
VI. FAIR MARKET VALUE
=================
For the purposes of the Plan, the "Fair Market Value" of a share of
Common Stock on any Payment Date shall be equal to the average of the high
and low sale prices of a share of Common Stock, as reported on the Nasdaq
National Market, on such Payment Date.
VII. DEFERRAL OF RECEIPT OF SHARES
=============================
(a) Election to Defer Receipt of Shares. (i) A Participant may
=================================== irrevocably elect on or
before December 20 of each year to defer the issuance and receipt of shares
of Common Stock issuable under the Plan in respect of Compensation to be
payable to such Participant during the next succeeding calendar year and any
calendar year thereafter. The Participant may elect to defer such issuance
of shares of Common Stock until (A) a specified year in the future, (B) the
attainment of age 70 or (C) termination of services as a Director. Subject to
Section VII(d) hereof, if the foregoing alternative (A) is elected by the
Participant, such shares of Common Stock and amounts (if any) issuable or
payable to the Participant shall be issued and paid within sixty days after
the beginning of the year specified in his or her election. Subject to
Section VII(d) hereof, if the foregoing alternative (B) or (C) is elected by
the Participant, such shares of Common Stock and amounts (if any) shall be
issued and paid within sixty days after his or her attainment of age 70 or
termination of service as a Director, as the case may be. (ii) In the event
of a "Change of Control" (as hereinafter defined), notwithstanding any
Participant's election, and if such Change of Control results in the
termination of a Participant's service as a Director of the Company, all
shares of Common Stock deferred under the Plan shall be issued on the first
day of the month following the termination of such Participant's service.
"Change of Control" means: (A) an acquisition of a controlling interest in
the Company's voting securities, (B) an election contest, (C) a successful
tender or exchange offer by a person other than the Company or an affiliate
of the Company, (D) a merger, or (E) a consolidation or other business
combination resulting in Directors constituting a majority of the Board
nominated by management of the Company immediately prior to such Event
ceasing to be Directors after such Event. (iii) A deferred compensation
account shall be established for each Participant who elects to defer the
receipt of shares of Common Stock under the Plan, and all shares so deferred
shall be credited to such Participant's deferred compensation account.
(b) Amendment or Revocation of Election. An election pursuant to
=================================== this Section VII
covering more than one (1) calendar year may be revoked or modified by a
Participant with respect to calendar years not yet begun by written notice to
the Company received by not later than December 20 of the year prior to the
first calendar year for which such revocation or modification is to apply.
(c) Cash Dividends on Shares of Common Stock. In the event that
======================================== cash dividends on
the shares of Common Stock, the issuance of which are deferred hereunder, are
declared and paid during the period commencing on the date such shares would
have been issued but for such deferral and terminating on the date of
issuance of such shares of Common Stock (the "Deferred Period"), an amount
equal to the amount of such dividends shall be credited to such Participant's
deferred compensation account as and when such dividends are paid by the
Company as if such shares of Common Stock had been issued and outstanding
during the Deferred Period. The cash portion of such account shall be
credited with interest on December 31 of each year (if on such date there is
a balance in the account) equal to the amount of interest, if any, which
would have been earned on the average cash balance in a Participant's account
for the year at an annual rate of interest equal to the average one-year
United States Treasury Bill rate for the year. If deferred shares of Common
Stock are issued and amounts credited to a Participant's account are
withdrawn prior to any such December 31, interest on such withdrawn amounts
shall be credited to such account calculated at an annual rate equal to the
average one-year United States Treasury Bill rate from the beginning of the
year to the date of the withdrawal. The Company shall pay the Participant on
the date such Participant's deferred shares of Common Stock are actually
issued an amount in cash equal to the amount of such dividends, on a
cumulative basis, and interest, if any, credited to such Participant's
account.
(d) Form of Payment. A Participant may elect to receive shares of
=============== Common Stock, the issuance of which is
deferred hereunder, and any cash dividends on shares of Common Stock, the
issuance of which is deferred hereunder, in either (i) a lump sum or (ii) up
to five equal (or as nearly equal as possible) installments.
PAGE A-3
(e) Nontransferability. The right to receive the shares of Common
================== Stock deferred hereunder and an amount
equal to the amount of cash dividends and interest thereon, if any, described
in this Section VII shall not be transferable, except by will or the laws of
descent and distribution.
(f) Participant's Rights Unsecured; Title to Funds. Nothing
============================================== contained
herein shall be deemed to create a trust of any kind or create any fiduciary
relationship. Funds payable in respect of dividends on shares of Common
Stock, and interest thereon, if any, under this Section VII shall continue
for all purposes to be a part of the general funds of the Company and shall
not be specifically set aside or otherwise segregated. The obligation of the
Company to issue and deliver shares of Common Stock under this Section VII
shall be a general contractual obligation of the Company. To the extent that
a Participant acquires a right to receive payments from the Company and
shares of Common Stock from the Company under the Plan, such rights shall be
no greater than the rights of any unsecured general creditor of the Company
and such rights shall be an unsecured claim against the general assets of the
Company.
(g) Statement of Account. A statement will be furnished to each
==================== Participant on or about March 1 of each
year stating the number of shares of Common Stock and the cash balance
credited to such Participant's deferred compensation account as of the
preceding December 31.
VIII. SHARES AVAILABLE FOR ISSUANCE
=============================
(a) Maximum Number of Shares Available. The maximum number of
================================== shares of the Company's
Common Stock that will be available for issuance under the Plan will be
200,000 shares, subject to any adjustments made in accordance with the
provisions of Section VIII(b). Shares of Common Stock available for issuance
under the Plan may be either authorized but unissued shares or treasury
shares. If treasury shares are used, all references in the Plan to the
issuance of shares will be deemed to mean the transfer of shares from
treasury.
(b) Adjustments to Shares. In the event of any reorganization,
===================== recapitalization, reclassification,
stock dividend, stock split, combination of shares or extraordinary dividend,
an appropriate adjustment will be made in the number and/or kind of
securities issuable under the Plan and available for issuance under the Plan
to prevent either the dilution or the enlargement of the rights of the
Participants hereunder.
IX. DETERMINATION OF COMPENSATION
=============================
The amount of Compensation shall be determined by the Board no more
frequently than once per calendar year during the term of the Plan.
X. LIMITATION ON RIGHTS OF PARTICIPANTS
====================================
(a) Service as a Director. Nothing in the Plan will interfere
===================== with or limit in any way the right of
the Board or the Company's stockholders to remove a Participant from the
Board. Neither the Plan nor any action taken pursuant to it will constitute
or be evidence of any agreement or understanding, express or implied, that
the Board or the Company's stockholders have retained or will retain a
Participant for any period of time or at any particular rate of compensation.
(b) Nonexclusivity of the Plan. Nothing contained in the Plan is
========================== intended to affect, modify or
rescind Company's stock option plan or retirement plan for nonemployee
directors.
XI. PLAN AMENDMENT, MODIFICATION AND TERMINATION
============================================
The Board may suspend or terminate the Plan at any time. The Board
may amend the Plan from time to time in such respects as the Board may deem
advisable in order that the Plan will conform to any change in applicable
laws or regulations or in any other respect that the Board may deem to be in
the Company's best interests; provided, however, that no amendment to the
Plan will be effective without approval of the Company's stockholders if such
amendment is to increase the number of shares of Common Stock available for
issuance under the Plan, or if stockholder approval of such amendment is then
required pursuant to Rule 16b-3 (or any successor rule) under the Securities
Exchange Act of 1934, or the rules of the National Association of Securities
Dealers, Inc. applicable to issuers with securities reported on the Nasdaq
National Market, and, provided, further, that no amendment to the Plan shall
be made to modify (i) the eligibility requirement for Participants set forth
in Section II of the Plan or (ii) the provisions of Section IV of the Plan
which require all Participants to receive Compensation in shares of Common
Stock. In addition, the Plan may not be amended more than once every six
months other than to conform the Plan to changes in the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, the Securities
Exchange Act of 1934, or the rules thereunder.
PAGE A-4
XII. EFFECTIVE DATE AND DURATION OF THE PLAN
=======================================
Subject to approval by the Company's stockholders, the Plan shall
become effective on January 1, 1997 and will terminate on the tenth
anniversary of such date, unless earlier terminated by the Board.
XIII. MISCELLANEOUS
=============
(a) Securities Laws and Other Restrictions. Notwithstanding any
====================================== other provision of
the Plan, the Company will not be required to issue any shares of Common
Stock under the Plan and a Participant may not sell, assign, transfer or
otherwise dispose of shares of Common Stock issued pursuant to the Plan,
unless (a) there is in effect with respect to such shares a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws or an exemption from such
registration under the Securities Act and applicable state securities laws,
and (b) there have been obtained any other consent, approval or permit from
any other regulatory body that the General Counsel of the Company, in his
discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary
or advisable by the Company, in order to comply with such securities law or
other restriction.
(b) Governing Law. The validity, construction, interpretation,
============= administration and effect of the Plan and any
rules, regulations and actions relating to the Plan will be governed by and
construed exclusively in accordance with the laws of the State of New Jersey.
